PARIS (ResourceInvestor.com) -- As we have made clear many times in this column we hold little truck with many of the whackos who inhabit the wondrous world of ‘Peak Oil’. Yes, despite the title of the column. No sooner do people start talking about energy supply crunches, plateauing production or acreage inflection then a host of bedraggled crazies rise forth from their graves to tell us a number of scary items.
Firstly, we are often told humanity is going to “die off.” What a great idea. It could almost be a book, or a series of books and a website. Oh wait. It is. Like an energy-related version of the film 28 Days Later. Every lazy person around the planet can argue how many people will be alive in 2050 or 2100 and no one can prove them wrong. Ker-ching!
Then we are told that the markets or the U.S. economy or the world economy is destined for some catastrophic collapse. In fact we have already been told this on several occasions. When oil hit $40 per barrel, when oil hit $50 per barrel, after Katrina and Rita hit the U.S. Gulf Coast, last summer when Brent hit $78.64. So little time, so many collapses. This is so accurate a prediction the Dow Jones hit a record of 13,800 this week. Now that is what we call a collapse. Actually it is not. It is the opposite.
Groups like the British National Party throw down their bananas, lift their knuckles from the floor and tell us any downturn in energy production will produce racial conflict. Rather than people working together, as they so often do in times of crisis, they will set fire to their neighbours house because he/she is Irish/Jamaican/Pakistani/homosexual/educated/able to count past 10. All because of the failure to invest early enough in solar panels!
Eco-primitivists put off purchasing some much needed soap and instead recount how in years to come we shall all ride oxen to work as a result of the dreaded ‘Peak Oil’. We will use TVs as bookends, iPods will be surfboards for mice and - despite the fact they would be completely isolated - village life will boom and fair damsels laden down with fruit will skip through the streets singing “fo diddley doe” and other folk hits.
Because it is much, much more trouble to actually do any research on energy. The International Energy Agency this week pointed out we could face a supply crunch within five years. They forecast global oil demand growth will rise to 2.2 million barrels per day in 2008 from 1.5 million barrels per day in 2007.
They also say non-OPEC supply growth will be just under 1 million barrels per day in 2008. But then they are getting 2007’s figures so wrong at the moment it is difficult to trust them on anything as regards production.
This means the world will need more oil from the OPEC countries, around an extra 600,000 barrels per day. But large amounts of extra capacity that OPEC can bring online quickly, just like the Strategic Reserve in the U.S., is heavy sulphurous oil that no one can refine.
They should really add that the major oil companies predictions on their own production growth have also been wildly over optimistic. The only significant way that major oil companies have been able to add production is by buying other oil companies.
The cost of energy has also fed through into other commodities. In turn this has rebounded onto costs to go and explore and produce new supplies of oil and gas. The huge deal signed by Gazprom and Total [NYSE:TOT] this week at the Shtokman gas field is an example in waiting. Phase one is priced at $15 billion. Wait a couple of years and see how much it costs then.
There is a problem with supplying the world’s energy needs. It is exacerbated by the growth in consumer lifestyles in China and India, but also by the rank wastefulness of the U.S., Japan and Europe which continues apace. There is a problem with energy supply but listen to the peak freaks at your peril. Do not buy your oxen saddle just yet.
