Tuesday, March 8, 2011

Is Nero playing the fiddle?

Or to put this in terms the current Administration might have heard of. While the responsible Administration official talks of energy solutions that will come from bacteria, and might make a significant contribution to energy supply in 20-years – in the world of energy Mrs O’Leary’s cow just kicked over the lantern *.

While the world moves more rapidly to a crisis in terms of the supply of liquid fuels this year, and most critically the gasoline/petrol that drives our vehicles, Western Governments are more excited about seizing the opportunity to talk about increasing renewable energy targets. The European Union (EU) with the help of the British Secretary for Energy and Climate Change, Chris Huhne, has just decided that it has become more critical to raise the target for cuts in carbon emissions, within the EU, to 25% by 2020 (the Hon Sec wanted 30%) than other concerns. The fact that this might, as the EU Energy Commissioner pointed out lead to a “de-industrialization of Europe”, is not considered persuasive.

It was just last week that the chief of the National Grid, Steve Holliday, was quoted in the British Telegraph on March 2nd
Mr Holliday told Radio 4’s Today programme that people would have to “change their behaviour.” “The grid is going to be a very different system in 2020, 2030,” he said. “We keep thinking that we want it to be there and provide power when we need it. It is going to be much smarter than that.”

“We are going to have to change our own behaviour a consume it when it is available, and available cheaply.”
So much for reliable and sustainable power, which used to be one of the things that Government was assumed responsible for providing.
(* The cause of the Great Chicago Fire).

Michael Klare has just pointed out that we have reached what others might call “A Tipping Point.” In similar vein to some of the earlier posts here, he notes
To put the matter baldly: The world economy requires an increasing supply of affordable petroleum. The Middle East alone can provide that supply. That’s why Western governments have long supported “stable” authoritarian regimes throughout the region, regularly supplying and training their security forces. Now, this stultifying, petrified order, whose greatest success was producing oil for the world economy, is disintegrating. Don’t count on any new order (or disorder) to deliver enough cheap oil to preserve the Petroleum Age.

This is an argument not just about the collapse of Libyan society into civil war and the loss of 1.6 mbd from the world market. Rather it seeks to point out that first, after revolutions such as those in Iran and Iraq it has taken years and they are still not back to pre-revolutionary production levels, despite all the rhetoric.

More critically the issue will, however, come back to the investment of resource. Many of those driving the popular protests across the Middle East and North Africa are young. Many of them are educated but un- or underemployed. Some of the blessings of the last century included the medical changes that allowed more children to survive into adulthood, and the MENA countries have seen up-surging populations. IN 1980 Saudi Arabia had a population of 9.3 million individuals, by 1990 it had reached 15 million last year it reached 26 million meaning that most of the population is under 30. (And this is typical of the countries of MENA).

Where will the jobs and other incentives not to riot come from? Dr Klare drew attention to the remarks of a Saudi bank governor
The average local consumption of gas and oil grew 5.9 percent in the past five years, the official news service reported, citing the kingdom’s central bank governor Muhammad al-Jasser. “Domestic consumption of oil and gas is posting continuing growth and at high rates,” the report said. “This requires looking into the reasons behind the increase in oil and gas consumption and working on rationing it.”

The Saudi economy, excluding oil, may expand 4.5 percent in 2010 according to the International Monetary Fund, compared with 3.3 percent in the previous year. . . . . . . .

Power demand in the holder of the world’s oil reserves is set to increase 8 percent a year as the government invests to spur economic growth and the population expands.

Saudi Arabia, lacking natural gas supplies to meet domestic demand, is burning oil in power plants as it expands industry. Demand for oil to generate power could account for as much as 10 percent of Saudi Arabia’s total oil production capacity by 2012, Lawrence Eagles, head of commodity strategy at JPMorgan Chase & Co. in New York, said earlier this year. . . . .

The kingdom’s energy demand will rise to 8.3 million barrels a day of oil equivalent in 2028 from 3.4 million barrels last year unless it becomes more efficient, Khalid Al-Falih, Saudi Aramco’s Chief Executive Officer, said in a speech posted on the website April 26.
This is the country that the world is relying on to keep it out of the hole when world oil demand surpasses otherwise bounded supply.

In many of these states the only major source of revenue has been from their energy exports, increasing percentages of that wealth is going to be turned to meet short-term public demands, it will not go into investments needed to sustain fuel production (see Iran and Iraq).

So there is a short-term increasingly-evident problem of coping with the obvious cut-backs from places such as Libya. But the more serious concerns, which Government seems to be ignoring while they still tilt with windmills (which have very little bearing on liquid fuel shortages), is that the rather bumpy plateau of oil production along which we have been bouncing for the past five years may very soon now tilt downwards, inexorably and without likely reversal.

Short term-measures such as releasing oil from a finite stockpile will not do anything significant to change that situation. But if it is not addressed soon then it is likely that the public opinion will switch from its current uneasy complacency into Panic – and that would not be good. For it is from such conditions that demagogues arise.

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