ASPO Declares War on DOE

Jim Brown
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ASPO took the fight to the Dept of Energy on Wednesday by holding a news conference on the steps of the DOE. ASPO is attempting to call attention to the blatantly false and misleading projections of the EIA for future oil production.

Half a dozen ASPO leaders, (Association for the Study of Peak Oil), held a press conference and presented representatives from the DOE letters and requests concerning the false EIA projections for future production.

Various ASPO leaders criticized what they called "dangerously unrealistic" oil and gas production forecasts. Calling for "truth in energy" they delivered a letter to Secretary of Energy Steven Chu seeking greater transparency in how the agency formulates its energy projections. They also asked the department to develop a plan to address the growing possibility of near-term oil supply disruptions and long term oil shortages.

Robert Hirsch, author of "The Impending World Energy Mess," warned despite rapidly rising oil prices the supply of oil has remained constant since 2005 with only minimal production gains. Simultaneously, production from existing world oil fields is declining at a high rate. Both of these developments are unprecedented yet DOE and EIA have dismissed them as not being of a major concern.

Hirsch added, "Many oil production analysts believe in a relatively few years, total world oil production will go into permanent decline. Since the majority of crude oil is used in liquid transportation fuels the impact of the decline will be difficult, expensive and time-consuming to replace."

Jim Balduaf, president and co-founder of ASPO, warned the EIA forecasts for future supply are dangerously unrealistic. If these exuberant predictions are wrong, the consequences could be catastrophic. We can't bet America's economy and national security on Pollyanna predictions. We may not be running out of oil but we are running out of oil we can afford."

Independent petroleum geologist Jeffrey Brown, warned that global net exports are declining because countries are consuming more of their own oil. Global net exports have declined by about 3.0 mbpd from 2005 to 2010 with 21 of the top 33 exporters now exporting less today than in 2005. At the current rate of export decline, China and India alone could consume 100% of global net exports in about 20 years and leave everyone else without oil.

Brown illustrated his point with a chart of the historical net exports over the last eight years and the impact of China and India on the available net exports for the rest of the world.

Historical Net Exports

Tom Whipple, a former CIA analyst and chief editor of ASPO's Peak Oil Review said, "There are literally dozens of reports every week around the world pointing to the fact the world is facing major challenges in maintaining existing production much less growing the global supply of oil." "Our concern is the growing disconnect between the solid evidence of serious trouble ahead and the DOE's benign projections concerning the availability of fossil fuels in the next 30 years." ASPO produced a chart of the EIA's own data showing crude oil production has not increased materially since 2004 despite hundreds of billions of dollars in exploration and development efforts.

EIA Production Chart

The ASPO officials presented Steven Chu with a list of seven questions they would like answered.

1. Global crude oil production has departed from its historical trajectory of steady growth and remained essentially flat since 2005, despite a substantial increase in oil prices. How does DOE explain this trend, and does the change signal an impending decline in world oil supply?

2. The inflation-adjusted price of crude oil has increased far above its historic average and remains very high despite a worldwide economic slowdown. Again, does this development portend an impending a decline in world oil supply?

3. The volume of crude oil exports available to oil-importing countries has been declining since 2005, as domestic demand has increased in many exporting countries. If this trend continues, what are the implications for future oil supply, particularly for importing countries such as the United States?

4. In projecting future global supply and demand for oil and gas, EIA models appear to assume that supply will simply increase to match whatever level is demanded by projected economic activity? How can this assumption be justified in light of the physical, economic, and geopolitical challenges facing oil and gas supply?

5. In projecting future U.S. natural gas supplies, including the growing share provided by shale gas, has DOE addressed the possibility that a large share of these gas resources may require much higher natural gas prices to sustain, let alone increase, production?

6. Has DOE conducted a risk assessment of the consequences of EIA's oil and gas supply projections turning out to be overly optimistic?

7. Unconventional oil and gas resources are providing an increasing share of total U.S. supply. Has DOE assessed the economic consequences of increasing production costs and declining net energy return associated with these resources?

The letter was signed by 20 top ASPO officials, geologists and oil production analysts.

I believe this was an excellent publicity stunt but I doubt they will get much play in Washington. The establishment does not want to recognize the approach of peak oil because it would require monumental changes in the way the country is run and by the agencies responsible for projecting future energy use.

Just imagine if president Obama came to the realization tomorrow that oil production would decline by 5.0 mbpd by 2015. That would push oil prices in the USA to more than $150 or even $175 and cause a massive recession. Gasoline prices would be over $6 and the national and global economy would shutdown. That is only the start of peak oil and either Obama or his replacement is going to face that fact.

The blame game would be huge. Everybody in government would be trying to blame everyone from Wall Street investors to OPEC producers. The forecasting agencies including the EIA, IEA and OPEC would be hauled into congress to testify on why this disaster occurred. Heads would roll.

Meanwhile consumers would be suffering from higher unemployment, smaller paychecks, less money after transportation expenses, etc. Home values in the rural areas would implode while homes and condos in the inner city would explode in price.

The price of everything we buy, especially food, would rocket higher due to transportation costs. Airline travel will become obsolete for all but the most well off business travelers.

The voting public would immediately blame whoever is in power and vote the bums out regardless of whether they had anything to do with it.

Those in Washington today that understand the problem are just hoping it will stay away long enough for them to collect their pensions and move into civilian life. Nobody wants to be in power when this hot potato arrives.

Unfortunately it will arrive soon. Depending on real excess production in Saudi Arabia it could happen by the end of 2012 or as late as 2014 but it will happen. It is a mathematical certainty.

Anyone who have not planned for it will be trampled in the stampede as everyone races to change their lifestyle and residence location. Commuting by car will be a thing of the past.

I applaud ASPO for their efforts but this is a secret everyone currently in power will do anything to keep as a secret. I seriously doubt the ASPO efforts will accomplish more than a headline on yesterday's paper. Unfortunately being right is not always a popular position as ASPO leaders have known for a long time.

Jim Brown

The OilSlick Newsletter is based on the expectations for global oil production of light sweet crude to peak and begin to decline in the 2012-2013 timeframe. I am calling this "Peak Sweet™" instead of Peak Oil. This is the point where global production of conventional light sweet crude supplies can no longer be supplemented by enough oil sands production, deepwater oil production, biofuels and natural gas liquids to offset the decline in existing fields. The roughly 6% annual decline of existing production due to depletion is larger than the rate of new discoveries and new production being added each year. The Peak Sweet™ countdown clock is ticking and time is growing short. Peak Oil will arrive shortly thereafter. Are you prepared?