Figure 1. Gas cloud threat from Bárðarbunga on October 31 (Icelandic Met Office)
It is only the high winds of the Icelandic winter that dilute the gas below the threat to individuals. And yet the earthquakes in the caldera persist with events above level 5 still occurring almost daily. There were 200 yesterday, with ten being larger than magnitude 4.
Figure 2. Earthquakes in the Bárðarbunga region of Iceland in the last 48 hours. (Icelandic Met Office)
The water in the caldera is melting at an estimated rate of 2 cu. m/second with hot magma residing under the originally half-mile thick glacial cap.
While these events are generating hundreds of megawatts it is not in the form of useful energy at this point, but despite the disappearance from the headlines of the Icelandic event, it still has the potential for much greater societal impact than does that in Hawaii. But it will happen more slowly (at least until the potential eruption when the icecap is penetrated.) And sadly it is this demonstration of the short-term focus of the news media and the need for dramatic pictures that again bring me to the analogy of these events to what is happening with Peak Oil.
As noted in an earlier post, the EIA have pointed out that the current glut in oil availability and thus the fall in gas prices correlates inversely with the increase in production from Libya. Their OPEC governor has pointed out that the current global oversupply is at around 1 million barrels a day. Libya has recently produced about 800 kbd of this, and while OPEC as a whole is not worried out the imbalance (since they are projecting that global demand will rise this much over the next year), he would like to see current production curtailed by 500 kbd to get the price back over $100 a barrel.
It is this marginal supply of around half-a-million barrels a day which is now the level of volume that can transform us from having too much to not enough. Which goes back to the remarks that Charles Dickens put in the mouth of Mr. McCawber:
'My other piece of advice, Copperfield,' said Mr. Micawber, 'you know. Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. The blossom is blighted, the leaf is withered, the god of day goes down upon the dreary scene, and - and in short you are for ever floored. As I am!'.Our sixpence, it would appear, is now at around that 500 kbd. OPEC will not increase production much above current levels, in fact it is hard to see where they could anticipate being able to do so. Libya remains threatened by worsening violence, which has been approaching the El Sharara oilfield and it remains questionable as to whether they can continue to sustain production.
The other big question mark remains Iraq. How far the Kurds can increase production up through the pipeline to Turkey remains a question. They have recently announced that the new pipeline is carrying 240 kbd and if the logistics can be put in place the volume could well increase. Problems however with contractors, making the necessary field connections and the nearby conflict will likely combine to slow that progress.
If both sources of supply continue to produce, and even increase a little more than at current levels then the global surplus will still be eaten up by increased demand over the next year. The short-term drop in prices (which may well extend over the winter) will gradually disappear as the surplus reduces. And in so far as the current drop in prices discourages new investment in costly alternate places, even if only in the short term, that cannot but help OPEC as supplies tighten in the future, and that competitive oil is not in place in the market to reduce the consequent price increase.
The short-term loss therefore may well, before long, be returned in higher prices in the summer and towards the end of next year. Such a projection assumes that the recent increases in US production will slow down, and that seems to be a reasonable assumption, given the changing price structure and the lower returns on wells drilled outside the “sweet counties.” One can only drill so many wells where production is rewarding, before the land gets full.
In the short term the drop in prices will also encourage demand, helping to build back what had been a falling away from earlier OPEC projections of demand growth. It will be an interesting year, and perhaps one that will change faster than the slow but steady changes that the volcanoes are having on their local communities. But if so it may still be too slow for the media to closely follow, since many of the controlling events take place away from media attention and occur without, often, immediate visible impact.