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Tag: Export Land Model

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[O]ur Peak Oil problem is a case of simple mathematics.
‘We stopped finding large oil fields 40 years ago. The production from those fields decreases every year and we simply can’t bring enough smaller fields on fast enough to offset those declines and grow daily oil production….
‘The demand side of the equation is no help either. Population grows every year. And the most populous countries in the  world grow per capita oil production every year as well. When you consider how many people are in China, India and other emerging countries and then consider how little oil each of them uses, it isn’t hard to see that changes in their lifestyle to include more oil consumption will make a big difference.’ [quoting John Hess, CEO Hess Corp]

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A moment’s pause to consider the practical realities of billions of others looking to improve their lifestyles on any scale by which we measure our own progress and achievements should realize immediately that a finite set of ever-more-challenging-to-acquire energy supplies needed to power those advances can only be spread so thin.

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A few more thoughts about transportation and the looming challenges we’ll face in the years ahead as our fossil fuel supplies become more challenging to develop and distribute. continue reading…

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As I mentioned in the first post of this short series, we are once again being subjected to differing interpretations of the same set of facts. It does make planning and strategizing a bit more challenging…. continue reading…

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Capex compression is a term we use to describe the reduction of upstream spending by the oil companies when their exploration and production costs are rising faster than their oil revenues. That’s what’s happening today. Hess is divesting continue reading…

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I have offered several posts on Jeffrey J. Brown’s Export Land Model [here, here, and here]. The ELM is a too-often overlooked yet critically important aspect of (declining) global oil production.

I will be the very first person to acknowledge that my math skills and my understanding of economics hover somewhere just about the “pitiful” marker. I am among the last people anyone should turn to for explanations about even simple concepts. My brain simply does not work that way, and long ago I made the decision that the investment needed to develop a reasonable level of understanding was not worth the potential benefits, and so I rely on many others to offer information and explanations.

Having said that, even I appreciate that in its simplest form, the ELM provides detailed analysis and explanations for an obvious and simple mathematical principle: Oil-exporting nations, whose own economies are growing—or hoping to—require for their own use ever-increasing amounts of the very same fossil fuels they traditionally export.

So when they keep more of what they have to offer, what’s left is less for the rest of us to divvy up. Those of us who “get,” thus get less.

I’m duly acknowledging the production increases from shale, the potential for Arctic production, and the tar sands of Canada. But the Happy Talk and Magic Technology Fairy won’t make up for depletion from existing crude oil fields, so that argument has a limited shelf life once facts are added to the discussion.

Dr. Brown recently published a detailed [and to my way of thinking, quite wonky] explanation and analysis of current trends and clear warnings about the future of fossil fuel availability for nations such as our own. If I was able to understand most of it, mostly everyone else who reads the article will understand it even more.

It’s well-worth the read [graphs, charts, and all]. Sobering to be sure, but more information is always a good thing, and Dr. Brown’s article offers us all not only a great deal of that, but of perhaps greater benefit, he provides us all with stronger reasons to start making plans based on the realities of fossil fuel supplies. Facts still suck, but we ignore them at our increasing peril.

* My Photo: Key Largo, FL – 02.20.05

NOTE: In an effort to provide another platform for at least some of the insightful and important work being done by many others hoping to make our planet and its citizens a bit safer, healthier, and better-informed about matters affecting us all, from time to time I’ll turn blog space here on Peak Oil Matters over to guests.

Tam Hunt is an attorney specializing in renewable energy law. He is the owner of Community Renewable Solutions LLC, a consulting firm based in Santa Barbara, California.

Tam recently offered another informative essay on the reality of Peak Oil, touching on the too-infrequently discussed topic of net oil exports—specifically those from Saudi Arabia.

I first mentioned this topic here, and followed up with a two-part series on the subject (here and here). Tam’s recent article: “The Saudi Oil Problem” is a terrific, informative, and clearly-explained addition to this overlooked subject. More information is always a good thing, and Tam offers us all a typically well-written account.

I’m delighted to share it here—it’s a great read. My thanks to Tam for giving me permission to post it. Enjoy!

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We’re worried about economic growth, or the lack thereof, presidential elections, and why Europe can’t get its act together. But the big daddy of issues is global net oil exports.

Saudi Arabia is once again the biggest producer of oil in the world, surpassing Russia to regain its title. Saudi Arabia also happens to be one of the most repressive and undemocratic regimes in the world. The Economist magazine ranked Saudi Arabia 161st out of 167 countries in its most recent Democracy Index.

The Saudis have massive economic and demographic problems to deal with, including a pending peak and rapid decline in oil exports. You heard right: Saudi Arabia, the world’s largest producer of oil, is facing a peak in its oil exports and a rapid decline thereafter.

There are solutions, however, to these very large problems, which I’ll discuss further below.

Saudi Arabia’s national oil company, Saudi Aramco, pumped about 11.5 million barrels per day for the last year, up from about 9.5 million in early 2009. The Saudis are pumping more oil now than they have in decades, along with the rest of OPEC, which is at a 23-year high for combined oil production.

Russia held the top spot for oil production for a couple of years, but Saudi Arabia has come roaring back since 2010. The U.S. is a distant third place with about 6 million barrels per day.

Net oil exports, are, however, a very different picture. The U.S. is famously the world’s biggest importer of oil. While our production of oil has taken an unusual upward tick in the last couple of years, spurred by record high prices, and our consumption of oil has declined even further due to increased energy efficiency, conservation and a still-struggling economy, we still import about half of the oil we consume: a massive 9 million barrels of oil per day.

Saudi Arabia exports about 8 million barrels per day (‘mbpd’ from now on), with Russia not too far behind at about 7 mbpd.

So far, this is all fairly familiar data. However, what is not well known is the degree to which Saudi Arabia’s massive oil exports are threatened by its demographics and a probable decline in its aging supergiant oil fields.

A new report from the U.K.’s Chatham House (PDF) examines this problem in detail. They conclude that Saudi Arabia’s oil exports will peak around 2020 and, under current policies, decline to zero by 2038. You read that right: decline to zero. This decline will occur due to the dramatic growth in consumption by Saudi Arabia’s rapidly growing population and increases in per capita energy consumption. Saudi domestic consumption of oil is growing at about 7 percent per year, which leads to a doubling of consumption in just ten years.
Figure 1. Saudi Arabia’s oil balance under “business as usual” projections

(Source: Chatham House)

Now, 2038 is a long time away, under normal circumstances. But oil politics operates in decadal timespans, not normal timespans. 2038 is, in oil terms, not that far away, so if Chatham House’s projections are accurate, we’ve got a major problem on our hands.

What will the world do if fully 10 percent of global oil production, and 20 percent of global net oil exports, is consumed by the Saudis rather than exported?

Saudi Arabia’s governmental revenue will come under extreme pressure if net oil exports decline. The Saudis rely on oil revenue for fully 80 percent of their budget. Many things will have to give if oil exports do dry up. Net oil exports declined fairly dramatically from 2005 to 2010, as Figure 1 shows, but have risen back in the last couple of years. Chatham projects net exports will rise to about 9 mbpd by 2020, and then start a precipitous decline as the Saudis’ demographic time bomb explodes.

Figure 2. Saudi Arabia’s fiscal deficit projections under “business as usual”


(Source: Chatham House)

The global oil exports problem

Saudi Arabia’s problem is not, of course, unique to Saudi Arabia. It is a global problem that afflicts many countries. Jeffrey Brown and Samuel Foucher have developed an “Export Land Model” to predict how the global net oil export situation will unfold in coming years. They found that the top five exporters of oil (Saudi Arabia, Russia, Iran, United Arab Emirates and Norway) decline from about 24 mbpd in 2008 to about 7.5 in 2020 and go to almost zero by 2030. Global net oil exports are about 40 mbpd, so these producers account for more than half of the global export market.

These net oil export projection declines are due to the demographic explosion that the Chatham House report focuses but also to declines in oil production in these countries. Chatham House chose not to discuss the role of declining oil production, choosing instead to believe Saudi projections of steady oil production, but this is a real and extremely serious corollary to the demographic explosion. It’s also the reason why Brown and Foucher project Saudi Arabia and other oil exporters going to zero faster than the Chatham House report. Figure 3 illustrates (with generic numbers) how these two trends work together to cause net oil exports to decline very quickly. Figure 4 shows the result of Brown and Foucher’s modeling for the top five producers.

Figure 3. Brown and Foucher’s Export Land Model

Figure 4. Brown and Foucher’s 2008 projections for the top five global exporters of oil

This data should provoke a “holy crap” moment in all readers. It’s a very big deal.

Currently, we’re far more worried about economic growth, or the lack thereof, presidential elections and why Europe can’t get its act together. These are all important issues. But the big daddy of issues is this one: global net oil exports.

I’ve written about these issues before, in the last go-round of record high oil prices in 2008. This time around, four years later, we’re seeing much the same phenomena unfolding. We’ve just been through yet another super price spike, which hurt Europe more than us because they hit new record highs for oil prices, whereas we in the U.S. didn’t see prices as high as we did in 2008.

Europe is now being pushed back into recession in part because of the new record high prices (every recession in the last 30 or more years has been preceded by an oil price spike). And we are now seeing oil prices decline again (oil is currently about $83 per barrel for U.S. WTI crude and just under a $100 for European Brent crude, down from the recent peaks of $112 and $127, respectively) rather quickly as European growth stalls, U.S. growth struggles and oil storage numbers reach recent highs here in the U.S.

A recent article extends the original Export Land Model, shedding additional light on this singularly important issue and providing strong support for Brown and Foucher’s initial projections.

The Saudi solar solution

There are solutions. I’ve written recently about the tremendous growth in renewable energy around the world and similarly positive trends in energy efficiency and conservation. The picture is far less rosy, however, when we look at transportation fuel as opposed to electricity. There are some similar positive themes in transportation energy, but there are also major problems in shifting away from petroleum as our key transportation fuel because we’re so dependent on oil for transportation. Simply put, this is a many-decades-long process at best.

What we really need is a World War II-level effort to rapidly and massively save energy in all sectors through improved energy efficiency and conservation, and to shift away from oil and coal in transportation and the generation of power.

The Saudis seem to be recognizing the severity of the problems they’re facing. They recently announced a massive renewable energy initiative, designed to bring 54 gigawatts of mostly solar and wind power on-line within 20 years. This will make up about one-third of total electricity consumption at that time, up from almost zero renewables on-line today. This growth will be achieved with a type of feed-in tariff, which guarantees eligible power producers a contract at a long-term fixed rate. Feed-in tariffs are responsible for the large majority of solar and wind capacity installed around the world today.

At the same time, the Saudis need to focus on energy efficiency and conservation. Saudis consume the most oil per capita of any major economy in the world. I have considerable faith that, as government revenues shrink from declining net oil exports, the Saudis will find economically compelling incentives and/or mandates to reduce domestic consumption of oil.

Conclusion

The problem of “peak oil exports” is the even more scary sibling to “peak oil.” Peak oil is, by itself, a massive problem, but peak oil exports highlight the problem even further, particularly for major oil importers like the U.S., Japan, China and Western Europe. The Saudis and other nations experiencing a demographic explosion will suffer greatly from reduced revenue from oil exports, but they will at least have the energy resources to maintain their economies. Countries that are net importers of oil will suffer in their own way, primarily from much higher prices for oil and possible shortages of oil as demand far outstrips supply.

As the world’s biggest importer of oil, by far, the problem of peak oil exports highlights the need for the U.S. to get off oil as quickly as possible.

The package of solutions to achieve this shift away from oil must include major and ongoing investments in energy efficiency and renewables. Energy efficiency is steadily improving with new technologies and higher fuel prices. Similarly, conservation (behavior change, as opposed to technological improvements that foster energy efficiency) will occur automatically with higher prices.

We also need to ensure that the exponential growth in renewable energy over the last decade continues. Luckily, the cost of renewables has plummeted in recent years, so this transformation away from fossil fuels can be done cost-effectively when it comes to electricity.

Transforming our transportation energy sector is far less easy, however. Conservation through carpooling, better mass transit and low-tech solutions like bikes and walking, will be major parts of the solution. Smaller vehicles, higher mileage vehicles, hybrid cars and electric cars must lead the way in terms of new technologies. Electrification of transportation, while still fairly expensive with today’s technology, is still the most promising long-term solution, because electric vehicles offer a readily available technology for entirely eliminating dependence on oil.

 

 

This is a follow-up to my (only slightly) tongue-in-cheek post from last week regarding the Export Land Model [ELM) designed by petroleum geologist Jeffrey Brown and Dr. Samuel Foucher, a subject I first broached here.

Yet over and over again — on the radio, on TV, in print, in the blogosphere, and all over Washington — political ideology is   substituting for thought. [1]

And when our leaders and influential voices aren’t thinking, when facts and science become nothing more than carelessly-dismissed casual opinions, problems are sure to follow. The onset of Peak Oil and the mounting evidence of global warming are but two casualties to facts, evidence, and truth as partisan (ignorant) ideology trumps … well, you know … the facts!

ELM is a fairly straightforward and actually quite logical mathematical concept. One can quibble until the cows come home that this percentile or that mathematical construct is incorrect/fails to take into account/yadda yadda yadda. But the basic premise is little more than common sense, a point I tried to drive home using the only slightly-embellished water bottle analogy in the first part of this series.

An owner of a resource of any kind, one beneficial not only to buyers/users but to the owner itself, will of course make use of that resource to grow or otherwise benefit its own standing. Simple enough. Growth inevitably follows, and with growth comes an increase in demand, and thus an increase in the amount of the resource retained by that owner. First-grade math will then demonstrate that if I keep more of what I own rather than give to you, the end result is that you get less from me.

Not really all that difficult to follow … even the most mathematically-challenged denier shouldn’t have much cause for dispute. But then again, when reality doesn’t matter at all if it conflicts with one’s delusion and denials, then I guess I could be wrong about that! Facts are damned inconvenient at times….

Even more significant is a corresponding factor to the basic tenet of the ELM, as noted in this post.

An ELM Key Insight is that the domestic consumption of oil exporting nations will, over long time periods, tend to grow faster than the domestic oil consumption of oil importers because of the windfall effect of oil revenues, and will tend to continue to grow even past the   production peak, especially whilst net exports are positive.

In other words, in my example above, “owner’s” rate of consumption of the resource will be greater than the rate of growth exhibited by that of the established “buyers/users.” The more revenues “owner” acquires and plows back into growth or similar improvements to its own standing, the greater the “momentum” of that growth or increase … and thus the more of those resources “owner” must retain for itself to support the rapidly-expanding rates of growth. The end result is that the rate of export decline accelerates. Getting less, faster, is not good math.

A nation only exports the surplus of its vital resources. Following a peak in oil production, a nation is flush with capital after exporting more oil than ever in its history—oil that is often sold at previously unreached high prices as well–and its economy responds with growth. But with an expanding economy comes growing demand for oil, causing the nation’s domestic oil needs to cut into a supply that recently began a steady decline. These two sources of pressure on the nation’s oil surplus cause it to deplete at an ever-faster rate. Unless the nation does the unprecedented and keeps its rate of domestic consumption always at or below its exponentially declining rate of production, the surplus vanishes and exports stop. [2]

And so as our first-grade math quiz above convincingly demonstrated (complex though the concept may be), if owner keeps more for itself, less is available to everyone else, and “less” is proceeding along much quicker. Deniers should feel free to rest here if this is too much to absorb all at once.

So when this story appeared on news feeds recently (and has gotten precious little attention so far as best I can determine) and opened with this remark:

The world may have to live on a lot less Saudi Arabian crude towards the end of this decade as rampant internal demand eats into oil exports and the kingdom’s alternative energy plans may prove too little too late.

Followed a few paragraphs down by these tidbits:

‘Domestic consumption has been growing very fast as a result of rapid demographics, steady economic growth and heavy subsidies, with the latter leading to excess demand, said Ali Aissaooui, head of economic research at Arab Petroleum Investments Corporation in Saudi Arabia….

Excess demand could affect the capacity of some countries, such as Saudi Arabia, to maintain the spare capacity needed to provide flexibility to the global oil market.

The head of state oil firm Saudi Aramco admitted last year that unless internal demand is controlled the amount of oil left for export could fall by 3 million bpd to less than 7 million bpd by 2028.

But Jadwa expects exports to fall far more dramatically, with less than 5 million bpd escaping onto the global market by 2020, thanks to a 60-percent surge in internal demand to nearly 4 million bpd and barely enough new production to offset declines from older fields.

added these statistics:

According to analysts at Riyadh-based Jadwa Investment, oil demand in the kingdom rose by 22 percent between 2007 and 2010, out pacing the Chinese oil demand growth rate despite China’s economy expanding almost three times faster.

Official data shows Saudi oil consumption rose by more than 5 percent a year from 2003-2010 to an average of 2.4 million   barrels per day (bpd) in 2010. BP statistics put it closer to 2.8 million bpd last year, up 7.1 percent from 2009.

A simultaneous subsidy-driven fuel demand boom and natural gas shortage could see oil consumption hit 6.5 million barrels per day (bpd) by 2030, or over half Saudi’s current production capacity, according to a report by Jadwa published in July.

and finally offered this kicker:

The country’s domestic consumption of energy, especially oil, at very cheap prices, is also likely to rise rapidly, sharply reducing the amount of oil available for export.

It all adds up to a whooper of a problem, one surely not limited to this oil-producing nation. Any reason to think this isn’t happening in other exporting nations now seeking to provide greater opportunities for their own citizens? The end result (as that article noted) is not much of a surprise for those of who living in Fact-Land:

It’s because the decline in oil exports accelerates that the bottleneck in oil made available to importing nations occurs as a  ‘crash,’ not the steady decline, or ‘long gradual tail’ so often pictured by authorities like the IEA.

Hello!

For all the disputes and conflicts and name-calling and finger-pointing that dominates much of the (still-too-limited) public dialogue about our future supplies of fossil fuels, the clarity (and distress) of the Export Land Model is a bit much to ignore. When you add it to the mix of the other facts* suggesting we’re already past the peak in rates of oil production—the nonsense disputing evidence notwithstanding—(as I’ve discussed in recent posts), perhaps it’s time we start engaging in a much more serious, ongoing discussion about what we should be planning and thinking about and doing?

Now would be a very good time.

* As I noted in this post last December: “[E]xploration (deep water or tar sands, anyone?) and production has become more difficult and certainly more expensive, to say nothing of the resource quality. The primary exporters of oil are experiencing increasing domestic demand, and so naturally they are keeping more oil for their own national use. Hard not to understand that that just means less for everyone else. The majority of large producing oil fields are experiencing an inexorable decline in production. A poor worldwide economic environment has restricted investment in exploration and production, and there quite clearly will not be a ramp-up quickly or inexpensively. China is leading the way in higher demand for oil. On and on it goes….”

Sources:

[1] http://robertreich.org/post/11410402042; The Triumph of Dogma, and a Sad Goodbye to David Frum By Robert Reich – October 14, 2011

[2] http://www.heatingoil.com/blog/another-take-on-peak-oil-exports-not-production-indicate-crisis224/; Another Take On Peak Oil: Exports, Not Production, Indicate Crisis by Zoe Macintosh on February 25, 2010

About twenty months ago, I discussed the topic of the Export Land Model, one defined and credited to Texas petroleum geologist Jeffrey Brown and a colleague (Dr. Samuel Foucher). Its premise begins with a simple question: “What happens to oil exports in a world with constrained oil supplies?”

As I noted in that prior post: “As oil-exporting nations use the profits generated from their production and sale to grow their own economies and strengthen their industries and infrastructure—while raising the standards of living of their own citizens—they must necessarily increase the amount of oil they retain for themselves. It is, after all, their oil. (And they function with fossil fuel-based infrastructures just as the rest of us do.) Seems fairly straightforward….

“What we tend to overlook … is that as oil production begins its inexorable decline (as it already has in many instances), and as this domestic use increases, the amount of oil available to the rest of us decreases even more drastically than it does based on a straight oil production decline.”

Uh-oh!

Let’s take a look at how this might work, using very simplified math (trying to help out certain political “leaders” as much as I can), and a scenario most can relate to.

I have 1000 bottles of water available to me each day from a reservoir located entirely on my property. My family has owned this land for hundreds of years. To extract the water and bottle it costs me, on average, just ten cents per bottle. So every day, like clockwork, investing the time and money needed, I extract 1000 bottles of water from my self-contained reservoir. My cost is a measly $100.00 every day.

Unfortunately, in my little community, we never get rain … ever! (Work with me here. I’m adopting a Republican leadership strategy: facts and science are inconvenient for purposes of my story, so off they go!)

The reservoir initially held, according to most water-bottling experts, approximately 100 million bottles of water way back when. Now I’m down to about 50 million bottles. Not an insignificant amount, to be sure! The reservoir is no longer just one big lake any longer, however. Draining away all that water over all these years has of course run it down quite a bit, and now some of that water tends to slide off here and there into little seams and pockets and shallower areas. That stuff is gonna be tough to get to, let me tell you!

But so far, I don’t have a lot of trouble getting to most of the water. Some days I have to work a bit more. Truth be told, more days are like that now than ever before, but not a big deal. I’ve had to buy some fancy do-hickeys to help me pump out the water, but I’m not worried. Just wish those things didn’t cost so much! But I’ve still got a lot of water on my property! Taking a good guess about those underwater nooks and crannies and eyeballing how deep I think the reservoir is, I’m pretty damn confident that I’ve still got “quite a few years” left before squeezing out all those bottles of water gets to be a bit too much for me.

Of course, water is absolutely essential to my continuing health. I can’t do without, that’s for sure! Every single day for the last many years, I’ve needed 50 of those bottles myself for all kinds of things. But those 50 that I first take out bottles every day for myself have been more than enough. I’ve never worried that I should start skimping here and there.

Now, I do like the finer things in life. A nice riding mower sure does help me out on the property, for one! Lots of TVs, too … can’t have enough of those! I like to take trips now and then, and as for new cars—the expensive kind—well, they’re a are a real treat for me. A few years back, I bought this really terrific piece of property and built a house. I like to spend a lot of time during the summer there. Lots of nice things in that house, too. Stuff is getting expensive! So I need some revenue to make sure I have all the stuff I want.

The neat thing about all of this is that with so much water on my property, every single day I’ve been able to share my good fortune with all my neighbors. It’s a small community, and most of them, unlike me, don’t have a lot of possessions yet and not a lot of needs, but they do need their water. And wouldn’t you know that each and every day, I’ve been able to sell all my bottles of extra water to my neighbors, all of whom are delighted to pay the $1.00 per bottle I ask. Win – win!

But here’s the thing: now I’m married (time travel into the future is way cool)! And wouldn’t you know, my wife needs her own supply of water every day. Not a problem, honey! We’ve got a lot of water. But I’ve been noticing recently that I’m not always getting the full 1000 bottles out every day. (That whole “no rain” thing is damned inconvenient!) Actually, I can’t remember the last time I did, but hey! We have enough for us, so no worries!

Neighbors grumbled a bit when I had to let them know I couldn’t meet all of their demands any longer, and because it’s getting a bit more difficult for me to get the water each day (gotta do some climbing down to get to the water nowadays, what with the level dropping and all), I had to start charging them a bit more. Truth be told, I’ve been kinda raising the prices regularly for quite some time. Wish it were different, but you know how it is!

Every now and then I’ve dropped the price when it made sense to do so, but most days I just can’t. (I do like buying all that stuff, you know, and it’s not free!)

And since my neighbors all need the water and would prefer getting it from me rather than having to waste time and money and effort driving all over the place to find a few bottles here and there in some of the outlying areas of our county (and it’s usually more expensive stuff, too; and some of it tastes funny, by the way), they keep buying whatever I put out on the card table I have out in front of my house.

No need to put up any fancy store decorations or anything like that. They’re gonna show up every day no matter what, so why spend the money? You would be amazed at all the cool stuff I buy from catalogs with all the money I save by not having to do anything to get my neighbors to buy my water! I’m sure I’ll use at least most of that stuff eventually.

Good news! We have a new baby (this fact-and science-free living is just amazing)! The baby sure does demand a lot, and it turns out that Junior needs a lot of water too! Not so much right now, ‘cuz after all he’s just a baby, but it’s just common sense that once he starts to grow, I know he’ll be needing more. Not a problem, ‘cuz I got lots of extra water!

Of course, while the neighbors are happy for me and delighted that my child is getting lots of chances to do things on my dime (amazing the stuff you can buy from baby catalogs!), I don’t have quite as many water bottles available for them each day. And you know how neighbors are: they do need their water!

There’s been some additional grumbling, and a few of the neighbors are starting to add some soda or tea to their daily routines, but that only goes so far. Those Dr. Pepper baths aren’t nearly as enjoyable as you might think, so they are definitely feeling the pinch now and then, but everyone is managing so far. There’s still just about enough water in the county to take care of everyone. Don’t for how long, but we’re all good at least today.

Fact is, I’ve got too much to think about right now as it is, so I really can’t be bothered thinking about tomorrow or next week, or even next month. That kind of long-term thinking just doesn’t work for me.

Of course, I could just tell my wife and Junior that they should do without all the water each of them needs, but I’m not having that conversation! So the bottom line is that I’m going to keep keeping for myself all the water my family needs every day and sell the rest.

More good news. Baby # 2 has arrived! Junior is starting to need a bit more water now that he’s starting to grow and have friends over, and well, with another thirst to quench, it looks like my neighbors’ supply has just gotten a bit smaller. And you know, I’m climbing down a bit more these days to get at all that water, so … well, you know how it is with costs and expenses and all.

Turns out that my parents are moving in. I’ve got a lot a space, and we do have that nice big second home (and man, that’s getting expensive to maintain). I hate to do it to my good neighbors, but it looks like the price is going to creep up just a bit more, and sad to say they are all going to have to start driving a bit farther out to get all they need, cuz most of the other suppliers in the county are having their own troubles keeping up with demand. I heard that just last week twenty of our neighbors had new babies! Six more of them started up new businesses, too. Good for them! They do need some water for all those new and shiny things, of course, and well, I’ve got more mouths to feed first and foremost, so  … well, you know how it is….

In fact, we just had baby # 3! Go figure! And man, do the other two growing children have their needs. Amazing how much more water I’m having to keep for myself these days. They all take showers; friends are now coming over; they’ve got school projects and sports activities and just about all of those events require water; and … well, the truth is that I’m needing a whole lot more water for my family than ever!

Neighbors are saying the same thing about their families, too! Go figure! A few of them are lucky because they have some smaller pools on their property, so they can usually make up for the county-wide shortfalls. Quality is not always as good, of course, but they’re fine. They do complain about how hard it is to get to those other reservoirs and how much work they have to do to get their water bottles back home, but no one seems to be worrying. Of course, they don’t have as much time to do other things, because getting that water home is now a lot more time-consuming than they imagined. Some of the store owners in town are complaining too. “Everyone in town keeps telling me that they can’t buy as much from me as they used to. Excuse is that they have to spend more money on that damn water! I’ve got expenses, too!” I hear that more and more these days.

This is kinda sad, but my sister’s husband lost his job, and they are having a tough time. Since I have a lot of water, I’m helping them out by giving them all they need. That’s one less thing they have to worry about, thankfully! After all, I do have lots of water! And my nephew … wow! He goes through water likes it … water! “It’s free, Uncle, and you’ve got a lot, so what’s the big deal?” I hear that all the time now. And my own Junior has this annoying habit of not turning the shower off, either. What a dummy! Twice a day, I have to clomp up the stairs to shut the water off. Good thing I have a lot of water to waste.

I know the neighbors understand, but I know they’re not happy. What can they say, really? It’s my water! It’s costing even more to get their water from me, I’m working harder, and my own water needs just keep growing! So glad I have a lot of water! Family is getting a bit antsy, ‘though. I had to buy my parents some new furniture because they were complaining so much. I think they’re happy now. But the kids! Every day they want something else, and I know there’s gonna be hell to pay if I don’t give in now and then. Truth is, it’s a lot more now than then these days….What can I do?

How’s all this math working for you so far?

Let me run by you this opening sentence from a recent Reuters report. Might be a good idea to take two minutes and read the entire story.

The world may have to live on a lot less Saudi Arabian crude towards the end of this decade as rampant internal demand eats into oil exports and the kingdom’s alternative energy plans may prove too little too late

Welcome to the Export Land Model … the one we need to consider here in the real, fact-based world.

More to come.

I haven’t touched on too many geopolitical issues (but see here and here for examples) as they bear upon Peak Oil, but that is a result of choices made, and not a determination that the subject is unimportant.

The recent publication of both German and Australian reports on Peak Oil (here and here—the subject of an upcoming post) have sparked a great deal of interest and chatter on the internet, and deservedly so. Coming on the heels of several other high profile reports this year, such as the United States Joint Forces Command’s Joint Operating Environment (JOE) report and a Lloyd’s/Chatham House white paper, keeping government concerns about Peak Oil away from public attention is becoming increasingly difficult.

The report from Germany cited above suggests that Peak Oil will happen this year, and it paints a disturbing picture of potential foreign relation and energy supply problems that will surely not be limited to Germany. The JOE report is not much more sanguine about future international challenges and potential conflicts, although it did not assert a specific date for Peak Oil (but did express serious reservations about the stability and availability of adequate supplies beyond the next few years).

As oil supplies diminish over time, the relative importance of oil-producing nations will likely increase, and with that added influence and power will be the likelihood that U.S. and other Western nations may find their preferences and “values” playing second fiddle to the preferences and values of those foreign suppliers—not all of whom share our ideals and objectives. It’s not at all far-fetched to consider the real possibility that active resistance to the growing political and economic might of these new international power players may result in a swift curtailment of oil supplies. That’s a powerful club for the Russias and Venezuelas and Saudi Arabias of the world to suddenly wield.

Seven of the fifteen largest suppliers of oil to the United States are on the State Department’s Travel Warning List, for their “long-term, protracted conditions that make a country dangerous or unstable.” [1] Who knows how the internal politics of those nations will play out in the years to come, and what the international/energy supply and security ramifications might be? Saudi Arabia, long-recognized as the leading oil exporter, has its own set of internal issues to contend with, as both Matthew Wild and this article make clear. We cannot passively assume that our primary suppliers of oil will remain so.

Relying on potentially unstable suppliers is not the most optimistic strategy, and we don’t have too many alternatives right now. Ignoring these geopolitical considerations is even less prudent.

Furthermore, the declining availability of fossil fuels will just as likely limit the opportunities we have to export our preferences and values to other nations in need of our assistance. Diminished influence in the international arena will carry its own set of consequences.

Coupled with the loss of political influence is the likelihood that our ability to project military might and protection will also be lessened. The military is the largest consumer of fossil fuels. If we continue to allocate the same percentages of energy supplies to our military, what happens to the rest of us? How will an even smaller pie be divided? And if we allocate fossil fuel supplies in the same proportions now, what happens to the comfort and security we derive from our then-decreased military capabilities? (The flip side, of course, is that proactively decreasing our dependence on fossil fuels lessens the need to project our military all over the world and at exorbitant costs—financial and otherwise.)

And let’s also not forget that diminishing supplies with the onset of peak oil production means that other nations will vie more aggressively for their fair share of oil supplies. The United States may find itself playing an international game it is not at all accustomed to playing—or prepared to play at all. Acceding to the types of political, economic or ideological “favors” that future suppliers may insist upon could prove a very difficult pill for this country’s leaders and citizens to swallow.

A sampling of headlines from just a few articles over the past few months about China’s aggressive acquisition of future oil supplies suggests another problem. They have the means to tie up a good chunk of future supply, and that behavior may be indicative of how future energy transactions take place, as the German report suggests.

“China Global Oil Shopping Spree” [2]

“China’s Global Shopping Spree” [3]

“Saudis Tighten China Energy Ties to Reduce U.S. Dependence” [4]

“China Looking To Make More Loan-For-Oil Deals – report” [5]

“China Now Controls Majority Of Canada’s Athabasca Oil Sands Corp” [6]

The longstanding practices of free market purchase and sale may not prove to be as enduring as we would expect. As the German report noted, “[b]ilateral, conditioned supply agreements and privileged partnerships, such as those seen prior to the oil crises of the 1970s, will once again come to the fore.” Suffering as we do from our arrogance and sense of entitlement because we’re Americans, the change in oil market practices in coming years will prove to be a distinct and unpleasant shock to our political and economic systems, with consequences spreading far and wide. We won’t be the only nation suffering, either, but that will be of little consolation.

Let’s also not ignore the fact that as supplier nations’ populations increase (Matthew Wild suggests that Saudi Arabia could have as many as 45 – 50 million people in twenty years’ time, more than double its 2000 population [7]), the needs of their own citizens will surely take precedence of those in other countries. Exports are usually derived from excess production after domestic usage is accounted for. (Mexico—one of our primary suppliers—has seen its oil exports to us decline by more than a third in just five years. That trend won’t be reversing course. That’s not encouraging.)

With hundreds of millions of citizens in less-developed parts of the world seeking their own version of the American Dream, where will that leave the gluttonous U.S. demand to be satisfied? (“Should China’s total per capita oil consumption reach the level of the United States, they will require basically all of the world’s current oil production. While it is highly unlikely that China’s per capita oil consumption will reach that level, even if it reaches half of the current U.S. level, they will require 40.7 million BOPD.” [8] That’s almost half of the world’s daily usage … not comforting.)

We’re beyond foolish and ignorant if we think that we’re always going to be first in line when oil is passed out just because we’re America.

Any sense that these are issues “out there” and not really affecting us in our daily, personal lives is a risk we should not be taking. What happens out in the real world oil markets has a direct impact on each and every one of us. The more information and understanding we possess, the better our chances of doing something to help mitigate the very real impact and consequences of declining oil production and supply. It’s understandably far more preferable to let “others” work on these issues, but we must give voice to our own concerns so that decisions and practices eventually implemented will have some marginal comfort and familiarity to us.

We are probably beyond the point where we can fully and properly prepare for effortless accommodations and transitions away from fossil fuel dependency, but having a say in how we all must deal with the effects of Peak Oil will help make those transitions more palatable.

Small consolations indeed.

Sources & References:

[1] http://www.energybulletin.net/stories/2010-09-03/exponentially-purpose-century-and-half-ignored-warnings – Exponentially on purpose: a century-and-a-half of ignored warnings – Published by Peak Generation on Fri, 09/03/2010 by Matthew Wild

[2] http://www.energytribune.com/articles.cfm?aid=3356; Posted on Mar. 02, 2010 By Michael Economides, ET editor in chief, and Xina Xie, ET China correspondent

[3] http://www.energybulletin.net/node/52256; 04/01/2010

[4] http://www.bloomberg.com/apps/news?pid=20601207&sid=afA7qKyLK44s

[5] http://www.forexyard.com/en/news/China-looking-to-make-more-loan-for-oil-deals-report-2010-05-17T101708Z

[6] http://www.treehugger.com/files/2010/01/china-now-controls-majority-canada-s-athabasca-oil-sands-corp.php

[7] http://www.energybulletin.net/stories/2010-09-03/exponentially-purpose-century-and-half-ignored-warnings (full cite above)

[8] http://oyetimes.com/views/columns/5880-have-we-passed-the-point-of-peak-oil – Have we passed the point of Peak Oil? by Glen Allen