 | Energy: the fundamental unseriousness of Gordon Brown | The Oil Drum: Europe | ODAC Newsletter, Thursday 25 October |  |
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toilforoil,
I think your exactly right, subsidising sunset industries has never been a great idea, and with more money flooding out of the UK for oil and gas one would ask, subsidise it with what?
The U.K. has often struck me as the canery in the mine on this particular round of crisis, in that they will get there first, and if they hope to survive as a major player, will have to find a solution first. We could learn much (either about how to act or how not to) in how their situation develops. Sad to say, but it may be true.
One other thing: I have never been able to figure out why Alan Drake's (he famous among of due to many U.S. Oil Drum posts) of electrified rail would not work even more perfectly in the U.K. and my fondness for Plug or gridable hybrids would not be a perfect matching companion. As far as electtric production, let's admit it (even if your a renewable fan like me) that it will be wind and wave with baseline nuclear.
The U.K.'s situation is not unresolvable, at least in the near term (this century plus) and as for their population density, it is still lower than several places in the world (Manhatten for one) but it wil be expensive and require iron will to avoid major discomfort....(hey, they do sound more like us on this side of the pond everyday) Good look on both sides of the Atlantic, and let's agree to share our best ideas....:-)
RC
At a guess about 10% of our cities have some form of electric underground trains. Some large cities are retrofitting trams in streets. The UK is a very crowded island, and with a very uneven distribution of wealth and investment. If you think of London like Singapore/Hong Kong and think of other entire regions as Chernobyl [economically].
Although Oildrummers think a lot of transport energy, the UK issue will be a heating/electricity problem and ultimately just a heating problem. We can come up with any sort of readjustments to our lifestyles but for 90% of the UK, a warm house either need big watts or knocking down and re-building to a standard that is never mass produced in UK houses.
Energy demand could be managed by planning 100 years ahead in the following way. For a 60 year period the UK planned state of the art new towns - see this:
http://en.wikipedia.org/wiki/Garden_city_movement
We gave up on centralised planning about 20 years ago [and 'bold thinking' planning about 80 years ago] with all this 'market forces' crap that gets us where we are now.
The UK needs new urban planning from the highest level. I would happily do it for them.
New cities need to start in unused areas such as the Pennine hills. The energy cost of making it will be astronomic. These are unpleasant climate areas and buildings will need to be state of the art designs - not art statements. We certainly don't have the land space for eco croft farming for everyone in the UK.
Retrofitting existing UK towns with any improvements eg for heat loss [or transport - until the cars are gone] is very limited.
Of the 27 countries in the European Union (EU), with regards to fossil fuels, the UK is actually one of the best placed at present - for instance we do actually, more or less, meet our needs for oil.
Other EU states with large economies such as France, Germany, Spain and Italy import about 100% of their oil.
If the Westexas' Export Land Model (ELM) is anything like correct (and so far it has been correct!) then, for importing countries, Peak Oil does not mean the end of cheap oil it actually means the end of any oil very shortly after peak. (Shortly probably means 10 years or less if we take into account escalating above ground events?)
If the 'peak' was indeed in 2005 (and there seems more evidence for this than against) that means very soon ...
any country currently importing a high percentage of their oil will not be able to source ANY oil.
There are many (25?) such countries in the EU and they are the UK's main export market! :-(
Xeroid.
I think this is overley dramatic. There will still be a significant global export market for many many years after peak and there is no reason why France, Germany etc. won’t be able to bid for a share of this market. I don’t believe the ELM can be taken to its final conclusion of exports drying up in economies where oil exports form a significant portion of GDP, far from it.
Where the UK is in a weaker position than say France or Germany is the rate+magnitude of change. The UK is experiancing a two variable problem, a £tens of billion pa swing from oil exporter to importer whereas traditional importer nations are only exposed to one variable, the price hike.
OPEC's Oil Output May Rise 1.6% This Month, PetroLogistics Says
By Grant Smith
Oct. 24 (Bloomberg) -- OPEC crude-oil supply will probably increase 1.6 percent this month in advance of the group's pledge to raise supplies from November, according to estimates by PetroLogistics Ltd.
The 12 members of the Organization of Petroleum Exporting Countries will probably supply 31.4 million barrels a day in October, compared with 30.9 million barrels a day estimated for September, Conrad Gerber, the president of the Geneva-based consulting firm, said today by telephone.
OPEC agreed on Sept. 11 to raise production by 500,000 barrels a day from Nov. 1 in a bid to cool record oil prices. Oil traded in New York touched a record $90.07 a barrel on Oct. 19 as investors piled into oil to hedge against the declining dollar, and as Turkey's plans for an assault in Iraq sparked supply concerns.
``We are implementing a decision we took in September, to increase our production by 500,000 barrels a day in November,'' OPEC Secretary General Abdalla Salem El-Badri told reporters in Beijing today.
Saudi Arabia, the group's largest member, will provide the majority of this month's output increase, raising supplies to 8.95 million barrels a day from 8.88 million barrels a day in September, Gerber said. The 10 OPEC states subject to output quotas will raise supplies to 27.5 million barrels a day this month from 27.2 million a day last month, he said.
Chris,
I agree my conclusion has very serious consequences, but I need to understand why my analysis is wrong and hopefully that you are correct.
Your beliefs that ELM is wrong by any meaningful amount are based on what logical reasoning?
I would like to be sure you aren't just at the first stage of Denial, Anger, Bargaining, Depression, and Acceptance.
If the net exports don't go to zero, what level do they go to? ( bearing in mind Return on Investment, Mercantilism, ELM, Nationalism, Privateering etc.)
The UK is an economy with a large element of GDP(10%?) based on oil, and the net exports have gone to zero in around six years ... so that, as one example pertinent to this current discussion, refutes your belief.
Xeroid.
It is an exponential problem, and the motivation of the sellers must be considered. If the OPEC cuts outputs below demand, then price will rise exponentially. The determinant of how much they then sell would be how much money they want, and how well they cooperate with each other. So far, they tend to cut each others' throats at the drop of a barrel and lie about their reserve numbers in order to ship more oil for more money. If they figure out that cooperation and limiting supplies can produce more money for a longer time than they ever dreamed before, then perhaps they will figure out some fixed quotas which keep just enough oil flowing to maintain the price/volume points. This is the rub, since if they go too far, they invite military action (shown to fail already, but still could be used as punishment incentive), if they cut too little, they risk running out of a future.
In past years, OPEC has been cognizant of the risk of alternative fuel incentives, but now that we see how futile that option is (in terms of volume), we also see that the oil production is going to decline much faster than alternatives can come on line. This means that the consuming countries will go into recession, and be unable to pay the prices which they could have in the past, which makes military action more probable.
Stress makes people collectively suicidal. Not a good situation. Anyone got another planet we can move to?
Didn't think so.
Unlike the UK and some others, many of the big exporters - Saudi Arabia especially comes to mind - have essentially no economy beyond oil and oil processing. As the rationing in Iran already suggests, one way or another they will do what they must to sustain some exports as they have nothing else to fall back upon. So it will be a while before Jeffrey Brown's curves actually cross over globally and the worldwide export market disappears.
But as to predicting the exact quantity of net exports, and the role of long term contracts vs. the spot market, there is simply no telling. Such things will follow from political decisions, which are capricious, arbitrary, and often irrational. Which is why are discussing it at all: it is a concern, just maybe less of a concern than the Mad Max Doomers would have us believe.
In any case, one reasonable side bet is that when forgoing coal becomes a matter of freezing in winter - rather than, as now, a matter of spitefully sticking it to evil wicked Big Business and sentimentally whining over useless, dangerous, brutish polar bears, it is unlikely that coal will continue to be forgone.
Difference between SA and UK : the Saudis have actually, starting fairly recently, been industrializing at a fast rate, concentrating on added value to their hydrocarbon products.
The UK, by contrast, has been rapidly deindustrializing, while pissing away their oil windfall.
The ELM focuses on the portion of oil that is exported - that's the interesting bit because it's what we in oil importing countries care about. Saudi production that's burnt in Saudi cars is of little consequence to the world. The ELM evaluates the impact of indigenous production (typically decline) and consumption (typically increase) to determine the remaining net exports.
Where I think the model breaks down, is to assume that there is no relationship between net exports and indigenous consumption - in countries where oil is a major part of the economy. How will a country earning much of their foreign exchange from oil exports be able to grow their economy (and indigenous consumption) whilst losing their main source of income? The UK is not a good example as oil is small part of our economy (~$50bn in a ~$2,000bn economy). The ELM, taken to its logical conclusion might see OPEC nations still producing some 20mbpd+ in several decades time yet exporting none of it as their internal consumption will have grown to use it all. In that scenario a country like France may well not be able to import any oil. However I think this scenario is nonsense since without the foreign exchange generating oil exports the OPEC countries will be in ruin, not able to feed themselves let alone import BMWs to burn all that oil. They will curtail their consumption in order to export oil.
For that reason I think that as long as oil is extracted from the ground somewhere in the world, there will be an export market and the French, for sake of argument, will be able to secure as much as their relative economic standing in the world allows them.
I agree that many OPEC countries will be in ruin without oil exports if that is all they have to offer for their essential imports.
Actually, they may starve or die of thirst without the oil. So, logically I would expect them act in their own best interests and make the oil last as long as possible by exporting only what they have to, and to diversify into other products as soon as possible.
Assuming that the OPEC leaders are sensible, then I think that neans not building up a huge pile of rapidly depreciating IOUs that may never pay out (or almost certainly won't, since it will be our grandchildren paying for our current consumption?)
The converse is also true that oil importing countries economies will be in ruin without the energy imports.
Which fails first, a country importing all it's oil or a country exporting a small part of it's oil?
IMO the amount of net exports may not be zero soon after peak but may very well be close to zero and that oil will be very expensive ... not to be burned!
Xeroid.
As the UK model showed, once production starts falling the overall net export decline rate (-56%/year) is more rapid than the production decline rate (about -7.8%year) and the net export decline rate accelerates over the net export decline period.
The top five net exporters in 2005 had a lower percentage of consumption relative to production than did the UK in 1999, so our middle case for the top five hitting zero net exports is 2031--peak top five exports to zero in 26 years.
Of course, the problems arise as soon as the decline kicks in, versus the expected increase in imports. IMO, October 1st was an inflection point of sorts as the bidding war for declining oil exports began to kick into high gear. Of course, here in the US I think that we are very poorly positioned to compete with Western Europe, Japan and China.
Westexas,
However, in 26 years many of the other countries that are currently exporting will have long since gone into import mode won't they ... they will be able to afford to do it and outbid all others with funds accumulated during the export phase?
Wouldn't you expect the Opec countries to look after each other, rather than the 'infidels', as they all roll over into net import mode?
Xeroid.
I think that various exporting countries will all react differently to the ELM. It is interesting that two vastly different regions, the UK and Indonesia, basically crashed to zero net exports in the same time frame.
In any case, what will be interesting is when the exporters begin to realize that oil exports are rapidly contracting. Do they continue to try to keep American SUV's on the road a little longer, or to they minimize their exports and try to use their oil to transition to a less oil dependent future? Note that the US went from a significant oil exporter in the Thirties and early Forties to a net importer around 1945, 25 years before we peaked.
At the start of WWII, Texas produced 60% of the oil in the world market. That's why Hitler sent U Boats to the Gulf of Mexico and sunk 72 tankers in the Gulf and the North Atlantic during 1942. So, as a comparison, the entire world was using less oil than Texas could produce at the end of the Great Depression.
I think the ELM model will describe the shortages for the next 30 years or so. Any farther in the future requires a crystal ball instead of mathematics skills, though. The Saudi's own the Texaco refining capacity which they bought about 1980. Saudi Rfining is in a joint venture with Shell, Motiva, and has a huge refinery in Deer Park. Since Chevron purchased Texaco's remaining 50% interest in the refining capacity, Saudi Refining may also be in joint ventures with Chevron. I'd guess they will continue to supply their US refining ventures. Likewise, PDVSA purchased Cities Service about 15 years ago, and I'd suspect that Venezuela will continue to supply its refineries in the US.
Likewise, we've used the first trillion barrels, but their is another trillion barrels left to be produced. Lots of it is in areas in which no one in their right minds would construct a refinery. And the country's lack the finances to construct their own. The oil strikes in the Great Lakes region of Africa are like that. Tullow oil has found a billion barrels in Tanzania, and the Chinese are planning to purchase the oil in the Darfur region. Who would construct another onshore refinery in Nigeria? And, when I was reading about Senegal I read that Hunt had discovered a billion barrel heavy oil offshore field in Senegal, but had let the concession go back because it wasn't economic to drill and produce in the 1990s. I'm sure someone is taking a second look at fields like that now
Bob Ebersole
The latest figures from the DTI oh alright DBERR have been updated to show 2.769 million tonne net import of oil and oil products this year up to August this year the peak of the summer maintenance shut downs. This is about 5.5% to total production this year. There may be some of this clawed back in the remaining four months but there seems to be little hope of the UK being a net exporter in 2007.
Buzzard the only large project coming on line in the near future has not even managed to compensate for the decline in other oil fields. This was the hope that gave the curves of Kemp and the DTI upper predictions the upward hump into net export shown in Euan's second graph.
Roger - right now in Aberdeen we are planning to build a new $1 billion high way around the city and expand our local airport - to boost tourism. Donald Trump is planning to build a massive new golfing resort just up the coast - but has said he won't go ahead if the off shore wind farm gets built.
The trains that run form Aberdeen down the east coast all the way to London still run on diesel, though the west coast line is electrified.
The majority of our politicians are quite simply clueless.
Do you think the UK will get by OK if we have to import more than 80% of our energy? And have you any suggestions where we might import all this oil and gas and coal from in 2020? And how will we pay for it? Ah ah - all those rich Arabs coming to play golf?
Sorry for the sarcasm here, but currently 7 of our 16 neuks are out of action and in the future I think we may face the choice of mining our deep coal or freezing to death in winter.
More than anywhere else in the World, the UK needs first a crash program in reality followed by a crash program of expanding our alternative sources of energy combined with a crash program of conservation - IMHO.
The "Great Debate" in the city of Dallas right now is where--not whether--to build a multi-hundred million dollar new road, within a floodplain or along the levees of the Trinity River.
Soon, we won't even be able to fully maintain our existing road network.
So go ahead and build that wind farm! Sounds like a win-win situation to me.
(Never knew there was a shortage of golf courses in Scotland.)
Clearly the UK's continued economic prosperity is highly exposed to the continued health of the "Services" particularly Financial Services, sector. If that should crash and burn...
Euan,
We may get our crash program in reality. This winter or next.
The current UK energy strategy is to pray for warm winters.
The UK population still thinks that we have the luxury of time. Hence the levels of stupidity in the debates, especially regarding realistic options such as coal, carbon capture and nuclear.
Whitehall and UKGov cannot act against the 'wishes' of the people. I am hoping that a sufficient number of Whitehall Mandarins know this and are sufficiently Machiavellian to realise that a couple of cold weeks with blackouts and consequent horrors such as dead pensioners, mass layoffs, food riots etc, may just provide a wake up call to get the people behind Nukes and Coal. And they will not care where we get it from, just that we get it.
Because if we keep skidding through mild winters by the skin of our teeth, then nothing will save us when the coal fired generation is not replaced, and the ageing nuke fleet is decomissioned and we depend upon the kindness of strangers for gas.
As it is, nothing will stop the dithering at present and enable the continued bleating and the nonsense sprouted regarding wind power and solar panels as a means to keep 60 + million energised (even at 1960 levels) - which would be an essential pre-condition to retaining any level of civilisation. A civilisation that would then need to seriously look at how it operates.
And the free market has no place in this debate. Energy is a strategic and sovereign issue. No nukes will get built without Government guarantees of contracts. No coal mines will open without Government guarantees of a market for product. So 'letting the free market decide' as Zach Goldsmith put it, is a disingenuous way of guaranteeing nothing will be done regarding Coal or Nukes. But then the Tory Party's favourite 'Green' is probably just a sleeper agent for Friends of the Earth.
And to all you Wind fans out there: Guess what: The UK gets sub-zero cold snaps when stable air masses from the arctic, or continental air masses push south and west over the UK. Wind turbines don't work when these stable air masses cover the UK. They can last up to 2-3 weeks. That is 2-3 weeks depending upon coal, gas and nuke base load generators, all of which are already stretched to operational limits.
The situation is becoming extremely dire for the UK, and it could start this winter with 7 nukes currently offline.
BTW: The Bewick Swans arrived in Norfolk from Siberia last Friday. 8 days earlier than the previous record. Maybe they know something about the coming winter weather that we dont.
Or maybe we will just get lucky like we did in the winter of 2005-2006.
But we are running out of time. It may already be too late.
Mudlogger - I agree. We likely need AN EVENT to change public attitude. Problem is, freezing conditions will get blamed on Global Warming;)
So we have our first Bewick Swan event!
I'm off to buy a chain saw and a wood burning stove.
Euan while I agree with your concerns with the energy problems the UK are going to be facing... can I just quietly point out the East Coast Main Line from Edinburgh to Kings X has been electrified for what must be getting on for 20 years now.
Wibble - thanks - I must try it some time.