10/10/10
Personally: I celebrated my 45th birthday this weekend and my family came to visit yesterday for a pizza party. Lots of fun was had crafting the maddest of pizza creations for cooking in the cob oven out back. Needless to say, everyone went home pondering how th
ey might go about building a cob oven of their own.
On the animal front, this week saw the arrival of three Khaki Campbell ducks. I cobbled together a duck house from an old kennel and a chicken run. The ducks stayed in the run on Friday and Saturday to get comfortable with all the comings and goings around the place – particularly the dogs – and then today we let them out in the late afternoon for a couple of hours. They made straight for the pond, even though it was out of sight over the brow of the hill. They arrived back safely before dark, and took a tour through the farmyard on their way. The good news is that they are already laying eggs.
I attended a Wexford Green Party meeting on Tuesday night and it was a breath of fresh air to see a group who were discussing things they had done, and things they are going to do. One particular novelty was the fact that there were two Green Councillors at the meeting who were able to bring us up to date on the activities of their respective Councils. Another novelty was the fact that there were two new members attending their first meeting.
On Friday morning I was on radio to discuss John Gormley’s proposal that all the Political Parties work together to create a robust four year budgetary strategy so we can demonstrate to the Bond Market that we are on top of the problem. This is something that has been discussed at length in the Green Party for a number of years, and reflects our firm belief that building consensus on a course of action in advance is a more efficient and effective way of doing things, and will lead to better outcomes.
There was the argument that we should have an election first, but we saw the downsides of that strategy in the early 80s, when we had three elections in 18 months, and how this only made things worse. If all the Parties are agreed on the framework for fixing the crisis before the election, then there can be none of the carry-on we saw back then where Parties tried to pretend there was no problem for short term political gain. The objective, as far as I am concerned, is to get a solution implemented as quickly as possible, and the Country back on track.
Locally: The campaign to get the Rosslare-Waterford Railway re-opened with a new operator is continuing. There are a number of International Operators looking at the line as a way of getting a foothold in the Irish market. There are huge barriers – technical, logistical, financial, and (most importantly) political – to be overcome if the line is to be re-opened by a new operator, but the prize is huge if it can be made happen.
Nationally: The Banking crisis seems to have been parked, for the time being. The Government’s strategy of quaranting the problem seems to be holding together even as the worsening economic crisis makes mincemeat of many of the assumptions they originally used when developing the strategy.
The big issue now is how the Government are going to address their massive overspend in the 2011 Budget.
There isn’t much I can add to the points I made on September 5th:
What IS a problem is the fact that the Irish Government will take in €30 Billion in revenue this year, but it will spend more than €50 Billion.
That is a problem because the €20 Billion gap has to be filled with borrowings of REAL money (not IOUs).
We had that same problem in 2008, we had it in 2009, we have it in 2010, and we will continue to have it for the foreseeable future because the Permanent Government see the problem as being a shortfall in revenue, when the actual problem is that we are massively over-spending.
It was perfectly possible to run Ireland on €30 Billion in 2002. There is no reason why we can’t run it on €30 Billion in 2011.
Everybody is focusing on the Banking problems. The real problem is the bloated cost of running the Country.
That is where we need to focus if we are to turn things around.
If we turn things around the Banking problems will disappear PDQ.
Actually, there is one thing I can add.
Money!
The underlying problem that everyone is missing is money.
When Seanie Fitz and the other bankers were bringing about a Billion a week in new borrowings, every week, into the Country, this money was washing through the economy in the form of wages and salaries for people all across the Country. At every stage where this money changed
hands there were taxes paid – PAYE, PRSI, VAT, CGT, RCT, VRT, Stamp Duty, Excise Duty, and many more. These taxes went into the Government coffers, and back out again as wages, salaries, expenses and pensions for public servants, as payments to people and businesses that provide goods and services to the State, and in payment for the big capital infrastructure projects up and down the Country.
This money got recycled through the economy many times, providing jobs and incomes for hundreds of thousands of people.
Now this money flow has stopped. The Money Fairy has stopped pumping a Billion a week into the economy.
All we have left is the money that we earn from the export of goods and services.
If we want more money in the Country, then we have to start exporting more goods and services – to bring in more money -, and we have to stop importing goods and services that could be provided by people and businesses that employ our family members, our friends, and our neighbours – to keep more money circulating in the Country.
It is hard enough to get money into the Country, and getting harder, without pissing it away on foreign holidays, or on foreign good and services. Through NAMA, we own a couple of dozen hotels. Through Social Welfare we pay out money to unemployed hotel and bar staff.
If we holiday at home we get to have some value for our ownrship of these hotels, and we get value for the money that is paid to the staff of the facilities we visit.
Internationally: The ASPO-USA Convention was held in Washington DC this weekend.
“Peak oil is a finite resource,” stated Baldauf. “Any finite resource has a beginning, a middle, and an end. We’re not saying that we’re out of oil. We’re saying that we’re about halfway out of it. There’s still oil in the ground, but it’s going to be more difficult, more costly to acquire from this point on,” Baldauf said, adding that “we are already feeling the impact of peak oil.” The recession has masked some of its effects, he said, but “even in the middle of this recession, oil is at $83 a barrel this morning. It was in 2005 that oil topped $50 barrel for the first time.”
Baldauf also discussed his experiences as an oil man and witnessing the crisis first hand. ”I happen to be an oilman in Texas in a very small way and I’ve seen peak oil play out under my own drill bit. We’re having to drill twice as deep at twice the cost to get a third of the production.”
Firsthand commentary from the Conference is available at The Oildrum website:
The ASPO-USA Conference – First Afternoon
Jeff Brown – Exportland Model
After commenting on how production declines in major fields, he tied this in to the rising standards of the producing country, and showed that, in a base case a 5% decline post-peak production for a country’s oil, when matched with a 2.5% growth in that country’s consumption, driven by the oil, but continuing after it starts into decline, rapidly lowers exports. Simplistically within 3 years after peak the country will have exported half the oil it will export post-peak. He then compared this theoretical situation with the realities of Indonesia and the UK, where within 9 years for Indonesia, and 6 years for the UK, the countries stopped exports and became importers. Export declines in the final years were over 25% per year.
He pointed to the problems that Venezuela is seeing, and noted that consumption in Saudi Arabia is rising at 6.9% a year. He anticipates that Saudi Arabia, until recently the largest exporter (now behind Russia), will stop exporting before 2030. Looking at the top 5 exporting nations, who collectively supply 50% of the imported oil around the world, he anticipates that they will have shipped half of their remaining export volume in two years. There are now only 33 countries that produce more than 100,000 bd. And, for these, production is sensibly flat over the past five years, while consumption has risen from 16 to 17.5% of production.
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ASPO-USA Conference, First Evening
China has already in place a “Post Peak Oil” strategy. It includes conservation, domestic supply, diversification, environmental impact issues, and international cooperation. It already buys oil from all over the world, including that still in the ground, and has a major blue water navy under construction to protect those interests. They are graduating seven times as many engineers as we are. They know you cannot rebuild exhausted reserves.
Admiral Rice was, until last week, the director of Strategy and Policy at the Joint Forces Command. They put out the JOE report, under the command of General Mattis. Admiral Rice recently took over from General Mattis. Since then Admiral Rice has received considerable push back on the contents of the report including comments on climate change; peak oil, China and Russia – and since these came from both sides, he felt that General Mattis had gotten it about right.
ASPO-USA Conference, Second Day, Before Lunch
Dr. James Schlesinger then gave the keynote address. He began with a bromide “A resource which is finite is not inexhaustible.” And followed this with others leading to the point that “peakists” have won the argument, though we debate the timing. We should be gracious in victory. Remember that politicians do not want to give pain to their voters, and so they must be reassured as we move into these new times.
We depend too much on the fields discovered 50 years ago, the Ghawar’s and Burgun’s of the world, and while it may not be Twilight in the Desert, it is definitely late afternoon. We are now seeing price spikes for oil based on availability. As fields decline, we will need to find 5 Saudi Arabia’s to replace them, and we can’t even find a second. Iraq may be such a place, and offshore Brazil a second, but neither is in a cheap location to produce. Shale gas may provide some help, but that will likely fade too soon.
In questions he noted again that politicians prefer to be reassurers, but that political tensions are rising as China moves into places such as Iran. The King of Saudi Arabia has talked for some time of the need to leave resources for later generations. The age of subsidies for renewable power sources is likely to be limited, and he pointed to economists who think that demand creates supply.
And he left us to ponder “Sufficient unto the day, is the evil thereof.”
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ASPO-USA Conference, Second Day, After Lunch
The final speaker of the evening was Robert Hirsch, who has also recently co-authored a book – The Impending World Energy Mess which was available in signed copy at the meeting. In large measure his talk followed the book (from which you may gather that I did buy, and have half-read, a copy – and it is worth doing so, I may do a review later). He noted that the economy depends on energy, not the other way around. Further we should expect that the general public will still be surprised when oil supplies start to decline in the next 2 – 5 years. From then they will continue to decline for at least a decade, until alternate sources of fuel become sufficiently available. He covered the oil problem, including their forecast of how it will develop, and what an individual could do about it.
The story is a familiar one to the peak oil community: we are over reliant on a few giant oil fields that are depleting and not being replaced. We have been sensibly in a production plateau since 2005, something not predicted by earlier models, but there are an increasing number of reputable sources that see an end to the plateau, and the consequent decline, coming relatively soon. This will impact GDP and hurt national economies. The recent recession and drop in oil demand may have only shifted the onset of the decline by a few weeks.
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Looking at individual response, we should all expect to be impacted, and because of the lack of political ability to resolve the issue (or even to address it yet) we should expect that the result will be very similar to the oil shortages of the 70s. There was a degree of panic – this will happen again. This time, however, there will be no North Sea or North Slope to come to the rescue. Nor can the oil taps be opened wider to remediate the problems. As a result he has got out of the market – since good stocks and bonds will be hurt as well as bad. He has added annuities to his portfolio, bought some gold, and moved closer to mass transit and the shops.
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Rick Munroe brought the debate into the larger picture of the Peak fuel debate. Ho pointed out the considerable difference between the military view of the coming crisis, in contrast with the more complacent civilian government point of view. The Energy Bulletin lists over 40 papers from military groups that have highlighted the coming problems of fuel availability. In contrast it was only in 2008 that the IEA began to express similar concerns. Yet, as a paper in 2009 from the war college noted, while these strategic shocks are predictable, they are either not prepared for, or inadequately addressed. The plans that do exist are over 30 years old, dating from the last time we had such a event.
On July 25th the Energy Bulletin carried a review of the Peak Oil situation by the German military. The response to the crisis, because of this lack of preparation, will not be stable, but chaotic. This instability will increase with time as economies shrink. The result will be unprecedented in its severity.
He pointed out that, by and large, these reviews are not individual opinions, but rather the consensus of qualified analysts and it defines a comprehensive domestic external threat to the point that peak oil can be seen as a weapon of mass destruction. In earlier exercises it was projected that if 4% of the world supply was removed from the market then prices would triple.
Yet with all this information available he was unable to find any significant interest in the topic either in Canada or the United States. There is no planning for the impact of oil shortage on the agricultural production of either country, and the GAO noted that planning on the topic ceased about 20 years ago. It is only, apparently, in the UK that plans for a Liquid Fuel Emergency exist. And yet a fuel crisis will, in very short time, transform into also being a food crisis. The problem is, in part, that while the response of many in government is to ration by price, but to give farmers priority, most operate on the margin and a trebling of fuel prices would put them out of business. It is a complex problem, and thus no-one wishes to address it.
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These articles about the ASPO Conference are important because they spell out the various aspects of the problems we will face, as a society and as an economy, once the quantity of oil available on the market begins to slowly decline.
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