GLOBAL FUTURE ANALYSIS
PERSPECTIVES | OIL
First mankind had horsepower and sometimes slavery. Than mankind start to harvest wind energy in mills. Than they found began to explore the energy within coal and fueled stream engines with it to power machinery directly, the process of 'implanting extra energy' in our economic system started. A while later Tesla can along and invented and further developed AC and the AC power grid and online power became the main indirect (remote) fuel for devices. Two decades later the combustion engine finds it way into earth based transport and mobility and after WW II the jet engine for air based transport find its way. Both are on location powered by oil. an energy source with a very high energy level can cheap and abundant available. Oil that first only was used for lightning (Kunstler: the oil lamp was the IPod of the Civil War), but by the invention and cheap production of both the combustion engine and gasoline/diesel got its boost into the global economy/society and the invention of the jet engine initiated real globalization. The development we called PeakOil is more about Peak than about Oil. PeakOil will be replaced by the Heinberg mentioned/designed word PeakX or PeakEverything. We're living on a limited planet and all finite resources (like oil) are as real finite as the word finite says. Oil became is the most popular kid in the carbon energy class due its easy logistical characteristics (non pressured, liquid, no physical left rest material). In the beginning of the oil age, the exploration energy balance was 1 to 100. Only 1 barrel oil was used to produce 100 barrels of oil. Now these days the energy efficiency of oil exploration is severe lowered to 1 to 5: 1 barrel oil used in exploration only gives yet 5 barrels of oil production. And this will change even more as 'easy oil is over' (quote of Jeroen VanderVeer, CEO Shell Corporation), so the current 1 to 5 ratio is not sustainable for the next 10 years. Energy ratio's will lowered once again severely. Oil exploration will become earlier economic to expensive than it become from energy perspective to expensive. It is no longer attractive by 1 to 3 ratio's (1 barrel oil used to explore 3 barrels), as investments and operational costs also take their piece of the price. Oil will still be available. But against much more higher prices and also more irregular. The current installbase of oil fueled/powered devices (cars, trains, airplanes, tractors, machinery) will still be used, but will become more and more less economic in use due to the continuing rising fuel costs. The Hirsch report of the US Department of Energy on the installbase issue, sees this a huge economic problem (the economic waste/decline of a complete installbase generation). In reality all transport/mobility devices will just become to expensive to use. It's not an oil price/availability problem, it's an energy price/availability problem. Transport/mobility will become expensive and thereby less used. The history of oil is widen distances (by its cheap and abundant availability), the future of oil is shorten distances (by its expensive and irregular availability). Cheap oil has given us car based commuting, industrial concentration and production/travel globalization. Expensive oil will give us vibrant local prosperity. The oil of the future will come from stated controlled companies of nations that not want to sell it all now in a hurry and nor sell it now for a bargain price. The price of oil double each year. The price of the dollar drops 20% a year. Producing this year, what also could produced next year is 'own initiated robbery' and no state controlled company will do so. Oil nations will produce a little above current year budget and no longer for stockpiling dollars. Oil nations will reduce production more and more, giving them even more income in doing so. As oil will reach its maximum market price, the granting based distribution model will be placed on top of the price based distribution model. Nobody knows where that price will be, but it's proven that $ 150 per barrel oil was high enough to kill demand (car miles, airtravel and airtransport) severely, both active as in terms of repressing global economy. High oil prices burden our old economic model that was based/build on cheap oil/energy. We need a new economic model that produce high prosperity by low energy demand. Energy that has brought us where we are, now can break was is build, if we stay using the amount we used when is was cheap and abundant available. When the granting based distribution model will come of top of the price model, nations with no real friends will become serious in trouble as their supply will shrink to very low levels. Oil prices will go up, due to the market mechanism (more global demand and less global supply), due to exploration facets (higher exploration costs, lower exploration efficiency ratio's), due to distance facets (more crude oil miles, not enough ship capacity), due to extended refinery facets (new refineries needed for heavy crude types and sulfur polluted crude), due geopolitical facets (strategic less production and the fact that a tight market is more vulnerable for regional/global tensions. Very heavy crude will be gasified, instead of being refined. New refineries will be build. Export of crude will be stopped, crude will be refined in the crude origin nations. The oil of the future is very difficult (expensive) to explore and to refine. Shipment capacity will become a real problem as oil supply in Canada, Mexico, USA and Europe declines a high speed. Conclusion: the globalized cheap oil based economic model will be replace by the local prosperity expensive oil based model, as transport and mobility will become to expensive. Oil fields never can be explored completely, the production of each oil field peaks at a certain moment and then declines gradually. Peak oil field production can be extended by oil field injection methods (nitrogen or water), but the decline rated of injected fields is after the injections more progressive. The Mexican Cantarell field output, which peak is extended by nitrogen injection, declines now at a 15% rate a year. If Ghawar (Saudi Arabia) should start to decline, global oil production will decline with it from it's current extended peak. Ghawar is 'reconditioned' during exploration by massive water injections. Water injections that must be done wisely/slowly otherwise the output will become to much water polluted and the field than needs some rest time to let gravity split oil and water during time. The viscosity of oil is the reason this process takes a lot of time. It's one force (gravity driven by the higher density of water) against the other (higher viscosity of oil). Oil nationalism has pushed western oil internationals out of the center of the market. The future of western oil internationals is serving oil nationalism and getting squeezed by it, when the bucks start rolling. The business model of western oil internationals is outdated. They were the rulers, the hunters, now they're in the wind silence of the oil nationalistic storm. They will become the losers and the hunted. Their history works now against them. They have in the past no real friendships that achieved mutual interests, this is now working severely against them. Only oil internationals with a complete different attitude (as in: complete change of management and policy, by open communication on their history) will get new mutual deals in an oil nationalism dominated global market. Otherwise every lost will be accounted to them and every profit will be taken from them. Oil nationals versus oil internationals will be won by oil nationals. The oil internationals will be used this they are brook. Current strategy of oil internationals is paying dividend and purchasing own stock (to maintain high stock prices). Shell has recalculated/reshuffled their owned reserves figures, others will certainly follow. If BP will loose their rights in the TNK joint venture in Russia, almost 1/3 of their proven reserves will be vaporized overnight. Oil internationals will be split due to shareholders pressure, giving the shareholders double stock value and double dividends, as oil internationals has become to big and to divers to manage centrally. The split-up of Standard Oil (which make Rockefeller from borrower to banker by the by the split-up generated value) has proven both the value and the performance improvements of a split-up. Oil internationals that follow the US in the occupation of Iraq will be thrown out Iraq when the US leave Iraq. The nationalization of oil is a non reversible process. Oil in the 21st century is nationalized. Period. Making old times alive by invasion (or profiting of it) is just a way to ask to kicked out / shut off for ever. Alan Greenspan in his book "The Age of Turbulence: Adventures in a New World.": "I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil." or an other quote of this former man of huge economic influence "The Republicans in Congress lost their way, they swapped principle for power. They ended up with neither." Some say these remarkable quotes of him are primarily done to swift attention away from the failures grown/matured during his economic credit/currency leadership. One other remarkable statement. This is from Fatih Birol which is Chief Economist and Head of the Economic Analysis Division of the Paris based IEA/IAE (International Energy Agency) of the OECD: "I think we should leave oil before it leaves us. That should be our motto."
Author: Gijs Graafland
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