The stability of the global economy is under threat due to oil prices entering a “dangerous zone,” according to the IEA’s Chief Economist, Fatih Birol.

Dr Birol’s warning follows new analysis from the IEA which found that oil import costs for member countries of the Organisation for Economic Co-operation and Development have shot up by $200 billion to $790 billion at the end of 2010.

“Oil prices are entering a dangerous zone for the global economy” warns Dr Birol. “The oil import bills are becoming a threat to the economic recovery. This is a wake-up call to the oil consuming countries and to the oil producers.”

(EDITORS NOTE: Wake up?? Not like there are any alternatives, they already raised taxes here on petrol and Diesel considerably and do we drive less? Not really, it’s still by far the easiest and quickest way to get around, and while we can, we will drive, all that happened was we just got a fair bit poorer. Solutions? Not really. Not yet.)

Despite a dip yesterday, oil prices have been climbing steadily in recent weeks, pushing close to $100 a barrel. On Monday Brent Crude reached $95 a barrel, its highest price for over two years, while the WTI price hit $89, up from $79 this time last year.

The analysis from the IEA, an energy policy advisor for its 28 member countries and beyond, also found that the European Union’s oil import bill grew by $70 billion last year. This figure is equal to the combined budget deficits of Greece and Portugal.

http://www.iea.org/index_info.asp?id=1737

A Peak in conventional crude oil production in 2006 as stated by the 2010 World energy outlook, should logically coincide in a short space of time with a peak in net oil exports, as the producing countries have less oil to export and keep the oil they need for themselves. If these peaks did happen, they should show up in a corresponding decline in the oil available for other countries, especially the worlds biggest oil consumer, the U.S.

Well, total net imports were 7.793 million barrels per day in the last report. That is an import level below any week since the week ending February 27th 1998.

“The crude numbers are shocking,” said Andre Julian, chief financial officer and senior market strategist at OpVest Wealth Management in Irvine, California. “A near-term shortage of crude in the U.S. is forming. Prices could easily hit $100 by the end of the year based on this report.”

Soooo, energy use is due to increase massively……

Crude oil production is due to decline…

Lot of oil to come (supposedly) in the near future from fields which haven’t even been found yet.

Peak oil is not just here — it’s behind us already.

That’s the conclusion of the International Energy Agency, the Paris-based organization that provides energy analysis to 28 industrialized nations. According to a projection in the agency’s latest annual report, released last week, production of conventional crude oil — the black liquid stuff that rigs pump out of the ground — probably topped out for good in 2006, at about 70 million barrels a day. Production from currently producing oil fields will drop sharply in coming decades, the report suggests.

The I.E.A.’s stance that 2006 will be the year global supplies of conventional oil reached their ultimate peak is a more pessimistic take than its previous assessments. In 2008, the organization projected that conventional oil production would continue to slowly climb for several more decades.

http://green.blogs.nytimes.com/2010/11/14/is-peak-oil-behind-us/

This is quite interesting too, basically shows why there will be no hope of future generations (myself included) ever retiring.

The vast majority of the important mathematical and accounting models of oil production used by entities independent from the oil industry all point to a similar time period when oil production reaches a maximum and begins to decline. This is a period of about a decade centred between 2008 and 2010, and the maximum oil produced is between 78 and 85 million barrels daily.

Luís de Sousa emphasizes that since 2005 world liquids production has been bound between 80 and 82 million barrels per day, clearly in agreement with those models. This plateau “has been sustained by the increase of natural gas liquids, with pure crude [petroleum] in decline since 2005″.

Recently, the ‘peak’ has returned to the spotlight because of a secret report by the Future Studies group of the German Centre for the Armed Forces Transformation, a military think tank working for the Berlin Ministry of Defence. The study was published by “Der Spiegel”, causing considerable concern by those less used to the issue and its geopolitical implications.

http://europe.theoildrum.com/node/7001

PIIGS are the most affected
One of the groups in the OECD that will suffer most with the contraction of available oil is the one formed by those countries most dependent on oil in their energy mix, according to Luís de Sousa. “A detail must be noted – those countries in greatest difficulties will be precisely those called the PIIGS. These countries each have an oil dependence in their total energy mix of over 45%, including Greece with 58%, Portugal and Ireland with 55%, Spain with 48% and Italy with 46%.

Dr. Robert Hirsch has a unique place in the ‘peak oil’ issue. Back in 2005, he was the main author of the first pessimistic report ever published by a public administration (presentation on Wikipedia).

Not any public administration : the Department of Energy of President George Bush.

[oil man] In the book that you are about to publish, your case is that ‘peak oil’ may happen very soon indeed. According to you, when might we be getting into trouble ? In ten years, in less than ten years ?

Let me begin with this : the background is the production. World oil production had been progressing and then it’s been flat, fluctuating, since the middle of 2004 : it’s been on a ‘plateau’. The economic recession led to a decline in demand, but not much.

The world demand is going up again. It’s back to where it was before the beginning of the crisis in 2008.

Correct. And the oil production fluctuates in a band of 4 or 5 %. It’s not very big. I think that the world oil production cannot go higher than that.

What is your hypothesis ?

We will stay in this band, and within 2 to 5 years, world oil production will go into decline.

So you have in mind the same terrible scenario which has recently been put forward by the Pentagon, the Lloyd’s and Chatham House, and by the German army.

Roughly, yes.

The Department of Energy too mentions a fluctuating, or “undulating” plateau of the oil production. Are you talking about the same thing ?

The difference is that they say we will get to that plateau somewhere in the future. But we are already there ! And if you look at the data, there’s no question we’re there.

Continue reading here..

Must read article from Forbes magazine with respected oil analyst and oil industry veteran Charles Maxwell.

Charles Maxwell: The use of petroleum in the world is now up to about 30 billion barrels per year. The rate at which we have found new supplies of petroleum over the last 10 years has fallen to an average, of only about 10 billion barrels per year.

We’re obviously in an unsustainable situation. We are now using up a greater number of barrels that we have found in the recent past and that we have reserved in the ground. We are now beginning to use it up relatively quickly–with scary consequences for the future.

The peak of production usually comes sometime between 30 and 50 years after the peak of finding oil. “The peak of discovery,” as they call it. For instance, in the North Sea, the peak of discovery was in the late 1960s, and the peak of production was in the late 1990s. So it was around 30 years between the peak of finding oil and the peak production of that oil.

Maxwell’s views.

• I view a global oil production peak within the decade as a near-certainty.
• I think there is a small probability that the peak has already occurred, but we won’t know that until several years after the fact.
• I don’t believe that there is anything in the technology pipeline that can prevent a growing gap between supply and today’s demand.
• I believe that gap will be closed by price-induced rationing, which will be very hard on businesses and individuals.

Higher prices will result in a very difficult transition period in which we are forced to use less because we simply don’t have the money to use the oil that we have historically used. This will be a period of great economic difficulty.

The difference between supply and demand is not going to be very much at first. It would not normally cause a big rise in price. On the other hand, in 2014, that tightness begins to grow and it is now a trend. By 2015 perhaps we’re only able to produce 0.50% more with about 1.25% higher demand, so that we’re 0.75% short. And now we have to raise prices enough to stop some people from using that oil because it is actually not available.

We call that “the destruction of oil demand.” It is important because it forces the price of oil up on an accelerated basis.

The euro rocketed to a two-month high of $1.29 and sterling jumped two cents to almost $1.54 after the Fed confessed that the US economy may not recover for five or six years.

“The worm is turning,” said David Bloom, currency chief at HSBC. “We’re in a world of rotating sovereign crises. The market seems to become obsessed with one idea at a time, then violently swings towards another. People thought the euro would break-up. Now we’re moving into a new phase because we’re hearing alarm bells of a US double dip.”

http://www.telegraph.co.uk/finance/currency/7893238/Feds-volte-face-sends-the-dollar-tumbling.html

Get that? The most powerful central bank in the world says the US will not recover for 5-6 years. If we are not within the start of a deep oil supply crunch by that time I will be extremely surprised, which means there will be no recovery in 5 or 6 years time either. Extrapolate that out further as you wish, taking into consideration the already record debt levels.

The US workforce has shrunk by a 1m over the past two months as discouraged jobless give up the hunt. Retail sales have fallen for the past two months. New homes sales crashed to 300,000 in May after tax credits ran out, the lowest since records began in 1963. Mortgage applications have fallen by 42pc to 13-year low since April. Paul Dales at Capital Economics said the “shadow inventory” of unsold properties has risen to 7.8m. “The double dip in housing has begun,” he said.

Nearly everyone will admit that continuing oil shortages and that high (above $100 a barrel) oil prices would be devastating to the prospects for economic recovery and that persisting very high (say above $200 a barrel) oil prices would send the U.S. and many other economies into a deep, long-lasting depression. The problem is that few are willing to consider seriously the accumulating evidence that increasing oil prices and eventually oil shortages within the next few years are as inevitable as the sunrise. Most of us have no thoughts about the issue other than the current price of a gallon of gas. Among those who appreciate that the world’s petroleum resources are finite, few understand the proximity of the crisis.

So where do we stand in mid-July 2010? While, the U.S. and OECD economies may not be doing so well, the global demand for oil has recovered nicely. After taking a two-year 3 percent dip in obeisance to the economic downturn, global oil consumption is now reported to be back in the vicinity of its 2008 high of 86.6 million barrels a day (b/d) for 2010. While U.S. demand is down a million barrels a day or so, demand from China and India are up more than enough to offset what is called “weak” US and European consumption. The International Energy Agency (IEA) tells us that it currently expects world demand to increase by 1.3 million b/d next year to a new annual high of 87.8 million b/d.

As nobody who carefully watches global oil production expects it to increase in coming years, we are left with “total productive capacity” which is currently estimated by the IEA to be 89.7 million b/d. This is about 3 million b/d above what we are currently using – maybe. Most of this spare capacity is supposed to be in Saudi Arabia; a land of eternal optimism where oil reserves never go down no matter how much is pumped up and sold. Many are skeptical that all of this “spare capacity” is really ready-to-go, reasonable quality, sustainable, production capacity. If not we are in worse shape than we believe.

Article from retired CIA analyst, Tom Whipple continued here.

Oil prices began to march upward in 2004, a pattern that would last for almost 4 years, slowly breaking all previous records. Even in the wake of the hardest Economic recession of the last 30 years, oil prices are today about four times what they where a decade ago. These continuing high prices have lent credibility to those who for many years have warned about impeding difficulties in continuing the growth in world oil production that has existed for the past two decades. Notable among those giving warning are Colin Campbell and Jean Laherrére [1], Richard Duncan and Walter Youngquist [2] or Kenneth Deffeyes [3] for their oil production forecasts and Ali Bakhtiari [4] for his price predictions.

The constraints to oil production growth have today been acknowledge by most, even by the Industry itself [5], as show by Figure 1. Also notable have been the implicit warnings issued by the IEA, that despite publishing production scenarios that each year match demand, have been vocal in other contexts explaining how unlikely the scenarios are to happen. It’s Chief-Economist, Fatih Birol [6], has been particularly outspoken in this regard.

Peak Oil, as it was named by Colin Campbell, is a pretty palpable reality at this stage, but for Europe reality is bit more intricate. Only one of its states is a net oil exporter, with most meeting their needs fully with imports. International oil trade peaked in 2005 and has entered a permanent decline; moreover, this decline will likely accelerate during the next decade, by 2020 taking away between 1/3 or 1/4 of the volume of oil available in the market in 2005. This has been the main reason behind the high price environment of the past 6 years.

Continued…

Because I am kind of a geek sometimes, I thought it would be fun to have a look at some data from China and run a few numbers after I read this article.

If China keeps growing at 7.5% they will need double the oil they use now, in 9.3 years. Even assuming nobody else has any growth there is no way in hell they will be able to find an extra 9 million barrels a day (around 18mb/d total or about twice what Saudi Arabia, the biggest producer produces per day). If we take it a little further out, to the next doubling time in just over 18 years time, when my son reaches his 18th birthday, China will be needing 36 MILLION barrels every day.

There is no way there will be enough Oil to go around pretty soon, when it is being consumed at 86.4 mb/d at the moment and world wide oil discoveries have been less than annual production, since 1980.

Funny but also disturbing, as you will see in the above must see clip, it is clear there is NO alternative to petroleum otherwise SOMETHING would have happened to transition away from this addiction. Nothing cheap and abundant to replace the over 6000 products which petroleum is used for. No cheap and abundant alternative for the life blood of modern civilisation. Why as we head forward it is a zero sum game from here on out. If china and the developing countries grow, the more developed countries will have to do with less, and once we come off this bumpy plateau of oil production we have been on since 2005, and start a faster decline, we will all have to do with less. Unless there is some as of yet unseen, unknown miracle alternative, but as the Hirsch report noted, any transition would have to happen 10 years before a global oil peak to prevent a serious collapse.

[6/16/10 11:24:12 AM] yann: well it doesn’t get much clearer about peak oil!

…a larger lesson is that no matter how much we improve our regulation of the industry, drilling for oil these days entails greater risk.  After all, oil is a finite resource.  We consume more than 20 percent of the world’s oil, but have less than 2 percent of the world’s oil reserves.  And that’s part of the reason oil companies are drilling a mile beneath the surface of the ocean — because we’re running out of places to drill on land and in shallow water.

For decades, we have known the days of cheap and easily accessible oil were numbered.  For decades, we’ve talked and talked about the need to end America’s century-long addiction to fossil fuels.  And for decades, we have failed to act with the sense of urgency that this challenge requires.  Time and again, the path forward has been blocked — not only by oil industry lobbyists, but also by a lack of political courage and candor.

The consequences of our inaction are now in plain sight.  Countries like China are investing in clean energy jobs and industries that should be right here in America.  Each day, we send nearly $1 billion of our wealth to foreign countries for their oil.  And today, as we look to the Gulf, we see an entire way of life being threatened by a menacing cloud of black crude.

We cannot consign our children to this future.  The tragedy unfolding on our coast is the most painful and powerful reminder yet that the time to embrace a clean energy future is now.  Now is the moment for this generation to embark on a national mission to unleash America’s innovation and seize control of our own destiny.

This is not some distant vision for America.  The transition away from fossil fuels is going to take some time, but over the last year and a half, we’ve already taken unprecedented action to jumpstart the clean energy industry.  As we speak, old factories are reopening to produce wind turbines, people are going back to work installing energy-efficient windows, and small businesses are making solar panels.  Consumers are buying more efficient cars and trucks, and families are making their homes more energy-efficient.  Scientists and researchers are discovering clean energy technologies that someday will lead to entire new industries.

Each of us has a part to play in a new future that will benefit all of us.  As we recover from this recession, the transition to clean energy has the potential to grow our economy and create millions of jobs -– but only if we accelerate that transition.  Only if we seize the moment.  And only if we rally together and act as one nation –- workers and entrepreneurs; scientists and citizens; the public and private sectors.
When I was a candidate for this office, I laid out a set of principles that would move our country towards energy independence.  Last year, the House of Representatives acted on these principles by passing a strong and comprehensive energy and climate bill –- a bill that finally makes clean energy the profitable kind of energy for America’s businesses.

Now, there are costs associated with this transition.  And there are some who believe that we can’t afford those costs right now.  I say we can’t afford not to change how we produce and use energy -– because the long-term costs to our economy, our national security, and our environment are far greater.

So I’m happy to look at other ideas and approaches from either party -– as long they seriously tackle our addiction to fossil fuels.  Some have suggested raising efficiency standards in our buildings like we did in our cars and trucks.  Some believe we should set standards to ensure that more of our electricity comes from wind and solar power.  Others wonder why the energy industry only spends a fraction of what the high-tech industry does on research and development -– and want to rapidly boost our investments in such research and development.

All of these approaches have merit, and deserve a fair hearing in the months ahead.  But the one approach I will not accept is inaction.  The one answer I will not settle for is the idea that this challenge is somehow too big and too difficult to meet.  You know, the same thing was said about our ability to produce enough planes and tanks in World War II.  The same thing was said about our ability to harness the science and technology to land a man safely on the surface of the moon.  And yet, time and again, we have refused to settle for the paltry limits of conventional wisdom.  Instead, what has defined us as a nation since our founding is the capacity to shape our destiny -– our determination to fight for the America we want for our children.  Even if we’re unsure exactly what that looks like.  Even if we don’t yet know precisely how we’re going to get there.  We know we’ll get there.

What I took out of it, is that basically there is no plan for the future yet, but don’t panic because you should have faith/hope even though nobody has any ideas how we can move away from the something like 6000 products which petroleum is used for. He says steps have been made, but when you look at the numbers, oil consumption in the US is UP since he entered the white house, from 21.5 Million barrels a day, to around 23 Million barrels a day. The few things he mentions to tackle the oil dependency are so small as to be almost not even worth mentioning, but I guess he has to mention something.

Still, it’s a bold step to hear such an acknowledgment from someone in such an important position.

As a side note, the amount of oil leaking into the gulf, if we take the higher estimate of around 50,000 barrels a day, is equivalent to just over 3 MINUTES of Americas total oil use each day.

Full speech you can watch here…

The beginning of a U.S. currency crisis and hyperinflation.

It’s been a long time coming, from the fringe to the center. Long overdue, but nevertheless a welcome sight and sound to hear peak oil being discussed on mainstream TV (CNBC). Meanwhile in other news, stock markets dropped as much as up to 9% today (!!!).

Chart from Evil Speculator:

One of the Federal Government’s top infrastructure advisers is warning of an oil crunch that could send the global economy spiralling back toward recession.

Curtin University Professor Peter Newman sits on the Government’s Infrastructure Australia Council and says peak oil – when demand outstrips dwindling supply – has already hit but that the global downturn has kept prices low.

Professor Newman even blames oil for causing the global recession in the first place, and he is not alone.

It is an issue being taken seriously by some local councils which have drawn up peak oil contingencies.

http://www.abc.net.au/news/stories/2010/04/27/2884100.htm

And check out this even bigger news, which whilst hopelessly optimistic, it is still a major step in that it is finally being addressed that SA oil exports can not keep increasing to handle increased global demand:
Saudi oil chief fears domestic risk to exports

Mr Falih said in a recent speech released by Aramco on Monday. “If no efficiency improvements are achieved, and the business is as usual, the oil availability for exports is likely to decline to less than 7m barrels per day by 2028, a fall of 3m barrels per day, while the global demand for our oil will continue to rise.”

It is believed to be the first time a Saudi oil official has so explicitly addressed concerns about the impact of domestic demand on exports. Analysts welcomed the announcement, saying the world’s largest oil producer and exporter needed to tackle the issue now.

Saudi Arabia produces about 8.5m b/d and raised its production capacity to 12.5m b/d last year, reaffirming its role as the world’s key swing producer.

But rapidly rising domestic energy demand and natural gas shortages have meant the kingdom has to burn increasing amounts of crude to fuel power plants, desalination units and new industries as its seeks to diversify its economy.

Continued at the financial times here..