The peak oil crisis: the NY Times drops the first shoe

by Tom Whipple, Energy Bulletin
12/13/07

Peak Oil started as a story about geology. It was once relatively simple. After 150 years of pumping up oil, the easy-to-find kind was gone and from here on out it was going to be much more difficult to find and eventually prohibitively expensive.

In recent years, however, the peak oil story took on new facets such as rapidly increasing consumption of oil in Asia and producing countries, concentration of most production in the hands of a few governments, unstable world finances, rapidly increasing cost of production and a growing inability or unwillingness to export oil to other countries.

Of all the reasons that gas prices are going up, only the geologic constraint – “supplies are running out” – has an air of finality. There is nothing anybody can do about it.

Other constraints on unlimited oil flows sometimes called “above ground factors” carry with them the subtle implication that there is something that can and just might be done to set things right. A war on top of your oilfield? Stop it! Getting too expensive to produce the necessary oil? Invest more. Government failing to step up production? Change the government! You get the idea. Peaking of world oil production by definition implies that the oil age is on the way out. Almost any other reason for restricted oil flows implies there is a “fix” which will allow us to continue on for awhile without any great disruption.

For over 25 years now, nobody in America has had to think much about oil. It was cheap, hardly taxed at all (by European standards), and available in unlimited quantities. In the last few years, this has started to change with gasoline circa $3 a gallon, oil in the $90s and, thanks to the ethanol craze, food prices going through the roof. Our newspapers are starting to take notice. The problem has become too big to ignore.

Three weeks ago the Wall Street Journal took a stab at explaining what was happening and came up with the notion that world oil production was only “plateauing,” not peaking ["Oil officials see limit" Wall Street Journal November 19, 2007]. Plateauing carries the implication that life as we know it can go on for awhile. All the oil we import today will continue to be available and, if only the Chinese economy would stop growing so fast, all will be well.

Last Sunday, the New York Times came at the high gas price problem from a different direction – availability of imports ["Oil-Rich Nations Use More Energy, Cutting Exports" New York Times December 9, 2007]. Drawing on the combined wisdom of no less than seven of their reporters strung out around the earth, the Times boldly concluded that “The economies of many big oil-exporting countries are growing so fast that their need for energy within their borders is crimping how much they can sell abroad.”

The Times then told its readers some very scary stuff. “Experts say the sharp growth, if it continues, means several of the world’s most important suppliers may need to start importing oil within a decade to power all the new cars, houses and businesses they are buying and creating with their oil wealth.” I particularly like the “if it continues” clause which suggests that the Russians, Mexicans, Venezuelans, Iranians and all those incredibly rich Persian Gulf Arabs might just stop buying new cars, building themselves places to live, and buying flat screen TV’s so they can export their oil to their good friends in America instead.

After more scary talk about world oil exports dropping by 2.5 million barrels a day in the next three years and how a drop of this size could lead to major economic problems, the Times switches to a reassuring mode. “The trend, though increasingly important, does not necessarily mean there will be oil shortages. More likely, experts say, it will mean big market shifts, with the number of exporting countries shrinking and unconventional sources like Canadian tar sands becoming more important, especially for the United States. And there is likely to be more pressure to open areas now closed to oil production.”

They even go so far as to suggest that an era of peace and friendship might just break out in the next few years. ”Greater political stability and increased drilling in some important oil states, notably Iraq, Iran and Venezuela, could help offset the rising demand from other oil exporters.”

After reassuring us that all is not necessarily lost, the Times concludes by reinforcing its basic point by saying “Internal oil consumption by the five biggest oil exporters — Saudi Arabia, Russia, Norway, Iran and the United Arab Emirates — grew 5.9 percent in 2006 over 2005, according to government data. Exports declined more than 3 percent. By contrast, oil demand is essentially flat in the United States. CIBC’s demand projections suggest that for many oil countries, including Saudi Arabia, Kuwait and Libya, internal oil demand will double in a decade.”

The Times and the Journal have taken a major step forward by admitting for essentially the first time in front-page stories that the U.S. is going to face a big problem in the next few years. Neither however has connected the dots.

Nowhere does the Times remind us that the U.S. is now importing two-thirds of its oil consumption each day and that a drop of a few percent in daily flow is likely to cause pandemonium at the pumps as it did back in the 1970’s. Neither paper has as yet mustered the editorial courage to discuss the 800-pound gorilla, oil depletion, which every year quietly eats away 4 or 5 percent of our oil supply – the life blood of modern civilization.

Until our major newspapers begin discussing in a frank and open manner what will soon be the first major crisis of the 21st Century, the U.S. Congress is doomed to empty posturing and debating energy red herrings. It is clear that most have no clue as to what is about to befall us.