05.16.08
Oil strike in Brazil, peak oil still inevitable
From R-G
Big Oil Strike in Brazil has Tongues Wagging, but We Continue Towards
Peak Oil
By Pedro Prieto, Tlaxcala. Posted May 7, 2008.
Since the 1980’s, the world has discovered less oil than it has consumed
every year.
note: This was translated from the Spanish original by Miss Machetera,
proprietor of the Machetera blog.
The world press, especially the Western press and specifically the
financial press, has jumped all over the headlines of the discovery of a
huge oil field in Brazil’s continental shelf.
It’s a concession within a series of blocks or zones earmarked for
exploration, over which very little technical data has been offered and
which apparently involve the Brazilian company Petrobrás, the Spanish
company Repsol-YPF and the British concern, British Gas. The press in
each country involved (an involvement created when the head offices of
these enormous multinational firms are in a certain country and have
close links with political power in their country of residence) has
exulted in the discoveries, as something truly impressive. So much so,
that stock markets have experienced significant fluctuations.
Naturally, if verified, it would be the greatest discovery in several
decades and would skew, to a certain extent, the observed tendency
toward a steady but inexorable decline in the volume of the world’s
discovered petroleum, while worldwide consumption continues its
relentless increase.
Peak Oil and its Impact
This trend was emphasized a decade ago by Colin Campbell and Jean
Laherrere, two important oil geologists, who published a well-known
article titled “The End of Cheap Oil,” in Scientific American, which
touched on the problem of the arrival at the maximum limits of
production of a substance as vital as petroleum, and what it would mean
for humanity, given that logically and obviously, oil’s geological and
physical limitations are finite; its underground formation taking tens
of millions of years under geologic pressure and temperature, but its
exhaustion by man taking place in barely two hundred years, with the
proverbial voracity of an industrial capitalist society in perpetual growth.
A basic rule of thumb, for which no engineering or serious economic
knowledge is needed, is that undiscovered petroleum can’t be consumed.
It’s known that plenty of oil producing countries have gone through
gradual growth in their discoveries of petroleum deposits, until they’ve
reached their peak. As a consequence of not finding any more oilfields,
or of finding smaller ones and producing (actually, extracting) more
than what is discovered, the peak of production comes some 30 or 40
years afterwards.
We know that this has happened in the United States and in the North
Sea, in Kuwait, in Indonesia (a curious case, continuing to be a member
of OPEC through incomprehensible inertia despite the fact that it is
already a net oil importer) and dozens of other countries.
We’re already seeing that the world as a whole, reached the peak of its
discoveries in the 1960’s. Yet we haven’t wanted to draw the conclusions
from this relevant fact.
Scientists and experts who do want to draw those conclusions, created
the Assocation for the Study of Peak Oil (ASPO, www.peakoil.net), which
went on to extend its studies to the analysis of the arrival of peak
natural gas production worldwide, coming a few years or decades after
that of oil.
The data put forth at the time has been updated as the industry has
released its own jealously guarded data, but without any significant
variation in the scientists’ predictions that we are at or near oil’s
peak (between now and 2010) and the peak for natural gas will come a
decade or two later, in accordance with the quantities that are going to
replace petroleum where functionally possible.
In Spain, ASPO is represented by the Association for the Study of Energy
Resources (Asociación para el Estudio de los Recursos Energéticos -
AEREN), which publishes studies and reports at its website:
www.crisisenergetica.org. ASPO already counts on resources from groups
in a variety of countries, all of them nonprofit, including those of
such importance as the United States, China, the United Kingdom, France,
Spain, Portugal, Italy, Ireland, Belgium, Norway, Denmark, Sweden, South
Aftica, Egypt, Japan, Switzerland, Hungary, Finland, Australia and Holland.
This group of scientists and geologists has as its unique nexus, its
concern for humanity as this historic moment comes about. For this
societal model, the moment when the oil and gas runs out is not as
important as the one that comes much earlier; the moment when geology
and physical reality combine to extract resources at the maximum level,
followed by an inexorable decline in production which must clash with
economic growth (and therefore the energy consumption demanded by an
industrial capitalist society). This type of growth is imagined to be
automatic and infinite, without alternative energies in sight to fill
the growing abyss created by a forseeable drop in production.
More than 55 of the world’s oil producing countries have already passed
this moment respectively, and can be found with declining production or
in clear decline. This decline is in the approximate form of a bell
curve, with slight variations due to certain relevant political or
economic events that may affect its shape; in any case, the end of
stable or flat production never comes as a vertical drop. But the peak
moment is very delicate and important for humanity. Therefore, it’s also
known with some accuracy, how fast production can fall, through the
dwindling deposits of countries already in decline: between 4 and 12%
less for every passing year, depending on the field and above all, the
more or less rational or irrational form of exploitation it has experienced.
M. King Hubbert was the first geologist to detect, in his own country,
that oilfield production followed a bell curve. Observing the tendency
of individual wells and oilfields in various places throughout the U.S.,
he deduced as early as the 1950’s that the United States, which was then
the world’s largest producer, consumer and exporter, would reach its
production peak around 1970.
Although Hubbert was the object of much ridicule and criticism during
the same period when films such as “Giant,” about an apparently
unlimited and abundant fuel supply, were being shown in theaters, a few
years after 1970, both the accuracy of his prediction and the curve as a
predictive model for the behavior and limitations of a limited and
finite production, were verified. Neither the entire technological nor
financial power of the United States (paper currency cannot produce
physical assets where none exist) have been able to avoid the fact that
today the United States finds itself in the unfortunate position of
having to import around 70% of the oil it consumes; a percentage that
increases visibly every year.
After Hubbert, other techniques such as “linearization” of the Hubbert
curves or so called “skimmed curves” have been developed, and geologists
and economists still argue over their degree of precision and predictive
value, while oil prices continue to rise and the resource demands
increasing effort to extract.
The imminent arrival of peak oil production will be the first historical
moment in which fuel production diminishes, globally and without
remission. There will be no corner of the world left to explore and
provide hope of further production, or in any case, to bridge the
growing gap between growing demand and shrinking supply.
For this reason, the discovery of a “gigafield,” a gigantic oilfield in
Brazil, has brought recriminating, or at least condescending glances at
the ASPO scientists, in the sense that much more remains to be
discovered and that their predictions, categorized by many as
“catastrophic,” were wrong. Nothing could be further from the truth. A
“gigafield,” according to the definition of those who coined the term,
is a field that has between 500 million and a billion barrels of oil,
from which a flow of at least 1 million barrels a day can be extracted.
ASPO has always asserted that the world’s oil resource supply has not
been completely discovered. In general terms and with the profound
knowledge that has come from more than 150 years of scientific
exploratory activity, much has been learned. Exploratory technology has
improved considerably, and geologists and geophysicists know with a fair
amount of accuracy which areas may have “possibilities” (prospects)
where money can be directed at exploration, although there may be rare
exceptions that simply confirm the rule. ASPO says that it believes that
a figure of around 10% of all petroleum discovered so far and classified
as proven reserves, remains to be discovered.
Given that the proven reserves are around 2 billion barrels, of which 1
billion has already been extracted, if the latest discovery in Brazil
proves to be confirmed, we would be talking about approximately 6% of
what remains to be discovered; although calculating an exact number is
an exercise in futility. What matters are the orders of magnitude of the
known major oil deposits around the world; an order of magnitude
impossible to escape.
Developments of recent decades toward unconventional oil provide proof.
According to some press releases, they concern the world’s third largest
oil reserve and could reach 33 billion barrels.
Since the 1980’s, the world has discovered every year less oil than it
has consumed, with the difference having been enlarged and reaching such
an outrageous level in recent years that almost no-one wants to think
about it. In recent years, despite a considerable increase in
exploratory activity and the application of the most up-to-date
quadra-dimensional seismic technology, annual discoveries amounted to
between 4 and 6 times less than what was being consumed at the same time
from known and proven reserves. That is, in the words of the geologist
Mariano Marzo, we are pawning our grandmother’s jewels in order to throw
the proceeds away.
To put the figures in their proper context, something that the financial
press tends to blur at its convenience, the maximum supposed quantity of
the discovery in Block BM-S-9, known as Carioca, 2,000 meters under the
Atlantic Ocean, would represent one year’s worldwide consumption of
petroleum, well above the 30 billion barrels. This is more or less the
result when the 85 million barrels produced as a daily average are
multiplied over 365 days.
Also, to clarify the importance of the oil discoveries, certain
characteristics must be considered that are not always emphasized by the
press, but are essential to achieving an accurate valuation.
1. Conventional and Unconventional Oil
So-called “conventional” oil is that which is generally found
underground or very close to a coastline at a depth of less than 500
meters under the water’s surface, in accessible zones and reasonable
depths and with certain qualities that can later be processed with a
reasonable degree of certainty in refineries and existing installations.
Since 2006, this oil, which represents around 66 million barrels of
daily production, has reached its peak and is at a plateau with a clear
downward trend. The decline is compensated for only with great
difficulty by what geologists call “unconventional” oil; that which has
begun to be drilled in less accessible and more costly places in order
to satisfy a demand that conventional oil cannot cover.
Thus, in 2007, “unconventional” oil accounted for more than 22% of
worldwide petroleum production: 19 of the 85 million barrels produced
daily come from the following:
• 4.5% of some 3.9 million barrels daily from heavy or extra-heavy crude
(Canada’s tar sands, oil shale such as that of Venezuela and others).•
7.6% of some 6.5 million barrels daily are from deep water. Deep water
means a depth of more than 500 meters in seas or oceans which demand
sometimes astounding technological force. This is the case of the
platforms in the Gulf of Mexico or the gulf of Guinea and that are now
claimed off the coast of Brazil.
• 1%, or 900,000 barrels daily are extracted from polar regions. It is
considered “polar” oil if it must be extracted above the Arctic Circle,
given the extreme difficulties of the attempt.
• 9% or some 7.7 million barrels daily are the result of liquefication
of certain combustible gases in order to give them a more versatile use.
This is very important, because it shows the other great weakness of
conventional oil and the worldwide demand that drives the liquefied gas
refineries with increasing force, through costly and complex processes
so that the resulting liquids can be diverted to a society that demands
more and more fuel of all kinds, but of liquid more than any other,
which accounts for more than 90% of transportation worldwide.
This is a clear indication of the growing difficulties the oil sector
has in finding fields in more accessible areas and how geologic limits
have forced the industry to go to increasingly difficult and
inaccessible places.
2. Calculus of Probabilities
In today’s world of petroleum production and reserves there are several
important additional factors to consider. In the first place, the
product’s valuation. The industry describes reserves as P4, P50 or P95,
according to the theoretical probability, in percentages, of finding
supposed oil. For example, the extremely optimistic U.S. Geological
Survey (USGS), estimates that proven reserves could be as much as 3.8
trillion barrels, but qualifies that by saying that there is only a 5%
probability of this. There is a 50% probability of 3 trillion barrels,
and a 95% probability of 2.2 trillion barrels (very close to the two
trillion calculated by most sources).
Probabilities are also described as P, PP or 2P, and PPP or 3P, which
means respectively, Proven, Proven + Probable, and Proven + Probable +
Possible, in decreasing categories of probability assigned to
exploration or development.
Another way of classifying petroleum is the following: “Oil Initially in
Place” (OIIP). Still another is the recovery factor which will give an
idea of the extractable resources, or Ultimately Recoverable Resource
(URR) which are data pertaining to geologic values that help clarify the
state and viability of recovery of underground resources. Suffice it to
say that for reserves in situ, for physical reasons (porosity, type of
rock, pressure, etc.) the recovery percentages for many wells do not
surpass 35 or 40% of the underground total.
In the past, geologists and oil businesses tended to be very
conservative when it came to the valuation of their discoveries and
generally estimated less than they thought they could extract, once the
field’s dimensions and structure had been well measured. This was done
by carrying out the exploration in the zone whose geological formation
seemed promising, and once something had been discovered in one of the
drilled areas (a “dry hole” if nothing was discovered), quality,
density, depth, type of rock, width of the field and various other data
were measured. Then they went on to drill the surrounding area, in order
to establish the field’s perimeter. If the field was of a certain size,
many exploratory holes were drilled before delimiting the field, in
order to see if it was fractured, contiguous or not, and other
questions. Finally it was catalogued as a “proven reserve,” leaving
possible interconnecting or nearby spaces that had not been drilled as
“probable.”
The nature of “unconventional” oil, such as that in Brazil, or the polar
regions, is that it is breaking with these best practices of
delimitation, declaring with certainty and with the greatest possible
precision a figure that is merely possible, due to the stratospheric
economic and energy costs of marine or polar exploration platforms.
There is also the factor of industry pressure to make increasing
appearances before the financial world in order to continue to have the
necessary credibility to acquire funds.
The world suffers today, paradoxically, more than in the past, from
confident publications about the certainty of prospecting, discoveries,
level of exhaustion in existing reserves and so on, while the
explorations are being handled exclusively by the Seven Sisters - the
largest capitalist oil businesses whose technological supremacy is
disputed by practically no-one. What a time to be longing for a measure
of scientific and accounting seriousness from the big multinational oil
companies!
3. Second Helpings were Never Very Good
It should be noted that the type of petroleum extracted brings with it
various difficulties when the time comes to turn it into liquid fuel for
the market. The quality of the resource is always essential.
In a recent debate between the economist Michael Lynch and the
representatives of ASPO USA, the argument supporting their analysis was
that generally, given that man has a certain intelligence, the richest
fields tend to be exploited first; in other words, the largest, the
least buried, with the most internal pressure (this saves quite a bit on
pumps and pressure injections) and the least contaminants, like sulfur,
which is measured in varying degrees of acidity or density (light or
heavy crude) in grades assigned by the American Petroleum Institute (API
- which sets the measurement standards) that refer to its density in
comparison to the density of water.
These are important factors, because they demand more work and expense
in refineries that may not be prepared to handle them. It demands
increasing quantities of energy to result in the same quantity of
combustible fuel at the gas station, at the service of society, when
dealing with fields of poorer quality which are what remain.
It should also be remembered, although there are economists who have
denied the basic principle that peak oil production occurs more or less
toward the middle of the resource’s possible extraction; worldwide, as
we’ve already seen, the second half of the petroleum era will take place
increasingly through oilfields further away, deeper and smaller,
demanding the same maneuvers of prospecting machinery to obtain less
fossil fuel. That is, by definition the oil is less accessible, of worse
quality, and demands a greater economic expenditure and above all,
energy, leaving less net energy delivered to society in the end, for the
same effort.
If on the one hand the technological advances are admittedly impressive,
on the other they indicate the fragility that comes with them. Let’s
look at some examples.
Improved Techniques
In the large fields already in existence (called “mature,” meaning they
are old and well exploited) various techniques are being used to try to
extract the maximum possible at the greatest possible rate of
extraction, because the market has a fierce demand that is beginning to
exceed availability, as is openly acknowledged; for example in the El
País daily newspaper on April 13, which reads:
The demand for crude oil is expected to grow to an average of 87.5
million barrels a day, according to the IEA (International Energy
Agency) which at the present time does not believe it necessary to go to
strategic reserves in order to reduce the price. The oil producers
believe that in the present situation it’s impossible to imagine that
the oil supply would reach 95 million [barrels], because of the simple
fact that there are not sufficient reserves or production capacity. The
result is that demand may exceed supply capacity sooner rather than later.
In these conditions, the large producers resort to very sophisticated
and expensive (always speaking in energy rather than economic terms)
techniques, with mixed results. Among them, the “Enhanced Oil Recovery”
type; improvements in the recovery of oil it was said would end up
remaining underground because it costs more money and energy to extract
than it returns.
Horizontal drilling to arrive at layers that previously couldn’t be
reached is one of these. Another is the injection of gas or water,
usually saltwater, in the wells in order to augment decreasing pressure
that results from the extraction of a resource from a space. Apart from
the extra cost assumed by these complex techniques, in some cases they
are proving that in the long run, they provide bread for today at the
expense of tomorrow’s hunger. The multimillionaire Texan Matthew
Simmons, a specialist in oilfield investing and president of Simmons
International, suggests that the “water cut” or level of water injected
into some of Saudi Arabia’s important oilfields, while initially
allowing an increased recovery rate, once it reaches a certain level in
the oilfield, can contaminate (and indeed has contaminated) the drilled
holes and lead to a sudden fall in production.
Oil Mining Instead of Drilling
The extraction of heavy oil in Canada or Venezuela is demanding enormous
quantities of water and natural gas and even hydrogen, which comes from
treating natural gas with steam in order to perform the necessary
“lightening” process to extract fuel (obtaining a molecular structure
shorter than that of heavy crude) in a form ready for the commercial
market, so as not to strand around a billion of the world’s internal
combustion engines, designed to work with refined fuel.
This, without even mentioning the environmental problems posed by these
gigantic transfers of material and the resulting muddy water, which can
be seen from space by satellites. The limits of such production are set
by the difficulty of extracting a sufficient quantity at the necessary
speed, by the availability of water and natural gas and the low net return.
According to Professor Charles A.S. Hall, at the University of Syracuse
in the state of New York, and one of the worldwide authorities on the
study of net energy (that which is obtained after subtracting the cost
of energy to obtain it), conventional U.S. oil in the 1930’s had an
energy rate of return of 100 to 1 (in other words, an expenditure
equivalent to one barrel of oil for every hundred barrels of oil put at
society’s disposal). Today, U.S. oil has fallen to a rate of one
barrel’s energy equivalent for every 8 to 20 barrels delivered from an
oilfield. Heavy oil such as that in Canada remains below that considered
a “minimal level to sustain civilization,” that according to him, is a
rate of five to one, for all the talk of hundreds of billions of
“potential” barrels in reserves made up of tar sands or oil shale.
A mordant comment is attributed to Sheik Yamani, Saudi Arabia’s oilfield
manager, criticizing those who would have us worry about the gradual
exhaustion of fossil fuels, something the sheik refuses to acknowledge
even peripherally, that “the Stone Age didn’t end because the rocks ran
out.” He has a point. The age of oil will come to an end and huge
quantities of oil will remain underground, without a doubt. But printed
banknotes and technologies will not be enough to extract them, because
the first don’t pump and the second consume more energy (which was the
whole point to begin with) the more advanced and complex they are, and
it has been so on a global scale ever since we’ve had industry at our
disposal.
This is a very important aspect, essential to emphasize, because there
are many people trained in classical economics, amongst whom can
sometimes be found engineers, for whom it is very difficult if not
actually impossible to understand that if the extraction of a unit of
energy resource costs more than this unit’s value to extract, the
resource may exist, but it will remain underground through the simple
laws of geology and physics, which have nothing to do with money spent
to investigate or extract it. That’s how you get to oil at $20,000 a
barrel; if it costs more than a barrel of energy to extract a barrel,
the barrel will not be extracted. Although this would seem self-evident,
it appears not to have entered the minds of many big thinkers.
Very Deep Water
In the case of deep water, it’s impressive to see the technology that’s
been acquired by Petrobrás, a company that knows how to drill to depths
that hardly any other business has managed.
Petrobrás said at the time that its Tupi oilfield, near to the newly
discovered Carioca had some 6 billion barrels. But aside from doubts
over the number of delimiting holes drilled which would grant the figure
some credibility, the oilfield is found under more than two thousand
meters of ocean water, another two thousand meters of salt layer and yet
another two thousand of rock. In other words the drilling tubes have to
extend more than six kilometers through very different media in order to
arrive where the oil is.
For example, the ocean’s depth makes it impossible to anchor a platform
to the ocean floor, and even that would be subject to winds and
currents. This demands a permanent expenditure of energy to maintain the
platform with many and very powerful motors, which consume highly
refined energy, not the crude oil that is being extracted through
exactly the same vertical sounding at all times, in order to avoid
breaking the extremely long tube. This is done with a lot of energy and
sophisticated GPS controls. When there are storms, the rig has to be
disconnected and put on standby, in order to avoid breakages, cutting
production for a world that has no desire to stop its consumption for
meteorological reasons.
Moreover, the enormous salt layer that must be traversed is in a viscous
state at such depths, very corrosive against the material employed (not
the normal deep-sea drilling tubes, because these depths require very
special and costly tubes with enormous capacities of resistance) with
the result that it is very difficult to penetrate. Finally, the fluid
obtained 6,000 meters below has to be pumped to the surface. This is
equivalent to 20 Eiffel Towers stacked one on top of the other
[translator’s note: or 13 and a half Empire State Buildings]. To obtain
a flow of half a million barrels a day from this field, which would
barely manage to cover a tenth of the annual fall in production after
peak oil, would require many drilled holes at a depth of 6 kilometers,
given the viscosity of the crude and the depth from which it must be
pumped to arrive at the surface.
The recently announced Carioca field appears to be of a similar geologic
structure, although the rambling and disjointed news that trickles out
is more financially than geophysically related, and doesn’t allow a
clear glimpse of the underlying geography. As if that were not enough,
Petrobrás’ own news agency indicated on April 16, 2008 that:
Following the normal exploration schedule, on March 22, 2008, the
company began to explore a second well, 1-BRSA-594-SPS (1-SPS-55) which
is located in the smaller area of the block, but it has yet to reach the
pre-salt layer. The ongoing exploratory activities include drilling new
wells, long-duration formation tests and new geological studies to prove
the range of the discovery.
4. All that Glitters is not Black Gold
Ultimately, it seems that the announcement of this new discovery of 33
billion barrels at Carioca, some two hundred plus kilometers from the
coastline off Rio and Sao Paulo, conforms less to a proven geologic
reality than to the new game of “paper barrels” that feeds the stock
market rather than the energy market; it’s apparently necessary to play
in both.
Harold Lima, the Brazilian manager issuing the statements that have
stirred the speculative dust in stock markets worldwide and the values
of the companies involved in the explorations, has disassociated himself
from the statements’ evident stock implications.
However, I believe it’s useful to reflect on the societal model that
triggers such voracious and immediate speculative action in the world’s
stock markets (tens of billions in euros on a day of frantic movement)
on the basis of barely tested information. This speaks volumes, none of
it good, about the general state of the social system in which we are
immersed, with sharks willing to eat everything up to and including the
sucker fish that are meant to clean them, at the least opportunity.
This fever over “paper barrels” happened before in the middle of the
1980’s when Kuwait in particular, taking advantage of OPEC’s rule for
allocating quotas which depended on declared reserves, presented itself
at one of the organization’s meetings (at that time the war between Iraq
and Iran was in its heyday) and said that it suddenly had twice the
reserves it had reported up until then. The rest of the OPEC membership,
instead of throwing up a fuss and demanding proof of geologically tested
explorations, swallowed the tale and Kuwait walked out of the meeting
with the largest quota on the market.
But the joy was short-lived. In a couple of years, the rest of the OPEC
countries were appearing at successive meetings with increasing
declarations about their own oil reserves, of the same size and bulk
percentage as that of the Kuwaitis, and equally doubtful exploratory
justification. The result was that the OPEC production quotas returned
to where they began, but with all the members in a brotherhood of mutual
deception that no-one dared to put in question.
These overstatements were calculated by Colin Campbell to be not less
than some 200-250 billion “paper barrels,” that today are officially
counted as part of the almost trillion barrels of reserves remaining on
the planet. Almost a quarter.
To make matters worse, the figures countries give each year on their oil
reserves appear untouchable, unchangeable, despite the fact that they
continue to be extracted continuously according to well known rhythms.
Hardly any are declaring less reserves each year. It’s a kind of
miraculous multiplication of loaves and fishes because such “stability”
does not correspond with the discoveries resulting from serious
exploration. The secrecy is tremendous. And there’s a formal excuse and
a real reason for this departure from reality.
The formal excuse is that the oilfields are experiencing the famous
“reserve growth,” that is, growth in the proven reserves that were
initially declared. Given the secrecy of the majority of the sources,
it’s impossible to verify if this is true or false.
It may be that some cases were certainly founded on the conservative
estimates of the good old professional geologists of yore, who were not
under the kinds of political and economic pressure from their
supervisors that their counterparts face today, and when it came time to
declare the results of their work, always estimated the discoveries
toward the low end.
It also could happen that some technological improvements have actually
increased the percentage that was initially believed possible to
extract. But the fact that the reserve figures for each country, given
by the International Energy Agency (IEA) or for example, British
Petroleum’s annual estimates, continue to remain constant (neither cold
nor hot, but always at zero, as the joke goes) in many cases, is very
suspect and likely to be an accounting based more on financial
engineering and accounting artifice, than on geophysical reality.
The formal excuse mentioned, is that oil producing countries enjoy
greater financial credibility. Quotas have ceased to be a problem for
quite some time; now each country may produce more petroleum, if it
cares to. The question is whether you can. The only country that seemed
to be able to put additional barrels on the market quickly and in a
sustained manner, if necessary, was Saudi Arabia, and now even this
great totem is in question. Therefore, if the credibility that comes
from a patrimony of mortgageable oil deposits (”collateral” in financial
terms) can be used to access so much more credit in the international
financial system, the declaration of more reserves than one has, is
useful to convince worldwide monetary authorities that there’s
sufficient oil underground to back it, which judging from the visible
evidence is not all that hard to do. A whole world of “subprime” energy
mortgages dangles over the oil producing and exporting countries in
these turbulent times.
The difference between oil and bricks is obvious, yet it appears that
the economy of use is not capable of assimilating it: energy is not
simply a consumer good, which is how it’s treated in the markets; energy
is the imperative prerequisite that makes all other goods possible.
If there is a shortage of plastic, perhaps its price will rise and
metals or cereals will not be affected. But if there is an oil shortage
and furthermore, this occurs for the first time in the history of the
new world (non plus ultra!*), every other good is necessarily affected,
because oil is the lifeblood of our modern society. It accounts for 95%
of transportation worldwide. It’s 6/7 of the food consumed in Europe and
9/10 of that consumed in the United States (yes, we eat oil!) and the
reason that food prices are shooting up so dramatically. Money can be
printed. Barrels, no.
The Carioca reserve, if confirmed, would add another year of oil to the
world’s supply. It would mean only a few months delay in the arrival of
peak oil (all liquids, not just the conventional kind), or if we have
already reached that point, it would be a minor mitigating factor in the
fall of worldwide production once the field’s petroleum reaches the
surface, no sooner than five years from now, and in no case without
having already spent the equivalent of tens of millions of barrels of
oil in energy which will have to be discounted against the future
supply. Too slow to catch up with the speed with which existing energy
resources are being exhausted.
Despite the fact that it is the largest oilfield discovery announced in
the past 30 years and has engendered such fierce speculation, oil
continues to dance with wolves at levels of $100-110 a barrel,
accompanied by explanations from the economic media that would make you
laugh if they didn’t also make you weep: In February of 2002 a barrel
was at $20. And now, as I write, it’s approaching $110, more than five
times as much. But in the world of flatland economics, there’s always an
explanation to justify any kind of upward jump as something
circumstantial (an explosion in a pipeline, a strike in some sector,
off-the-cuff declarations from an oil-producing country’s leader, a
hurricane near the ocean platforms, a guerrilla attack on some
facilities, and so on). Curiously, there are never any explanations for
why the price remains at a high level after the temporary event has
passed, nor for why the trend over the last five years has been always
upward, to the point of quadrupling over that period of time. There’s no
choice but to accept that perhaps it is something structural, not
cyclical, in other words, that we are touching the untouchable limits of
the physical world. There’s no choice but to acknowledge that the system
is finished. And we’d rather die than admit it.
The comedian Groucho Marx wanted the epitaph on his gravestone to read
“Pardon me for not getting up.” By way of farewell, I might add that
this is what occurred to me when I saw the news about the supposedly
impressive oilfield at Carioca.
Spanish author Pedro A. Prieto is Vice President of the Association for
the Study of Energy Resources (AEREN) and co-editor of the Energy Crisis
website (www.crisisenergetica.org)
http://www.alternet.org/workplace/84482/?page=entire