Chris Rhodes on "Why are Oil Prices so Low?" An interview by Rob Hopkins for the Transition Nework.

The following is a transcript of Rob Hopkins interviewing me for the Transition Network. Since this was prepared by me, any errors are mine alone.

https://soundcloud.com/transition-culture/chris-rhodes-on-low-oil-prices 

CR. “I’m Chris Rhodes. I’m currently Chair/Coordinator of Transition Town Reading. I’m actually an independent consultant. I deal with energy issues, of various kinds. I’m a former academic, but I decided to branch out and do some other things with my life, including getting involved with Transition, prompted actually by some research I was doing into the origins of petroleum. And then I came across “peak oil” in the middle of all this, and that rather changed my thinking about a lot of things basically.”

RH. “It does tend to do that!”

CR. Laughter. “Yes indeed.”

RH. “You wrote a piece that was on Energy Bulletin recently, that came from your blog, reflecting on what seemed to you to be the causes behind the spectacular recent plummeting in the oil price, and something that you then wrote up under the guise of a “Transition Agony Aunt” recently . Could you just give us your thoughts on why we’ve seen a fall from a hundred and forty eight dollars a couple of years ago, down to less than fifty now?”

CR. “Mm. It’s been an astonishing journey really. The original hike up to practically a hundred and fifty dollars for Brent Crude was amazing. It was to do with a combination of factors, but really the demand was ahead of supply, and you don’t need much actually, of supply over demand or demand over supply. One percent either way can really shove the price up or down. And the U.S. dollar was in a certain situation too, it was weak at the time, and a combination of these factors shoved the price of oil right up. Then we had the economic catastrophe, and as always, when you have an economic problem, a great slowdown because everything that we do requires oil, and then that demand for oil falls, and the price plummets.

And then we had a recovery, the Chinese economy was ramping ahead, and a combination of various factors preserved the demand for oil, and that sort of drove the price up above a hundred dollars, and kept it going that way. Of course there was the fall in the output of oil from Libya, and that certainly had an impact on the whole equation. And things seemed to be trotting along quite happily. With a tight market, the oil was above a hundred... I think it was a hundred and fifteen dollars a barrel in June of last year. And then something really started to go pear-shaped, in terms of the oil price. And there are various conspiracy theories around, about people trying to destroy other people’s economies. I try and steer away from conspiracy theories, but the most sensible explanation I can come up with is that indeed, the world economy is slowing.

The Chinese economy has slowed considerably, and things aren’t so good in Europe, so the demand for oil has actually fallen, but yet supply is way up. The Oil has come back out of Iraq and out of Libya, the U.S. production of shale oil is about three and a half million barrels a day, and the Saudis, who produce a third of OPEC’s oil, have said “well no. Right, OPEC is not going to pull back on oil production", so we’ve got an oversupply against demand, and the force – the supply/demand force – has pushed the oil price way down. And it’s not until that glut has been absorbed that anything will happen. But I don’t believe that we’re going to have this situation for too much longer. Because the oil price is so low, this has caused a lot of oil companies to pull back on their investment in new production.

So if they’re not investing now – they’ve pulled back a hundred and fifty billion worth of production this year – then a year or so down the line, the overall global oil production is going to be decreased accordingly. And what we’ve got to look at is that the world existing oil production is falling by about three and a half million barrels a day, which means that we’ve got to find a new Saudi Arabia’s worth of production about every three or four years, and mostly from unconventional sources. So it really does have to absorb that glut, and fairly rapidly, so I would predict that the price of oil is going to go back up again. How high is hard to predict, probably impossible to predict, but I think this is a temporary situation. Peak oil is real, and the existing conventional production did peak probably the best part of ten years ago now, so I think that is where we are standing at the moment.”

RH. “So the fact that, um, oh what was he called, oh God my brain’s gone completely, Matthew – Simms?”

CR. “Simmons.”

RH. “Simmons, yes Simmons, who wrote his book about the Twilight of the oil in Saudi Arabia.”

CR. “That’s right.”

RH. “And the fact that production has been able to ramp up and they feel they have reserves to hold out as long as it takes, do you think that some of those forecasts in terms of peak oil and lack of availability of oil were maybe slightly overdone?”

CR. “It’s not played out exactly as was anticipated. I mean, the original idea was, of course, well, due to the difficulty increasingly in getting the stuff out of the ground it would peak, but it’s been more complex than that. I know the Saudis – I’ve forgotten the name of the field, but it’s a field that’s full of pretty filthy oil, which is full of metals and all kinds of stuff. This was mothballed - you know - decades back, but now they are producing from that, and I think a lot of production has been possible because the price of oil did go up so high, so what’s happening there, but also the whole of the fracking industry. If the price of oil hadn’t gone up to a hundred dollars and then more than that, then nobody would have invested money – no oil companies would have invested in production, because it would have been a money loser.

Now, apparently with the low oil price, so I read yesterday, 97% of all shale fracking projects are now basically money losers, so I can’t see that that’s going to continue for too much longer. And I think that what we can say is that we’ve seen the oil price plummet because of this oversupply against demand, but production costs are still high, and we’re not going to continue to produce oil until the price goes back up above the breakeven cost of production. And the unconventional oil sources tend to be more expensive to produce from. They cost more energy, they’re a lower net energy return, they’re more difficult, they require more advanced technology, and it’s overall a really less – I was going to say beneficial – it’s a poorer investment really than conventional oil. So we’re trying to fill up this great hole – as I say, one Saudi Arabia’s worth of production every three years, which would sound to me like five Saudi Arabias worth of production by 2030. Because time’s moving on. It’s 2015 already. 2030’s not so far away, is it, from as it seemed from not that long ago. And it’s going to be a more difficult and expensive procedure.

So we are using up, quite naturally, the easy to get stuff. The cheaper to produce stuff. And we’re trying to fill that hole with more difficult and more expensive stuff. I mean the Saudis can still produce oil for – oh, ten dollars a barrel, but of course they need it to be a hundred dollars to balance their national economy. And this is true of many countries, but Saudi at least has deep pockets, so they can actually weather this for some time. Whereas somewhere like Venezuela, they get about fifty percent of their GDP from selling oil, but of course they don’t have deep pickets, so their economy, I think, is likely to suffer... well, badly, and soon.

RH. You mentioned, when we’ve talked before, that you’ve been to some seminars around fracking over the last few weeks. I wonder what your sense, with the infrastructure bill having gone though, and the government talking about a green light, a go ahead for fracking, of the reality of whether we’ll see large scale fracking in this country.”

CR. “It’s a very interesting  question. I mean, the only place that fracking has been done on the grand scale so far is America. And really, however people may feel about hydrocarbons, what they’ve accomplished in terms of production is astonishing. Something like 30% of domestic oil production now comes out of shale. This is tight oil – shale oil produced by fracking shale. Not kerogen, that’s another story altogether. And about 45% of American domestic gas production also comes out of shale, at the moment. So, it’s astonishing. So, the only other place we can look to beyond America is Poland, where there’s been some significant attempt to produce gas, at least. And it’s really not played out as well as was hoped. Poland was looked at as something that was going to be the European giant, because they had apparently more reserves than anybody else did. And then the Polish Geological Institute revised those reserves down to about 10% of what they thought they had originally. Chevron and other majors have pulled out of Poland.


They’ve drilled 66 wells, and I don’t think any of them gave a decent production rate, the geology is more complex and more difficult in Europe from in America, and even in America, where – OK, naturally they’ve drilled into the sweet spots, where they’ve got the good production, both for oil and gas, for drilling elsewhere, it seems that the energy returns are becoming poorer, so I think that if we’re going to start doing this in Britain – ah well, it may not play out as well as hoped. People I was talking to, at some of these workshops, um, they were very interesting in what they said. These were people who were on the edge of the industry, at least, were saying that it was a great big gamble, but of course, if it comes off, then there is money to be made, but, again, nobody is going to seriously invest with very low oil and gas prices. Because the oil and gas prices tend to be connected. If one is low, so is the other, and vice versa. So, I think that unless the oil price goes back up again – and I think it has too, for the reasons I’ve said – supply and demand – then we’re not likely to get much serious investment.


But there was a report out – the parliamentary bill – the environmental audit, came out last Monday, and their conclusion – well, you’re probably well aware of it – but basically what fracking we do should be very limited, mostly because of the CO₂ emissions aspect, but we’re not likely to have a U.K. shale industry for about ten to fifteen years. Now, by that stage, if that’s true, then we will be way down in the likely production of oil across the world. And people have various views as to - even in America - how long that production is going to play out for. Um, you know, there’s David Hugues, who came out with a report for the Post Carbon Institute, didn’t he, and he is somewhat less optimistic, shall we say than some of the other figures than have come out - for example, the U.S. Department of Energy... who are they? The Energy Information Administration. I always confuse them with the French counterpart. But, yeah, basically that there’s no guarantee that there will be sustained production out to 2040, because even that assumes there’s going to be better technology developed along the way, and the geology will be better understood. I found an interesting – I discovered quite recently – a presentation by Chevron for their investors. And basically they were saying that, well, we need to find another 200 billion barrels of oil by 2030.


Well, that’s interesting in itself, and then on a slide they show, as I say, the decline rate of production of conventional oil, which is this needing to find a new Saudi every 3 years worth of production. But, of course, it’s not only that they’ve got to find 200 billion barrels more oil, they’ve got to find more of it, and produce more of it, year on year. And then they go on, and they look at where that oil’s going to come from. Well, a little titsy-bit is going to come from conventional oil, they reckon about 40% is going to come from deepwater drilling, maybe 20% from shale fracking, and a few other things to make the whole lot up. Some tar sands increase, but if you look at the amount of oil that’s reckoned to be produced over time from fracking, even the EIA’s figures, there’s not as much oil to be had, so they reckon, as Chevron does. And you start to think, yep, there are a lot of uncertainties about how much of it there is to be had, and of course, what the production rate is likely to be. 

You don’t know what the production rate is going to be until you start drilling. Neither do you know the quality of the material that you’re going to recover. So, I think there’s a lot of uncertainty, and I do have my doubts that we’re going to have a massive scale shale industry in Britain any time soon. And what I fear is that if we really go out for this, and it doesn’t work, and we’ve ignored renewables, and other ways of doing things which, basically, involve cutting the amount of energy that we use, then we may have backed the wrong horse in the race.”

RH. “Mm. Mm. And you wrote recently about the Ekins and McGlade study about keeping fossil fuels under the ground. What does that add and bring to these discussions, do you think?”

CR. “Mm. It’s interesting. I mean, the discussions really, so far are right, OK, can we maintain oil production. If, yes, how can we do it? Then we start to see, yep, it’s going to have to be unconventional oil, it’s going to be expensive to do, difficult, maybe it’s not going to be possible to maintain overall production. Because it’s the old adage, isn’t it, that it’s the size of the tap, more than the size of the tank, that matters, and these are more difficult to produce from. And you’re trying to maintain or grow production from them, to maintain overall production, in the face of what you’re losing from conventional oil. But, of course, yeah, the paper in Nature that you refer to, concluded largely that we’ve got to stop burning about, um, well basically that we’ve got to leave about two thirds of our fossil fuels in the ground.

I looked at it in terms of production rate, but it seemed to me that we have to reduce our rate of burning coal by about two thirds, and the oil supply they reckoned would only need to go down by 5% or so, the production, but the gas supply, the gas supply would have to increase by maybe 60 or so percent. So, for that to work - the analysis they presented – it seemed that we would need to grow our gas supply, which sounds quite reasonable to me. Of course, where is the gas going to come from? Shale presumably, and coal bed methane, but again other unconventional sources which are more difficult to produce from.


So, we really are in the scales of a great balance, between what might be done in terms of production, and of course whether that actually is desirable to do – to grow that production, rather than reducing it anyway, because we are going to proverbially “fry the planet”, It’s interesting that if you look at the, uh, the B.P. Statistical Review, although they reckon that there will be some substitution of coal by gas, still, um, by 2035, we will have increased our carbon emissions by something like 30%. So that seems to be totally – diametrically - opposite to the proposals of what needs to be done, according to the analysis published in Nature.”

RH. “And, uh, that gap that you mention, and the challenge that the paper presents, what is it that you think – I mean, you know, you’ve been involved in consulting around energy, and now you give some of your time to Transition Reading, as, you know, the Chair of the group. What’s your sense of what Transition brings to those conversations – to those discussions?”

CR. “I think what Transition brings, among many things, to these discussions is that, while mostly, popular discourse centres around where are we going to get our energy from? How are we going to grow supply?, Transition starts to say, OK, well accepting that if we are going to grow any supply, but even to maintain what we have, we have to move over to lower carbon energy sources. But then Transition focuses on ways of reducing energy – focuses on localisation . I mean that really came in implicitly with looking hard and firmly in the face of peak oil, but there are so many other aspects. 

So, we have local community activities, producing more of what we need at the local level, establishing resilience, as we use the word, but really, it’s about, in a growing way, um, managing to use our resources more efficiently, and in fact, in terms of energy, it’s facing up to the fact that we are going to be in a situation where we will have less energy available to us, whether that may come from carbon-free or carbon-emitting sources. I think Transition is about a completely different paradigm, um, really, for how we go about our lives in the future. But, it’s also about drawing people together and finding the strengths that we have within communities, and at the local level.”

RH. “And the last question I had was, as somebody who – you’ve been an academic for a long time, and a writer, and a researcher and a consultant, what has getting involved with Transition brought to your sense of your ability to affect these issues or respond to these issues, that might not have been there before? I’m wondering what that involvement has brought to you personally, either that the previous responses and approaches might not have done?”

CR. “Well, I, for many years used to do terrible things. As you said, I was an academic, I used to fly around the world working on particle accelerators, and things like this, so my carbon footprint must have been – well, I wouldn’t like to think about it – but I really wasn’t thinking in these terms, and what really, uh, changed my attitude and my outlook, as I said, was in my researching into the origins of petroleum – biotic, abiotic etc. – coming across a page, um, on the internet – it might have been by Matt Simmons actually – but peak oil, and I was just transfixed as the implications slowly started to drop in my head, like the proverbial penny. 

And immediately it became obvious that we needed to relocalise, and then that naturally caused me to gravitate, um, beyond my writing on the subject etc, to getting involved with the local Transition group. But what Transition has given me is a sense of hope, actually. That by – I feel that we either all stand or all fall together, as a human society. And I think that from this grass roots, getting together and sharing skills and hope and resources, we may actually get through what is likely to be quite a testing time, however it unfolds.”

Can flooding be prevented by rebuilding the soil?

Living close to the River Thames, I am well aware of the reality and presence of flooding. Although this house has not been flooded since 1947, some, closer to the river and on lower ground, have. On periodic occasions, we have been presented with television-footage of the Somerset Levels, utterly overwhelmed by water, and it is apparent that the suffering of those living there and all whose lives are also disrupted by flooded roads and railway tracks, may not be abated beyond temporary "fixes", according to the likely weather patterns that we may anticipate in the coming decades. For hundreds, or perhaps thousands, of years, the regions of the Somerset Levels were marshlands, until humans encroached upon them, in days before the Domesday Book was written http://en.wikipedia.org/wiki/Somerset_Levels. Similarly, here and elsewhere, many houses have been built on the floodplain. The floodplain does the job that ecology might expect it to, which is to take-up the excess water when the river is in flood.

At the end of our road used to be a farm, and every winter that I can recall, the riverside field there used to flood, and I did wonder if it was such a good idea to graze cattle there, since they might pick-up some contagion such as liver-fluke from the sodden ground. Then, perhaps twenty years ago, the farm was sold to developers, who created a rather picturesque complex of houses, each of which sold for a pretty penny, and I imagine that the farmer is still laughing his socks off. In contrast, those who now occupy the complex are less amused, since every winter, from where the cows used to graze, people have to make their way gingerly along the single narrow track out, while the former fields are flooded not only as they were, but more heavily because the water can no longer soak into the soil, being debarred by the impermeable foundation of concrete and tarmac on which the houses are built. The name of that narrow track remains as "The Causeway", which probably sounds rather twee, but by definition does give a heavy hint as to the prevailing geography: i.e. "A causeway is a road or railway route across a broad body of water or wetland raised up on an embankment." http://en.wikipedia.org/wiki/Causeway. Interestingly, there is a house that has stood on ground to the other side of the causeway for around two hundred years, that is protected from flooding, since not only is access provided to the farm/development but its raised structure acts as a fortification against the floodwater from the river. This, they knew to do, in days past when people observed and understood the lay of the land, and worked with its natural topology.

In the midst of such reflections, a friend alerted me to an article by George Monbiot http://www.monbiot.com/2014/01/13/drowning-in-money/ which refers to a study in which the replanting of trees enhanced the rate at which soil could take-up water by 67 times. While this is something of a revelation to read, sitting here in an English village, Britain has in fact been involved with and has funded research across the globe whose results show similar effects. I know that soil erosion/degradation runs hand in hand with poor absorption of water into the soil, and hence flooding. Planting cover crops is one way to curb erosion, otherwise the soil is more strongly eroded in the winter: (1) when it is left bare (on fields harvested earlier in the year), and (2) when the elements are at their most forceful. Through erosion, soil is washed away and contributes to the silting of rivers, so reducing their flow capacity and further exacerbating the problem of flooding.

Planting trees acts to shield soil from the winds, and the mulch from fallen leaves forms a layer to protect the soil on the "forest" floor. The roots, and associated fungi, also help to hold the soil together. The mulch furthermore contributes to building soil organic matter (SOM), when it is taken down into and processed by the soil food web (the ecosystem of microbes and other creatures, such as earthworms and beetles that live in soil), and so the soil structure improves, meaning that it can absorb water and drain properly. In combination, this reduces run-off, at least until the soil becomes saturated. The study suggests that the roots can act as conduits for water into the soil, which makes sense because tree roots are very deep and can access soil regions that roots from grass, say, cannot. There is a rough symmetry between the depth of the roots and what grows above the surface. Hence, a greater "volume" of soil can be made available to absorb water, and so that sixty seven-fold improvement in water absorption rate is perhaps accounted for. Impact by the hooves of animals can certainly compact soil, raising the volume of runoff, and particularly when combined with overgrazing accelerates erosion of the soil. That said, in arid regions of Australia, soil has been brought back to life by the deliberate introduction of grazing animals, whose hooves drive seeds into the soil, while their manure assists the creation of SOM http://www.sciencereviews2000.co.uk/blog/view/science-progress-news/62/feeding-and-healing-the-world/650. 

The study is fascinating, and if funding has been withdrawn from tree planting projects, as Monbiot says, the policy might appear misguided. Perhaps those allocating the cash are unaware of the potential benefits of having trees rather than ground that is otherwise left "open". Certainly more work should be done, as it seems such a cheap and easy option - a "back to nature" approach.To be sure, the situation on the Somerset Levels and elsewhere is complex, but I was struck recently by another news item about mitigating flooding at lower levels by cutting trees on higher ground and placing them to act as partial barriers to slow down the flow of water, which can be described as "engineering nature's way"  http://www.engineeringnaturesway.co.uk/category/blog/flood-alleviation/. Rather than getting "rid" of the water as quickly as possible, as has been done by technology, holding it back using natural defences has proved successful in preventing flooding in property that has previously been inundated http://www.theguardian.com/environment/2014/jan/10/flood-defence-nature-experiments

It seems likely that other human actions are contributing to our flooding problems, which are expected to continue into the coming decades http://www.ceh.ac.uk/news/news_archive/the-recent-storms-and-floods-in-the-uk_2014_06.html  However, there are many ways by which the issues of degraded and flooded land might be addressed, particularly through the observation and partnership of Nature  http://www.sciencereviews2000.co.uk/blog/view/science-progress-news/62/feeding-and-healing-the-world/650. Hence, surely, to take care of the soil, the land and the landscape must be the certain path away from an emerged human condition that is all too apparently, and in all respects, non-maintainable. The importance of earth-works such as swales, ponds and dams should not be forgotten either: "slow it, spread it, sink it!" as they say in permaculture circles

Why Cheap Oil Does Not Mean that Peak Oil is a Myth.

Peak oil is a fundamental tenet of the Transition Towns concept, but the current return of “cheap oil” has muddied the waters about how to discuss it: https://www.transitionnetwork.org/blogs/rob-hopkins/2015-02/transition-agony-aunt-how-talk-about-peak-oil

At a recent meeting of Transition Town Reading (U.K.), we discussed the prevailing low oil price, and the group asked me to put together some salient points on the subject, set within the context of whether or not we can now dismiss peak oil, e.g. as is currently being contested. http://peakoilbarrel.com/will-2015-peak-oil/  http://www.counterpunch.org/2015/02/02/why-the-crash-in-oil-prices-should-bury-peak-oil-once-and-for-all/

The following points are based on an article that I wrote on this blog http://ergobalance.blogspot.com which was re-posted on Resilience.org http://www.resilience.org/stories/2015-01-16/fossil-fuel-use-is-limited-by-climate-if-not-by-resources Most of the references that I have drawn from are in the links posted there, with a few more added into the text below. Some of the points overlap with each other, but hopefully expand their perspective in so doing:

(1) Peak oil is NOT when oil runs out, but it is the point at which the maximum rate of production of oil is reached, globally. Beyond the peak, global production falls relentlessly. New technologies can extend the supply, but the cost of production rises accordingly. 

(2) Peak oil is expected to happen as a result of geological/ technical/ geopolitical factors, but it may also be that a very high cost of production (mainly due to these factors), and hence selling price, makes oil less affordable, reducing consumption, so production “peaks” for this reason. 

http://www.jeffrubinssmallerworld.com/2011/10/19/peak-oil-is-about-price-not-supply/

(3) Different nations/regions will peak at different times, but “peak oil” refers to the global maximum.

(4) Over half of the world’s major oil-producing nations have passed their production peak. http://www.resilience.org/stories/2014-06-26/the-oil-production-story-pre-and-post-peak-nations

(5) The decline in production rate from existing oil fields amounts to a loss of 3.5 million barrels a day, per year. To maintain overall supply (around 30 billion barrels per year), the equivalent of a new Saudi Arabia’s worth of production must be brought on-stream every 3 years or so. http://www.theguardian.com/environment/earth-insight/2013/dec/23/british-petroleum-geologist-peak-oil-break-economy-recession

(6) This (5) means that new production has to grow relentlessly, year on year, such that by 2030 (only 15 years time) we must install new production to the tune of around 5 Saudi Arabias.

(7) It is not only the (large) total of the oil that must be produced (200 billion barrels  by 2030), but [reinforcing (6)] that the production rate of the “new oil” has to increase relentlessly to meet the decline from existing conventional fields. http://www.peakoil.net/200-billion-barrels-of-new-oil-production-is-needed-by-2030

(8) It is production rate that is critical, more than the size of the reserves. “The size of the tap, not the tank”. Of course, the oil has to be there in the first place, but it is how fast it can be got out of the ground that determines whether the overall global production rate can be maintained.

(9) The conventional fields being found now tend to be smaller than they were. The 20 largest oil fields in the world account for 25% of total global oil production, of which the majority are already in decline. “Giant” oil fields (those containing 500 million barrels or more) currently provide 60% of the world’s oil supply, but their discovery peaked decades ago. http://www.energyandcapital.com/articles/peak-oil-investments/1603

(10) This means that most of the new production has to be from unconventional “oil” sources. These are more difficult and expensive to produce from, and have a lower energy return on energy invested (EROEI) than for conventional oil. This is likely to translate into lower production rates per unit of $ or unit of energy.

(11) There is an inverse correlation between EROEI and $ price for different oil sources, i.e. lower EROEI, higher $ price. http://rsta.royalsocietypublishing.org/content/372/2006/20130126

(12) Chevron have released a presentation for their investors [emphasising (10)] which indicates an expectation that 40% of the “new oil” will come from deepwater fields, 20% from U.S. shale, 10% from increased tar-sands production, 25% from OPEC growth (Venezuelan extra-heavy oil?), and around 5% each from shale outside of the U.S. (Russia?) and “onshore and shallow offshore”. http://www.peakoil.net/200-billion-barrels-of-new-oil-production-is-needed-by-2030

(13) Chevron also stress that production from these sources will not come cheap, and will probably be of the order of $100 a barrel (“Breakeven price” or “marginal cost”).

(14) Hence at under $50 a barrel selling price, these projects will not go ahead, or they will be money-losers (cost more to produce the oil than it sells for). This year, $150 billion worth of new projects may face the axe, which are mainly from heavy-oil, deepwater, tar-sands and shale-oil.

(15) Lack of new infrastructure now will mean a reduced production rate, a year or so down the line.

(16) So why is oil so cheap? There are various contributing factors relating both to supply (production rate) and demand. The main supply factor is that production of U.S. shale oil has increased rapidly to 3.5 million barrels a day, along with the renewed oil production from Iraq and Libya. Saudi produce one third of OPEC’s output, and this time they have refused to cut production because they want to keep (grow?) their share of the market.

(17) At the same time, demand has fallen because the global economy (especially China) has slowed down. Since everything we do uses oil, when an economy is strong the demand for oil goes up, and when the economy weakens, demand goes down.

(18) The result of (16) and (17) is a glut of oil. According to supply/demand considerations, the price goes down. It only takes 1% or so, in undersupply or oversupply, to push the price of a barrel of oil to above $100 or (as we have seen recently) down to $50. http://www.resilience.org/stories/2015-01-12/the-oil-price-fall-an-explanation-in-two-charts

(19) So, can we now forget about peak oil? No. Due to (5) and (14/15), the oversupply of oil will peter out. We still have the background global decline rate, so needing to produce a new Saudi every 3 years, and from unconventional oil, which is more difficult, tends to have a lower net energy return, and is expensive. Due to the current low oil price, new infrastructure is now not being built, meaning a further loss in production a year or so ahead.

(20) Then the price will then go-up again (supply/demand). But it has to, or producing much of the oil that is left would be a money-loser. The price has to go above the breakeven price (cost of production) for new investment to be worthwhile.

(21) The only way the price could maintain a sustained low is if the global economy continued to slow, so the demand not only didn’t grow but actually fell. This, naturally would have its own adverse consequences. If the price were to rise massively, e.g. to $150-200 a barrel, oil would become increasingly unaffordable, which would also reduce demand [point (2)].

(22) So long as the selling price of oil stays above the “shut-in” price, existing production will mostly continue. If, however, it were to fall below this level (say, $20 a barrel), much global production would actually lose money, and be shut-down. This might reduce the world oil supply rapidly and massively, to the point that the world economy would stutter, and restarting both the oil production and the economy in its wider sense, might prove extremely difficult (worst case scenario!).

(23) While a low oil-price is seen by the consumers as a good thing., i.e. sales of Hummers and other SUVs are at a record high, because the full-prices are low!, it’s no fun for the oil-producers. Saudi get 90% of their GDP from selling oil; Venezuela, 50%; Russia, 35%. To balance their national budgets, all these countries need oil at $100 a barrel. At $50, Venezuela may go bankrupt. Saudi has deeper pockets, and can hold out for longer. Russia is interesting, especially as they control much of the gas-supply to Europe. If they held it back, even for a week...

(24) While the return of a sufficiently high price may encourage new investment, it is unlikely that we can grow production of new oil to equal five Saudi Arabias within the next 15 years, especially from sources that are more expensive and more difficult to produce from than the oil they must serve to replace. Therefore, we can anticipate a contraction of the global oil supply within this timescale.

(25) Once the production rate of new (unconventional) oil can no longer match the rate of decline of conventional oil, the global production overall must decline, i.e. we will be at peak oil. How exactly this happens and when, will be determined by the interplay of the factors mentioned above, but to quote Fatih Birol (Chief Economist and Director of Global Energy Economics at the International Energy Agency in Paris):

“One day we will run out of oil, it is not today or tomorrow, but one day we will run out of oil and we have to leave oil before oil leaves us, and we have to prepare ourselves for that day. The earlier we start, the better, because all of our economic and social system is based on oil, so to change from that will take a lot of time and a lot of money and we should take this issue very seriously."

(26) There is the climate-change aspect too, since burning oil contributes around one third of the carbon emissions that are due to human activities. http://cdiac.ornl.gov/GCP/images/fuels_co2_emissions.jpg

Fossil Fuel Use is Limited by Climate, if Not by Resources.

We appear to be living in rather peculiar and unsettling times. A year ago, discussions and fears were over the high oil price, which until September 2014, had been above $100 a barrel http://uk.reuters.com/article/2014/09/09/markets-oil-idUKL3N0RA1L220140909. The price rose to $115 in June 2014, but has subsequently plummeted, with West Texas Intermediate falling to $43 and North Sea Brent Crude to $47 earlier in the week. Today, both have rallied marginally to around $48, with an untypical mere 21 cents between them. Since Brent typically trades at several dollars above WTI, any apparent synchrony between the two tends to reflect price-volatility, as indeed is the case now.

It is fair to say that the crash in oil price was not anticipated by most people who keep an eye on the oil supply situation, and accordingly, its cause is a matter of intense speculation, and the likely prognosis even more so. Among the various factors that have been brought culpable for it http://www.economist.com/blogs/economist-explains/2014/12/economist-explains-4, we may list: a slowing of the Chinese economy, and little recovery in Europe, so that demand has fallen, and that moreover, supply of crude oil has soared ahead of expectation. The latter is accounted for by supplies of oil returning from Iraq and Libya, and overwhelmingly, the ramping-up of oil-production in the U.S., principally released from impermeable shale-formations by hydraulic fracturing ("fracking"). While the U.S.is not a major exporter of oil, the increase in its own domestic production has reduced the amount of oil it needs to import, so leaving a bigger surplus on the global market. Saudi Arabia produces around 10 million barrels a day, or one third of the output from OPEC, which has refused to cut back on production primarily to avoid losing its market share http://www.reuters.com/article/2015/01/08/us-opec-oil-idUSKBN0KH1HA20150108. Thus the result is overproduction against demand, leading to a glut of oil, and this has pushed the price down markedly.

Although, from the perspective of "price at the pump", a low oil price is widely being seen as positive, i.e. sales of Hummers have increased http://www.pri.org/stories/2014-11-11/gas-guzzling-hummer-makes-comeback-fuel-prices-plunge, and the British Prime Minister has promised that cheap oil and gas will lead to reduced energy bills http://www.telegraph.co.uk/news/earth/energy/fuel/11345216/Fuel-prices-will-fall-further-and-faster-says-David-Cameron.html there are various reasons to infer that the situation is but metastable and temporary. The main factor is that the world's currently producing oil fields are showing a production decline of 4.1% per annum, meaning that year on year we need to find another 3.5 mbd http://www.theguardian.com/environment/earth-insight/2013/dec/23/british-petroleum-geologist-peak-oil-break-economy-recession, or the equivalent of the production from Saudi Arabia about every 3 years.

This surely will eat into the glut, and in addition, we are already seeing oil companies pull back on investment in new production to the tune of $150 billion in 2015 http://www.naturalgasintel.com/articles/100639-150b-plus-of-upstream-projects-face-wipeout-on-low-oil-prices-says-analyst, because the price they can sell oil for is less than the breakeven price (how much it costs to produce it). Any failure to inaugurate new production now must reduce the supply of oil a year or more down the line, and it is unlikely that U.S. shale oil output, impressive though it has been (now providing 30% of U.S. domestic  production http://www.energyglobal.com/downstream/the-environment/11122014/CBO-oil-gas-budget-and-economy/), can grow in perpetual step, to offset the decline from existing fields. Indeed, along with deepwater production, it is the relatively expensive shale oil projects that are vulnerable to a curtailing of new investment in them. It is speculated too, that the resurfacing of troubles in Libya will reduce its exports of oil http://www.bloomberg.com/news/2014-12-29/oil-climbs-as-libyan-output-threatened-by-fire-at-storage-tanks.html, further attenuating overall global oil supply. Once the supply surplus is reduced against demand by these combined forces, the price will go back up: it has to, in line with true and rising production investment costs, and the real speculation is only over "when".

This may well sound like the bones of a "peak oil" argument, which will be laid bare once more, as the oil surplus which has veiled them drains away, but the technical and economic viability of oil production may not be its limiting element. Rather, the determinant of how much oil (and other fossil fuels) we can produce may be the amount of carbon dioxide that we are allowed to release into the atmosphere if we are to keep the mean global temperature from exceeding another 2 deg. C warmer than it is now, which is predicted to drive catastrophic climate change. In a paper published in the prestigious journal Nature http://www.nature.com/nature/journal/v517/n7533/full/nature14016.html, Christophe McGlade and Paul Ekins, researchers at University College London, conclude that it will be necessary to leave some two thirds of the fossil fuels available to us unburned, to achieve just a 50% chance of keeping global warming within the 2 degree C limit. From their analysis, they deduce more specifically that it is necessary to leave one third of the oil, half of the gas and more than 80% of the world's coal in the ground, up to 2050.

This is in line with previous studies, but the real significance of the work is the particular geographical regions that will be most affected, if these findings are turned into global policy. In particular, the Middle East would have to leave half of its oil and gas unburned, while Russia and the U.S. could only burn less than 10% of their coal reserves. 85% of Canadian oil sands (bitumen) reserves and 95% of Venezuelan extra-heavy oil reserves are described as "unburnable". The study is based on a model which limits the total amount of carbon discharged to the atmosphere at 1,100 Gt in the form of cumulative carbon emissions between 2011 and 2050.

The study concludes that Carbon Capture and Storage (CCS) technology would have little influence on the overall quantities of fossil fuels that can be produced, due to its high cost, relatively late date of introduction (2025) and likely rate at which it can be installed on the scale required.

While such a static reckoning of the distribution of the oil, gas and coal reserves across the world is extremely informative and undoubtedly salutary, it is of interest to examine the production rates of the three fuels that the model implies. To make an estimate of this, I have simply "blown up" the various charts (Figure 3 in the paper) on the computer-screen and measured them with a ruler, with the following results. EJ = Exajoule = 1.0 x 10^18 J:

            2010 (EJ)                   2050 (EJ)               Change


Oil       164                             156                            -5%


Gas      109                             172                           +58%


Coal     142                              46                            -68%



Total     415                             374                           -10%


Thus, we see that it is predicted that the oil-supply will remain robust (falling by only -5% over the 40 year period), fuelled mostly by fields already in production and those scheduled (from which production will have halved by 2050), with "reserve growth", "undiscovered", light tight oil (shale oil), and natural gas liquids filling-out the supply.

The major change is the replacement of coal by natural gas, the production of which is required to grow by 68% in 2025, and to be maintained through to 2050. (It is predicted that shale gas, tight gas and coal bed methane will form a substantial proportion of the gas supply, along with reserve growth and new discoveries). Since the carbon emissions per unit of energy are only half that of coal http://www.biomassenergycentre.org.uk/portal/page?_pageid=75,163182&_dad=portal&_schema=PORTAL, the production of which is curbed by two thirds in the model, the impact is large. It is predicted that the strategy would decrease the annual carbon emissions from 48 Gt CO2-eq (2010) to 21 Gt CO2-eq (2050), a reduction of 56% from start-to-finish year. The overall use of fossil-fuel energy is predicted to be reduced by 10%. This may be contrasted with the view taken from the B.P. Statistical Review of World Energy (2014) http://www.bp.com/en/global/corporate/about-bp/energy-economics/statistical-review-of-world-energy.html that by 2035, although there will be some replacement of coal use by gas, global carbon emissions will increase by 29%, in accord with our increasing consumption of fossil fuel.

The authors further conclude that: "developments of resources in the Arctic and any increase in unconventional oil production are incommensurate with efforts to limit average global warming to 2 degrees C."

They also warn that to maintain large expenditure on fossil fuel exploration is pointless, because it will not be possible to increase the amount of them available to burn (since the limits are already exceeded by the amounts that we already have!).

It is salient that at a time when policy-makers are intent on exploiting their fossil fuel reserves to the limit of availability and production, they should in fact be setting limits to production. Thus, the difference between the decrease of 56% in CO2-eq emissions from 2010 to 2050, predicted by the model, and the increase of 29% by 2035 (B.P. Statistical Review) - probably +50% or so by 2050! - emphasises the disparity between what must actually be done and propping-up business as usual.

In the U.K. we await the outcome of the Infrastructure Bill, which forces governments (both the present and future incumbents) to produce strategies for “maximising the economic recovery of UK petroleum”. This means producing as much oil as possible, albeit how difficult that will be do, once the price escalates, once more, and the supplies (increasingly furnished by expensive, unconventional oil) become less and less affordable to buy. Yet such efforts appear as paradoxical denials of the urgency to ameliorate climate change.

Regenerative Agriculture: The Transition.

In the face of peak oil and in order to curb carbon emissions, methods of farming that depend less on oil and natural gas, respectively to run machinery and to make synthetic fertilizers, must be sought. Such options are to be found within the framework of regenerative agriculture, but the transition from current industrialised agriculture to these alternative strategies will prove testing.

It is an illusion to think we can continue to use as much energy as we do now. No one can entirely rule-out that some extravagant technology will be forthcoming, e.g. solar power or nuclear fusion on the full-scale of more than 500 EJ/year as we get through now http://www.resilience.org/stories/2012-02-16/world-energy-consumption-beyond-500-exajoules, but the particular issue of matching liquid fuels derived currently almost entirely from petroleum appears insurmountable. The "solution" is probably the collective of individual solutions, and this means adopting a completely different paradigm of human philosophy and intention. The most pressing demand is how to feed the population of the world, and how to adapt industrialised conurbations, with cities provided for entirely from external regions for their food and electricity. If oil is the most vulnerable element in the energy-mix as the life-blood of transportation, then we must aim to live with less transportation, and this includes the means and distribution implicit to modern food production.
 
In methods of regenerative agriculture and permaculture http://www.ingentaconnect.com/content/stl/sciprg/2012/00000095/00000004/art00001?crawler=true, much of the energy involved is provided quite naturally by native soil flora and fauna fed ultimately by photosynthesis, since the fuel for good soil derives from plants as the factories that supply carbon-rich nutrients, and in a wonderful symbiosis, the living soil microbes, especially fungi can draw other nutrients and water from the soil to nourish the plants. The individual elements of life feed one another in a mutually dependent and beneficial manner.

While the two approaches can be defined and envisaged rather clearly, the intermediate means for transition from industrial agriculture, with its acknowledged unsustainable impact on the soil http://ergobalance.blogspot.co.uk/2014/04/deep-down-and-dirty-science-of-soil.html, to regenerative agriculture (permaculture, agro-ecology) is rather more nebulous, since it has not been done before, or at least not in the degree that necessity now demands. So how might we perform this revolution in the least painful way?

For a start, a decolinising and restructuring of present industrialised agriculture is necessary along with an appreciation and magnification of native and traditional food systems http://phdtree.org/pdf/38299805-a-transition-from-agriculture-to-regenerative-food-systems/. Overall, a change in thinking and concept is required from conflict and limit to cooperation and abundance.

The scale of the transition may be compared with other milestone transitions throughout human history, such as the hunter-gatherers becoming farmers, and then modern industrial societies. It is the latter that are under threat and unsustainable, and a compromise devolution to a more localised collective of small communities (pods) is required, supplied by local farms and infrastructure with (probably) rail links between them for essential movement of goods and people. The maintenance of the Internet and electronic communications would seem desirable since ideas and knowledge can be transmitted from pod to pod and between countries and continents.

In the 1970s, there were studies done that evaluated the massive inefficiency in energy requirements for food production. It was concluded that 10 Calories of energy are expended to bring 1 calorie of food onto the dinner plate http://blogs.scientificamerican.com/plugged-in/2011/08/11/10-calories-in-1-calorie-out-the-energy-we-spend-on-food/. It has been stressed that essential agricultural production is to yield food and fibre - i.e. the essential elements of biomass. One might also add-in fuel as a product, if the consideration also includes fermentation of sugars form starch into ethanol, or hydrothermal production of liquid and gaseous fuels from biomass by heating it under pressure in the presence of water.

The impending stress of "climate change" is well acknowledged, e.g. sea-level rise and the spreading desertification of formerly green lands, but its impact on agriculture is rarely mentioned by climate-modellers. However, as a for-instance, it is speculated that the Colorado River basin could dry up. It's mighty dams would then look something like the pyramids of Egypt, maybe leaving future generations to speculate as to what their purpose was, and upon the nature of the civilization that created them. As climate zones shift, it is the variability of the weather that will have greater impact than ramping "mean temperatures" on the enormous investment made by humans in agriculture. The capital outlays required for new dams, irrigation supplies and the retraining of farmers will need to be contrasted with that for flood-defences in vulnerable locations (e.g. New Orleans and the east coast of England). Most likely both cannot be supported and it may prove expedient to simply let some regions "go to the sea".

Biodiversity is a natural means for evening-out the losses and gains of living systems http://peakoil.com/enviroment/the-soil-land-water-climate-honey-bees-oil-food-nexus-peak-soil. It is cooperative in the sense that pests are not encouraged as they are by growing single strains of crop, and that suitably matched plants help each other to grow - the holistic whole being more robust than the simple measure of its components. The term "global village" tends to signify an interconnected unity of trade or electronic communication, while aspects of cultural diversity and biodiversity seldom enter the line of thinking. However, it is a necessity to preserve and expand the traditional food and fibre production systems that are tried and tested and whose regenerative capabilities have been demonstrated over millennia. We may adapt to or readopt cultures that have been lost, as industrial civilization has supplanted them, and it is the latter that we must seek to break away from in order to arrive at a sustainable future, that is if we are to survive as a human species.

If "global village" means "global supermarket", the term lends acceptance to the concomitant rule of multinational corporations. If we restructure societies to become self-sustaining, rather than dependent on inputs and indeed outputs, as they are now, we also must abandon "limited liability" and the legal designation of "corporations" as "persons" with the same rights as individual citizens. Traditional food systems are storehouses both of biodiversity and cultural diversity. It is a pity that the seedbanks around the world contain no information about the culture, economy, details of cultivation methods, flavour or other human aspects of the crops and the food they produce. Including my own musings on the topic, most commentators on the post peak oil world refer to the need to localise food systems, such that small populations are provided for locally by means of community farms. However, establishing regenerative systems to grow food and fibre must include cities too, the design of which must be analysed in terms of the natural mechanisms that interweave them.

It is mostly not realised that the rural development or redevelopment urged by the industrialised nations for the developing world are precisely those they need to adopt themselves. E.F.Schumacher's "Buddhist Economics" which he describes in the bestselling "Small is Beautiful - A Study of Economics as if People mattered" http://www.amazon.co.uk/Small-Is-Beautiful-Economics-Mattered/dp/0099225611, applies equally to the industrialised world as it must of needs de-industrialise, and take lessons from simpler societies which consume far less per head of population. The example of Cuba may be taken as a benchmark for progress, as it has survived and indeed thrived through implementing a system of community gardens, in the abrupt absence of cheap and plentiful oil and fertilizers gifted from the Soviet Union when that regime collapsed in 1989. "Small is Beautiful" has been updated for the 21st Century context by Fritz Schumacher's Daughter-in-Law, Diana: http://www.greenbooks.co.uk/Book/4/396/Small-is-Beautiful-in-the-21st-Century.html
 
James Lovelock's Gaia hypothesis has acted as an iconic beacon to the environmental movement, drawing-in a range of people who are dissatisfied with the industrial and materialistic way of life, and seek alternative, more natural and or spiritually rewarding lifestyles, and with less detriment to the planet and life upon it. "Gaia" is holistic in nature and is based on ecology. Rather than an indstrialised "global village" it implies a "globe of villages". Food and fibre production http://phdtree.org/pdf/38299805-a-transition-from-agriculture-to-regenerative-food-systems/is one of the most important features of the transition to a post-fossil fuel era, to which the establishment of regenerative food systems is essential. Underpinning all of this is the need to grow and protect perhaps the most fundamental element of the life-nexus, the soil itself, which is truly "our children's earth" http://www.resilience.org/stories/2014-05-30/for-our-children-s-earth-rebuilding-the-soil-sustaining-the-future