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Oil demand will soon outstrip supply: industry planner

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Oil demand will soon outstrip supply: industry planner

Old 08-10-04, 01:34 AM
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Oil demand will soon outstrip supply: industry planner

Interesting article on yesterday afternoon's radio [Australia]

http://www.abc.net.au/pm/content/2004/s1172404.htm

Ultimately, I guess it's a good thing as it forces us to look at alternate energy sources for fuel. Oil is too precious to simply use in cars (such as plastics, etc).

It's going to hurt though...

MARK COLVIN: If you think you're paying too much at the petrol bowser now, brace yourself. An expert from one of the most oil-rich countries in the world says the price per litre could soon more than double, and he says that's his conservative estimate.

Dr Ali Samsam Bakhtiari is a senior planning expert with the National Iranian Oil Company and he's in Australia to warn that the world's demand for oil is now close to outstripping supply.

The problem, he says, is not in the Middle East countries like Iran, Iraq and Saudi Arabia, which still have plenty, but in other producers such as Australia and Indonesia, which were both net exporters of oil but are becoming net importers.

And meanwhile, with China's phenomenal economic growth, the worldwide demand is growing and growing, and now it regularly matches peak production of 81-million barrels a day.

The result? The spiralling prices we've seen in the last six months, from $30 a barrel last December, to a whisker under 44 today.

Dr Samsam Bakhtiari spoke to me on the line from Perth, where he's speaking at the Sustainable Transport Coalition's conference on living with less oil.

SAMSAM BAKHTIARI: The supplies side is limited. We are reaching the limits of the planet very soon. We can't produce much more oil than we are producing today.

MARK COLVIN: Well how soon? What kind of time frame are you saying about this?

SAMSAM BAKHTIARI: I am talking about two to three years from now.

MARK COLVIN: Two or three years?

SAMSAM BAKHTIARI: Two or three years, yes 2006 or 2007.

It is always a supply problem. It is never a demand problem. The oil fields cannot produce enough oil anymore.

MARK COLVIN: So 81 million barrels a day – you are saying that the supply will not keep up with that within two to three years from now.

SAMSAM BAKHTIARI: Exactly, yes. That's the maximum in my opinion that the world can produce.

MARK COLVIN: And if, for instance there is a big problem in Russia at the moment between the Government and the Yukos Oil Company, and that Yukos produces something like two per cent of the world demand, I understand. If that was cut out, if as you say, Australia, Indonesia, various other ones were cut out and we were left with the Middle East. How much would be left?

SAMSAM BAKHTIARI: You would still be left with a sizeable amount of production but cutting Yukos, cutting one, one point seven million out of the 81 million that you are relying on now would be a serious dent in the supply side. It would have very dramatic effect on the demand side, naturally.

MARK COLVIN: Now what are we talking about here when we turn to the world economy? Is this going to be comparable to the previous three oil shocks, or worse, or easier?

SAMSAM BAKHTIARI: If what I predict is going to happen in 2006 or 2007 then you will have a constant oil shock after that. So everything is going to change.

MARK COLVIN: So what would that mean? At the moment Australians, for instance, might be paying more than $1 a litre, sometimes $1.10 a litre. It depends where you are in the city or the regions – sometime more than $1.10 a litre, but what would you forecast for after 2006 – 2007 then, if you are correct?

SAMSAM BAKHTIARI: It certainly is going to go up. It certainly is going to go up but where, that will depend on many factors. It will depend especially on factors in the Middle East area, which is now producing roughly 40 per cent of the total crude in the world and this 40 per cent is going to increase with time naturally. But I could see easily prices of three or four dollars very, very soon for every litre of petrol.

MARK COLVIN: Three to four dollars a litre?

SAMSAM BAKHTIARI: Oh yes. Very, very soon, and that in my opinion would still be very good you know, because it could get much worse than that as well.

MARK COLVIN: Wouldn't a price rise on that level have the effect of slowing world growth to such a huge extent that the demand would drop off really drastically anyway?

SAMSAM BAKHTIARI: Oh no, no, no, no. Demand will…

MARK COLVIN: Well isn't that what's happened in previous recessions?

SAMSAM BAKHTIARI: Oh yes but not this time around. You will cut demand first but then the supply is going to go down as well. In the previous ones it was not like that. You would cut demand and supply would go up and you would recalibrate the whole system.

This time you will not be able to recalibrate. What I'm saying is that you don't have any more spare capacity neither in the Middle East, nor in OPEC, nor anywhere else. That's why a problem like Yukos, which is a small problem after all, becomes such a big problem today.

MARK COLVIN: Because the system is so stretched that any little problem at the edges becomes magnified?

SAMSAM BAKHTIARI: Exactly and this you will have more and more. So you will have a brand new world very, very soon.

MARK COLVIN: Well what do you suggest that we do about it?

SAMSAM BAKHTIARI: Get prepared today, not tomorrow. Don't leave things for tomorrow.

MARK COLVIN: When you say get prepared, what do you mean? Go into solar energy or change the type of car you drive? Go to electric cars? What are you talking about?

SAMSAM BAKHTIARI: There are 1,001 solutions already but you have to think about it. You have to study it and see what solutions you can come up, and there is no panacea you know. There is no hydrogen economy at the horizon. There is small little things in my opinion you can do and when you add these all up, it amounts to quite a lot, but you have also to get ready to live with less oil.

MARK COLVIN: Doctor Ali Samsam Bakhtiari, Vice President of the National Iranian Oil Company, speaking to me on the line from Perth where he is speaking at the Sustainable Transport Coalition's conference on living with less oil.
Old 08-10-04, 01:41 AM
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If only there were a place in America that had about 12 billion barrels in reserve.
Old 08-10-04, 02:00 AM
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Exactly.
Old 08-10-04, 02:01 AM
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Problem is though, that will only help you for so long. If your local producers are able to export their oil (say to Australia) for $90 a barrel, then they're not going to supply the local US market for $45 a barrel.

Now, you could force oil producers to sell locally at a cheaper price, but that wouldn't be very free market.

And while the 12 billion may be released at a subsidized price, you will need to replenish that supply at market prices. Even then, it's stil costing you, because you could sell those reserves at market prices. Basically, you'll still be paying for it (just indirectly).

With a production of 81 million barrels a day, you could still only supply the world market for less than 5 months. That reserve won't shield you from the problem, it will only delay the onset.
Old 08-10-04, 02:07 AM
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Yep, we have tons of natural power in Canada, but I seem to recall when the California energy crisis happened, we started paying more, heh.
Old 08-10-04, 02:13 AM
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Originally posted by kvrdave
If only there were a place in America that had about 12 billion barrels in reserve.
I assume you're talking about ANWAR?

Don't get me wrong, I'm in favor of drilling there, but that's still a very temporary solution

12 billion divided by 81 million barrels/day = worldwide extension of oil supply is increased by 148 days. (Assuming the 12 billion barrels is correct, I didn't bother to look up an estimate, just using your supplied number)
Old 08-10-04, 02:15 AM
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Oh, just read the post about US reserve... I had no idea we had that much in reserve. Still, it's only going to last so long.

Guess I should try to find out the estimates for ANWR.
Old 08-10-04, 02:18 AM
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We've been 2-3 years from the "no more oil" apocalypse for going on 30 years now, but let's just assume this particular quack is right for a moment. Even if demand finally does outstrip the production capacity of liquid oil reserves, oilsands remain practically untapped. When oil was at $15 per barrel oilsand production just wasn't viable, but if Oil prices remain high I'd expect current oilsand developments to be fast-tracked in a serious way. It's estimated that there's more oil locked up in oilsands in Canada alone than all of the liquid oil in the entire middle east. It will eventually run out too, but by then alternative fuel sources should finally be ready to pick up the slack. We're not headed for Mad Max land just yet. The dicks being sucked (or bombed) may change, but the spice shall flow.
Old 08-10-04, 02:46 AM
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I don't think we're going to get to Max Max land either. I do think that we should get used to $45 a barrel being relatively cheap though.

If, say, things got really bad and the price of oil tripled in two years, we'd still have a lot of oil. We just would need to readjust our way of viewing it (ie: is it more economical to bicycle to work; do I get a more efficient car rather than the SUV I currently have; can I use electricity to heat my house - or should I get better insulation to cut down the heat loss, etc).

As Nutter says: if the price of oil remains high (or goes higher), the world won't end. It will simply mean that other methods of harvesting oil will come forward (such as oilsands) OR we will look at alternative tecnologies (such as solar powered or battery cars).
Old 08-10-04, 02:49 AM
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I recognize that any solution that depends on drilling for oil only delays the problem, but honestly, isn't that the point? Should we just hold on to it to say that we did? Tar sands and oil shales will be the future, but why bother with those so long as we have a good supply of cheaper stuff?
Old 08-10-04, 08:08 AM
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I assume a petrol bowser is a gasoline pump or station; otherwise I probably don't understand what he's talking about.

The total amount of remaining oil obviously is limited, but is also unknown. As we need more, we look more, and find more. Eventually, that has to end, but perhaps not in his timeframe. More reputable forecasts admit they don't know either and put a range on it. Sometime between 2040 and 2080 we are likely to be seriously short of oil and natural gas. That of course is not 2-3 years. It is possible to process coal to both gaseous and liquid fuels. More expensive than present gasoline supplies but certainly attractive compared to the absurd prices thrown about in the article. WE are estimated to have a 500 year supply of coal.

His point that pumping capacity can't be increased is absurdly wrong. The simple answer: drill, drill drill. ANWR is not the only known oil off limits because of rules (there is also a lot of oil off limits due to economics, which will be attractive long before the absurd prices). Of course, if we increase pumping capacity, we shorten how long the global oil pool will last.
Old 08-10-04, 09:03 AM
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Canada has over 300 billion barrels reserve of "heavy crude" accessible as technology advances (half accessible NOW, though at a cost higher than light crudes).
Old 08-10-04, 09:26 AM
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Oh boy, the weekly energy crisis and/or ecological disaster thread!
Old 08-10-04, 09:48 AM
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Not to worry - If Kerry becomes President, he has assured us that we will be energy independent in 10 years.

Now if you believe that crap .........
Old 08-10-04, 10:40 AM
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I don't know if it will happen in his timeframe, but we will eventually run out of oil.

It will cause major social changes and we'll have to adjust to how we live.

Besides needing new power sources, outlooks I've seen include: abandoning suburbia as a viable living situation. If you live in the suburbs you pretty much have to drive everywhere, even just to get some milk. Cities, both small and large, and villages may become more attractive places to live. Telecommuting should allow people to work from or close to home. Passenger rail may expand to connect villages and cities.

The hydrogen economy is a pipedream. It takes energy to get that hydrogen out of water.

I wouldn't be surprised to see all houses and buildings equipped with solar panels in the future. Some of the newest panels are more than capable of providing enough electricity to run a house.

You might also see a population shift away from the desert Southwest and Sun Belt south to more northern climes. As oil and natural gas reserves deplete, power outages will be more common. Would millions of people want to live in the South without air conditioning?

James Howard Kunstler has a fascinating book that includes this, The Geography of Nowhere and his website, http://www.kunstler.com, includes his frequently updated rants. Before you label him a leftist nutjob, he did support the war in Iraq.
Old 08-10-04, 11:00 AM
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Actually, we will never run out of oil. It's a simple economics question...

dave

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