Leaked Study on Peak Oil Warns of Severe Global Energy Crisis

This week a study on peak oil by a German military think tank was leaked on the Internet. The document shows that the German government is closely studying the issue of peak oil, and is aware of the potential for serious consequences as oil production declines. The study is reminiscent of the , commissioned by the U.S. Department of Energy, that warned of the risks posed by peak oil.

The document warns of the potential for regional shortages, market failures, and a shift in political power toward those capable of exporting oil. This report describes potential outcomes that require planning and preparation.

The report clearly lays out just how vulnerable Europe will be because of its continuing dependence upon Russia for both oil and gas, and notes that Russia will be in a very strong political bargaining position as a result.

Peak Oil

Implications Of Resource Scarcity On (National) Security
Center for German Army Transformation, Group for “Future Studies”
July 2010

Introduction
The focus of the document is on the topic of finite resources, using Peak Oil as an example. The report is part of a series of publications focused on long term (30 years) with the intent to enable the Ministry of Defense to take action early.

In the past, resources have always triggered conflicts, mostly of regional nature. For the future, the authors expect this to become a global problem, as scarcity (mainly of crude oil) will affect everybody.

The authors confirm multiple views on Peak Oil timing and concede that there will be Peak Oil eventually. The study isn’t about positioning the problem on a timeline, but instead about the consequences of a peak. They expect major consequences with a delay of 15-30 years after the peak has hit.

The report refers to the uncertainty of reserve statements mainly in OPEC countries based on the quota allocation method within OPEC but also refers to the possibility of better extraction technologies.

They suggest that it has become urgent to understand those consequences of an eventual peak now in order to have enough time to adapt.

The Importance of Oil
2.1       Oil as a driver of globalization
95% of all industrial outputs is dependent on oil, in fuels, as a chemical base for polymer production etc. Oil has become a key driver of modern lifestyle and globalization.

Substantial oil price increases poses a systemic risk, not just for obvious things like transportation, but equally for other subsystems.

Thus, internationally, but equally nationally, there is a vital interest in securing access to oil, which is currently possible on world spot markets, with OPEC being cooperative due to a mutual dependency between key actors (and a massive presence of the U.S military in the gulf region).

Yet on the other hand, regional conflicts can always at least partially be attributed to resources, such as in the Caucasus region, the Middle East or in Nigeria, or they fuel conflicts due to the wealth they create (such as in Africa).

The report sees – within a timeframe until the year 2040 – a changed international security layout based on new risks (including transport risks for fuels) and new roles of actors in a possible conflict around the distribution of increasingly scarce resources.

General interdependencies driven by Peak Oil
Oil as a deciding factor in international relationships
With increasing scarcity, producers are increasingly in an advantageous position, both from high revenues and access to cheaper oil when compared to spot market prices. This partly reverts the trend to free oil markets which took place after the ’70s shocks, and gives those countries more control over the supply chain, with a risk of monopolies and nationalizations, and of “political pricing.”

Further, oil producers use increasing amounts of their production internally at lower prices, which increases domestic consumption and inefficiencies, accelerating the problem.

The report then looks at increasing “strategic” moves by key actors including the Chinese CNPC (China National Petroleum Corporation), which tries to grab the sources that are still available (particularly in Asia and Africa), but often at relatively unattractive conditions.

Overall, the authors expect a reduction of “free market” mechanisms in oil trade, and a rise in more protectionism, exchange deals, and political alliances between suppliers and customers, which could lead to significant geopolitical shifts.

Overall, higher volatility and loss of trust are seen as possible outcomes in a world where oil supplies are limited, increasing the need for “oil related diplomacy” and thus increasing risks for moral hazard among all actors, which in turn decreases overall global supply security.

The Middle East is identified as a very dangerous region with high external involvement from many players and thus a very unstable overall situation.
Link -
http://www.consumerenergyreport.com/2010/09/02/leaked-study-peak-oil-warns-sever...
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The Hirsh report also makes interesting reading!  

The Fake Fire Brigade - How We Cheat Ourselves about our Energy Future

The future of electricity – a shaky one
Today’s electricity grids are key building blocks of modern civilizations. Advanced economies depend on the reliable and discretionary delivery of power to every single socket. Our way of living, which includes the ability to read this article, wouldn’t be possible without.

Today, this is manageable, because most sources are either providing steady power flows (such as coal, nuclear or run-of-river hydro power plants) or then they are mostly controllable (such as gas fired power plants or hydropower from dammed water pools). With that mix of inputs, electricity on demand becomes possible for most advanced economies.

Additions of wind and solar power over the last decade introduced renewable electricity generation technologies into the grid. Those two sources have none of the above qualities: they neither provide steady flows, nor are they controllable. “No wind” means "no power", so does “no sunshine”, and even sharing across long-distances using high voltage DC (HVDC) transmission lines won’t change that fact, due to the stochastic nature of the inputs.

Given sufficient backup generation systems powered by fossil fuels, a larger penetration of renewable electricity is definitely possible, and might reduce carbon dioxide production and other externalities, albeit at a horribly high cost. However, these types of add-in systems fail to break our dependence on fossil fuels and don’t prove that we can deliver stable electricity in a world where renewable sources supply a majority of inputs into electricity grids.

The truth about electricity is simple, surprising and daunting: with the most promising renewable technologies - wind and solar - irrespective of expensive supplements being added, electricity systems as we know them today will not be able to operate.

And for those who now suggest to go for a nuclear option: irrespective of any argument about long-term risk, this technology too has a number of downsides, among them the inability to control output according to demand, relatively high cost, and a high dependence on fossil fuels both for the construction of plants and the mining of uranium.

And last, but not least, the fact that uranium too, is a non-renewable resources, subject to the fact that we will eventually arrive at the limits of meaningfully extractable material (e.g. the ones offering an attractive RREI) - particularly if we plan on scaling up nuclear power to replace other fuels.

Toxic legacy of uranium haunts proposed Colorado mill

GRAND JUNCTION — As Colorado nears the possible approval of the nation's first new uranium mill in a quarter century, the federal government and state continue to deal with the staggeringly expensive and never- ending mess left by earlier mills.

More than a billion dollars has been spent cleaning up radioactive tailings piles and lessening toxic leaks into rivers and aquifers at nine defunct mills in Colorado. Nearly 20 million tons of radioactive tailings sit in disposal sites where they must be monitored in perpetuity. Hundreds of acres of unusable water fill contaminated aquifers.

Much has changed in the understanding of uranium milling since that toxic legacy was created. New regulations are in place to make the industry safer. But those regulations are still untested. Costs for dealing with its inevitable contamination are as long-lived as its radioactive leavings: The state's latest regulations call for the monitoring of new mill waste for 1,000 years.
A full picture of all the taxpayer and privately funded expenses for past cleanup and ongoing monitoring and maintenance is not available because multiple agencies — the Department of Energy, the Nuclear Regulatory Commission and the Colorado Department of Public Health and Environment — along with multiple programs within those agencies, have a hand in overseeing the uranium legacy. The only federal cost information available is 5 years old.

Using those federal figures, The Denver Post found that, so far, the cleanup cost of mills in Colorado ranges from $50 million to $504 million per mill.

Nonetheless, the state is requiring that owners of the proposed new mill put up only $12 million in a bond for cleanup — an inadequate pittance in the opinion of mill opponents with an eye on history.
Link -
http://www.denverpost.com/ci_15996355
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A $12 million bond and a 1,000 year wait!

Makes sense?

Whilst I suspect that Nuclear make be pressed into action, to make up a short to medium term shortfall in the transition away from Oil & Coal, it will run into some Public scrutiny & deservedly so.

Like Oil & Coal, Nuclear is certainly a two edged sword!

Coal and Oil: The Dark Monarchs of Global Energy: Understanding Supply and Extraction Patterns and their Importance for Future Production

The formation of modern society has been dominated by coal and oil, and together these two fossil fuels account for nearly two thirds of all primary energy used by mankind. This makes future production a key question for future social development and this thesis attempts to answer whether it is possible to rely on an assumption of ever increasing production of coal and oil. Both coal and oil are finite resources, created over long time scales by geological processes. It is thus impossible to extract more fossil fuels than geologically available. In other words, there are limits to growth imposed by nature.

The concept of depletion and exhaustion of recoverable resources is a fundamental question for the future extraction of coal and oil. Historical experience shows that peaking is a well established phenomenon in production of various natural resources. Coal and oil are no exceptions, and historical data shows that easily exploitable resources are exhausted while more challenging deposits are left for the future.

For oil, depletion can also be tied directly to the physical laws governing fluid flows in reservoirs. Understanding and predicting behaviour of individual fields, in particularly giant fields, are essential for understanding future production. Based on comprehensive databases with reserve and production data for hundreds of oilfields, typical patterns were found. Alternatively, depletion can manifest itself indirectly through various mechanisms. This has been studied for coal.

Over 60% of the global crude oil production is derived from only around 330 giant oilfields, where many of them are becoming increasingly mature. The annual decline in existing oil production has been determined to be around 6% and it is unrealistic that this will be offset by new field developments, additional discoveries or unconventional oil. This implies that the peak of the oil age is here.

For coal a similar picture emerges, where 90% of the global coal production originates from only 6 countries. Some of them, such as the USA show signs of increasing maturity and exhaustion of the recoverable amounts. However, there is a greater uncertainty about the recoverable reserves and coal production may yield a global maximum somewhere between 2030 and 2060.

This analysis shows that the global production peaks of both oil and coal can be expected comparatively soon. This has significant consequences for the global energy supply and society, economy and environment. The results of this thesis indicate that these challenges should not be taken lightly.Link -
http://uu.diva-portal.org/smash/record.jsf?pid=diva2:343046
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At the bottom of the link page, is another link to download the full report in PDF format.

Whilst it is a lengthy report, I recommend it, particularly for those who have limited knowledge of the issues or those who think they know it all.

As the final notes of thios report say -
"If we take a lamp and shine it toward the wall, a bright spot will appear on the wall. If the lamp is the search for truth and for understanding, one should not assume that the light on the wall is the truth as too many often do.

The light is not the goal of the search; it is rather the result of the search. The more intense the search is, the brighter the light on the wall will be. The brighter the light on the wall, the greater the sense of revelation upon seeing it! Similarly, someone who does not search, who does not bring a lantern with him, sees nothing. For what we perceive as truth, is the by-product of our own search. It may simply be an appreciation of the light, pure and unblemished, not understanding that it comes from us.

Sometimes we stand in front of the light and assume that we are the center of the universe. If we allow ourselves to get in the way, we defeat the purpose; which is to use the light of our search to illuminate the wall in all its beauty - and in all its flaws. And in so doing, we also gain a better understanding of the world around us.

There is namely one thing even more vital to science than intelligent methods or accurate data; and that is the sincere desire to search for the truth, whatever it may be.
However, the saddest aspect of life right now seems to be that science
gathers knowledge faster than society gathers wisdom to use the knowledge.

To paraphrase M. King Hubbert, it appears as if our ignorance is not as vast as our failure to use what we already know."

One part of the conclusions of this report also says -
"Just offsetting the decline in existing production would require a new production capacity of something like 5 new Saudi-Arabia over the next 20 years."

Clearly, given the history of new Discoveries of Oil over the last 50 years or so, we are unlikely to find even ONE new Saudi Arabia, let alone one every four years, so production has no option, it is about to start heading South!

muso wrote on Sep 9^th, 2010 at 9:47am:


Yes, the USA has had, but also still has problems and not just in the Nuclear arena, but mining & industry generally.

Interestingly, there is a large push for less, not more regulation and for less, not more government involvement.

However, it seems Capitalists happily accept Socialist bailouts, where it concerns the Big end of town!

It is difficult to see a satisfactory resolution to the dilemma and that also applies to other nations, including Australia.

Personally, I would think it's a bit like food, all things in moderation, but some things are more vital than others, at certain times!

Coal and Oil: The Dark Monarchs of Global Energy: Understanding Supply and Extraction Patterns and their Importance for Future Production

Introduction

Oil is the black blood of the earth which runs through the veins of the modern global energy system. Coal is the equally black flesh of the earth which makes up the spine of the worlds power grid. Together they account for over 60% of all energy annually used by mankind. In some senses, these two Dark Monarchs can be seen as the black soul of the modern society.

Combustion of these fuels releases energy in immense amounts and can drive a wide array of machines, tools and processes. Oil and coal can also be broken down and used as a feedstock in a wide range of chemical processes, providing everything from medicines to plastics. They bring wealth and political influence to those who control them. In essence, they are a manifestation of power in the truest sense of the word.


“The Wheel of Time turns, and Ages come and pass, leaving memories that become legend. Legend fades to myth, and even myth is long forgotten when the Age that gave it birth comes again.” – Robert Jordan

In other words one may state that “nothing lasts forever”, as countless bards and poets already have announced since the dawn of time.

Currently, the world is in an age that may be called the Hydrocarbon Age. Nearly all energy is derived from fossil fuels and they dominate the present world. How did this come to be? What events lead to this present dependence on fossil energy? How did the two Dark Monarchs, coal and oil, rise to power?

The Chinese philosopher Confucius once said the following:
“Study the past to define the future”

Taming the dark flames of coal

The story of the dark twins, oil and coal, and their role in the present actually begins many hundreds of years ago, with the rise of mechanization and industry. It is from here the dark saga of the present society’s dependence on fossil energy, and the issue of peak oil and fossil fuel depletion, begins.

The dawn of the Industrial Revolution marked a most important turning point in human history. Almost every aspect of daily life was eventually influenced in some way. The most important event is undeniably the appearance of steam engines and the taming of the dark flames of coal.


The industrialized countries had previously been relying on manual labour, draft-animals or even slaves to power their economies and manufacturing. New innovations, brought to the world by an increasing number of engineers and scientists, made it increasingly possible to replace man and animal, with machines.

Thomas Newcomen, James Watt and other steam-power pioneers all subsequently developed steam engines to drive pump water out of mines.

The introduction of efficient steam engines, thanks to James Watt and other engineers, also played an important role in the development of the railroad, steam powered ships and machines. The use of steam-powered machinery demanded energy to feed the boilers. At first, this was chiefly done through the use of firewood. However, the demand soon outpaced the available production of wood fuels. Deforestation became a problem and firewood prices increased. This made it possible for a new fuel to emerge as main provider of energy, namely coal. Coal was commonly cheaper and much more efficient than wood fuels in most steam engines.


Coal mining was still predominantly quite primitive at the beginning of the Industrial Revolution. At first, most mining were done from shallow pits or holes. In some places, coal was scraped from natural outcroppings. Increasing demand forced miners and producers to venture deeper into the ground and to develop more advanced mining methods.

Central and Northern Britain contained an abundance of coal that helped to make the prosperity of Lancashire, Yorkshire, and South Wales prior to 1900. Similar development occurred in Pennsylvania in the USA and in the Ruhr-area in Germany. In the US, coal production doubled every tenth year until 1900.

Heavy industry, various stationary steam engines, railroads and steamboats became major consumers and coal production soared (VIII). By the beginning of 20th century, coal was the dominant energy source for mankind.


The modern era in steel-making began with the introduction of Henry Bessemer’s new process in 1858. The Bessemer process used pig iron as a raw material and could deliver steel in large quantities.

In 1865, the French engineer Pierre-Emile Martin bought a license to use Siemens innovation and applied it to steel making. This gave birth to the Siemens-Martin process. The most interesting property of this process is that it allows rapid production of large quantities of basic steel as well as smelting and refining of scrap metal.

The new steelmaking technologies greatly changed the availability of durable materials for society. The availability of cheap steel now allowed the construction of large bridges and enabled the production of railroads, skyscrapers, and large ships. The dawn of steel was undeniably an important event for the whole world.

The kerosene barons of late 19th century would eventually find themselves surpassed by a new invention that came to replace flame-based illumination systems.
In late 1870s, Thomas A. Edison developed and began marketing the incandescent light bulb. This new device produced even light, burned longer and brighter than oil or kerosene, and was much safer than flame-based lights. As the country was electrified, whale oil and kerosene were both driven from the illumination market.

This electrification could have been a problem for the young petroleum industry, but it was saved by the successful commercialization of the automobile. As the 20th century dawned, electric capacity expanded rapidly while continuous innovation improved the electric system.

Hydroelectric plants, such as the Hoover Dam from 1930s, became vital steps in the electrification of the society. Cheap and plentiful electricity were now possible.

Thanks to the dance of the electrons coal was still the supreme ruler of the world’s energy system, even though oil started to appear as a more and more promising branch of the hydrocarbon tree. The world would never be the same after legions of marching electrons was tamed by the dark flames of fossil fuels.


The dawn of the 20th century marked a definite turn for mankind and the birth of modern society as it is known today.
The growing need for electric power in the wake of the worldwide electrification provided new uses for fuel oil in various power plants. In addition, fuels for internal combustion engines opened many new doors for petroleum utilization. Petroleum refining and the multitude of petrochemicals that could be obtained became increasing important for the emerging chemical industries. Consequently both oil demand and production soared.

The higher energy content per volume unit of oil had resulted in the conversion from coal-burning to oil-burning on a few ships prior to the First World War.


The First World War broke out in August 1914. Oil came to play an important role in the entire war and securing access to oil became vital for the war strategies.
Gasoline-consuming aeroplanes made reconnaissance and engaged in early bombing raids. Diesel-powered submarines were operational and motorized lines of supply became increasingly important. Introduction of tanks, aeroplanes and other mechanized or motorized equipment had increased the mobility of armies. Meanwhile, new explosives and poison gases unleashed the destructive fury of the petrochemicals.


The use of automobiles for personal transport continued to boom in both USA and Europe. With a car, one could literally drive wherever and whenever one wanted to. Cars soon took on a larger and larger role in society and became an integral part of city planning.
The Great Depression of the 1930s naturally reduced the speed of development for some time. However, this decade also saw major oil discoveries in California. The largest oil boom ever seen in the USA began with the discovery of the supergiant East Texas field in 1930.

The economic troubles and remaining tensions from the First World War resulted in increasing nationalism in many countries.

In 1920s, there was a fear of oil shortage in the USA. During the war, the USA had been overproducing to supply its allies and discoveries in the late 1910s had been disappointing.
USGS even expressed fear that the nation’s petroleum resources would soon prove inadequate to meet the needs of the industry. This and increasing competition made US oil companies set their aim on primarily the Middle East and Venezuela.

New oil discoveries were later made in Mesopotamia, Saudi-Arabia, Kuwait and other Middle-East countries. The discovery of the Kirkuk and Greater Burgan fields were among the largest ones ever made.

The main lesson the Japanese military had taken home from World War I was that a country cut off from raw materials was bound to lose in a military contest. Japan conquered Manchuria in 1931, and later invaded China in 1937. The new occupied areas yielded vast quantities of food, coal and iron ore, but very little petroleum.