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Title

Global Warming will not kill you but  Peak Oil could

By

Peter F Dodds

20b Preston parade

Seasalter Kent CT54AD

01227 273070

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Will you survive when Crude runs out .

“ During a power cut I probably have more money than Richard Branson  “

  P.F.D August 2006

“  The first Oil producing Country , big or small , that decides that retaining the remainder of their Crude reserves is more important and valuable to their own population and their internal infrastructure than the Foreign Exchange flow generated by their exports , will precipitate a mad slide to disaster “            

   P.F.D August 2006 .

   Sitting in the wonderful Portuguese sun I was thinking about a documentary I saw on Channel Five called Megastructures which was about the $16-20 billion construction which includes Palm Island . World Island etc in Dubai .

    The commentary informed us that the Crown Prince had stated that he was building an infrastructure that would support Dubai when their Crude reserves ran out . In the back of my mind was the preciptious plunge of the Dubai Stockmarket .

   The only word that really sums up the Dubai project is an Olde Englishe Worde that was used to describe basically exotic  buildings created by eccentric wealthy aristocrats over the last three hundred years or so .

    That word is Folly .

    Why use it to describe Dubai .

   The very existance of our Global Village depends totally on a finite and failing resource which is under assault from an ever growing demand .

   How I wish I could ask the Crown Prince how , when Oil runs out , does he expect the owners of the thousands of villas he is creating to be able to get there from wherever they live .

   The likelihood is , unless the owners have moved permanently to live in Dubai, that the majority will remain empty and

 valueless .

   With their own crude resources drained, Dubai will find it impossible to maintain the islands which need constant  refurbishment with vast quantities of expensively dredged

sand .

    Fuel cost , rationing or scarcity will leave those in Dubai watching all their beautiful concrete slowly being reclaimed by the sea.

     To be brutally honest if I owned anything abroad I would be planning to sell it probably within the next two to five years .

    I think the situation could get that serious very quickly .

    The real problem is not if it happens ,because it will ,but when it happens and how long can one ignore it without taking precautions because once it starts it will be too late to do anything .   

   Experts keep us in the comfort zone by continously telling us that Crude could/will/should last 25 years or more with further exploration , better extraction from present resources and technological advances possibly extending that period further .         However, those calculations are made at todays demand levels which  are predicted to grow ,outstripping supply and new discoveries , as the multi-billion people economies of China and India mature and other nations start to climb the ladder of civilised prosperity and westernisation .  

   People in the Oil industry say that they believe that the major oil company producers like BP , Shell etc have already seen their production peak and that new discoveries are only helping them to stand still .

    Without major new discoveries Oil companies will simply sell us less for more .

    They cannot tell us the truth because their share prices would probably collapse along with their ability to raise the huge financing required for prospecting .

   Cheap Oil , the kind that you see in John Wayne films where the hero only has to spud in a well about 200 feet down before it blasts its way to the surface in an ever increasing volume , has all been used up .

     Not that many years ago exploration and discovery would have brought about a return of 100 barrells of new oil for every single barrell of crude used for prospecting.

   It appeared then that there was a virtual inexhaustable supply of Oil in the ground but that was only because the daily demand was so low .

   Nowadays a single barrell of Crude probably  generates under ten barrells of discovery or production .  

   Cheap oil , easy oil , whatever you like to call it , has now been used up .

    Exploration has now moved into the next and  final stage .

    Oil companies are now seeking oil in the frozen wastes or deep under the sea at depths that previously would never have been contemplated where exploration , discovery and recovery come at great expense and with no little risk .

   It is also true  that huge amounts of Natural Gas remain within recoverable distances under the earths crust .

    However the recovery and delivery of  this energy source , even its conversion into its transportable liquid form , is difficult and expensive .

    The sheer volumes of LPG required to substitute for Crude in different areas of consumption make it highly unlikely that it will halt or ameliorate the forthcoming petroleum supply difficulties .

   Surprisingly , the present day Crude Thermal Btu usage in the United States for Commercial , Industrial , Electricity generation and Domestic use is actually lower than 1973 as economy measures and improvements in technology give us more output of energy from less Oil .

Apart from transportation of course .

    Here consumption has soared and now stands at two thirds of global daily usage .

     Can you imagine a world without air travel . No .

    Well start now ,

    There is no known substitute for Jet fuel .

    None whatsoever .

   Without fuel every modern jet engined giant cigar tube will be consigned to a scrap heap in a field somewhere or left to rot on deserted airports .

   There are already hundreds of these machines standing in rows in the rust free heat of Arizona .

   Some new, some not so old  , but all mothballed waiting for a supposed explosion in passenger numbers or a fifty percent drop in the price of Crude .

    Most will never fly again . Some never have .

   All this leads me to the frightening conclusion that we are  much closer to severe  price increases or shortages of supply than the Oil world would have us believe .

This cataclysmic occurrence has a name .

 It is called Peak Oil.

   Its an insignificant name really for such an event but it is used to describe something that is inevitably going to happen .

    Peak Oil may even  pass by unnoticed . It may even only be a hindsight event when  even the most fervent ‘ it will last forever’ geologist/analyst/economist would have to grudgingly admit that has actually taken place .

   Despite this,  it is as significant as Krakatoa , the Nuclear bombing of Hiroshima , the Boxing day Tsunami in the Far east, the Chernobyl meltdown and the advent of the global death disease , Aids .

   The main difference will be that Peak Oil will have the  combined seismic economic shock wave effect of each of these events  in every far flung corner of the globe at some indeterminable time in the future .

   This destroyer of our humanitarian infrastructure  will rampage around the Earth ,like one of those gigantic patterns of falling dominoes , leaving havoc in its path .

   There are some professionals in the Oil industry who believe that Peak Oil is happening now .

   Others have 2007 , 2010 and other dates in mind .

    Six of them including Geologists and spe******ts give a forecast for Peak Oil before 2010 .

   The World Energy Council Peak Oil forecast is ‘ after 2010 ‘ which of course could mean anything but there again they did not say after 2015 so one has to presume that they actually do mean anytime after 2010 , As close as that .

   Others are quoted as forecasting Peak Oil between 2010 and 2020 . 

     Shell Oil has a forecast of 2025 or later and there are some that say never .

    Unfortunately those who say never seem to spend most of their time debunking those who are giving a forecast but never actually give their own reasons as to why they think Oil is everlasting .

   There are also those that believe that the Earth produces Oil as the result of a  continous heat process deep below the surface and that this inexhaustable stream moves around replenishing reservoirs that had previously looked exhausted .

   Oh were this to be true .

    Unfortunately it would have to be at the expense of the scientific community who have confirmed that petroleum is a millions of years old soup which contains plants, insects , vegetation , and probably dinosaurs too and which has been under extreme pressure and heat for most of that time before being discovered as Oil by mankind . 

   Peak Oil can be compared to the Point of No Return that aircraft have when making an overseas journey .

    This is when it is quicker to continue to their destination, despite any problem with the aircraft , than to return to their take off point .

   In Oil terms it means that  there is less Oil coming out of the ground ,even when combined with new discoveries , than can accommodate the daily demand rate .

   Once established ,this deficit between daily supply and demand ,will continously be increased as demand growth and supply slippage both move in different directions like ships passing in the night .

   Hardly noticeable at first ,market forces will convert this daily difference into higher prices for Crude and all its products .

    These higher prices  will also be exacerbated by production failures , territorial disputes between Countries and Companies , political tension , terrorist activity and the technological improvement in resevoir depletion .

   When new technology and drilling techniques produce more Oil on a daily basis from an existing or mature reservoir then it simply hastens its demise and future failure .

   Are you wondering why this irrefutable fact barely rates a mention anywhere .

    Why you have not heard about it before .

  Well it is out there .

   There are hundreds of articles and websites on the Internet . Most major Oil companies have departments that are watching it closely . It is not in their interests to either cause a panic or have their industry come under closer scrutiny .

   Reserves are continously overstated, indeed , there is a huge difference between what is quoted as being in the ground at a particular location and how much the Oil company knows is recoverable .

    Improvements in 3 and 4D computer graphic technology now enables the industry to ‘see’ what is under ground and yet recently a major Oil company was fined a massive sum for deliberately misleading the public over its quoted reserves which is the basis for a share price calculation .

   Revenues have increased over the last five years beyond imagination for Oil companies and producers like Opec .

    Back in the 80’s they were happily receiving about ten dollars a barrell compared to the recent market high price of nearly $80  a bbl .

    With global daily production around  barrells then you can see how much money has been slopping around in fat cat wages and bonus’s , shareholders dividends , non producer Governments tax take and in the bulging  coffers of the  producers themselves .

   Oil companies and producers operate strategic futures market operations designed to keep prices at the high end of their range.    Massive financial intervention from Hedge and Mutual funds, who trade  huge quantities of paper traded Oil,  combined with  worries about American intervention against Iran and the Israeli attack on Lebanon to keep prices moving through the summer to record highs in Jly 06 .

   Since then we have seen the price slip as speculative positions are liquidated and the Wall of Money moves on through the financial markets in its never ending search for profit .

  Despite Opecs protestation they will  cut production at regular intervals until they find the level at which selling stops in order to defend their one and only resource despite their knowledge that the Crude price will continue to move higher overall through the peaks and troughs of global economic activity .

    Even a severe global recession ,which I believe is heading straight for us , will only serve to delay the onset of Peak Oil for a  limited period on the World Clock .

  As far as Governments are concerned ,they are very aware of Peak Oil but have no intention of doing anything about it until either it is far too late or it is already with us .

   The best study that I have read is by Robert L Hirsch and was conducted on behalf of the American Government .

    This is a 90 page comprehensive in-depth document which you can find on the web .

    The study is called Peaking of World Oil Production , Impact,  Mitigation and Risk Management .

   The project leader is Robert L Hirsch and I urge you to read this study .

   Hirsch sums up the problem we are facing as follows ;-

   Oil is the lifeblood of modern civilisation . It fuels  the vast majority of the world’s mechanized transportation equipment – Automobiles , trucks , airplanes , trains , ships , farm equipment, the militiary etc . Oil is also the primary feedstock for many of the chemicals that are esential to modern life . This study ( by Hirsch ) deals with the upcoming physical shortage of world conventional oil – an event that has the potential to inflict disruptions and hardships on the economies of every country .

   The earth’s endowment of oil is finite and demand for oil continues to increase with time . Accordingly, geologists know that at some future date , conventional oil supply will no longer be capable of satisfying world demand . At that point world conventional oil production will have peaked and begun to decline .

    Scary .

   One of his many conclusions is that any mitigation of the oncoming event of Peak Oil must be started at least 20 years before the onset for any benefit to be achieved from alternative processes or fuels .

 I think we all know that there is fat chance of that happening .

   You will be told that there is plenty of Oil still in the ground to enable us to keep pumping ad infinitum .

   The inferance is that we have the technology to extract this resource until one day it stops just like an empty aerosol can . Then and only then does anyone in power  intend to start doing something about it .

   Unfortunately this is one of those urban myths that everyone wants to believe in .

   The real truth is this :-

    That we may never see the  expiry of exhausted Crude resources because of a catastrophic failure of our global human infrastructure due to severe supply difficulties which are price generated when the production/consumption situation becomes untenable .

This means that there is a real possibility that there will be huge amounts of recoverable Crude still in the ground as the World grinds to a halt .

In 1973 , as a reaction to the Yom Kippur war , Arab Oil Ministers announced a ban on sales to Israeli sympathetic nations like the U.S.A and the Netherlands and an immediate production cut of 5% followed by further 5% cuts each month .    

   From under $10 a barrel,  the price of Crude started to rally eventually peaking around $40 a barrell in 1980 . Oil production in Iran also dropped sharply during the Revolution adding to the strain on supply .

   I well remember the queues for petrol in those days , always being desperate to replace any amount used from my full tank.

    Returning from a two week holiday on a boat on the Scottish Caledonian Canal I was horrified to find that petrol stations were only allowing each motorist a single gallon per purchase .

  With the  car loaded with luggage and the family I had to calculate the mileage extremely carefully to make sure that we would be able to get to the next station where we would be

able , hopefully, to purchase another gallon .

   The thought of leapfrogging our way home for 600 miles almost made me think of giving up when , at midnight , I managed to run , virtually on empty , into a lonely out of the way next filling station which consisted of two isolated pumps manned by a one armed attendant .

   He peered into the darkened car and saw the children asleep on the back seat . Then he turned and told me that with only one arm he could not work the pump so I would have to do it

myself .

   Then he walked away with a wry smile .

    Realisation dawned on me as the petrol flowed so  I filled the tank to the brim . 

   I thanked him with a shake of his single hand and a £10 note , a fortune in those days .

   I have never forgotten his act of kindness and how it made me feel . I am quite sure that , in times of future chaos , no-one will ever act like that again .

   People have forgotten those traumatic times .

    It felt like the world was coming to an end . A simple taste of things to come .

   The high price of Oil in 1980 triggered a recession in the United States and exploration in the North Sea ,as price dictates discovery , bringing to an end the Arab domination .

   Saudi Arabia is the worlds largest depository of Oil reserves and also the largest producer . It occupies the role of swing producer basically increasing or decreasing production to reflect the world price .

   In defence of the quadrupled price Saudi reduced its output from around 10million barrells a day to virtually three but then decided that market share was a much more valuable target and began to increase production .

   Ronald Reagan , The President of the United States , reportedly asked Saudi Arabia , in return for access to huge amounts of American armaments , to swamp the market with Oil to bring Russia to its knees by virtue of a falling price thus bringing about a victorious end to the Cold War .

   With the Oil price falling to around $10 a barrell or lower in 1986 Russia could not afford to continue the arms race and collapsed in the rampant face of people power .

   The low price level brought Oil exploration and discovery to a halt along with most long term investment by producers and Oil companies .

   Steadily increasing growth in  transportation combined with the growing demand from the powerful emerging economies of China and India ramped up the daily demand for Oil to present day levels of around 85 million barrells a day .

    Output , suffering from 15 years of under investment and stagnant capacity utilisation , could not cope with such a demand and prices started to rally about five years ago .    

   Our future problems will begin by prices soaring to record levels .

    Even if  higher  prices draw reluctant stock holders to the market over the short term releasing reserves and increasing pumping to total possible capacity , the damage will have been done .

    A Crude spot price of $150-300 a bbl would not surprise me in the first and early days . .

   Remember the 2000 shortage in the U.K .

    Shortlived as it was it gave everyone a brief glimpse of what lies in store . Anarchy and chaos .

   Russia lost the Cold War but is winning the new Warm front assault .

   They have realised that their huge reserves  of Oil and Gas mean that eventually Europe , and possibly ultimately  the USA, will depend on their production .

   We have already seen a brief glimpse of energy sabre rattling as they forced one of their neighbours into a new price agreement simply by shutting off the pipeline .

   I am really concerned that the Russians are operating a grand scheme .

    Putin has forcibly taken back the Russian resources that were sold into the private sector now that they are producing huge amounts of Foreign Exchange .

    He is forcing the major Oil companies to accede to his demands that Russia becomes a major partner in new discoveries and the exploitation of existing fields .

    Russia is now using  huge amounts of capital to buy energy infrastructure across Europe including the UK .

   Across Europe the percentage of Russian oil out of the total importsof  the six major users is 24% with the highest 39% and the lowest 11%.

   That is a significant dependency .

    Russian energy companies with blood on their hands and no credibility whatsoever float their shares on eager uncaring European bourses raising further billion dollar amounts of capital which they then use to buy other energy outlets .

    If this is not a Grand Plan then it should be because it is exactly what I would do if I was a Russian smarting because I got my ass kicked by the Yanks and had to watch as my country  dissolved .

    A Russian never forgets and will wait 20 years, or whatever it takes , to take revenge .

    It appears to me that they will be able to wreak havoc in the West without a nuclear warhead in sight and without firing a single bullet .

    The only problem that Russia has now  is the depletion of their resources of which possibly less than  50% now remains.

   I am not talking about 25 or 50 years from now because I believe that we could have already seen the Peak , or are living within the peaking period or are approaching it over the next few years .   

   Crude has already traded as high as $80 per barrel .

    There have been been huge increases in raw material prices which look to continue as the merchant banks and hedge funds pour money into the sector .

 There is a possibility of a global grain shortage.  

   Gold and Silver have  doubled and trebled in price at todays levels.  

  Gas and Electricity costs in the U.K have already given us a taste for the future by doubling in the last two years and yet no one is screaming even when a new pipe line from Norway increased supplies to such an extent that traders were selling gas at Zero or below .

  In other words they were paying for people to take it off their hands .

   How can we have any faith in such a system that allows pensioners to freeze to death in their homes because of their fear of energy bills that they will not be able to pay yet the same gas that is costing them all their savings and pensions is  sold for free on the Energy marketplace .

   How can Blair and Brown sleep at night warm and comfortable in their grace and favour establishments which the pensioners pay for too .

  Even if there is only one pensioner who dies from Hypothermia during this winter we will all be responsible  .

   The politicians because they are corrupt and uncaring and we , the general public , because we stand by and watch and do nothing .

   I would actually support a policy in which pensioners refuse to pay their Council Tax because they would get sent to prison where they would be warm , comfortable and well fed with free TV without a licence . 

    Consumers who believe that their domestic prices will follow suit will be disappointed as future supplies have been sourced at dramatically higher prices and , no doubt , once these contracts come to an end , by then market prices will be back to higher levels .

    The Energy companies are warning us that these increases will continue because of rises in the raw material costs.

   It’s a load of bollox .

    We are being screwed and no one is doing anything about it .     

   Everything runs on Crude . Everything .

   Yet there is no alarm . No widespread anxiety . Every one thinks that Oil will last forever . But it wont  . It cannot

    We are constantly being told that we must save the Planet for our children .

   That we must control carbon emissions and enforce the Kyota agreement despite the immense cost .

    Global warming enthusiasts inundate us with articles  , radio broadcasts and televison documentaries on a regular basis beating the drum of the disappearing ice cap and the indisputable Fact  that where I live on a beach in Whitstable  will soon be under twenty foot of water .

     Failed Presidential candidates tour the Globe getting paid handsomely to fill our heads with doubtful forecasts and inaccurate prophesies full of warnings about deserts appearing everywhere overnight and yet more ice cap melting predictions .

   And yet no one warns us about the World coming to an abrupt stop one day .

If anything threatens the global inheritance of  our children it is the finite supply of Crude .

   It is not a matter of will it happen or even when it happens . Whether its next year , ten years or twentyfive years hence is of no consequence .

    What does matter is that the very existance or survival of our next generation is seriously threatened in the near future , maybe not in my lifetime , but possibly within yours depending on your age .

    Anyone presently under the age of 40 will almost certainly  see these horrific circumstances come to pass .

BACKGROUND OF A COMMODITY TRADER .

I was born in Middlesbrough Yorkshire and moved down to Plumstead SE2 when I was seven in 1948 .

   After a happy schooling in the quiet leafy backwater of Abbey Wood I passed my 11 plus and made every one really happy that I was going to go to a Grammar School. 

    I remember that my parents fought long and hard to get me into a local school but for some reason the authorities insisted that I should attend Addey and Stanhope Grammar School which was located in New Cross opposite Deptford High Street .

   Not only was this a long bus ride away from Plumstead but another world as far as I was concerned . It was a dirty , tough and uncompromising area . A surprising place for a Grammar School whose catchment involved the Old Kent Road , the Elephant and Castle , New Cross and Deptford .

    To this day I have no idea as to how children from this area managed to pass the entrance exam .

I believe that the school was being used as a barrier to prevent the local children from attending other schools in supposedly middle class areas like Blackheath and Greenwich .  Nicknamed Study with No Hope , the school was a sink hole where the majority of children came from underprivileged ,  violent and abusive families that lived in rows of dirty tenament houses  in the Old Kent Road or the Elephant and Castle .

These were the streets that spawned the Kray Brothers and other violent gangs where a criminal underclass, laughingly described as ‘loveable Cockney rogues’ festered and fought .  

An innocent abroad , I stumbled into a total bloody nightmare .

   Young first year innocents were fresh victims for t