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Carbon based fuels are currently the major suppliers of energy. In only one decade time 3 billion new carbon energy users have entered the global prosperity class (household income of more than $ 7000) and the energy consumption of those 3 billion is only just started. Demand is exploding. This by anybody unforeseen demand explosion has as consequence that the PeakOil moment has come much more earlier than almost anybody expected. PeakOil is about having used half of the available oil reservoirs in the world. As carbon sources are finite (only a limited quantity is out there and can be used, there are no new capacities formed). This situation has some consequences: 1) Our supply will not grow, but starts to decline (the Hubbert curve/peak) (market supply/demand inequality driven price explosion). 2) We have first used the easy to explore reservoirs, what's left is much more difficult to explore which takes loads of investments to explore (exploration cost driven price explosion). 3) We have first used the light/sweet/clean/free reservoirs, what's left is heavy/sour/contaminated/bounded reservoirs which takes loads of investments/energy (refining cost drive price explosion). 4) Our suppliers of carbon energy sees demand accelerating, supply tightening more and more, are very aware of the finite characteristic of their natural resources and see the prices rise and rise and rise. This has impact on their production/exploration policies: why produce this year as producing next year give higher prices. If production next year double attractive than production this year, it's not a tough choice for the producing nations. The result is that carbon supplying nations are no longer front runners in investments: next year everything is severe more beautiful than this year. So why doing it this year? They do more and more this year just the production/investments they need for funding the needs of this year and making next years production possible. Next year they will do the production that addresses the needs of next year and the investments for the year after. 5) The yearly currency erosion on the capital achieved with former sales of resources, doesn't stimulate actual production increasing. Why sell this year when next year the for the sale received capital only has less value. Producing less oil this year and more oil next year is just an easy way of protecting against dollar value decline/erosion exposure. Why sale and get dollars for it which loose their value each month as they are in storage/use). 6) Resources rich countries choose more and more for attracting industries instead of exporting plain energy. Attracting industries gives besides the actual world market price an extra benefit for the resources owning countries: extra economic income and diversity of their economies, with all the extra economic spin-offs of that. 7) The energy consumption in energy resources rich countries is exploding as they mostly subsidize energy as compensating other not so nice facets of their regimes. The export/exploration ration is dropping year after year and last years severely. 8) We discover for each 5 barrels we consume, 1 new barrel. This 5 to 1 ratio has a huge impact. 9) The 5 barrel we use are easy oil and the 1 barrel we discover is difficult oil. So PeakOil is about a) an exploding demand, b) an ending road (finite source of energy) and c) continuous climbing carbon energy price driven by the above mentioned 9 facets. PeakOil has two definitions: The first is 'the moment we've used 50% of the oil', the second is 'the moment that production no longer increases'. The first definition is not correct and it also doesn't underline the fact that exploration is getting more difficult and expensive. An other facet is that the peak maybe will a plateau for some year and after that a very hard (much more heavier than any current projection) decline. The bell curve shape is just a theory, the reality drafts its own curve, with maybe some attractive facets (like the plateau) and less attractive facets (like a very rapid decline speed). This is maybe the reason that coal miners and oil majors will move to each other (major to miner development). In coal beds there is gas to explore.

Author: Gijs Graafland

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