Amazing New Revelation by Dept of Defense

Jim Brown
Printer Friendly Version

News broke today about a new report out by the DoD which is sharply critical of expected global production. I am shocked and amazed that these tidbits of new information are starting to be released from our own government.

A report from the American Joint Forces command published on March 15th warns that there could be a 10 million barrel per day shortfall in production by 2015.

I could end this commentary here and that one sentence alone would be enough to give everyone a restless night's sleep. Section 1, page 29 of the Joint Operating Environment for 2010, states the following:

To generate the energy required worldwide by the 2030s would require us to find an additional 1.4 MBPD every year until then.

During the next twenty-five years, coal, oil, and natural gas will remain indispensable to meet energy requirements. The discovery rate for new petroleum and gas fields over the past two decades (with the possible exception of Brazil) provides little reason for optimism that future efforts will find major new fields.

At present, investment in oil production is only beginning to pick up, with the result that production could reach a prolonged plateau. By 2030, the world will require production of 118 MBD, but energy producers may only be producing 100 MBD unless there are major changes in current investment and drilling capacity.

By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 MBD.

Page 27 - OPEC and Energy Resources

OPEC nations will remain a focal point of great-power interest. These nations may have a vested interest in inhibiting production increases, both to conserve finite supplies and to keep prices high. Should one of the consumer nations choose to intervene forcefully, the ?arc of instability? running from North Africa through to Southeast Asia easily could become an ?arc of chaos,? involving the military forces of several nations.

OPEC nations will find it difficult to invest much of the cash inflows that oil exports bring. While they will invest substantial portions of such assets globally through sovereign wealth funds ? investments that come with their own political and strategic difficulties ? past track records, coupled with their appraisal of their own military weaknesses, suggest the possibility of a military buildup. With the cost of precision weapons expected to decrease and their availability increasing, Joint Force commanders could find themselves operating in environments where even small, energy-rich opponents have military forces with advanced technological capabilities. These could include advanced cyber, robotic, and even anti-space systems.

Finally, presuming the forces propelling radical extremism at present do not dissipate, a portion of OPEC?s windfall might well find its way into terrorist coffers, or into the hands of movements with deeply anti-modern, anti-Western goals ? movements which have at their disposal increasing numbers of unemployed young men eager to attack their perceived enemies.

The 75 page report is critical of the buildup of population and the rising middle class in China and India and warns that severe shortages could develop as the world grows from the current population of 6.8 billion to 8.5 billion in 2025. They project China to grow to 1.4B and India to 1.8B in the foreseeable future.

They warn that China is building 1,000 kilometers of four lane highways every year to support their 40 million cars. America currently has 250 million and China is expected to exceed that number by 2020.

It appears not everyone in the U.S. government has their head in the sand on Peak Oil. Of course just knowing something is coming does not change the outcome. Somebody has to ensure that action is taken to prevent the U.S. from being hung out to dry when the next oil shortage comes.

Jim Brown

This newsletter is only one of the newsletters produced by OilSlick each day. The investment newsletter is also produced daily and contains the current play recommendations in the energy sector. Stocks, options and futures are featured. If you are not receiving the "Play Newsletter" please visit the subscribe link below to register.

Subscribe to Energy Picks Newsletter