Wednesday, January 04, 2012

Oil Shock - The No Growth World


http://bit.ly/zVEXwh Radio Ecoshock 120104 Oil Shock the Post-Growth World with Jeff Rubin, Charles Maxwell from ASPO 2011 and interview with Italy's Ugo Bardi on climate change vs. peak oil.


The price of oil hits you at the pump, in your food bill, and everything you buy. What if you can't afford it?

For years, I've covered Peak Oil as the story of a limited resource. Meanwhile, the oil industry, glutted with billions in profits, keeps drilling deeper offshore, finds more dirty oil in the Tar Sands. They have a mountain of goo in the "heavy oil" of Venezuela - the industry just needs to build more refineries capable of handling it. And we can always make more oil by liquefying coal!

All these options drop from using about one barrel of oil to get 100 barrels, like the pressurized oil wells we grew up, to using one barrel of equivalent energy to get three (like the Tar Sands.) That means many, many times more emissions for every mile or kilometer we drive, house we heat, or factory we run. Oil costs soar and it's a recipe for climate disaster.

Meanwhile, big oil companies, aided and abetted by polluting countries like Canada and Russia, are already plotting to drill in the extreme conditions under the Arctic ice. One leak there, stays for centuries. Nobody can clean it up, and the oil-eating bacteria are few in the cold environment. We can't let that happen. Oil companies must not take advantage of the ice they helped melt.

What about Peak Oil?

Economist Jeff Rubin says we've hit a new kind of peak oil: the peak price our civilization can pay and still grow. We've passed that point now, Rubin says. If China and India grow,

Western countries must shrink. And "shrinking" isn't pretty. Expect unemployment, disappointed dreams, and governments drowning in debt they cannot repay.

Who is Rubin? He was the Chief Economist at CIBC World Markets, a global-scale bank trading operation. As a forward thinker on energy issues Jeff Rubin gets a lot of press and TV appearances. His 2009 book "Why Your World Is About To Get a Whole Lot Smaller" (8 minute You tube here) shook up the financial world. He predicts an end to globalization, and a return to regional production, due to ever-rising oil prices.

In this week's Radio Ecoshock show you hear Jeff Rubin's presentation at ASPO 2011. That was the annual conference of the Association for the Study of Peak Oil and Gas USA, in Washington D.C. at the beginning of November 2011.

Then you'll get the main clips from a talk by Charles T. Maxwell. He is the senior Energy Analyst for Weeden Co. Charley's been a top ranked energy authority for years. Charlie outlines who has more oil (very few countries, like Norway and Columbia) and who is running out fast (like Mexico and maybe Saudi Arabia).

Rubin and Maxwell were recorded by Radio Ecoshock Washington correspondent Gerri Williams, and presented courtesy of ASP USA. As far as I know, Radio Ecoshock is the only place to find these recordings online.

But neither of these gurus include the challenge and damage of climate change in their forecasts. They don't mention it. Why not? To wrap up that angle, we'll finish off the show with a Radio Ecoshock interview with Ugo Bardi. He's a cross-breed, as founder of ASPO Italy, and an editor at the Oildrum.com blog - but also part of the Italian climatologist scene. I'll ask

Ugo why these two camps, don't talk much to each other.

JEFF RUBIN

Wiki on Jeff Rubin here.

Jeff Rubin is a Canadian with a Masters in Economics from McGill University. But he sounds like a Texan, with almost a drawl. Maybe he spent so much time with Texan oil men?

Jeff was chief economist from 1992 to 2009 for CIBC World Markets, a huge Canadian global trading and investment company, part of the equally huge Canadian Imperial Bank of Commerce (CIBC). By correctly predicting many trends, Rubin made a lot of people a lot of money. In 2009, Rubin decided to resign from CIBC to pursue his career of writing and public speaking.

In particular, Rubin warned of the increasing price of oil, and it's impact on business and society at large. For this, he was adopted as a popular speaker at Peak Oil events like the annual ASPO USA gathering. His 2009 book "Why Your World Is About to Get A Whole Lot Smaller" sold a lot of copies, and brought him international TV coverage. Rubin was already a weekly financial columnist for Canada's national newspaper.

In this stimulating talk recorded November 4th, Jeff Rubin offers his own definition of peak oil. Instead of basing it on the geological limits of oil on Earth, Rubin says the peak is the price a global economy can afford to pay, before it slows down, or crashes. Rubin doesn't say the price of oil will always increase. He says it will go up until it becomes unaffordable.

The economy goes into a recession (or worse), oil falls, then things pick up a little. We keep hitting the ceiling of "too high", doing damage to our economic system all along the way (like creating unsolvable debt levels).

Every major recession, Rubin says, has the "fingerprints of oil all over it."

As national debts pile up, every politician says they will "grow" their way out of it. Creating growth is the only way to pay off all that debt, which only grows with interest. But with oil limitations, whether geological limits, limits caused by lack of needed refineries, or limits imposed by price - the days of growth for everybody are over, Rubin says.

We have hit a plateau of "no growth".

That means if one country grows, another must shrink. For example, the China's economy is growing rapidly. But the economies of Greece, Italy and others are shrinking. Perhaps with real accounting, and taking out the currency factor, America's economy is shrinking also. If more consumers use more oil on one side of the world, people have to consume less and use less oil somewhere else. Nothing in our political system, nor our classic capitalist economics, is ready for a no-growth world. That means a rocky road ahead.

National debt might as well be denominated in barrels of oil, Rubin says. We depend upon it so much. The higher the price of oil, the higher the amount of our true debt.

And this is no "oil shock" like the oil embaro of the 1970's. Right now, there is no limit to producton other than people's ability to pay, and the industry's ability to go get it. But it's too expensive to support more growth, and only going to get more expensive. The end of growth is not a temporary thing. It's the new reality that nobody is ready for.

Unlike our next guest speaker, Charles Maxwell, Rubin says a no-growth economy is going to make a lot of people unhappy. There will be high unemployment. Many dreams will be shattered. There could be civil unrest, possibly for decades.

And as he describes in his book, triple digit oil prices will kill off globalization. It becomes just too expensive to ship things all over the world. Some industries will return to the United States and Canada, for example, despite the low cost of labor overseas, Rubin says. Some environmentalists will cheer the end of globalization, and the oil age, but Rubin says the process isn't going to be pretty.

It's an interesting take, and I think he's right. Check out Jeff Rubin's complete talk in this week's Radio Ecoshock show. (Click the title above to download)

Find Jeff Rubin's blog here.

CHARLES MAXWELL

We move on to one of the heavy-weights of the energy investment business, Charles Maxwell, the senior Energy Analyst for Weeden Co. Charlie is a legend in peak oil circles. Due to time limitations, I've selected two key parts of his presentation. Following talk of when Peak Oil might strike, Maxwell explains where our future oil might come from. Then I'll deliver his conclusion of "austerity and joy".

Unlike Jeff Rubin, Charlie Maxwell thinks we might adjust to a reasonable life consuming much less oil. He suggests we envision life in the 1950's, with that level of consumption.

Plus, people might enjoy things like gardening, even though they are forced into it just to have enough affordable food.

Happiness is not necessarily linked to consumption Maxwell says. In fact, he cites a study from Denmark, where people were healthiest during the last years of World War Two. They had little access to alcohol, tobacco, sugary foods, and over-eating. That "deprivation" led to better health, which is a fundamental for happiness.

First Maxwell treats us to an overview of who is producing more oil, and who will produce less. His goal, as an energy investment analyst, is to figure out what the maximum level of oil production is. Maxwell thinks we can go from our current ceiling of about 88 million barrels per day to about 95 mbpd. But that's it. No more.

His analysis of barriers to Russian expansion are interesting. The limits there are less geologic than social, and their approach to business, Maxwell says. On the other hand, if Columbia has really ended their civil war, that South American country may be able to increase production, like its neighbor Venezuela.

Mexico on the other hand, is in deep trouble, as oil production crashes at the main field at Cantarell. Maxwell treats us to an insight into the role of the asteroid which hit the Earth about 65 million years ago (causing a mass extinction) - and how that made a great oil field for Mexico (for a while).

It's rare we get a kind of private sitting with an oil insider like Charles Maxwell.

DOWNLOAD THE WHOLE 1 HOUR PRESENTATION WITH RUBIN AND MAXWELL

Here is the one hour talk by both men, including the Q and A, recorded by Gerri Williams, and presented by ASPO USA on November 4th, 2011 in Washington. You can choose from the CD Quality version (56 MB) or Lo-Fi (14 MB).

UGO BARDI

You'll notice neither Rubin or Maxwell mentioned climate change at all. They speak as though extreme weather damages and rising seas are not also major impacts on our economic prospects. As though the world will never limit fossil fuel production because we are wrecking the climate for all foresable time. Jeff Rubin, I know, does acknowledge climate change.

But it is absent here.

I've been following Peak Oil for years, interviewing people like Richard Heinberg and James Howard Kunstler. Both of them have added climate change as a serious threat in recent years.

Of course I speak with climate scientists. But it's very seldom I find anyone to talk about both. Why is this?

Plus, we often wonder, which comes first, and which is worst: climate change or Peak Oil?

To help sort this out, we go to Italy, to talk with Ugo Bardi. He is a professor of Chemistry at the University of Firenze, - that is Florence.

Ugo is a rare bridge in two worlds. He is the Founder of ASPO Italy, the Association for the Study of Peak Oil and Gas. Ugo is a contributor and member of the editorial board of the Oil Drum blog, and has published two books in Italian on oil depletion.

But Bardi is also a member of an association of Italian climatologists.

His latest book in English is "The Limits to Growth Revisited" published in 2011 by Springer.

In March 2009, Bardi wrote an important article in the Oil Drum blog called "Fire or Ice? The role of peak fossil fuels in climate change scenarios".

I highly recommend this article. Bardi goes through the very few scientific papers and articles which consider both Peak Oil and climate change together, up to 2009.

I'm going to quote just the first three paragraphs from that key article from the oildrum.com

"Until recently, most simulations of future climate have been run without taking into account "peaking" of the major fossil fuels. Concepts such as 'peak oil' are not discussed, and not even mentioned, in the reports of the International Panel on Climate Change (IPCC). But, with peak oil coming, or already arrived, the subject is starting to appear in scientific journals, blogs, and conferences. In a previous post , I reported about the 'Mission Earth' seminar held in Zurich in 2009 where climatologists and depletion experts gathered to exchange views. Here, I present a short review of the status of the field. There is a very small number of papers published in scientific journals on this subject and I think this summary includes them all. I also tried to include a number of less formal studies published on the web or presented at conferences.

Some early papers raised the question of the discrepancy of the standard IPCC scenarions and the peak oil projections. The first one was probably Jean Laherrere with a paper published in 2001. Later on Anders Sivertsson , Kjell Aleklett and Colin Campbell wrote in 2003 in 'The New Scientist' a paper titled 'Not enough oil for climate change'. They criticized the IPCC scenarios for being overoptimistic in terms of oil and gas reserves. These early papers didn't attempt to calculate the future concentrations of CO2 in the atmosphere.

Perhaps the earliest attempt to quantify the effects of CO2 on climate while taking depletion into account was the work by Pushker Kharecha and Jim Hansen who produced a paper titled 'Implications of "peak oil" for atmospheric CO2 and climate'. This study was published in 2008 but became available on line as a working paper in April 2007. In the first version of the paper, Kharecha and Hansen start from the premise that the CO2 concentration in the atmosphere should not be allowed to exceed 450 ppm; later on they arrived to the conclusion that the dangerous limit is more likely to be around 350 ppm. So, they examine several scenarios that involve policy measures to force the reduction of emissions. They find that, if no such measures are taken, CO2 concentrations might rise to near 600 ppm by the end of the century, mainly as the result of coal combustion. Oil and gas would peak before 2030 in most of the scenarios considered and would give only a minor contribution to the total of the emissions."


Ugo Bardi began his Oil Drum article with an important point: climatologists, and the Intergovernmental Panel on Climate Change, assume we will fill the sky infinitely with carbon, as though the supplies will not run out. However, as we learned from Jeff Rubin's talk, and all the development of alternative ways to get oil, plus gas fracking - there seems to be more than enough carbon to wreck the atmosphere before supplies run out.

And the implications of climate damage are so severe, in our interview Ugo Bardi concludes climate change is the most pressing challenge of this century. Humans have lived for most centuries without fossil fuels he points out. We could do so again, perhaps with a much smaller population. But humans might not survive a radical shift in the climate very well.

It's a thoughtful interview from a thoughtful man and scholar. You may also want to check out his "Limits to Growth Revisited" book, the first update to that 1970's report written for The Club of Rome.

Find Ugo Bardi's blog "Cassandra's Legacy" here.

THANKS TO A LISTENER

I would like to thank Radio Ecoshock listener Barath Raghavan for suggesting this topic, and sending his helpful links. Find Barath's article on "Climate Change Vs. Peak Oil" here.

If you have suggestions for guests or topics, you can always write me, Alex Smith, at this address:

radio //at// ecoshock.org

4 comments:

Luisa Williams said...

I guess, that's where the principle of supply and demand pops in, the more demand a particular country needs for oil the more supply they needed, in turn, in filling up this demand the other place who can't afford the gush of oil prices they have to shoulder will not be able to acquire enough for their own, that means shortage for the inferior country. This doesn't sounds so good but let's face it, this is the reality of this kind of system, you gain some but if you can't manage it you will lose big time. This will also post an effect to the different oil drilling materials we will be using like the flare ignitors and flare stacks cause only those who can afford will have this one.

Janet Waddell said...

The view points of these economists are worthy to consider. However, they all painted a troublesome picture. Human beings are known to develop resiliency when faced with difficult times. This resilience will help to establish a better source or alternative for that oil. The globalization may or may stop and it may or may not generate good results, but globalization is created by mankind and we can always be sure that something will be created again to counteract the effects of this change.

Solomon Peckman said...

A simple principle that covers up this kind of economic system is the law of supply and demand. Once the demand for the oil get higher the price will also increase, most of the companies take advantage of this kind of system so they could manipulate the flow of everything in it.

Del Hersh said...

Sooner, people or car owners will no longer depend on oil or on fuel cause they will become more expensive than the cheaper alternatives on this. Though the economic competition will always be present at least the price will become cheaper compared to before.