by Kevin Moore — January 10th, 2005
|Hon Trevor Mallard
|10 January 2005|
Dear Mr Mallard,
Toward the end of 2004 I wrote to Pete Hodgson (copy enclosed) concerning the monstrous discrepancy between the IEA projections for future oil supply [based on statistically defective analysis of USGS figures] and the real situation. In short, the IEA projects the discovery of several ‘king size’ oil fields in easily accessible locations over the next decade or so and that the worldwide rate of extraction of oil from the earth will continue to rise from the current figure of around 82 million barrels a day, to around 120 million barrels a day a couple of decades from now. Such projections for growth in oil supply can only be described as completely ludicrous, when the scientific evidence of actual discovery rates and declines in currently producing oil fields is examined. In making such projections the IEA stands alone in defiance of all other energy organisations. Yet despite obvious errors, it seems that the NZ government relies solely on the IEA for all its international energy projections.
I should perhaps remind you that oil has been used in large commercial quantities for around 150 years. The peak in discovery of oil was in the early 1960s and every decade that has passed, the quantity of new oil reserve has declined markedly. Indeed, no significant discoveries at all have been made in recent years — the fields that have been discovered contain trifling amounts by world consumption standards. Thus, although the USGS might statistically rate the chances of discovery of significant oil field at 5%, in reality, the chance of discovery of any new major oil fields (other than in Antarctica) is actually zero. The planet has already been gone over with a fine toothed comb and all geologically promising regions have been thoroughly examined. Indeed, the initial reserve status (endowment) of the planet has hardly changed since calculated in the 1970s and so-called increases in reserves have been the result of political manipulations of figures, rather than any genuine new discoveries. Hence Shell was forced to downgrade its reserves by 30% last year.
I should also remind you that a large proportion of the oil fields currently producing oil are in decline; the lower 48 states of the US peaked in the early 70s and production continues to decline by the month (as does natural gas production, which of now supplemented by increasing quantities of imported gas, as the US sucks its neighbours dry of energy); the North Sea fields that saved Britain from economic obscurity, peaked around 2000, leaving Britain with an ever increasing oil importation bill; numerous other fields, from Australia to Mexico, have either already peaked or are about to peak in production. Thus, the sudden rise in oil prices that occurred over 2004 came as no surprise whatsoever to oil geologists and energy analysts. The announcement by the Saudi Oil Minister, Ali al Naimi, in June 2004, that production would be ramped up and prices would return to $22-28 dollars a barrel was laughable (and clearly, as the evidence now supports, completely unachievable): oil is currently hovering at around $44 a barrel, a good $15-20 above the so-called ‘acceptable’ range. We might thank relatively mind Northern Hemisphere weather and the Chinese government’s dampening down measures for the current pricing level, but must surely anticipate further escalation in oil prices as the ‘tired’ oil fields of the Middle East peter out. In case you are unaware, current production levels are being achieved by the injection of massive quantities of sea water. We should also note that much of the short term ramping up of production was achieved by re-opening of inferior, semi-retired wells.
I should also remind you that through the early part of 2004, rampant growth of the Chinese economy led to severe shortages, since suppliers had only 1 million barrels a day spare capacity. Obviously the cooling of the world economy, as house prices decline throughout much of the western world, and consumer confidence flags, will allow some breathing space before the very serious period of worldwide decline in extraction commences.
Just when that will occur, nobody can say for certain; we are in the extremely dangerous position of not being able to accurately predict the worldwide peak and will only be aware of it after it has happened — clearly a diabolical situation to be in, since, one oil supply does indeed begin to decline, the economy must, by definition begin to contract. There are a few oil projects due to come on stream between now and 2008, but it should be born in mind that these are to utilise reserves discovered some time a go. There is nothing to speak of beyond 2008. However, these newly on stream wells cannot be looked on as providing any increase in supply: they will simply replace other wells that are in decline. The future of oil supply has been carefully analysed by everyone except the IEA it seems. And for some unaccountable reason, the NZ government ignores all accurate data on oil analysis and sticks steadfastly to IEA analysis, even though IEA analysis has on numerous occasions been demonstrated to be in total defiance of scientific facts! We can only assume this is in order to instil market confidence right up till the moment of collapse.
Those of us with the scientific background to understand chemical bond energy and energy equations are amused by the never-ending plethora of technological fixes that are supposedly going to provide salvation from the coming energy crash: none of the work of course for a multitude of reasons, the most common being that they are net losers of energy. We can be certain that in an energy-starved future, the last thing we would want to do is adopt a system that wastes energy. This does not prevent vested interest groups from promoting ‘the hydrogen economy’ whilst not having a clue where the hydrogen is going to come from, or the ‘ethanol economy’ whilst ignoring the energy require to make the ethanol. However, such concepts are easily promoted to the scientifically naïve and we will undoubtedly see many more, as we drive off the energy cliff.
Unfortunately, the harsh realities you are going to have to face over the next two to three years as Minister of Energy can be summarised as:
The consequences of society of declining energy supply will be interesting, to say the least, since our entire economic system is predicated on ever increasing use of energy at ever cheaper prices and quite clearly continuation of policies based on cheap energy will be impossible from 2005/2006 onwards. At this point of time the writing is clearly on the wall, but is still being ignored.
The coming year or two are going to decisive, since, as one commentator put it, ‘economists are far better at discovering oil that oil geologists’ and the gulf between the two will get wider. We know that most of the world’s oil geologists now agree that the peak in extraction will occur before 2010, whilst some put it at within the next few months. Of course we also all know that economists are notoriously hopeless at reading the future and invariably get it wrong: hence the constant revision of economic projection as reality proves otherwise. The long-standing projections of oil geologists are about to be tested and those of us with logical minds are putting our money on the scientists rather than the economic mystics who tell us oil will be found because we need it.
The reality we are about to face will see ‘wheels fall off’ the entire economic system., probably within about five years and as Minister of Energy you will be clearly be in the hot seat, having to explain why government policies (based on growth) are unworkable because the necessary energy supply is not there. It is perfectly clear either the government has no idea what is about to hit it, or the government knows about imminent peak oil, but chooses to ignore the issue in order to maintain market confidence. Just how that confidence will hold up during the collapse is another matter.
Those of us who are aware what is happening in the real world anticipate the following to occur over the next five years.
What is particularly odd at this stage is the government’s encouragement of gross squandering of energy and the prospective bankruptcy that entails. Our roads become increasing congested by grossly inefficient military-style SUVs and racing cars, right at the moment when the nation should be downsizing to conserve fuel, to improve our balance of payments and to reduce environmental pollution. I have no delusions whatsoever about the government talking any appropriate action on the matter of energy. I have been attempting to persuade the government for several years to adopt sane energy policies, as detailed in ‘Burn Baby, Burn’ (encouraging the use of motor scooters, small-engined cars, differential taxation, sales taxes on energy intensive activities etc.) and have been ignored on every occasion, whilst the government instituted policies that increased energy consumption (raising speed limits for commercial vehicles would be a prime example). Presumably NZ will continue to import gas patio heaters, SUVs, racing cars, power boats, leaf blowers, spa pools and all the paraphernalia of consumerism, will continue to misallocate vast amounts of financial resource to the construction of motorways etc. and the government will continue to sanction the construction of grossly inefficient houses and offices, right until the moment of energy collapse. Government policies can thus best be described as driving straight off the cliff in an orgy of consumption (encouraging as rapid conversion of fossil fuels into carbon dioxide as possible): I am sure that will not change as long as economists with absurd notions about growth of GDP continue to drive government policy.
However, in the meantime, I would be grateful if you would supply a comprehensive answer to the letter enclosed [addressed to Pete Hodgson], as I assume he will no longer be concerned with the matter of future energy supply. (His surprising departure does raise speculation that he suddenly realised what was about to occur i.e. peak oil, having realised was totally wrong in his analysis and has decided to escape responsibility, before them matter come to a head — a tactic of passing the buck, or should we say pass the time bomb?)
I am sure you will appreciate that the issues I raised in my letters do require soundly-based scientific answers, rather than standardised political/economic dogma and failure to address these issues will result in certain disaster for the nation and for you personally. Economic platitudes such as ‘As a member of the IEA, New Zealand takes the issue of energy supply seriously’ (the form letter in the world processor) cannot be regarded as answers to what is clearly the most pressing immediate issue of our time (second only to the prospect of abrupt climate rendering the planet largely uninhabitable beyond 2050 — a direct result of out-of-control energy use of course).
If the government has demonstrated anything in the past 4 years, it must surely be unresponsiveness to expert input and a steadfast clinging to outdated economic dogma and continuation of policies based on denial of the reality of the world we live in (on one hand supposedly addressing carbon dioxide emissions, while on the other hand promoting use of energy that results in increases in pollution levels). We live in desperate times for our environment and energy supply and we wonder why a person with no scientific background and perhaps no scientific knowledge has been appointed Minister of Energy. Are we to be pleasantly surprised by a change in policy from a new minister or are we just to get more of the same?
(BSc Honours Chemistry, Diploma in Technology)
Energy Analyst, Environmental Consultant and Educator