On Tuesday the 23th of September, the deployment of the first commercial wave energy farm in the world started. A Pelamis unit was towed into the sea, connected to an underwater cable and moored to the sea floor, at a site were it will stay for the next 15 years. The Industry was present at the highest level, as so a Minister and even the Navy showed up with a frigate to join the celebration. But is it all roses? Below the fold are a few thoughts and calculations that show how this is truly a green energy source. Green as in immature, that is.

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The basics on Pelamis and the Aguçadoura I Project can be found here.

Celebration

Two and a half years behind schedule, after legal and technical delays and the sale of the main commercial company (Enersis) to Babcock & Brown, the first pelamis was finally permanently deployed. A high profile event was staged to signal the day, with the Minister of Economy (Manuel Pinho) and an entourage of CEOs and journalists embarking on the Portuguese Navy frigate Corte Real to follow the tug boat trailing the red serpent to its final resting place, 5 Km off the coast, by the village of Aguçadoura.

The pelamis units spent much of the last two years in the port of Peniche waiting for this day. After legal clearance the company struggled with technical difficulties, especially concerning the undersea cable that connects the mini-farm to the shore. The Pelamis engineers developed a floating plug that allows the connection to the cable without the help of divers. But unfortunately the system had been tested in shallow waters and failed in the deployment site, where a deeper water column exerted different hydrostatic pressure on the plug. Solving this issue alone took more than a year.

After a few rehearsals at sea and some tuning of the units for better adaptation to the site, the green light was given. The first serpent is in place with the next two being deployed these days, depending on the weather.

Manuel Pinho compared the event to the dawn of Wind Energy, that fifteen years turned is a story of success. He hoped that the same can be said about Wave Energy fifteen years from now:

The future of wave energy starts today.

Finland is very good in mobile phones, Portugal wants to be good in renewable energy. We are among the top five in the world, and we are just in the beginning of the process.

Renewable energy is the source of energy for the future and we think this can create an industrial revolution and a lot of opportunities for jobs and research and we want to be ahead of the curve.

The read serpent being put in place. Picture by João Abreu Miranda/EPA.

The Cluster

A new agreement was signed at the occasion with Pelamis Wave Power (the technological partner) having a 23% stake, Babcock & Brown 46.2%, EDP 15.4% and Efaced 15.4%. This new consortium will proceed with the Aguçadoura II project, that will be a larger scale farm, constituted by 25 pelamis units, summing up 18.75 MW of installed capacity. The press is quoting the project as costing up to 70 million €.

But these companies have longer term horizons; Leocádio Costa, Enersis’ CEO:

What’s programmed in the second phase is for 40% of the project being built nationally by Efacec, which is our largest producer of transformers, and with which makes all the sense he had talked to for the set up of a Cluster.

The Government providing us the licences, we are ready to go up to 500 MW in three or four different zones [along the Portuguese coast].

Alberto Barbosa, Efacec’s CEO:

Through the years we will grow in Portugal and increase installed capacity, but afterwards we can proceed with that technological development at world level.

Portugal can be the Denmark of wave energy. The question is the political will to concede that installed capacity.

This Cluster in the prospects of these companies is an inception environment that would propitiate wave energy technology development, promote local component manufacturing and assembly, eventually creating an exporting industry. Talks are under way with steel transforming companies to join the project and new experiments with alternative wave technologies are being planned.

Pelamis Wave Energy will deploy the first water snakes (four in total) in their Scottish home shores next year off Orkney. Following that, seven are planned for deployment off the northern Cornwall in 2010. Other sites are being considered in Spain, France, Norway, North America and even South Africa.

Click to watch a movie summarizing the concepts behind Pelamis.

The Algebra

Now, let’s go back to the black board and do a little algebra. Last time I showed some concerns towards this project given the money involved for such a small installed capacity (the three pelamis together don’t sum up to a state of the art wind turbine). With the delays the project’s costs are now reaching 9 million €.

Using a base load factor of 30%, the three pelamis of the Aguçadoura I project will generate in a year about 5.9 GWh (2.25 MW * 8760 h * 0.3). In my monthly electricity bill the kWh is rated at 0.12 € (that accounts also for grid maintenance and management, but let’s take it at face value as an upper end estimate). Hence the yearly revenue of the project will be just under 700 thousand €. Or putting it another way, it will take 13 years for the break even, at best.

Each pelamis unit has an expected lifetime of 15 years. Considering that those 9 million € are not counting with maintenance costs, it is not a stretch to conclude that the financial return on investment (ROI) is close to 1:1. Where that leaves EROEI is not easy to envision, but it might not be that far off.

This could be a scalability problem, being the Aguçadoura I just a mini-farm, taking much of the burden of first time tuning to the site. But the press already has the figures for Aguçadoura II, 25 serpents (down from the announced 34 in 2006) and a 70 million € budget. This project will generated circa 49 GWh (18.75 MW * 8760 h * 0.3) of electricity per year resulting in a revenue of 5.8 million €. Break even arrives at 12 years of operation, again with best estimates for electricity prices and without maintenance costs.

The problem (as I stated in 2006) is that while a MW of installed Wind capacity costs about 0,4 million €, Pelamis is costing in the order of 4 million € per installed MW. There is a steep development curve ahead before competitiveness, more over taking in account that offshore Wind energy has a higher load factor (40%) and operates essentially during the same periods (waves are higher when the wind blows stronger).

Even if Pelamis manages to deal with low EROEI, this technology will likely stay in small market niches were Wind power doesn’t reach, either be it due to visual impact, water depths or implantation difficulties. Looking long term this type of systems may be used to complement already in place Wind-farms using the space between windmills and taking advantage of the already existent electric connection to shore.

Is the future of the red serpent as clear as the sky? Picture by Catarina Pereira.

An Energy Policy Dilemma

With such prospects, why are these companies so eager to expand the project? The answer is simple, the state pays a feed-in-tarif of 0.23 € per kWh generated by renewable energy producers. This appears to be a good policy, guaranteeing a price for the electricity generated in the country, speeding up the phase out of fossil fuels, that are imported in their entirety. In that way a favourable environment is created for new energy sources to grow and develop.

But there’s a huge downside to it: this subsidy is masking the low EROEI of some of these new energy sources, that otherwise should be preventing ill fated projects from surviving in the market. As seen from the Pelamis example, while the Aguçadoura I is an interesting development project from which architects and engineers will learn and improve, the Aguçadoura II does not represent any visibly evolution in technology, presenting essentially the same EROEI. Still it will be a profitable business for the companies involved, at the cost of the Executive Budget, representing a tangible money transfer from tax payers to private business, some even held by foreign capital.

This dilemma faced today by the Portuguese government will be one of the most important issues energy policy makers worldwide will have to deal in the transition away from fossil fuels: how to draw a line between those new energy sources that are really helpful for society and those that are not. Correctly measuring EROEI and determining how it evolves along the development phase of new technologies will have a crucial role in the Energy Policy of the XXI century.

I hope that this Cluster idea really turn out to be a success, and that development allows for Wave energy to became a useful part in our future energy mix. And not only for the sake of the country’s industry but also for the negative social effects that the failure of the policies supporting it may bring.

The elements gathered here are based on the following news services:

Luís de Sousa
TheOilDrum : Europe

Where are Libya’s oil exports headed? Libya is a relatively new country, having declared independence in 1951. For the last 39 years, the country has been ruled by a single man, Colonel Muammar al-Gaddafi. Over the years, the identity of this leader and his exquisite sense of style have mingled with the identity of the country itself. Libya joined OPEC right after its creation, and played a pivotal role in the 1973 oil crisis. For the next three decades, Libya endured tense (and sometimes belligerent) relations with western countries. In recent years, as international oil prices have been rising, Libya has been able to re-institute itself as a reliable partner to the West, taking full advantage of the wealth promised by its still considerable oil resources.

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Some History

From time immemorial, the territory that is now Libya has been part of one empire or another–whichever empire had control of the southern Mediterranean at the time. The Umayyad Caliphate reached the area in the VII century. This resulted in the conversion of much of the population to the Islamic religion and culture.

The territory entered the XX century under the rule of the Ottoman Empire, but was invaded by Italy in 1911. A resistance war ensued that would last until the end of World War II. Libya become a de facto colony of Italy during that time.

At the end of World War II, Italy renounced its claims over Libya in the peace treaty it signed with the Allies. The territory was briefly ruled jointly by the UK (with the provinces of Tripolitania and Cyrenaica) and France (with Fezzan).

In 1949, Cyrenaica became an independent emirate ruled by Emir Idris Sanusi (a resistance leader between the two World Wars). Nevertheless, in the same year the United Nations ruled in favour of a united country covering all the three provinces. In 1950, a national assembly gathered at Tripoli and designated Emir Idris Sanusi as the king of the state to be. The following year, a Constitution was established and King Idris declared the independence of the United Kingdom of Libya. Parliamentary elections were held in 1952.

Soon after the new Kingdom was created, first the UK and then the USA obtained rights to build military bases in Libya. In 1956, the first concessions on oil exploration were granted to foreign companies, and in 1959 the first successful drilling was reported. Libya became an oil exporter in 1961 with the completion of a 167 Km pipeline. This started a spectacular production rise that would surpass 3 Mb/d in 1969.

Figure 1 – Colonel Gaddafi soon after taking power.

Overnight, Libya went from being one of the poorest nations in the World to one of the richest, when measured based on average GDP per capita. But equity was lacking, and popular resentment grew as oil exports grew. In 1969, a small group of young military officers staged a successful coup d’état and deposed King Idris. Their leader, Colonel Muammar al-Gaddafi, became the country’s ruler at the age of 28.

Gaddafi intended to build an ad hoc socialist state and promote Arab unity. Banks were nationalized in 1969. The following year, the oil industry was nationalized, all the foreign troops left the country, and a new Constitution established. Plans were made for Libya to merge with Egypt, Sudan and Tunisia, but none of this actually transpired. Between 1969 and 1972, Libya’s oil production fell 1 Mb/d. In 1973, Libya played an active role in the oil embargo to the USA, and production dropped even further to 1.5 Mb/d.

Libya’s performance during the embargo, its support for Arab unity, and its opposition to western interests in Islamic states made it a pariah to the western world. Libya even supported revolutionary organizations that do not restrain terrorist actions–something the western world could not accept. During the 1970s, Gaddafi successfully dealt with several attempts to undermine his regime, coming from both inside and outside the country.

Figure 2 – Crash site of Pan Am flight 103. The bombing killed a total of 270 people inside the aircraft and on the ground.

In 1982 the USA imposed a unilateral embargo against Libya, and in 1984 the first serious assassination attempt on Gaddafi took place. Two years later, the USA bombed Tripoli and Benghazi, most likely with the objective of eliminating Gaddafi. One of his sons died in the attack. In 1987, a French airliner was destroyed over the Sahara. The next year, Pan Am flight 103 exploded over the Scottish town of Lockerbie; Gaddafi’s regime is implicated on both actions. Oil production declined to just over 1 Mb/d.

As consequence of the regime’s involvement in the Lockerbie affair, the United Nations imposed a set of sanctions against Libya in 1992. The country was asked, among other things, to hand over perpetrators for trial and to compensate victims’ families. Gaddafi did not comply with any of these requests, relegating the country to international isolation. Nonetheless, oil production grew to 1.4 Mb/d and remained there until the turn of the century.

In 1999, Libya handed over the requested perpetrators. By the end of 2003, the remaining UN requirements had been fulfilled . In 2003, the country also announced it intention to decommission its programs of weapons of mass destruction. Since 2003, Libya has collaborated with several international organizations to accomplish that goal. In 2004, the UN lifted all sanctions against Libya. With these changes, cooperation with International Oil Companies began strengthening again.

By late 2007, Gaddafi travelled to Lisbon to represent Libya at the II EU-Africa Summit. He immediately caught the attention of journalists by taking an active part in the Summit’s proceedings and showing great agility in dealing with other heads of state. At the close of the Summit, Gaddafi proposed that Libya host the next Summit, which will take place in 2010.

The country’s oil production has steadily increased since sanctions where lifted, now approaching 1.9 Mb/d. In the first part of September 2008, Libya received an official visit from US secretary of state Condoleezza Rice, a moment that seems to have sealed the country’s full reintegration with the international community.

_{Figure 3 – Condoleezza Rice and Muammar Gaddafi in Tripoli. Photo by Mahmud Turkia, AFP / Getty Images.}

Production

Libya is now a mature oil-producing region with most of its oil fields discoveries occurring during the 1960s. Slowly, discoveries have become smaller, with little oil being found after 1990. In ASPO’s newsletter 34 [pdf!], published in 2003, Colin Campbell showed discovery the following way:

_{Figure 4 – Libya Cumulative Oil Discovery.}

Discovery by then summed up to 52 Gb, of which 23 Gb had already been extracted. During the previous years discovery had averaged 0.1 Gb per annum, leading Campbell to point to an ultimate discovery of 55 Gb.

_{Figure 5 – Libya’s oil fields. Source: ENI, click for full version.}

In ASPO’s IV International Conference, held in 2005, Jean Laherrère showed [pdf!] an assessment of Libya, noting that different databases were presenting different scenarios. While IHS data trended to an ultimate of 60 Gb, Wood Mackenzie was showing 40 Gb. The creaming curve also demonstrated the unreliability of OPEC’s data.

_{Figure 6 – Libya Oil Creaming Curve from IHS and Wood Mackenzie data.}

At the end of 2007, the amount of oil produced by Libya had already surpassed 27 Gb. Considering that production had been in a plateau of around 1.4 Mb/d since 1990 and started increasing after 2003, the lower figure of 40 Gb seems unlikely.

Several production forecasts are available for Libya. Richard Duncan and Walter Youngquist projected a peak of about 2.3 Mb/d occurring about now, after which a slow decline would ensue, accelerating after 2020.

_{Figure 7 – Libya Oil Production forecast by Richard Duncan and Walter Youngquist in 1998.}

In ASPO’s newsletter 34 Colin Campbell projected a production plateau of around 1.4 Mb/d, lasting until 2010, when a gentle decline would set in. For an ultimate recovery of 55 Gb that may seem a rather conservative projection, but at the time the openness showed by the OECD towards Libya in the following years was likely difficult to foresee. (In 2003, the country was still on the US’s list of terrorist-supporting states.) In 2007 production reached 1.85 Mb/d.

_{Figure 8 – Libya Oil Production forecast by Colin Campbell in 2003.}

Jean Laherrère’s projection is more reflective of the new reality that emerged after 2003. Two logistic curves give shape to the different ultimates given by IHS and Wood Mackenzie, one peaking by 2010 at 2.2 Mb/d, the other by 2020 at 3 Mb/d.

_{Figure 9 – Libya Oil Production forecast by Jean Laherrère in 2005.}

While 40 Gb now looks like too small a figure for Libya’s ultimate, a production peak of 3 Mb/d would probably represent too much of a departure from Ghadaffi’s long lasting conservationist policy towards oil. In that sense, Duncan and Youngquist’s forecast seems to be the one better reflecting Libya’s strategy, even if probably presenting a production peak too soon.

In light of the information gathered here, an alternative projection is proposed, trying to both reflect the country’s policy and the favourable developments in latter years regarding foreign relations. The 55 Gb ultimate is adopted, meaning that Libya is passing its mid point of depletion in 2008. Production is allowed to rise slowly towards a peak of around 2.2 Mb/d a decade from now after which a gentle decline sets in (with cumulative production reaching 35 Gb by then). To describe this profile a logistic curve is used (if for nothing else, for historical reasons). The model proposed shows Libya continuing to produce over 1.6 Mb/d in 2030.

_{Figure 10 – Libya Oil Production forecast. Click to enlarge.}

Consumption

After World War II, Libya experienced incredible population growth. The population grew from 1 million in 1950 to 5 million in 2000, and presently tops 6 million. This represents a six fold increase in less than sixty years. The UN forecasts this growth (that has followed a nearly linear trend) to continue until 2020 before slowing down. In 2025, the country is expected to reach 8 million people, and by 2030 will have close to 8.5 million people.

_{Figure 11 – Libya Population forecast, according to UN’s forecast.}

In spite of political turmoil and difficult foreign relations, Libya has shown a stable path of oil consumption, growing from 5.5 b/cap/a in 1965 to over 17 b/cap/a in 2007. During times of low oil prices this trend slows down or stalls, just to return to the previous pace some years later. During the price crash of 1998, consumption per capita receded, picking up again with the first hikes after 2000. Since 2003, oil consumption per capita has steadily risen around 2.5% per annum.

_{Figure 12 – Past Libya Oil Consumption per capita.}

Consumption per capita is forecast to continue to rise at 2% per annum until production peaks. By then this trend will start slowing down due to depletion concerns, falling to 1% per annum by 2030. This projection takes consumption per capita to over 25 b/cap/a in 2030, still below many of the rich exporting countries, but equalling US consumption today.

_{Figure 13 – Libya Oil Consumption per capita forecast.}

Using this consumption per capita model and UN’s population growth projections, the country’s oil consumption is set to increase two-fold during the next two decades. While consumption growth will visibly slow down, it should top 0.6 Mb/d soon after 2030.

_{Figure 14 – Libya Oil Consumption forecast.}

The country’s maturity both as an oil producer and as an integrated member of the international community assures a minimum degree of accuracy of the projection made here. Historical data does show, however, that a marked and prolonged fall in international prices (for example, imposed by recession) could change the picture markedly. Being a member of OPEC, production quotas could be lowered, and as seen from past data, low oil prices usually have a visible impact on consumption.

The Macroscopic View

Even with the increased consumption projected here, Libya remains as an important oil exporter for the period considered.

_{Figure 15 – Libya Oil Exports forecast. Click to enlarge.}

There is much irony in Libya’s history as an oil producer. If Colonel Gaddafi hadn’t reached power, the country probably would have extracted most of its oil during times of cheap energy (as happened in most of Europe). While the country was forced into isolation for decades, Libya now reaches the XXI century with half of its oil reserves to extract and healthy foreign relations, looking set for what maybe the country’s Golden Age.

With one more country assessed, World Oil Exports (WOE) remain little changed. 2005 continues to be the peak date, now with nearly 39 Mb/d of oil traded internationally. The fast decline in the second decade of this century continues to be present, falling from over 36 Mb/d in 2011 to under 26 Mb/d by 2020.

_{Figure 16 – World Oil Exports as of September 2008. Click to enlarge.}

Previous analyses of WOE:

WOE [01] Angola
WOE [00] Introduction

Luís de Sousa
The Oil Drum : Europe

This is a guest post by Sterling Smith (TOD user Sterling). This first installment of the series outlines the evolution of the energy panorama from now to 2050. A second installment will deal with technical and political aspects of the path put forward.

Sterling is a software architect who works in Silicon Valley and lives in Woodside, California. He was born in the suburbs of New York City and graduated from Dartmouth College, where he majored in physics. He has worked in the software business for 35 years, still writes code, and has been part of eleven start-ups as well as several major corporations. Sterling’s wife, Deborah Metzger, PhD, MD, is a very prominent gynecologist with whom he is raising four kids.

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Overview

While many people who are just beginning to learn about peak oil do not yet grasp how serious it will be for society, many of those who do understand the threat are perhaps overly pessimistic of the world’s chances for shifting to a new energy base and even of maintaining civilization. Much of this debate revolves around the desirability of trying to preserve modern civilization and its apparent reliance on physical growth, but many also doubt that there are any energy alternatives to oil and the other fossil fuels that could possibly ramp up to address the looming need. I think we need to decouple these two issues and debate them separately. This article does not attempt to answer the question of whether civilization is worth saving. I think we need to answer that question “can we preserve modern civilization” before we try to take on the question of “should we do so”? The objective of this and a future piece is to derive and present a vision of a world that preserves modern civilization after it can no longer rely on fossil fuels as its primary sources of energy, with the assumption, supported in the second piece, that energy sources exist to support this outcome.

The world may follow any of several paths but the single one presented here seems to me the most likely. The first step will be to project the overall economic path that the world is likely to take as it struggles through the coming peaks of fossil fuels and replaces them with an alternative infrastructure. In step two, I will attempt to derive the total energy that would be required to support this projected economic activity. The third step will be to determine the energy mix that could support this energy demand. A future article will attempt to describe how we get there from here and what the new energy system would look like.

My reading of the evidence convinces me that the world possesses adequate energy resource to power a civilization like ours into the indefinite future. However, for this to happen, we will have to transition to a radically different energy infrastructure in the years to 2050. Can the world survive this transition? My faith in the ingenuity, persistence and will to survive of mankind says yes but I am not prepared to defend that at this time.

The Size of the World Economy in 2050

Assumptions:

• Energy resources exist that could power a civilization like ours forty years from now.
• The long term growth rate will approximate the current rate after a new energy infrastructure is built.
• The world will not be able to avoid a severe downturn, due to peaking, lasting about 20 years.
• Concerted societal action will mitigate the downturn.
• Total world population growth will end by 2050.
• The world economic activity mix will shift toward less energy intensive activities.
• Growth in traditional economic activities will slow.

My starting assumption is that the rate of economic growth in the next forty years, if unconstrained by declining energy, would likely be about what it has been for the last fifty years, which is 3.9% (World Economic Growth – Earth Policy Institute). However, since the current population growth rate is about 1% (1.167% – 2007 est.) and population growth is expected to go to zero by 2050, I reduce the expected growth rate without an energy shock to 3% in 2050. The rapidly developing countries such as China and India have had more than twice this growth rate in recent years but many critical resource are becoming constrained. These physical resource limitations are likely to slow physical economic activity but the economic mix is trending towards more creation of intellectual capital (entertainment, knowledge, communications, software, etc.) through activities that are placing much lower demands on physical resources. It should be possible to maintain this 3% level of aggregate economic activity growth while dramatically reducing physical resource consumption. I think it is fair to conclude that this level of economic growth in 2050 would maintain the current level of economic vitality.

_{Figure 1. Gross World Product, 1950-2005}

The next task is to estimate the impact of fossil fuels peaking on economic activity. Three potential scenarios come to my mind as possible with a fourth thrown in since it seems to be popular.

Collapse – In this scenario, once the crisis of peaking hits, it is never successfully mitigated. Economic activity turns down and continues down to a low level. Since there are potential mitigations, this might happen is if the shock causes the economic system to break down so that a coordinated response is not possible. This scenario would undoubtedly be accompanied by wars, tremendous environmental destruction and a huge die-off.

No Growth – For some reason that I cannot fathom, zero economic growth seems to have great appeal to some. This scenario seems completely implausible to me. We will either make the transition to a new energy base or we will not.

Profound Oil Shock – In this scenario, economic growth slows down as shortage of oil, principally, puts people out of work. Eventually, substitutions emerge and economic growth resumes. The net effect is the time at with the economy reaches a certain level is delayed for some years.

World War Mobilization – This scenario would occur if the world mobilized to take concerted action to mitigate the problem as quickly as possible by focusing world resources narrowly. It seems more likely to happen after a more rapid deterioration. Growth could be significantly above trend for the entire world for up to ten years. A third World War might not include as much wholesale killing as the first two. It might just be an intense economic competition with dramatic winners and losers. The rapid wealth transfers now occurring are setting the conditions for this kind of event.

_{Figure 2. Four Responses to Peaking}

While the world war level mobilization seems to me almost as likely as a profound oil shock, I am going to arbitrarily choose the oil shock perturbation as the basis for my model. The question is, what is a plausible depth and duration for the downturn? The Hirsh Report predicts that it will take twenty years to fully mitigate the effects of oil peaking. It also notes that economic upheaval is not inevitable (“given enough lead-time, the problems are soluble with existing technologies.”) During the Great Depression in the US, the economy lost 25% of its value in 1930-1933, but was back to its previous high by the beginning of 1937. My guess for the coming downturn is that it will be similar in magnitude to the 1930s depression but that it will be shallower and last longer. With this in mind, my model estimates that the world will lose about 70% the economic growth that it would have otherwise had during the twenty year mitigation process starting in 2010 (23 vs 78 T$). This is a very severe downturn but I am simply making guess here how severe it will be.

The only somewhat similar historical precedent for such a downturn happened after the 1979 oil shock, prompted by the Iranian revolution and the subsequent Iran – Iraq War, when the price of oil rose two and a half fold and stayed at about twice the previous level for about six years before collapsing in 1986. This event involved a temporary reduction on consumption of about 15% which created a noticeable blip in world economic growth (see figure 1) but no overall downturn. This was a much smaller event than the 2010-2030 downturn assumed here. It is interesting to note that this event was mitigated not only by the rapid increase in oil supply in many countries but also by the world’s first nuclear power buildup.

_{Figure 3. Projected Gross World Product to 2050}

Energy Demand

Assumptions:

• Economic activity and energy consumption are directly related.
• Energy supply constraints produce greater energy efficiency.
• Greater energy supply leads to lesser energy efficiency.
• Emerging knowledge intensive activities will use proportionally lower energy.

It is widely believed that there is a direct relationship between a level of economic activity and the amount of energy that must be consumed to produce it (see works by Robert Ayres and Charles Hall). However, I expect three major trends which will slow the growth of energy demand. The first is the already stated expectation that world population growth will go to zero by 2050 which will lower long term economic demand growth to 3%. The second is that energy efficiency will improve for the current mix of economic activity, which will itself decline by one third due to resource constraints. However, these efficiency improvements will be largely given up once the supply of new energy resources increases. In my model, the current mix of economic activity improves to 70% of the current energy consumption per unit of GPD in 2020 (i.e. these activities are 30% more efficient), but then reverts to 90% by 2050 once the supply of energy has rebounded. I believe the world will add an additional approximately 1% of growth per year (of 3% total growth) of low physical resource activities which characterize the information society. These are modeled at half as energy intensive as the current mix and grow to 33% of the total mix by 2050. Together these would provide 3% economic growth with 75% of the current energy demand per unit of economic activity in 2050. The current world energy demand is about 15 TW per year (World energy resources and consumption).

_{Figure 4. Projected World Energy Demand}

The question has been raised if it is plausible that energy efficiency could improve 30% by 2020? For the purposes of my model, I am mainly concerned with deriving the demand in 2050 so the efficiency in 2020 does not matter except for the light it might shed on the plausibility on the depth of the downturn. To me a 30% improvement in 12 years does seem plausible in a severe crisis.

Energy Mix

Assumptions:

• Oil will peak by 2012 , coal by 2024 and natural gas by 2029.
• The amount of electricity that can be generated by nuclear, wind and solar is not effectively limited by the amount of available fuel.
• No new energy source will be significant between now and 2050.
• Production volumes of fuels from low grade hydrocarbons will never rival today’s production of traditional fossil fuels.
• It will be important to leave a significant amount of coal in the ground to lessen global warming.
• It will be necessary to slow the consumption of remaining oil and gas below the projected natural decline to save some for future generations.
• A future electricity grid will be designed around the principal of power on demand
  Transportation will shift to an electricity base from an oil base.

The next question is how to provide for the energy demand with the resources that are likely to be available. Fossil fuels are all projected to peak in this period. It is probably not possible, in the short to mid term, to ask people to reduce their use of oil and gas more than they will have to due to peaking, since there are not good immediate substitutions. However, if possible, it would be better to slow the consumption of these so that we do not exhaust the last supplies of these as soon as projections now suggest we will. Coal is another matter. It is the dirtiest of fossil fuels and it can be displaced directly for electricity generation by sources that I do not expect to be in short supply. Due to the seriousness of global warming, my model phases coal out for electricity generation by 2050. It will presumably still be used in 2050 for transportation fuel, especially for aviation and for such uses as steel production.

Dave Rutledge of CalTech, who has done some of the best work on the peaking of coal supplies, has estimated that even if all fossil fuels are consumed as quickly as they can be produced, that carbon dioxide levels will peak at only 460 ppm, a level that most climate scientist recognize as at just the threshold of doing serious damage to the climate. Does this mean that fossil fuel depletion will solve the global warming problem and that we do not need to do anything about it? I do not think so. James Hansen, NASA’s top climate expert, thinks that this threshold needs to be 385 ppm, below the current level, and we are already seeing serious negative effects. Even once emissions decline significantly due to peaking production, it will take several hundreds of years for the carbon dioxide levels to come down to acceptable levels.

My model will use these data compiled by Luis de Sousa for his Olduvai revisited 2008 article (thank you Luis) which has oil peaking in 2012, coal in 2024 and gas in 2029 (1 TW = .086 Mtoe):

_{Figure 5. Conventional Fossil Fuels}

In the following three graphs I show how each of the three fossil fuels is expected to decline due to peaking and also provided recommended levels of consumption, shown as dashed lines below the solid lines of the same color. I assume that coal will be phased out in the model by 2050, except for expected non electricity generation purposes, due to its severe impact on global warming. For oil and natural gas, I cut back the consumption of each on the assumption that these will become too value for us to consume them as fast as we can. I am convinced that this will only be possible once we have alternative sources rapidly coming on line. All data are converted to tera watts.

_{Figure 6. Projected and Recommended Oil Supply}

_{Figure 7. Projected and Recommended Coal Supply}

_{Figure 8. Projected and Recommended Natural Gas Supply}

As you can see, I am projecting that by 2050 we will be able to rely on fossil fuels for only 5.5 TW of my expected world demand of 31.7 TW or 17.3%. I believe this total includes essentially all likely production from alternative fossil fuel source such as oil sands, oil shale and bio fuels which are essentially repackaged fossil fuels. None of these sources seem to be capable of producing much net energy and/or to be producible at high rates. I expect that Biomass, hydro and all other sources (excepting nuclear, wind and solar) will provide about 1 TW combined, as they do today bringing the conventional total to just over 20% of my predicted demand. (I do anticipate the there might be a very large increase in hydro to deal with the wind and solar intermittency issue.) Here is a view of the current world energy mix (World energy resources and consumption):

_{Figure 9. Current World Energy Mix (Click to enlarge)}

Wind and Solar will play vital roles in the future. However, they will have to operate within a power on demand grid. People will not stand for not being able to get on the Internet at night or use air conditioning during the day because the sun is not shining or the wind is not blowing. Today, all wind and solar has to be redundantly backed by dispatchable sources such as gas or hydro to cover for their intermittency. A max of 20% for these sources is widely accepted as the upper bound of their usefulness without a method of large scale power storage or other way to cover for their intermittency. This situation will be made worse in 2050 by gas becoming too precious for power generation. The only large scale storage method of power storage that has emerged to date is pumped water storage. Stuart Staniford and others have proposed a world wide super grid as a way allow solar to be used where the sun is not shining. Al Gore has also recently described a large scale electrical grid as a way to allow wind power to provide a very high percentage of electrical power. To give these vital sources the benefit of the doubt, my model will allow 30% wind and solar with one third of it assumed to be backed by some storage method or grid yet to be determined. I do not think that the proponents of these approaches have demonstrated that they could reach the high levels of renewables they advocate, preserving the power on demand nature of the system and competing on cost with alternatives likely to be available at the time. Note that my model does not adequately provide for the dispatchable power sources that would be necessary to provide the redundancy for the level of wind and solar projected.

My model assumes that 80% of the energy that the world will require in 2050 will have to come from nuclear, wind and solar, or 25.4 TW of electricity. At least the current amount of gas used for electricity generation and all the hydro totaling another roughly 1.5 TW will also be part of the total for an electricity total of 26.9 TW. Of this 30% could come from wind and solar together adding up to 8.07 TW which is 158 time the current .051 TW from these sources. Note that the level of wind and solar projected would only be possible in a mix with nuclear baseload or if the power on demand characteristic of the current system were abandoned. In the latter case, the grid would be completely dominated by the intermittent characteristics of wind and solar.

_{Figure 10. 2050 World Energy Projected Production Without Nuclear}

The next chart shows the dilemma of what would be possible without nuclear power or some other energy source not here considered. Again, remember that this scenario would also feature an electric grid that would only provide power on intermittent supply.

_{Figure 11. Production vs Demand without Nuclear}

I am not sure how to explain the gap in 2010-2030 between the energy projected to be available and the demand projection of the model. One interpretation is that the crisis will be primarily a shortage of oil and that coal and gas cannot immediately substitute. Demand goes down because the oil shortage depresses economic activity and enforces conservation. This article does not pretend to understand what happens during that period, how we would muddle or suffer through it. The important point here is to look at the end state: what is the size of the world economy in 2050? Perhaps the downturn does not have to be a severe as I am forecasting it to be. Tom Whipple, former CIA analyst and top peak oil reporter, has a recent article the comments on the coming crisis. He concludes:

It is getting very complicated out there, and none of us really know what is going to happen.

The Solution

This article assumes that the world has sources of energy in nuclear, wind and solar that are not supply limited and it has the will and the means to transition to a new energy base after fossil fuels are no longer available. In my view, the only credible way to do this is with a large nuclear, wind and solar buildup. In my model nuclear increases 19 fold and wind and solar increase 158 fold.

My goal is to write a future article which describes what this world would look like and how we would get there. My hope would be to write that article with the collaboration of several Oil Drum posters who know more about the details of this issue than I do. It is obviously controversial to put forth a vision that assumes that the world can resume the kind of growth it has seen in the last 50 years after fossil fuels are largely depleted and especially to base the vision heavily on nuclear power. Regarding nuclear, I cannot think of a topic where so many contradictory views are debated so often without a consensus emerging. For example, many people still think that nuclear has a low energy return and that supply of fuels are nearly running out, views that I think are strongly at odds with the evidence.

Is this vision hopelessly naïve and cornucopian? Only if you assume that there no way to go but down for mankind.

Spreadsheet with calculations and graphs.

This is a guest post by Jean Laherrère

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Acronyms

CP – Cumulative Production
U – Ultimate (Recoverable Reserves)
1P- Proven Reserves (95% probability of being produced)
2P – Proven + Probable Reserves (50% probability of being produced)
3P – Proven + Probable + Possible Reserves (5% probability of being produced)
E&P – Exploration and Production

Introduction

Reserves reporting in Saudi Arabia (SA), being unaudited as all OPEC reserves, are mainly political
as confirmed by Sadad al Husseini (former VP of Aramco) with the 300 Gb referenced by OPEC being just a speculative number and not a proved one. Field production data are confidential, except for a few publications by Aramco to reply at Matt Simmons book “Twilight In The Desert”.

IHS is obliged to follow Aramco’s reporting and has increased cumulative oil discovery from 313 Gb in 2004 to 395 Gb in 2006. It is difficult to check field reserves estimates with oil declines, because of production quotas and incomplete data, except for Abqaiq which was reported by the end of 2003 as being 73 % depleted (CP = 11.8 Gb or U = 16 Gb) .

Abqaiq’s oil ultimate is about 15 Gb when calculated from the decline profile, when Baqi reported 16 Gb in 2004, Saleri 17 Gb in 2007 with wishful EOR. IHS reports 18 Gb (30 Gb OIP) in 2008 (plus 0,5 Gb condensate), but in 1993 was reporting 15 Gb. Old data (before the quotas fight) seem more reliable.

Figure 1: Abqaiq oil decline 1946-2006.

Old and new estimates

In the book Aramco and its world published by Aramco in 1980 before nationalisation, Saudi Arabia proved reserves were reported to be 113 Gb and probable reserves 65 Gb, with cumulative production by the end of 1979 being 38 Gb. 2P discovery was 216 Gb for Aramco in 1979. Since then, discovery have been negligible, as shown by the creaming curve (cumulative discoveries versus the cumulative number of New Field Wildcats – NFW). The first 40 NFW (1935-1968) found 360 Gb in 22 fields while the last 40 NFW (1994-2007) found only 6 Gb with 33 fields!

From IHS data, the oil ultimate is about 400 Gb and natural gas ultimate about 65 Gboe (= 400 Tcf).
Recent natural gas exploration by IOCs has been dry (6 NFW) and Total has withdrawn.

Figure 2: Saudi Arabia oil & gas creaming curve from IHS data 1935-2007.

Aramco (Baqi & Saleri 2005) reported as of end 2003:

• cumulative production (CP) = 99 Gb,
• remaining 1P = 260 Gb,
• 2P = 292 Gb,
• 3P =363 Gb and
• contingent resources 238 Gb

All of this for an oil in place of 700 Gb. Saleri seemed to have forgotten that contingent resources are potentially producible one day and he assumes that all oil will be produced without leaving one drop in the ground (!) when the range is from 99% to 5%.

Aramco discovery as of end 2003 is then 2P 391 Gb, giving an increase from the 1980 estimate of +175 Gb, mainly for political reasons, because of the quotas fight.

Figure 3: Aramco (Baqi & Saleri) reserves as of end 2003.

IHS was obliged to accept Aramco’s field estimates and reports 396 Gb at the end 2007 . But Sadad al-Husseini (VP of E&P) when retired in 2007 stated that the 300 Gb proved reserves increase from
1985 to 1990 by OPEC are based on speculative resources and that Saudi Arabia’s increase in 1990 was 90 Gb. In 1980 Aramco’s 2P reserves were about reported 1P.

Figure 4: Saudi Arabia oil cumulative discovery and remaining plus produced.

What is the real ultimate?

Colin Campbell estimates Saudi Arabia’s ultimate to be at 275 Gb. Production linearization is not reliable, ranging from 180 Gb to infinite depending on the selected period. The plot is linear only if the pattern is logistic but this is not the case because of above and below ground conditions.

Figure 5: Hubbert Linearization from OPEC production data.

Oil production seems to have been pushed very hard with new drilling. The comparison between oil
production and number of rigs seems to show that oil production is at the peak, despite that the new
drilling could be the redevelopment of fields like Khurais and Khusanyah.

Figure 6: Saudi Arabia and Kuwait oil production and number of rigs.

Anyway King Abdallah has declared that, if new fields are discovered, they will be kept for the next
generation.

I am inclined to choose 250 Gb for the oil ultimate with 110 already produced as of end 2006. Colin’s 275 Gb seems optimistic and the maximum is 300 Gb, far from IHS 400 Gb.

But there are also NGL (natural gas liquids, reported as natural gas plant liquids by USDOE/EIA)
and it is hard to forecast NGL production which increases more than crude oil because it is outside OPEC’s quotas and Saudi Arabia has high needs for gas (in water desalt plants).

Figure 7: Saudi Arabia Crude Oil and NGL production.

Natural gas (NG) production data varies with sources. The ratio Mb NGPL to Tcf NG seems stable
at 200 Mb per Tcf during the last 20 years.

Figure 8: Saudi Arabia NG and NGPL production.

If the NG ultimate is 400 Tcf (assuming no overestimation as for oil because there’s no quotas), the NGPL ultimate is about 80 000 Mb (400 x 200) or 80 Gb. The ultimate for Oil + NGL could be about 250 Gb + 80 Gb, rounded to 300 Gb.

Crude Oil+NGL production (CP 2007 = 122 Gb) is plotted assuming a plateau up to 2020 and a
decline of 3%/a after 2020 with a 300 Gb ultimate, but the big problem is domestic oil consumption
which is increasing with population. The oil consumption estimated in Figure 14 is plotted as the
volume of production less consumption available for export, which could be zero in 2050.

Figure 9: Saudi Arabia oil and NGL production forecast & consumption.

Oil consumption is plotted, estimated from population forecasts (UN 2006, USCB, PRB =
population reference bureau) and per capita consumption.

Figure 10: Saudi Arabia population forecasts.

Population forecasts are based on fertility rate forecasts, but Saudi Arabia’s fertility rate is badly reported.

Figure 11: Saudi Arabia fertility rate.

Oil consumption per capita was about 25 annual barrels, but it has increased lately to 32 b because
domestic gasoline price is well below the normal price: in 2006 gasoline was 0.16 $/l compared
to a normal price of 0.58 $/l (USDOE/EIA study).

Figure 12: Country by country 2006 retail gasoline price versus cumulative oil consumption.

Oil consumption for the producing countries where gasoline price is well below the normal price increases more than the world’s mean, meaning that their exportation will decrease rapidly.

Figure 13: Oil consumption in 20 countries where 2006 retail gasoline price was below normal.

Saudi Arabia domestic oil consumption could reach 4 Mb/d in 2050 if consumption per capita stays
at the present ratio of 32 b/a, but it has to decrease because Crude Oil+NGL production will be at this level (Figure 9).

Figure 14: Saudi Arabia oil consumption and population (UN 2006 medium) forecast.

Conclusion

There are many uncertainties in liquids forecasts mainly because of the poor quality of the data for
production and population. Saudi Arabia should improve the quality of these data in order to manage the coming crisis. Saudi Arabia could stop exporting oil in 2050 meaning that they will be in trouble to finance their budget.

Furthermore the world needs to know that Saudi Arabia cannot fulfill the wishes of many countries in
increasing their oil imports.

During the last weeks disturbing news have been showing the dark side of human nature in face of these new rough times: all across the state, from north to south, littoral to interior, gasoline and diesel theft is spreading like fire. The black market is thriving with people selling diesel and gasoline for 1 €/litre.
Right: A tank like this can hold up to 1000 litres of diesel, which at today’s prices is worth arround 1400 €. Photo by Getty Images.

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Crossposted at the European Tribune.

The word spreads by mouth that someone at some obscure place has gasoline or diesel to sell at prices not seen for years. A tempting offer, when these fuels are sold for 1.5 €/litre and 1.4 €/litre respectively at filling stations. But these fuels have simply been stolen from the same people buying them: the end consumer.

The first news started to come from the north, in the city of Braga, with regular thefts from parked lorries during the night. But now reports are coming from almost everywhere, from the big city centres to the isolated interior of Portugal.

The preferred targets are lorries with tanks large enough to hold 500 to 1000 litres of fuel. During the night thieves approach and force the tank open, then run in a small tube connected to a manual pump that moves the fuel to a hand held jerrycan or similar container. When the opening offers resistance the tank is simply pierced with a pickaxe or other sharp metal tool. In this case, after the jerrycans have been filled the fuel is simple left flowing on the ground.

Beyond lorries, even regular cars and heavy machinery are being targeted by this kind of theft. Construction sites are a tempting place, where heavy cranes and diggers are usually left unguarded during the night. Many businesses are installing surveillance and alarm systems, but without major results, thieves study the place carefully to avoid cameras and using a pickaxe a tank can be emptied swiftly.

Here’s a digest of what a haulier business holder told to the Diário de Notícias newspaper:

On the 24th of June when the workmen arrived for a new day they found 3 lorries that have been filled up the last night with their tanks completely empty, having been pierced with a pickaxe. They didn’t even take half of the diesel, with the remainder spilled on the ground. The company lost more than 4000 € that day from fuel theft in addition to the cost of repairing 3 fuel tanks.

One month later the smell of spilt diesel still engulfs the facility. Now the lorries are guarded during the night by a man with a licence to carry and use fire arms. On the fence a sign warns: be wary of pitbull dogs.

Many thoughts come to mind reading these news pieces. Like addicts, when the fix dwindles consumers are turning on each other. Before adjusting their lifestyles or finding new arrangements to their daily lives, some consumers seem to opt for the black market, buying fuel that might have been stolen from his neighbour yesterday or from himself the next day.

Life on the slippery slope of oil depletion will likely become much more violent than what we’ve been used to.

For reference, some of these news in the Portuguese press:

Diário de Notícias
Correio da Manhã
Lusa

Luís de Sousa
TheOilDrum:Europe

Days ago Euan got a ping from London based journalist Jonathan Ossoff: We’ve tracked down a lot of statistics that demonstrate just how remarkable oil is as a resource, but we’re having a bit of trouble synthesizing and contextualizing that data to get a usable understanding of how oil compares to, say, human labour, or a hydroelectric plant, as an energy source. This query prompted an interesting discussion among the TOD staff on the comparison of human labour to oil.

Right: Bradley Wiggins, one of today’s top endurance athletes. He can sustain a power output of about 500 watts for extended periods of time. But how significant is that number?

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Nate was the first to provide an answer:

This has been argued and debated often on TOD, mainly in response to some of my own quotes in media about 1 barrel equating to 25,000 hours of human labour (12.5 years at 40 hours per week). Ultimately the answer to this question depends highly on assumptions – but we can arrive at a good approximation. 1 barrel equates to 6.1 Gigajoules (5.8 million BTUs). Depending on the ‘job’, humans use roughly 100-700 Kilocalories per hour (Computer work requires an estimated 119.3 Kcals/hr). 1 kilocalorie (Kcal) = 4,184 joules. So 1 barrel of oil has 6.1 billion/4,184 = 1,454,459 kcals. Using a range of 100-700 kcals per human hour of work then results in a range 2078 and 14544 hours per barrel of oil. At 2000 hours per year (40*50), this is would then be 1.0-7.25 years per barrel. This was discussed in the comment thread here.

However, we aren’t robots – we need to eat, sleep, breathe (we exhale energy), maintain, etc. So a wide boundary analysis would require other calories not devoted to doing work – thereby increasing the disparity between human work and a barrel of oil – there is a good discussion of human thermal efficiency here.

Lastly, there is the quality issue. Though one could expend enough calories to chop down a tree or carry a cord of firewood by hand, there are many activities which would be physically impossible for humans to directly accomplish -e.g there wouldn’t be room for the required number of humans to stand behind a semi-truck and push it down the highway at 100 kph. Or fly a jet, etc.

The average american uses 60+ barrels of oil equivalent(oil, gas and coal) per year (360 billion joules), which implies a fossil fuel ‘slave’ subsidy of around 60-450 ‘human years’ per person. Depending on assumptions another way to look at it is to take a midpoint of 10,000 hours per barrel. At $20 per hour average payroll compensation, that is $200,000 per barrel, not even quality adjusted….

I made a few calculations based on my experience:

This is a very interesting question. The answers you usually see simply assume some fixed value for the human body energy output per day and divide the barrel by that.

The problem is that the human body can produce motion at different power rates. An healthy person can produce close to 1 kw instantaneously; a top Olympic athlete, like a 100 metres runner, should go above 2 kw during those 10 seconds.

But you know that no one would make that kind of speed for much longer. That’s because to produce its maximum power output the human body has to shut down air intake ??? what’s called anaerobic exercise. To keep normal breathing the body’s power output can’t go above a certain threshold; every person has a certain heart beat rate beyond which air intake shuts down ??? the anaerobic threshold. In theory the body’s power output just below the anaerobic threshold should be maintained indefinitely ??? what is called maximum sustainable output.

The fastest Olympic runners are those that do the 200 metres race. They do it in about 20 seconds or less, about the longest consecutive period the body can be at absolute maximum power output without breathing. In the old days in Greece this race was 180 metres, the distance the Greeks believed that Herakles could make on a single breath. A funny thing to note is that athletes that run the 200 meters look like oxen, while those who run the 400 meters look like gazelles.

Down to the math, my anaerobic threshold is about 178 heart beats per minute (this can vary during the season). When I reach my top form, I calculate that my output is about 240 watts (w), about half of a professional athlete. So you could just hit the blackboard and multiply that by a number of hours and relate it to oil, to know how long I’d have to work to replace a barrel.

But not so fast, at that power output I’m using over 1000 Calories per hour. The human body can’t digest much over 2500 Calories per day. So all this math can be complicated. What happens is this, if you have your body working for a long time at maximum sustainable output the next day you won’t do much.

Why is it so? When exercising, muscles use essentially three fuels: oxygen, water and carbon-hydrates (which at high output are mainly sugars, the ones that can be used fast enough). So as long as there is water and easily digestible food (chocolates, fruit, marmalades, honey, etc) the body keeps on delivering. But at this high output level the muscle tissue slowly dies and more important than that, so do the red blood cells. Slowly the body’s performance degrades, and replacing this cells requires the intake of proteins that are all but easy to digest and synthesize.

On certain occasions I spent over 6000 Calories in the same day but on the next I was close to dead. By experience I can say that if I spend anything over 3000 Calories on a given day, my performance the next day will be visibly affected. It is as if there’s some energy budget that can’t surpassed, even if at lower output rates. This may change from person to person but let’s use that round number.

So you could just multiply the maximum sustainable output by 3 and get the body’s daily energy delivery? Not yet. Anyone that would go on spending 3000 Calories per day every single day for an extended period of time will eventually hit problems of hormone production (those that stimulate tissue regeneration) and even psychologic induced performance losses. Any serious training program also includes rest periods, which equate to at least one day per week, more likely two.

So the calculation I’m comfortable making is this:

Empirical maximum sustainable energy output per day (240 w * 3 hours)

multiplied by

the number of workable days per year (365 * 5 / 7)

That would give about 187 kwh in a year.

But no one is able to keep itself at top form during the whole season and there are also vacations. So, 150 kwh might be a more realistic number (3*220*230). A top athlete should be able to double that.

I would take 11 1/3 years to replace a barrel of oil (equivalent to 1700 kwh), while a top athlete would make it in about 5 2/3 years.

But in face of all this Chris had an interesting remark:

It’s an interesting calculation but I don’t think it really answers the question in a useful way. Rather than thinking about energy maybe it’s better to think about useful work done.

“how many days / years labour does one barrel equal?”

Pick a task – cutting wood, moving dirt, harvesting a crop etc…

Compute how many man hours it takes to complete the task without external energy sources and how many hours with external energy. Assume any tools are available and ignore the tool’s embedded energy. For a more holistic approach include the embedded energy in the tool divided by the fraction of its lifetime used to complete the task (likely to be minimal).

The question is hugely complicated though as some tasks are far easier to mechanise and therefore apply external energy to than others – cultivating/harvesting grain is easy to mechanise, picking strawberries far less so. The equivalence between human energy and oil energy is highly dependent on the task.

Glenn had a more down-to-hearth perspective:

C’mon everyone, we’re just talking about brute force labour here. Humans add “smart labour” which is worth a lot more than the wattage equivalent of energy output.

There is a trade-off between human smarts, capital/tools and energy. In the cheap energy era, we relied too much on the energy inputs and not enough on our brains and building the right capital stock. In the very expensive energy era, we will have to make more use of our brains and technology and build infrastructure that does not require heavy energy inputs.

On which Chris built up:

It’s a good point Glenn. Historically we’ve had lots of “brute force” available in the form of fossil fuels. This availability has let us maximise tasks for which this kind of energy can be applied. In pure energy terms many of these activities are hopelessly inefficient though (hence the 10:1 oil:food ratio).

This is why direct energy comparisons between oil and human labour don’t make much sense. Without oil, the “task set” would be completely different. We wouldn’t even think about running a 10:1 food system on human labour for obvious reasons!

Take away the large amount of brute force fossil fuel energy, and we also take away all this hopelessly energy inefficient tasks. We don’t attempt to maintain the same task set on human labour and therefore average task energy efficiency rockets automatically. Looking at the global economy as a whole, we only need to use so much gross energy because the fossil fuel source of energy tends to be used for very inefficient tasks. As fossil fuel supply declines, the overall efficiency, measured as Joules in per unit of useful work out, will improve – we’ll need less energy to deliver the same output.

And Euan finished:

A Human Being may have around 45 useful working years. From Luis’ calculation detailed above, this computes to around 4 barrels of oil equivalent which at today’s price equates to a value of $540 for lifetime human slave labour.

However, in today’s oil slave wealth inflated economy a healthy human body sold as spare parts may fetch up to $45 million.

The not so healthy human body rendered into constituent compounds is worth only $4.50.

Somewhere between these extremes lies true worth based on human intellect, ingenuity and compassion on the one hand and the enormous chemical potential energy of oil on the other. Survival of humanity must lie in Mankind using the second half of Earth’s oil endowment more wisely than the first.

So, what has the TOD readership to say in face of all this?

Angola is one of the few oil producing countries with a bright future ahead. Decades of war prevented the country from developing it’s energy resources properly, but is now becoming one of the largest world oil exporters in a period of rampant prices. Just as if Fortune decided to compensate Angola for its misfortunes during the XX century. Becoming an OPEC member just recently, Angola is set to build one of the strongest economies in Africa, with its GDP growing over 30% 15% annually (numbers here), one of the highest rates in the world. Hopefully Oil will be just the trigger of a golden era in a country that possesses other important natural resources. digg_url = ‘http://europe.theoildrum.com/node/4184′;

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Some History

To read a not so short History of Angola, click here.

Production

Colin Campbell first assessed Angola in December of 2003 in ASPO’s newsletter 36. Back then it was already clear that the Regular Oil cycle was approaching peak (if not already past it). It was also clear that Deep Water fields were coming strongly on stream promising to more than double the country’s production. Using 10 Gb for both Regular Oil and Deep Water ultimates, the best estimate was resulting in a total production peak by 2020 just under 2 Mb/d.

Figure 1 – Colin Campbell’s Angola forecast in 2003. Click to enlarge.

Acknowledging the difficulty of estimating the Deep Water cycle shape at such an early stage, Colin Campbell put forward three different scenarios. The first (A) modelled the hypothesis of the country using all productive capacity as soon as it became available, the other two (B and C) considered a different approach in which the resource would be explored in a slower fashion, extending the economic income in time. These last two scenarios resulted in later and lower peaks. Scenario B would be the one chosen for the forecast this time.

Figure 2 – Colin Campbell’s Deep Water scenarios for Angola in 2003. Click to enlarge.

Production in Angola would rise steeply, more than doubling from 2003 to 2007. Meanwhile, by the end of 2006 it was announced that Angola was joining OPEC. Without a quota attributed, Colin Campbell would reissue his forecast for Deep Water (newsletter 73), this time preferring scenario A, and extending the previous ultimate to 12 Gb, allowing for a possible later cycle of discovery.

Figure 3 – Colin Campbell’s Deep Water forecast for Angola in 2007. Click to enlarge.

And finally in December of 2007 OPEC announced Angola’s quota: 1.9 Mb/d. Official reactions were scarce, but at the time, with the country already producing close to that figure, some disappointment was ventilated in the press:

Some oil companies have expressed concern about an OPEC quota potentially putting the brakes on Angola’s rising oil prospects.
[...]
An Angolan oil official recently said his country would be happy with a quota of 2.5 million barrels a day, a figure which industry analysts say would be about 500,000 barrels a day above real output capacity.

But a few months later Syanga Abílio (Sonangol’s vice-president) would assure that the country’s policy was in line with the given quota:

“It’s possible to reach that production [2 Mb/d] still this year … this for sure may occur in the last quarter of this year,”
[...]
“We are doing our best to maintain our plateau of 2 million barrels, probably until 2014. Our production profile does indicate normal decline (after 2014) which we will be fulfilling with our exploration programme,”

Also countering Colin Campbell’s later assessment is the fact that new production capacity coming on stream in 2008, 2009 and 2010 is not enough to fulfil the expected jump from 1.6 Mb/d to 2.7 Mb/d in Deep Water production up to 2010. New projects coming on stream listed by the Oil Megaprojects page and the EIA are in the following table. A chart of Angola’s concessions blocks can be found here; only blocks 0 and 14 are in Cabinda’s waters.

Table 1 – Oil Megaprojects planned for Angola.

In light of the information gathered here, an alternate forecast for Deep Water Oil is used, more in line with Colin Campbell’s original B scenario, but this time with an ultimate of 12 Gb. Production is forecast to reach 1.5 Mb/d by late 2009 and from there slowly growing to support a total production (Regular + Deep Water) of 2 Mb/d. This plateau is maintained up to 2016 with Deep Water topping 1.6 Mb/d; at this time depletion sets in at 9% per annum, a characteristic figure for this kind of reservoirs.

Figure 4 – Angola Oil Production forecast. Click to enlarge.

It is likely that with rising oil prices countries like Angola start feeling pressure from consuming countries to increase their production. Hence a quota hike or even an unilateral move to break the 2 Mb/d plateau remain open possibilities. In such case an earlier peak and unfolding decline are to be expected.

Cabinda

Much of the Regular Oil produced in Angola still comes from Cabinda, and in spite of having just two concession blocks in its sea, it is also from here that the lion share of Angola’s Deep Water production is coming. Hard figures don’t seem to be available but at least two thirds of Angola’s present oil output are coming from Cabinda.

Cabinda is a short piece of land north of the Congo River, cut of from the main territory in 1885. Early in the 1960s several independence groups joined to form FLEC. In the summer of 1975 FLEC created a provisional government and declared independence from Portugal. Early in 1976 MPLA (aided by Cuban troops) invaded the territory, gaining control of the territory and pushing FLEC to a guerilla war. FLEC would receive help from UNITA years later, but struggle inside the movement between different idealogical veins would break it apart in several organizations.

In the 1990s with the first peace agreements in Angola’s mainland, it became clear that the independence of Cabinda wasn’t a priority. FLEC reorganized, with FLEC-Renovada (FLEC-Renewed) congregating the political arm and FLEC-FAC (FLEC-Cabinda Armed Forces) the military, that continued the armed actions. After the death of Jonas Savimbi the Angolan Armed Forces concentrated in Cabinda, dwarfing FLEC’s power. FLEC turned into kidnapping actions that cost them much of the already dwindling international support. In 2006 peace was settled between FLEC-Renovada and the MPLA’s government, a move that wasn’t followed by FLEC-FAC, casting doubts over its legitimacy.

The present situation in Cabinda was assessed by Jeff Vail here. An example of the current restless felt in the territory happened weeks ago when Isaías Samakuva (the present leader of UNITA) visited Cabinda [portuguese]. While discoursing Samakuva referenced peace as a fundamental instrument of development in Angola, the crowd answered claiming “Cabinda is at war!”.

At the moment FLEC-FAC doesn’t seem to have visible armed power; actions are sporadic and so far haven’t targeted oil facilities. The heavy military presence of Angolan troops (that has fostered the nationalist sentiment among civilians) allied to FLEC-FAC’s international isolation makes it unlikely for a more serious situation to develop (e.g. similar to that in Nigeria).

As seen from the megaprojects list above, Cabinda is loosing its importance in Angola’s oil production. With elections months way a policy change towards the territory might take place if the political balance in mainland Angola turns more into UNITA’s side. But in the end it all comes down to social equity, if the Cabindese people come to feel that Oil exploration is bringing them development and its wealth not ending in Luanda’s elites, the situation will likely improve.

Consumption

Angola’s population presently stands at around 17 million and has been growing around 3% yearly. According to the UN’s forecast the country is still far from completing its population transition and this growth rate should endure for some decades. By 2020 the country is forecast to have 24 million people and reach 30 million by 2030.

Figure 5 – Angola Population forecast, according to UN’s forecast.

Data on Angola’s energy consumption is scarce, the only institution keeping record of it seems to be the EIA. The country profiles database indicates very low values, which although cannot be cross check with other datasets, shouldn’t be far from the truth.

Figure 6 – Past Angola Oil Consumption per capita.

These are very low numbers, about one fourth of the world’s average in 2006. Demand was erratic until 2000, but with the onset of deep water exploration and the country’s political stabilization, things started to improve. Although erratic, growth averaged 9% per annum from 2000 to 2005, it was almost 10% in 2006 and about 9% again in 2007. With international companies entering the country’s service sector and economic development reaching other regions outside Luanda, this high rate of growth should continue for some time.

The internal oil demand forecast for Angola is as follows: consumption per capita should continue to grow along present lines, until about 2015 when depletion should start being a concern. From then onwards consumption growth per capita starts easing, reaching the world average only after 2020 and stabilizing around 6 b/cap/a by 2030 (a comparable figure with 3.6 b/cap/a today in Namibia and 8.5 b/cap/a in South Africa).

Figure 7 – Angola Oil Consumption per capita forecast.

Combining this forecast with UN’s population figures results in a rapid growth of internal demand, topping 200 kb/d before 2020 and approaching 500 kb/d by 2030.

Figure 8 – Angola Oil Consumption forecast.

How likely is this forecast? The main driver of consumption is population growth itself, hence it relies heavily on UN’s figures. By 2030 this forecast projects Angola almost doubling its population and becoming one of the wealthiest nations of the region, similar to South Africa today. Such an outcome is indeed possible, Oil is not the only economic activity in Angola, with Diamond extraction and Fisheries already important sectors and Agriculture having considerable potential. The main issue for the country is how to grow in an equitable fashion, an enduring problem in many oil production nations (especially in Africa). Above everything else, social inequity could be the determining factor undermining the foundations of this possible growth.

The Macroscopic View

In spite of the strong consumption growth and declining production forecast, Angola remains as a net oil exporter for many years to come, presenting a surplus up to the end of the period considered.

Figure 9 – Angola Oil Exports forecast. Click to enlarge.

Adding this forecast to the previously assessed countries yields no major changes, except for higher yearly totals. Peak continues to stand in 2005, with a gentle decline forming, that by 2011 starts accelerating.

Figure 10 – World Oil Exports as of June 2008. Click to enlarge.

Previous numbers of WOE:
WOE [00] Introduction

Luís de Sousa
The Oil Drum : Europe

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History

Probably the earliest assessment of future oil exports on a worldwide level was that authored by John Halloc et al., entitled Forecasting the limits to the availability and diversity of global conventional oil supply published by the Energy magazine in 2004. In spite of being produced before the first oil price rises of 2004, this work has the merit of going beyond the traditional Hubbertian analysis of oil supply. The authors found not only that the volume of oil available to the market will follow a dynamic of its own, declining faster than total production, but also that the number of exporting countries would diminish, compromising the diversity of supply.

Figure 1 – Conventional oil production available for export according to Halloc et al. (2004). Diamonds represent net exports from FSU, Iran, Iraq, Kuwait, Nigeria, Saudi Arabia, and the United Arab Emirates, dots exports from the rest of the world. Arrows show forecast moments in time when producing countries cease exporting oil. Click for article.

Later, prices would start increasing in the wake of vanishing spare capacity in the Middle East. The accelerating flow of events fostered communication through faster means, overriding the slow processes of traditional submission, peer review and printing. The internet became quite alight with resource depletion news sites, fora and weblogs, were the idea of a singular concept of oil exports would be pursued.

Early in 2006 Jeffery Brown laid down the idea of “Export Land”, a model where an oil exporter faces both a decline in production and an increase in internal consumption. He observed that the world’s top three oil exporters were facing similar conditions. Then, together with Khebab, further analysis would be produced reaching similar conclusions for the top four oil exporters. The latest update to the Export Land Model resulted in the following forecast:

Figure 2 – The Export Land Model for the top five oil exporters. Click for article.

In 2006 The Oil Drum would harbour the first version of World Oil Exports (WOE) a country by country forecast of future export volumes up to 2020. Although a simple accounting exercise, based upon rudimentary forecast tools, the outcome would give another dimension to the international oil market’s future. Exports were peaking (possibly already in decline since 2005) and where in for a decline at an accelerating rate. After an update later in 2006, the picture devised was the following:

Figure 3 – The main graph produced by WOE 2006. Click for article.

WOE 2006 lacked some important countries for which data on consumption wasn’t satisfactory at the time: Angola, Iraq, Libya and Nigeria, together with a large number of small exporters. WOE 2006 missed almost 20% of the international oil market.

In large part due to the continuous efforts of Jeffrey Brown, the concept of an unfolding decline in the volumes of oil available for international trade slowly reached larger audiences. CIBC economist Jeff Rubin would embrace the concept as a reason to invest in North America’s unconventional oil resources, eventually bringing it to main stream media.

With oil prices doubling in less than one year, a broader conscientiousness has yet to be built of a real shortage of oil flowing to the market. Public cries of market speculation or manipulation, geopolitics and above ground factors in general as being the main drivers of current high oil prices continue to be the norm, in spite of stark export numbers. It is therefore due time for a new WOE assessment.

Concept

The present world oil market can be perceived vividly in this graph published by Kenneth Deffeyes:

Figure 4 – The Supply vs Demand plane compiled by Kenneth Deffeyes. Click for article.

The crude oil Supply curve is getting vertical with elasticity virtually at zero. But with oil prices climbing from 40$ a barrel in 2005 to a record of 139$, so far, in 2008, Demand stood still. Importers have no short term answers to supply constraints and keep bidding higher prices. It is a market were Supply rules.

This price increase represents an enormous wealth transfer from oil importers to oil exporting countries, as calculated by Kenneth Deffeyes now summing up to several points of the world’s GDP. In its turn, this new found wealth in exporting countries will foster higher consumption internally, leaving a shorter fraction of production available for export. Population in exporting countries tends to grow, along with consumption patterns (if not for everyone at least for some section of society) with access to technologies that provide a better quality of life but invariably consuming more energy (cars, homes, home appliances, air conditioning, etc). This is the basic dynamics behind the oil exports model.

Figure 5 – A simplified scheme of the dynamics behind the WOE model. Click to enlarge.

The main change from a sufficiently supplied market is for mature exporters facing terminal declining production. Rising prices offset an otherwise declining income, and if the production decline rate is lower than the price increase rate that income will actually rise. In such environment oil exporting countries find little incentive to either try increase production or curb internal demand. Production and internal consumption run towards each other, rapidly swallowing exports. Jeffrey Brown and Khebab captured this effect on the following graph.

Figure 6 – The Export Land Model. Click for article.

Criticism

These concepts have received some criticism, that can’t be dismissed upfront. Two main aspects must be addressed, first oil importing countries cannot bid ever higher oil prices continuously, and secondly at some point, when exports dwindle below a certain threshold that start hurting the exporting country’s economy, action should be expected. While these observations seem prescient, up to now events are not unfolding that way. It is worth understanding why.

Oil demand has kept healthy for several reasons, lack of alternatives (especially on Transport) and subsidized consumption in some countries are perhaps two of the most important. In the short term the most likely factor to curb world oil demand is economic recession (for which a change in current loose monetary policies might be a catalyst). But this recession may not be effective worldwide (or it may affect only certain economic sectors). Moreover, an economic recession that would induce a retraction of demand would effectively reduce world oil exports, possibly at a faster rate than that envisioned now.

On the exporters side there are two very interesting cases of countries that turned net importers just recently, the UK and Indonesia. Although two markedly different countries in economic terms (one developed, another developing) both show similar patterns of internal consumption and production fast running to each other without any action taken to avoid the rendez-vous.

In Indonesia action to curb internal demand was only taken several months after exports sunk to zero, with subsidies on oil products reduced just recently.

Figure 7 – Indonesia Oil production and imports. Red: imports; blue: indegenous oil consumed; yellow: exports. Click to enlarge.

In the UK any visible action to change the situation is yet to be seen. Government is just leaving to high fuel prices the task of curbing demand, facing at the same time a wide budget deficit opening ahead.

Figure 8 – UK Oil production and imports. Red: imports; blue: indigenous oil consumed; yellow: exports. Click to enlarge.

Both countries also share the unavoidable effects of terminal oil decline. The option to increase production is left out, and governments seem unwilling to take unpopular measures towards energy efficiency.

Methodology

Despite the weaknesses identified, the main objective of the present update is to complete WOE, assessing the countries up to now left aside. Still some improvements will be tried.

The main data sources used are:

• ASPOs Newsletters edited by Colin Campbell;
• BP’s Statistical Review of World Energy;
• EIA’s country by country Energy Profiles;
• Oil Megaprojects database;
• United Nations Population Forecasts;

Production

The model will continue to rely on Colin Campbell’s thorough country by country assessments published monthly in ASPO’s newsletter. While the forecasts contained there were the only ones considered in the 2006 version, this time other projections will be analysed (if existent) and curve fitting methods employed whenever practical. These will also be cross checked with the data gathered by the Oil Megraprojects database.

Consumption

This is where the model will hopefully get better improvements. Instead of searching for consumption increase patterns in plain consumption values, this time the past evolution of consumption per capita will be the model’s main driver. For many countries a long-term trend emerges on oil consumption per capita; in such case consumption forecast resumes to an exercise of population growth for which the UN provides worldwide public data.

Objectives

World Oil Exports doesn’t aim to be an accurate picture of the future, it is a possible picture. No error bars are given or alternative cases, first for the number of countries is such that gathering each one with alternative cases in one graph would be near to impossible and secondly because WOE pretends to present just the most likely path and not all or several possible paths.

The final outcome of WOE aims to be a guide for policy makers and stakeholders in general from oil importing countries. It will show from which countries oil will likely be available in the future and in which quantities. Hopefully it will help them prepare in advance for the challenges to come.

WOE will provide a macroscopic view of the present and future world oil market, hence care should be taken when relying too heavily on it for individual country assessments (although all effort will be taken to produce a clear picture). Deeper assessments on individual countries are both welcome and encouraged.

Format

This time, instead of an extended article, WOE will be a series of articles, of which this one is the first. Subsequent articles will deal individually with each country. This will both provide for a more comprehensive assessment and enforce it as an open, ongoing work. At the end of each country assessment the main macroscopic graphs will be updated.

Luís de Sousa
The Oil Drum : Europe

Updated 13-06-2008 at 19h00 (GMT+01h00).

It all started in Spain, it quickly spread to Portugal and southern France. Lorry drivers are on the streets and on roads protesting against high fuel prices and bringing normal day life to a stand still.

Spanish lorry drivers blocking main access roads to Madrid.

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This is a crosspost from the European Tribune.

Spotty shortages of fresh goods, petrol and diesel are still enduring. This morning the radio reported that the route connections between Algarve and Andalucía were still being blocked, disrupting fuel supplies to the former region. In Spain fresh goods are still a problem in some supermarkets, with picket lines now blockading access to central warehouses that supply retailers. It is likely that these products will see price hikes during the following days, as supply falls from normal levels.

Up to this fifth day of strike there have been more than 1000 protesters detained by the police and 600 others have been fined for ill driving practices. But on the overall order seems to have been restored and life appears to coming back to normal for the regular citizen.

With 800 thousand people deciding the fate of almost 500 million, the news on the hauliers strike are fading away into background noise. Strikers tiredness and lack of interest by the media will probably give the fatal blow to the protest, by Monday we’ll know for sure.

Tonight Europe goes to bed with another institutional crisis in its hands. The big difference this time is that Peak Oil and the associated economic hardship won’t wait.

Life is slowly coming back to normal in Spain. A deal was struck between government and representatives of the vast majority of hauliers during last nigh, granting several fiscal and social benefits to the industry, but leaving diesel taxes untouched. The hauliers’ associations behind the blockade reunited today after lunch and rejected the government’s proposals, vowing to continue protests (the main claim for a minimum service fare remains unattended). Check striker’s demands and the government’s offers [hat tip Migeru].

The police is on the roads, clearing blockaded routes and facing the picket lines all around the country; there have been insistent reports of arrests throughout the day. Escort is being provided by the police to hauliers that request so, protecting lorries from raging blockaders. There’s an all round improvement in traffic. Today’s reported actions have been mainly of slow marches that didn’t had much impact on the returning normality.

Stores are getting shipments again, although still rationing some high demand fresh goods. Factories are slowly coming back to operation, even if partially, and fuel is reaching filling stations again.

For tomorrow the Spanish association of taxi drivers is calling for a national strike, claiming a fare hike of at least 3 euro cents per kilometre. Negotiations will take place still today to avoid the stoppage.

A few hours ago the Portuguese government yielded, striking a deal with protesting hauliers. While taxes on diesel remain in place, a package of measures was presented by the government that includes reduced toll fares and income tax exemptions, representing a substantial subsidy to the industry. Economic activities non dependent on Spanish trade routes should go back to normal in the next 48 hours.

Meanwhile in Spain a deal has been struck with some hauliers organizations, but not with those in action. Reports of violence are increasing, pierced tires, broken wind shields, cargoes destroyed; yesterday some lorries were set in fire during the night, resulting in serious burns on at least one driver asleep inside. The Spanish government is calling for “cogent” action by police forces against the picket lines.

Click for more pictures of the blockade in Spain

There are several hundred lorries stranded in Spain, many of them Portuguese. Those holding fresh cargoes are running out of fuel to maintain their goods. Speaking to the media some of the drivers stranded considered leaving their lorries on the road and simply return home by other means.

Elsewhere, Irish fishermen are suspending the blockade to the ports of Cork and Waterford. Belgian drivers are planning action against high fuel prices for the 19th and 20th of the month, considering a blockade of Brussels [hat tip Migeru].

Lisbon ran out of diesel during the afternoon and petrol will run out still today. Milk, vegetables and fruit are becoming very scarce in stores.

Towing lorry operators have also paralysed south of the Tagus, impairing all on road assistance to motorists. Cars with engine problems are piling up on the road sides all across Alentejo and Algarve.

Farmers and fishermen were also in protest today in Spain, setting demonstrations in several cities of the country. TVE had some sad pictures to show today, with confrontations between the police and demonstrators resulting in numerous injured. At least Madrid is also feeling the same kind of shortages in supermarkets as in Lisbon; fresh meat is becoming an especially scarce product.

During the weekend in Portugal lorry owners called a strike at a national meeting with the main intention of joining the announced actions by the Spanish unions. But at the same time the employed lorry driver’s Union was (and still is) in negotiations with the Portuguese government. The Union called on its members to not go on strike so negotiations could continue. Feeling isolated the lorry owners transformed the strike into a blockade.

These owners are mainly small businessmen that operate with their own lorry, the big companies don’t seem to be involved. Less than one fourth of the country’s drivers are in the protest but the blockade is affecting most of them, the main connections to Spain have been blocked as so the major oil products storage facilities. The objective is clear: bringing the country to a halt.

In many blocking spots protesters are menacing to stone those who may try to break it. Old tyres have been set to fire at road junctions and boarder crossings.

A blockade picket in Portugal.

In Spain mobilization seems to be more deeper, yesterday several access roads to Madrid were blocked. As here, main border routes are being blocked, accumulating lorries in a kind of no man’s land. In some places where bolder drivers tried to break the blockade the protesters managed to halt lorries and dumped their cargo. There are news of roads blocked also in the northern side of the Pyrenees, with French protesters mobilizing at least as far as Bordeaux.

Video from Reuters.

Yesterday things heated up between protesting drivers and those eager to deliver their cargoes. One protester was killed in Alcanena, Portugal when a driver tried to break a blockade at an important freight route. Hours later a similar situation happened in Granada, Spain when a van hit a blocking picket also killing one protester. A video digest of Tuesday’s protests can be found at Euronews.

From a round on the media these are the main impacts to normal life:

• Traffic jams are affecting visibly commuter traffic in Spain with Madrid, Barcelona and Valencia being hardest hit.
• The National Guard has been escorting oil products convoys both to Madrid and Lisbon, densely populated areas that could rapidly dry out of fuel. This morning many filling stations in the northern suburbs of Lisbon had already ran out of diesel and 95 octane petrol.
• Diesel especially is becoming scarce in many filling stations all across the Peninsula. The Algarve seems to be on of the most hit regions, to where many people travelled taking the chance of an extended weekend to spend a few days in the southern warm shores.
• Many factories are closing operations for lack of supply of all varieties of goods. Car factories, an important sector in the Peninsula, are already paralysing, lacking parts to continue operations.
• Fresh goods are disappearing from the supermarket shelves. Yesterday fresh fish was already impossible to find.
• Milk will be unavailable in less than two days. Producers and storage facilities are dumping milk they can’t send to the markets.
• Poultry producers are running out of feedstock. A massive die off could take place if new supplies don’t arrive in the next few days
• Fuel supplies were suspended at the Lisbon airport, but up to the moment no flights have been cancelled. Air line companies have been filling their aircrafts at other airports in Oporto and Funchal.

Today other states will join the protest. Irish fishermen are set to blockade Cork’s port and Scottish lorry drivers will take the road from Glasgow to Edinburgh on a slow pace, disrupting traffic in Scotland’s most transited highway.

How all these actions can impact oil production in Saudi or Russia is hard to envision. Governments will either capitulate and reduce taxes (something that up to now no one seems willing to do) or recur to force and send the guard and the police against the drivers. No option is pleasant, and none will bring the international oil market back into balance.

I can’t help feeling that for road transport these are the last breaths of a dying industry.

Previously at TOD:E: Post Peak Italy.

In a country largely turned into itself, a lone journalist tries to bring reality on oil prices above the daily roll of news bits on football results, jet-set gossip and political fait-divers.

On the 24th of May Jorge Nascimento Rodrigues published on the newspaper Expresso (the largest weekly publication in Portugal with 120 000 printings) what is one of the most direct addresses of Peak Oil ever featured in Portuguese media. Apparently written about the US this article is replete with messages for internal consumption.

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O mês do choque psicológico na América	The month of the psychological shock in America
Três factos provocaram um primeiro safanão no cidadão americano: o preço do galão de gasolina, um documentário dramático da CNN e um aviso sobre um relatório que só sairá em Novembro.	Three facts gave the first shake up on the American citizen: the price of a gallon of gasoline, a dramatic documentary on CNN and a warning on a report that will come out only in November.
O mês de Maio de 2008 vai ficar na história do cidadão comum americano como o momento do choque psicológico. Finalmente, o americano da rua deu-se conta – na bomba da gasolina, no sofá em frente da TV e na primeira página do seu mais importante jornal – que a era do petróleo barato acabou mesmo.	The month of May of 2008 will remain in the history of the common American citizen has the moment of the psychological shock. Finally, the American in the street has perceived – at the filling station, on the couch in front of the TV and in the first page of his most important newspaper – that the age of cheap oil is really over.
Na bomba de gasolina, o automobilista americano surpreendeu-se com o galão (não confundir com o café com leite) a chegar aos 4 dólares e começou a entrar em pânico (apesar de, ao câmbio actual, ser, ainda, menos de metade do preço do litro em Portugal!). Pela primeira vez, começou a perceber que o impacto real do barril de crude acima dos 100 dólares (barreira que foi ultrapassada em Fevereiro deste ano) também lhe toca.	At the filling station, the American driver was surprised by the gallon (not to confuse with coffee with milk [in Portuguese the word gallon has this alternative meaning]) reaching the price of 4 dollars and started panicking (in spite of, at the current exchange rate, being still half of the price in Portugal!). For the first he started to understand that the real impact of a barrel of oil over 100 dollars (barrier overcome in February of this year) also touches him.
Bush veio de mãos a abanar. Bush came back empty handed.	Mustafa Kamal /EPA
CNN assusta com “Out of Gas” A CNN passou um documentário de choque intitulado “Out of Gas” ficcionando uma crise dramática, económica, social e geopolítica, para o final de 2009, uma prenda envenenada para o próximo inquilino da Casa Branca. A poderosa estação televisiva abraçou o ponto de vista de que a alta do preço do barril tem razões estruturais (o famoso “pico da produção do petróleo” e a mudança na cena geopolítica com o fim provável do estatuto de “hegemonista sozinho” dos EUA) e não meramente conjunturais (sejam elas, acontecimentos fortuitos que sempre ocorrerão, como aconteceu agora com o terramoto na China, ou a “bolha” de especulação financeira nas “commodities”).	CNN scares with “Out of Gas” CNN broadcast a shock documentary entitled “Out of Gas” staging a dramatic crisis, economic, social and geo-political, by the end of 2009, a poisoned gift for the next White House lodger. The imminent broadcaster embraced the viewpoint that the high barrel prices have structural reasons (the famous “peak of oil production” and the change in the geopolitic scene with the likely end of the “lone hegemonist” status of the USA) and not merely circumstantial (might they be, fortuitous events that will always take place, as the earthquake that just happened in China, or the financial speculative “bubble” in commodities).
O diário ‘Wall Street Journal’ divulgou que a Agência Internacional de Energia irá rever, em Novembro, os seus prognósticos sobre a oferta futura de petróleo, especulando que a revisão será em baixa – o aumento progressivo de produção estimado estará muito abaixo de atingir o patamar dos 116 milhões de barris diários em 2030 (actualmente está nos 87). Ou seja, a agência embarcou, também, na corrente “pessimista”, comenta o jornal. Apesar do “rascunho” do relatório ainda estar a ser teclado nos computadores com base na investigação nos 400 campos petrolíferos existentes, o efeito das suas prováveis conclusões estatísticas fez já tremer tanto os “traders” como o leitor mais ligado a estes temas.	The daily paper “Wall Street Journal” revealed that the International Energy Agency will revise, in November, their forecasts on the future oil supply, speculating that the revision will be downwards – the progressive production growth foreseen will be far from reaching the [previous] threshold of 116 million barrels per day (presently at 87). In other words, the agency also embarked in the “pessimistic” current, the newspaper comments. Although the “draft” of the report is still being typed in computers, based on research on 400 existing oil fields, the effect of its probable statistic conclusions is already shaking traders and readers knowledgeable on these issues.
Mercado de futuros atacado pelo vírus do “contango” O mês de Maio tem visto os noticiários televisivos e as manchetes “online” repetir diariamente que os “máximos históricos” foram ultrapassados, o que, de tanto ser repetido, já é uma banalidade.	Futures market attacked by the contango virus The month of May has seen TV news programs and on-line headlines repeating daily that “record highs” have been surpassed, which, by so much repeating, is now a banality.
O acaso, ainda por cima, resolveu dar um empurrão negativo – o terramoto na China ocorreu numa região (Sichuan) que produz 22% do gás natural e que detém imensas barragens e estações eléctricas (396) e minas de carvão (no conjunto de Sichuan, Chongquing e Gansu há 22 minas importantes). Tudo está paralisado.	To make things worse, fortune resolved to give a negative push – the earthquake in China in a region (Sichuan) that produces 22% of the [country's] natural gas and that holds a vast number of dams and electric stations (396) and coal mines (on the whole of Sichuan, Chongquing and Gansu there are 22 important mines). All is paralyzed.
Estima-se que, para além dos Jogos Olímpicos de Beijing, o efeito acumulado com esta paragem forçada provocada pelo terramoto naquelas regiões obrigará a um aumento excepcional da procura chinesa de crude. A situação é ainda mais dramática no campo dos destilados – o aumento da procura de gasóleo por parte da China deverá disparar justamente numa altura em que os “stocks” deste destilado são escassos face à procura, particularmente na Europa e na Ásia, alertou, esta semana, a Associação para o Estudo do Pico do Petróleo e do Gás (ASPO) dos Estados Unidos.	It is estimated that, beyond the Beijing Olympic Games, the cumulative effect of this stall imposed by the earthquake in those regions will result in a exceptional increase of the Chinese demand for crude oil. The situation is even more dramatic for distillates – the increase in demand of diesel in China should shot up exactly in a time when stocks of this distillate are scarce to fulfil demand, particularly in Europe and Asia, alerted this week the Association for the Study of Peak Oil and Gas (ASPO) of the United States.
A questão fundamental é que o petróleo – como “commodity” não renovável que é – entrou desde 1999 numa nova fase da sua formação de preço, em que os constrangimentos estruturais da oferta determinarão que se comporte como um mercado liderado pelos vendedores (que poderão reforçar o seu papel de cartel) em que estes terão condições de impor os seus preços e as suas estratégias… até que a “commodity” em causa deixe de ser crítica em termos de consumo (nomeadamente para todo o sistema mundial de transportes).	The fundamental question is that oil – as a non renewable commodity – entered in 1999 in a new phase of its price formation, in which structural supply constraints will determine the behaviour of a market leaded by sellers (that could re-enforce their role as a cartel) where they will have the power of imposing their prices and their strategies… until the commodity at cause stops being critic in consumption terms (namely for the whole world transport system).
Tudo indica que o preço do barril se consolidará no patamar dos 130 dólares durante o próximo mês e que a barreira dos 150 dólares poderá ser galgada no segundo semestre deste ano. A Goldman Sachs vaticinou, como média, 135 dólares no terceiro trimestre e 145 no último trimestre de 2008.	All things considered, the price of a barrel of oil should consolidate its new grounds at 130 dollars during the next month and the 150 dollar threshold should be tackled in the second semester of this year. Goldman Sachs predicted, on average, 135 dollars for the third quarter and 145 in the last quarter of 2008.
Convém, o leitor ter em conta que o comportamento do preço desta mercadoria é oscilante – sobe de um modo “não linear”, ou seja parece-se com um io-iô. O facto de estar hoje nos 130 dólares não significa que nas próximas semanas não possa descer, para depois retomar o patamar anterior, e disparar para cima. Tendo triplicado de preço nos últimos cinco anos, o preço do barril poderá continuar a ter uma subida de longo prazo similar, com várias oscilações mais ou menos pronunciadas.	The reader should be aware that the price of this commodity behaves on an oscillating fashion – rises in a “non linear” way, meaning it is like a yo-yo. The fact it is today at 130 dollars doesn’t mean that during the next weeks it can’t go down, to later climb to the previous plateau and shot up higher. Having tripled during the last five years, the price of a barrel should continue to have a similar long term rise, with several oscillations more or less pronounced.
Provavelmente mais técnico – e por isso menos óbvio para o leitor comum – é o facto do preço no mercado de futuros do crude ter entrado numa dinâmica de “contango” (uma corrupção dos termos continuação e contingência, um palavrão técnico inventado no século XIX em Inglaterra), ou seja, apresenta preços progressivamente mais altos do que os no mercado de entrega imediata (chamado de “spot”). O que significa que os “traders” já interiorizaram que o disparo dos preços veio para ficar.	Possibly more technical – and therefore less obvious for the common reader – is the fact that crude prices in the futures markets have shifted to a dynamic of “contango” (a corruptive form of the terms continuity and contingency, a technical word invented in the XIX century in England), meaning, it presents higher prices that those at the market ready for immediate delivery (called “spot”). That means that traders have already perceived that price rises have come to stay.
O petróleo não vai nascer para todos Apesar do marketing intenso (para efeitos de valorizações bolsistas ou ganhos de posição geopolítica) em torno de muitas novas descobertas de reservas petrolíferas, a questão crítica é a sua extracção, produção e destilação rentáveis. E, sobretudo, o seu efeito liquido na oferta global (ou seja, à medida que alguns são descobertos ou iniciam exploração, muitos outros poços vão ficando esgotados – o que conta é o saldo).	Oil will not rise for all Although the intensive marketing (for effects of stock market gains or geopolitical positioning) around many new discoveries of oil reserves, the critical question is its commercial extraction, production and refining. And, above all, its net effect on global demand (as new reservoirs are discovered or start production, many other are becoming depleted – what matters is the balance).
Diversos estudos apontam para um facto incontornável – o pico de produção do petróleo poderá ocorrer antes de 2010 e, segundo as previsões mais optimistas, até 2025. A aproximação deste tecto provoca uma escalada altista, facto histórico já observável nos ciclos de outras “commodities” não-renováveis. O investigador Ugo Bardi, da Universidade de Florença, demonstrou um comportamento similar para o caso do óleo de baleia no século XIX.	Several studies point to an unavoidable fact – the peak of world oil production can occur before 2010 and, according to the most optimistic forecasts, until 2025. The approach to this ceiling fosters a rise spiral, historical fact previously observed in cycles of other non-renewable commodities. The researcher Ugo Bardi, from the Florence University, has shown a similar behaviour in the case of whale oil in the XIX century.
O que o pico significa é que, numa fase imediatamente seguinte, a produção não chegará para o aumento muito superior da procura, até que o efeito dos preços altos contraia drasticamente a própria procura. Um “equilíbrio” entre oferta e procura será atingido – mas a um nível muito mais baixo, e sem que o preço da “commodity” baixe significativamente. O que é que isto significa? Que não haverá petróleo para todos e que não serão muitos os que terão dinheiro para o pagar!	What the peak means is that, during an immediate following stage, production will not reach the much faster increase of demand, until the effect of high prices drastically contracts demand itself. An “equilibrium” between supply and demand will be met – but a at much lower level, and without a significant fall of the commodity’s price. What does this mean? That oil will not be enough for all and not many will have the money to pay for it!
Não será de estranhar, por isso, que se generalize, nesta fase de ocaso, a prática da troca directa de petróleo por outros produtos sem intervenção de divisas – o que tecnicamente se chama de “barter”, uma prática comercial típica de mercados com “rigidez” e em épocas de hiperinflação ou desvalorizações massivas.	So it shouldn’t be strange during this foreclosing stage a generalization of direct trade of oil for other goods, without the intervention of currency – what is technically named “barter”, a commercial practice typical of “rigid” markets and during times of massive hyperinflation or devaluation.
O americano da rua deu-se conta que a era do petróleo barato acabou mesmo. The American on the street realized that the cheap oil age is really over.	Don Ryan/AP
Ilusões de “intervenção” política O mês de Maio assistiu nos Estados Unidos ao “ensaio” geral de todos os argumentos sobre a forma do poder político “intervir” na situação.	Illusions of political “intervention” The month of May assisted in the United States to the “rehearsal” of all arguments on the way of politic power to “intervene” in the situation.
A Administração Bush foi ao Médio Oriente ver se “extraía” mais petróleo. Mas, em troca, recebeu uma promessa sem grande impacto (300 mil barris por dia da parte da Arábia Saudita), e uma contra-resposta do cartel dos produtores: de que a culpa era dos especuladores financeiros e da imposição de impostos elevados sobre os destilados pelos países consumidores.	The Bush Administration went to the Middle East trying to “extract” more oil. But in return received a promise with little impact (300 thousand barrels per day from Saudi Arabia), and a counter-answer from the producers’ cartel: that to blame are financial speculators and the high taxes imposed on refined products by consuming countries.
O cartel da OPEP não quer admitir publicamente que a sua galinha dos ovos de ouro atingiu um tecto e que, por isso, terá de gerir o que resta de um modo muito apertado. A intervenção militar para “regular” o assunto, também se mostra muito cara financeira e geopoliticamente (vide caso do Iraque), e sem grande impacto na oferta. Uma intervenção mais “soft”, através da Organização Mundial do Comércio pressionando o cartel, esbarra com lacunas legais e dúvidas de eficácia.	The OPEC cartel won’t admit publicly that its golden eggs chicken has reached a ceiling and that it will have to manage what’s left in a tight manner. The military intervention to “regulate” the issue has also shown very costly financially as geo-politically (e.g. Iraq’s case) and without much impact on supply. A softer intervention through the World Trade Organization pressuring the cartel, stands against on legal holes e efficacy doubts.
Restam, por isso, os outros argumentos “domésticos” de emergência, muito esgrimidos na contenda das primárias das presidenciais norte-americanas.	Therefore remain the other emergency “domestic” arguments, heavily exchanged in the primaries race for the presidential elections.
O efeito da especulação financeira é inferior a 15% do preço actual. E, mesmo que parasse, o impacto em baixa seria transitório, refere o investigador Pedro de Almeida, 49 anos, especialista nos mercados financeiros e de “commodities”, professor na Universidade da Beira Interior. Mais: “Quaisquer medidas que se tomem contra os ditos especuladores financeiros apenas tenderão a reduzir a liquidez dos mercados mundiais de crude, limitando as possibilidades de utilização desses mercados para que os produtores e consumidores efectivos façam os seus negócios em boas condições”, sublinha o investigador e consultor. Acresce, ainda, que face à tendência de declínio das bolsas e à desvalorização do dólar, os investidores encontram nas “commodities” uma zona de refúgio – é uma “lei de ferro” da finança. Não há política “voluntarista” que lhe valha.	The effect of financial speculation is inferior to 15% of the actual price. And, even if it stooped, the downward impact would be transitory, says the researcher Pedro de Almeida, 49 years old, specialist in financial and commodities markets and professor at the Beira Interior University [Covilhã, Portugal]. More: “Any measures taken against the so called financial speculators will only tend to reduce the liquidity of the world’s crude markets, limiting the possibilities of using those markets for the effective producers and consumers to do business in good conditions”, underlines the researcher and consultant. Over that there’s the tendency, in face of stock markets decline and dollar devaluation, for the investors to take refuge on commodities – an “iron law” of finance. There’s no “voluntary” politics to help.
Devido à pressão política no Congresso dos Estados Unidos, a Administração Bush travou os fornecimentos adicionais de crude para a Reserva Estratégica de Petróleo dos Estados Unidos. Uma medida que não tem impacto significativo nos preços (como se está a observar), servindo apenas para “desdramatizar” a situação. E que poderá ser um erro estratégico desguarnecendo uma reserva que poderá ser vital para os EUA.	Attending the politic pressure from Congress the Bush Administration stopped the additional supplies to Strategic Petroleum Reserve. A measure that has no significant impact on prices (as can be observed) taken solely to “de-dramatize” the situation. And that could be a strategic error degarnishing a reserve that could be vital for the US.
Finalmente, o discurso dos impostos sobre os combustíveis. Jack Nilles, o “pai” do teletrabalho, foi dos poucos gurus americanos que teve a coragem de ir contra a corrente, e de fazer uma afirmação politicamente incorrecta. Afirmou explicitamente que realizar uma isenção populista de impostos na gasolina, durante as férias por exemplo, é um erro estratégico que só atrasa o necessário incentivo à reconversão urgente (e inevitável) do sistema de transportes norte-americano. Pedro de Almeida, por seu lado, refere: “Os Estados Unidos terão dificuldade em reduzir ainda mais os impostos numa conjuntura de défices públicos. São ideias que passam bem nos votantes, mas só defensáveis por políticos inconscientes, que comprometerão ainda mais a evolução futura da economia americana”.	Finally, the speech of fuel taxes. Jack Nilles, the “father” of telecommuting, was one of the few American gurus to have the courage to go against the flow, making a politically incorrect address. He affirmed explicitly that proceeding with a populist exemption on gasoline taxes, during holidays for instance, is a strategic mistake that only delays the necessary incentive for the urgent (and inevitable) reconversion of the north-American transport system. Pedro de Almeida, in his turn adds: “The United States will have difficulties in reducing taxes even further, in face of public deficits. These are ideas, that go will with the electors, can only be put forward by unconscious politicians, that will compromise even more the future evolution of the American economy”.
Paradoxalmente, é provável que uma reversão da política da Reserva Federal (FED) – que continua a insistir em manter taxas de juro negativas (ou seja, que empresta o dinheiro aos bancos a um juro muito inferior à inflação, obrigando os contribuintes a pagar esse subsídio encoberto à alta finança) – “trave”, a partir de certo ponto, a espiral dos preços do petróleo. Luis de Sousa, outro especialista em petróleo, e membro da ASPO portuguesa, comenta: “Antes de se chegar a valores astronómicos do barril, é provável que haja uma intervenção monetária no sentido da que Paul Volcker [presidente da FED entre 1979 e 1987] fez em 1982″.	Paradoxically, it is probable that a reversion of the Federal Reserve (FED) politics – that insists in keeping negative interest rates (borrowing money to banks at a rate below inflation, forcing tax payers to pay that covert subsidy to the high finance) – stepping on the brakes, after a certain point, of the crude price spiral. Luís de Sousa, another oil specialist, and member of the Portuguese ASPO, comments: “Before reaching astronomic barrel prices it is probable that a monetary intervention takes place, in similar sense to that Paul Volcker (FED’s president from 1979 to 1987) made in 1982″.

Jorge Nascimento Rodrigues got a degree in Economics in the 1970s and started collaborating with Expresso in 1983, since then founding several magazines and e-zines. Beyond Expresso he also collaborates with the EuroAsia Journal of Management (in China) and is co-ordinator of the Revista Portuguesa e Brasileira de Gestão (Brasilian and Portuguese Management Magazine). Author of several books, he is also the editor of www.gurusonline.tv and www.janelanaweb.com.