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US Army colonel: world is sleepwalking to a global energy crisis

 
Oil Refinery in Canada

An oil refinery in Canada. Has cheap oil gone forever? Photograph: Dave Reede/All Canada Photos/Corbis

 

Powered by Guardian.co.ukThis article titled “US Army colonel: world is sleepwalking to a global energy crisis” was written by Nafeez Ahmed, for theguardian.com on Friday 17th January 2014 06.01 UTC

A conference sponsored by a US military official convened experts in Washington DC and London warning that continued dependence on fossil fuels puts the world at risk of an unprecedented energy crunch that could inflame financial crisis and exacerbate dangerous climate change.

The ‘Transatlantic Energy Security Dialogue‘, which took place on 10th December last year, was co-organised by a US Army official, Lieutenant Colonel Daniel L. Davis, operating in a private capacity, in association with former petroleum geologist Jeremy Leggett, chairman of the UK Industry Taskforce on Peak Oil and Gas.

Participants, who addressed one another via video link, consisted of retired military officers, security experts, senior industry executives, and politicians from the main parties – including two former UK ministers. According to US Army colonel Daniel Davis, a veteran of four tours of duty in Afghanistan and Iraq, and regular contributor to the Armed Forces Journal:

“We put the event together because the prevailing idea that we have a bright future of increasing oil and gas production that can sustain our current way of life indefinitely is based on a selective appraisal of the data. We brought together experts from across the spectrum, and with a wide range of opinions, to have a comprehensive look at all the relevant data. When you only look at certain things, like the very real resurgence of US oil and gas production, the picture looks fine. But when you dig deeper into the data, it becomes clear that this is only part of the picture. And the big picture proves that our current course cannot continue without significant risks.”

The dialogue opened with a presentation by Mark C. Lewis, former head of energy research at Deutsche Bank’s commodities unit, who highlighted three interlinked problems facing the global energy system: “very high decline rates” in global production; “soaring” investment requirements “to find new oil”; and since 2005, “falling exports of crude oil globally.”

Lewis told participants that the International Energy Agency’s (IEA) own “comprehensive” analysis in its World Energy Outlook of the 1,600 fields providing 70% of today’s global oil supply, show “an observed decline rate of 6.2%” – double the IEA’s stated estimate of future decline rate out to 2035 of about 3%.

The IEA report also shows that despite oil industry investment trebling in real terms since 2000 (an increase of around 200-300%), this has translated into an oil supply increase of just 12%. Lewis said:

“That is a very striking number and one I think that should be ringing alarm bells. It indicates to me that something has fundamentally changed in the economics of the oil industry and that you’re having to invest more and more for diminishing incremental production.”

Lewis also referred to US Energy Information Administration (EIA) data showing that although global crude oil exports increased “year on year from 2001 to 2005”, they “peaked in 2005 and have been trending down since 2009.” Lewis attributed this trend to rapidly rising populations in the Middle East which has led to escalating domestic oil consumption, effectively eating into the quantity of oil available to export onto world markets.

OPEC (Organisation of Petroleum Exporting Countries) populations since 2000 have increased at twice the rate of the world as a whole. This has driven them to increase their oil consumption four times faster, or by 56%, relative to the rest of the world.

Such increases in domestic consumption, curtailing global exports, have been enabled by a corresponding increase in domestic subsidies, said Lewis. Fossil fuel subsidies have increased to $544 billion, nearly half of which amounted to oil subsidies dominated by Saudi Arabia and Iran.

Against this consistent trend of rapidly declining oil exports, Lewis questioned the IEA’s projection of an increase in global crude oil exports and imports from 35 to 38 million barrels a day out to 2035.

 

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