The Swedish newspaper Svenska Dagbladet has now, on 2012 December 23, published my article “The EU must drastically reduce its oil imports”. In Swedish, “EU måste skära ner sin oljeimport drastiskt“. Michael Lardelli has made a great translation of the article (see below) and I have added some relevant photos and graphs. Every week you are around 1000 people that read my blog and I wish you all a merry Christmas and happy new year.
The EU must drastically reduce its oil imports
The term “Peak Oil” refers to that point in time when the rate at which oil is produced can no longer be increased and instead plateaus or begins to fall. Peak Oil does not mean that oil production is over but it does mean that the era of increases in the rate of oil production is over. During autumn I have been invited to give presentations on Peak Oil in China, Abu Dhabi, the EU, Canada and the USA. The conferences have addressed food production, fuel use by the aviation and shipping industries, resources, reserves and production of unconventional gas and oil as well as political policy in the light of the reality of Peak Oil. Among other things I have had meetings to discuss Peak Oil with representatives from the oil industry, the World Bank, the International Monetary Fund (IMF), investment companies, trading banks and the aviation and shipping industries.
An important meeting occurred in Quebec with approximately 120 politicians of the International Parliamentary Union (IPU) that was established in the 1800s and represents 162 parliaments around the world. For the first time in the IPU’s history they discussed the importance of energy for the global situation and they chose to discuss the future from the perspective of Peak Oil.
In the review of Peak Oil produced by Professor Øystein Noreng for the Finance Department in Sweden and presented last spring (Brännpunkt, 30 March), and in some of the reports produced by members of the oil industry and think tanks during the past year there is a message that we do not need to worry about oil production. Journalists describing these reports have done so under large, bold headlines. In contrast, when one discusses Peak Oil with the people who deal with the daily reality of oil production one finds genuine concern for what Peak Oil will mean for our future because, in reality, our world is completely dependent on oil. The most critical factor determining the performance of the world economy is access to inexpensive oil.
Douglas-Westwood is a company based in New York and specialising in market research and analysis for the energy industry. At a conference in Austin, Texas at the end of November, Steven Kopits of Douglas-Westwood presented an analysis that showed the ability of various nations and regions to “carry” (tolerate) a particular oil price while still showing economic growth. In 2003 when the oil price was below $30 per barrel, the US economy was so strong that it could carry an oil price of $60 per barrel while the corresponding number for China was $50 per barrel. At the start of 2008 the economies of both nations had developed so that both could carry an oil price of $70 per barrel. It was in that year that the current shortage of oil caused the price to exceed $70 per barrel. Indeed, when the price of oil spiked to $147 in July of that year the world economy subsequently crashed. There were segments of the economy – such as the US debt market – that were affected worse than others and that contributed to the crash but the most important initiating factor was the high price of oil.
From the beginning of the 1980s until 2003 the international oil industry was able to increase its rate of oil production by 1.5% per year and this provided for growth in the world economy (GDP) of 3% annually. When the International Energy Agency (IEA) presented its yearly World Energy Outlook report in 2004 this coupling between growth in the rate of oil production and GDP growth was the most important factor underlying its calculations that the world would require 121 million barrels per day (Mb/d) of oil production in 2030. At around the same time, my research group Global Energy Systems at Uppsala University published an article showing that this rate of oil production was impossible to achieve in reality. We estimated that the rate of oil production in 2030 would be approximately 40 Mb/d less than the IEA had estimated the world would require. Today, the IEA has revised down its estimated rate of oil production in 2030 to 96 Mb/d, a reduction of 25 Mb/d. Thus, their estimates are now approaching those of our earlier calculations. When one studies the IEA’s latest scenario in detail it can be seen that it still includes aspects that are not realistic (if one believes the representatives of the oil industry which whom I have spoken).
If we return to our earlier discussion and examine the oil price that the Chinese and US economies could tolerate today, Steve Kopits showed that the Chinese economy has developed so strongly that it can now carry a price of over $100 per barrel while the USA can now only carry $80. The fact that (for various reasons) the price of oil in the USA is currently approximately $20 cheaper than the world price of oil that China pays shows that both China and the USA are balanced on the knife edge of what they can tolerate. Without the new oil available in the USA from production of shale oil, the US economy would have been unable to cope. Today, the rate of this production is approximately 1 Mb/d and estimates of US shale oil production in 2020 vary between 2 and 4 Mb/d.
An optimistic view of future shale oil production in the USA (Hart Energy, Houston, USA). BOE is “Barrel of Oil Equivalent” because the products of shale oil production vary in their energy content and so simple comparisons of production volume are not valid.
The EU lacks production of shale oil and so its economy must withstand a world market price of over $100 per barrel. According to some experts the EU cannot expect significant production of shale oil in the future. The ability to pay this world oil price varies between the EU’s nations. Sweden, that has export products that fluctuate in value somewhat consistently with the price of oil has been able to cope so far. However, nations such as Greece, Italy and Spain are in a worse situation. They do not have the means to pay for the oil imports that they require without accumulating additional debt. But now the OECD is warning that even Sweden’s economy will weaken. It is time for the EU’s finance ministers to begin to discuss oil and Peak Oil. Austerity measures that reduce a nation’s government spending have only a marginal influence on its oil import needs. The fact is that the EU must drastically reduce its oil imports. Politically, the EU’s governments currently want to do this to protect the environment from climate change but the reality is that reducing oil consumption and oil imports is vital to the EU’s future economic success.
The climate change negotiations in Doha have now ended but while they were underway we heard representatives of the environmental movement state that we must reduce our oil consumption. Peak Oil will assist this. However, in terms of carbon dioxide emissions oil has only a marginal influence compared to coal. If we accept those reserves of fossil fuels reported by BP and convert them to possible carbon dioxide emissions then we find 350 billion tons (Gton) of possible emissions from natural gas, 540 Gton from oil and 2,300 Gton from coal. This means that 85% of possible future carbon dioxide emissions come from fossil reserves that exist in only 15 nations and it is 9 of these nations that are principally expected to use the majority of this coal. The most important action to protect the environment in future is to use less coal for electricity production. We see now that increased extraction of natural gas in the USA has meant that they are reducing their use of coal for electricity production and that carbon dioxide emissions from the USA are declining even though they have not signed the Kyoto Protocol. However, China’s enormous investment in coal-fired electricity generation means that total global emissions of carbon dioxide from coal use are increasing and it is crucial that China invests in renewable and nuclear energy sources. The fact that Germany is shutting down its nuclear electricity generation means that it will emit more carbon dioxide than necessary. The money the Germans are currently spending to replace nuclear energy would be better spent reducing coal-fired electricity generation which would reduce total carbon dioxide emissions by the EU.
When I released my book, Peeking at Peak Oil, in May the journal World Oil wrote the following, “…this book should be required reading for anyone seriously interested in the future world energy market and economy, especially politicians and policymakers.” In this article I have discussed how the economy is influenced by Peak Oil but there are many other areas that will be affected. Ten years ago I wrote that we would see problems in a decade. The IEA estimated that we would require a rate of oil production of 93 Mb/d while we stated that only 85 Mb/d was possible and, in reality, we now see that only 83 Mb/d was achieved. Our daily lives could have been better now if decision-makers had paid attention to our calculations.
Kjell Aleklett, Professor in Global Energy Systems at Uppsala University, Sweden.
Aleklett's Energy Mix 
Lars-Eric Bjerke
December 23, 2012
Kjett,
Sveriges BNP är 3500 Gkr och kostnaden för Sveriges oljeförbrukning är ca 50 Gkr/år (12 Mm3) dvs oljenotan är 1,4 % av Sveriges BNP. Bensin och diesel dominerar. I dieseln erbjuder ju numera Preem, Statoil och OK/Q8 diesel med ca 25 % bioinblandning. Är situationen mycket sämre för övriga EU än den är för Sverige?
Michael Lardelli
December 25, 2012
As Murray and King pointed out in their commentary in Nature of almost a year ago (26 January 2012):
“Italy now spends about $55 billion a year on imported oil, up from $12 billion in 1999. That difference is close to the current annual trade deficit”.
Looking at the comments following Aleklett’s article in SvD I can see that Sweden’s commentariat, like Australia’s, appears to be overwhelmed by cornucopians and climate change deniers. One only hopes that leading politicians and industrialists are less subject to self-deception – but I think this is a forlorn hope.
By the way, I LOVE Olle’s Christmas tree. Wonderful !
Tom S
January 3, 2013
Michael, you spoke of self-deception, but we must remember that almost anyone is capable of deceiving himself. Even people who believe in imminent peak oil are capable of this.
I have been following the peak oil movement as a casual observer for a long time. It has a very bad track record of prediction. ASPO first called peak oil in 1989, then again in the late 1990s, then in the mid 2000s, then in the late 2000s, then 2012. If I recall, kjell first called the peak in 2008 and now is saying 2012 was the year.
Also we should not forget that peak oil believers formed a large doomsday group in the 2000s. They were highly confident that civilization would soon collapse. They have a long track record of drastically mistaken predictions, all issued in a very confident tone. Many of their ideas were borrowed from Colin Campbell’s book, The Coming Global Oil Crisis.
Of course, other people have gotten it wrong too. The predictions of CERA, Michael Lynch, and the IEA have proved to be too optimistic.
However I don’t understand this misplaced confidence of the peak oil movement with regard to its most recent predictions. This article does not mention the prior incorrect predictions, and makes it sound like ASPO has gotten things pretty much right all along. That is not correct.
-Tom S
Lars-Eric Bjerke
January 6, 2013
Tom S,
In Jan 2001 Campbell wrote his first newsletter for ASPO and in May 2002 ASPO was formally established. At this time ASPO predicted peak oil at 2010 to 85 Mb/d (oil as defined by BP). Today this oil productions is 83 Mb/d. I suggest that you review your data sources.
Tom S
January 7, 2013
Lars,
I have carefully reviewed my sources. I grant that ASPO was not formally established until later. I should have said “the members of what is now ASPO predicted…” However, the founding date of ASPO is not the important thing here, at all. It does not help if they create a new organization with a new name.
Colin Campbell, its founder and the grand-daddy of the modern peak oil movement, used these methods and wrongly predicted peak oil in 1989, several times in the 1990s, and again in the 2000s. Campbell’s 1991 prediction clearly shows oil peaking around 1993, and then declining to approx 58 mb/d in 2013. Campbell’s 1997 prediction shows oil peaking in the early 2000s.
Aleklett, Hook, and Lardelli (to whom I was responding) predicted in 2008 that oil had already passed its maximum and would then decline. From their article, The Peak Of The Oil Age:
“The fact that global oil production has very probably already passed its maximum implies that we have reached the Peak of the Oil Age.”
There were also many other authors, such as Deffeyes, Simmons, etc, who are frequently cited in Aleklett’s work. Almost all of them use similar methods such as Hubbert Linearization, and they all wrongly predicted peak oil in the mid 2000s.
Tad Patzek, who is on the board of directors of ASPO-USA, used Hubbert Linearization methods and wrongly called the peak of coal in 2011.
There was also a large doomsday movement which confidently predicted that industrial civilization would soon collapse. This movement was inspired by Colin Campbell’s (the founder of ASPO’s) book, The Coming Global Oil Crisis, which was published in the late 1990s and strongly insinuated that there would be near-term disasters from oil depletion.
ASPO’s recent prediction, in 2003, shows oil peaking around 2010 and beginning its decline this year or so. I assume this is the prediction you’re referring to. Maybe they will be right this time. However, if they are wrong, it must not be swept under the rug and then forgotten, like prior predictions.
-Tom S
Tom S
January 7, 2013
Lars,
I should also turn your attention to figures 15 and 16 from the paper in 2008 by Aleklett, Hook, Lardelli et al, entitled “The Peak of the Oil Age”.
Figures 15 and 16 clearly show all liquids peaking in late 2007 or early 2008, then declining fairly rapidly thereafter for a few years. Those figures clearly show that all liquids were predicted to have declined from ~83 mb/d, to ~75 mb/d by 2013.
Older predictions, by Colin Campbell et al, have diverged tremendously from reality by now. Campbell’s prediction from 1991 can be found in a graph I saw on The Oil Drum:
This graph clearly shows Campbell’s 1991 prediction that all liquids would decline to ~40 mb/d by now. In other words, Campbell’s 1991 prediction was drastically wrong.
You forgot to mention these failed predictions. The only prediction you mentioned, is the only one which has not yet failed. The other predictions have all been forgotten–not just by you, but by everyone in the peak oil movement.
-Tom S
Lars-Eric Bjerke
December 25, 2012
Michael,
Thanks for the excellent translations of Kjell´s blog. I know of course that oil is of utmost importance for the economy. As I wrote above the Swedish oil bill is 1.4 % of the BNP. For Italy with a BNP of 2200 G$ it is 2.5 % of the BNP. In a normal EU economy this corresponds to the yearly BNP growth. Are your sure that we will have such difficulties to adopt to exspected increases in oil prices.
evolvESustain
December 28, 2012
Reblogged this on evolvESustain.
Lars-Eric Bjerke
December 30, 2012
Kjell och Michael,
Här är en länk som jag hittade. Den ger en sammanställning av olika studier av en oljeprishöjnings påverkan på USAs ekonomi, Sammanfattningsvis ger 10 % oljeprishöjning en påverka på BNP av -0,2 till -0,6 %.
http://blogs.cfr.org/levi/2012/12/28/an-update-to-the-eias-2006-survey-of-estimates-of-the-effect-of-oil-prices-on-the-u-s-economy/
Lars-Eric Bjerke
January 8, 2013
Tom S, you wrote:
“You forgot to mention these failed predictions. The only prediction you mentioned, is the only one which has not yet failed. The other predictions have all been forgotten–not just by you, but by everyone in the peak oil movement.”
I only commented the incorrect statements about the organisation ASPO you made. Of course I recognize that are many predictions from various parties about future oil production that have shown to be wrong and I am not saying that the first prediction ASPO made in 2002 will show to be correct. However the prediction of 85 Mbl/d by 2010 (oil as defined by BP) I believe was fairly good. Do you know a better prediction at that time? It is also my opinion that it is the duty of departments of earth sciences at our universities to study depletion of limited raw materials and make society aware of the limitations they have found, and of course humbly recognize that they might be proven wrong.