ABC TV Interview with Richard Heinberg on peak oil and the end of growth

In this post I add some graphs into the interview transcript.

http://www.abc.net.au/news/2012-09-17/peak-oil-and-the-threat-to-growth/4266638

On youtube: http://www.youtube.com/watch?v=eGphOQXCt2s

Ticky Fullerton, ABC TV Lateline Business: “There have been few more passionate debates in resource economics than around peak oil, whether it has or hasn’t happened and indeed whether peak oil is about resources left or production levels”

The link between resources and production levels can be seen on this graph:

http://crudeoilpeak.info/bp-statistical-review-2012-the-incredible-growth-of-oily-resources

Timing of peak oil

Richard Heinberg: “We have seen oil production at a plateau since 2005.”

This website is continuously monitoring the global crude oil peak

Richard: “We are replacing regular conventional oil – which made economic growth happening during the 20^th century – with harder-to-produce, more expensive-to-produce and environmentally risky tar sands, shale oil and ultra deep water oil. The problem is that these things are slow to come online and in the meanwhile regular conventional oil is declining”

Graph shown by ABC TV in the April 2011 oil crunch show

http://www.abc.net.au/catalyst/oilcrunch/

We’ll be cooked alive if we burnt 50% of unconventional oil and gas: calculations from NASA climatologist James Hansen

http://www.columbia.edu/~jeh1/mailings/2011/20110902_WhiteHouseAndTarSands.pdf

Ticky: “Boone Pickens predicted in 2004 that never again will we pump more than 82 mb/d but according to the FT we are pumping 91 mb/d”

Boone Pickens Warns of Petroleum Production Peak

May 04, 2005 PALM SPRINGS, CA. – May 3, 2005. By EV World

“Let me tell you some facts the way I see it,” he began. “Global oil (production) is 84 million barrels (a day). I don’t believe you can get it any more than 84 million barrels. I don’t care what (Saudi Crown Prince) Abdullah, (Russian Premier Vladimir) Putin or anybody else says about oil reserves or production. I think they are on decline in the biggest oil fields in the world today and I know what’s it like once you turn the corner and start declining, it’s a tread mill that you just can’t keep up with.
http://www.peakoil.net/BoonPickens.html

Richard: “That definition is a bit wobbly because that 92 mb/d includes biofuels, natural gas liquids and all sorts of things that aren’t really conventional oil”

Extracts from the August Oil Market Report of the IEA. In 2011 we had 88.4 mb/d out of which 4 mb/d were biofuels and refinery processing gains so Pickens was pretty close. Other numbers marked red: OPEC NGLs, US uptick from shale oil and Canada including syncrude from tar sands.

http://www.graphoilogy.com/2012/04/energy-production-data-from-statistics.html

Canadian oil production profile: growing bitumen, syncrude and heavy oil sitting on light and medium crude oil

US energy independence and the shale oil boom

Ticky: “When we have recently Mitt Romney saying he is going to make America independent by 2020 because of all this shale oil which has been discovered. You don’t see that continuing with accessing more proven reserves?

Richard: “No it’s not going to happen. The tight oil which is coming from North Dakota is in smaller reservoirs and wells deplete very rapidly, sometimes as much as 60% in the first year…. So that means you have to drill and drill and drill more all the time..”

https://www.dmr.nd.gov/oilgas/presentations/ActivityUpdateRotaryClubBismarck2011-03-09.pdf

Stacked production profiles: drill, baby, drill: http://www.willistonnd.com/usrimages/BakkenReportOct2011.pdf

Oil is trucked because it does not pay to lay pipelines

Impact of tight and deep water oil on total US production

Ticky: “It all depends on the oil prices. The oil price is going up as it has been so these less viable projects are becoming viable and on we go”

Richard:”But there is a limit to how many wells you can drill in a year and they are going for the sweet spots first and as the time goes on the quality of the resource declines and also the energy returned on the energy invested declines. It takes energy to explore and drill for oil and if you compare the amount of energy you get back at the end of the day with these unvonventional resources compared to the amount of energy that has to be invested, its pretty paltry especially if you compare it to the glorious days of conventional oil back in the 20^th century”

Ticky: “…We know all about the dramas in the Middle East at the moment….”

Peak oil in Egypt

The biggest drama is still off the radar: 2^nd and last oil peak in Iran

Oil price too high for oil dependent economy

Ticky: “….On the other hand we got people worried that economic demand will not be there notwithstanding QE3. But you have actually quite an interesting theory how oil and peak oil could be linked to the end of growth”

Richard: “We have a situation where the oil industry needs a price above the $100 a barrel in order to justify looking for that incremental barrels worth of production. But we have seen from recent history when the price of oil goes beyond 100 dollars and stays there for very long that tends to undercut economic growth. So one way or another we are in a situation where oil just isn’t able to provide the economic bang that it used to.”

Ticky: “You say that the economy tends to hate high oil prices because it presumably drives the economy into a volatile state..”

Richard: “Oil is implicated in about every aspect of our lives economy whether its agriculture, transportation and so as oil prices go up food prices go up. Across the board it makes everything more costly…”

Ticky: “drives recessions..”

Richard: “…we have seen it again and again. In the US every oil price spike since 1973 was correlated with a recession”

Graph from the WSJ showing links between recessions and oil price, from Gail the Actuary’s blog:

“WSJ, Financial Times raise issue of oil prices causing recession”
http://ourfiniteworld.com/2011/02/25/wsj-financial-times-raise-issue-of-oil-prices-causing-recession/

Brookings Institute:

Causes and Consequences of the Oil Shock of 2007–08

Whereas historical oil price shocks were primarily caused by physical disruptions of supply, the price run-up of 2007-08 was caused by strong demand confronting stagnating world production. Although the causes were different, the consequences for the economy appear to have been very similar to those observed in earlier episodes, with significant effects on overall consumption spending and purchases of domestic automobiles in particular. In the absence of those declines, it is unlikely that we would have characterized the period 2007:Q4 to 2008:Q3 as one of economic recession for the U.S. The experience of 2007-08 should thus be added to the list of recessions to which oil prices appear to have made a material contribution.
http://www.brookings.edu/~/media/Files/Programs/ES/BPEA/2009_spring_bpea_papers/2009_spring_bpea_hamilton.pdf

Hamilton: “On the other hand, I think we understand pretty clearly the main factors behind the overall increase in oil prices since 2005. Demand for oil, particularly from the emerging economies, has grown significantly, and we have had a hard time increasing global production. The single most likely outcome is that both conditions will continue to be with us. The most likely scenario is that the next decade will look something like the last, with oil prices volatile but exhibiting an upward trend.”
http://www.economonitor.com/blog/2012/08/james-hamilton-oil-demand-rises-global-production-stalls-volatility-here-to-stay

The blame game has started

Ticky: “Again, on the other side of the debate we have seen recently Iran’s OPEC governor Khatibi saying that the US and the European government should focus on solving their structural problems in particular their budget deficits rather than blaming high oil prices”

Crude oil should be at least $150 per barrel, Iran’s oil minister was quoted as saying on Sunday, and the sanctions-hit country’s OPEC governor said current oil prices were not high enough to threaten the world economy.
http://english.ahram.org.eg/NewsContent/3/12/53109/Business/Economy/Oil-should-be-at–per-barrel-Iran.aspx

How about OPEC telling the truth about their oil “reserves”?

OPEC whistleblower Saddad-al-Husseini crossing out 30 years of OPEC’s easy oil at an Energy Intelligence conference “Oil & Money” in October 2007, London

Convergence of peak oil and peak debt

Richard: “Well we are facing the convergence of 2 crises. First the problem of oil but at the same time we also have the situation of peak debt. And not just government debt. For the last 30-40 years countries have been trying to stimulate economic growth with more consumer debt so private debt has risen 3 times the rate of GDP. You can’t do that forever. At a certain point we reach the situation where we can’t make the interest payments on the existing debt …”

Global public debt and oil price

From Prof. Steve Keen’s website. Australian mortgage debt approaching 90% of GDP

http://www.debtdeflation.com/blogs/

http://www.debtdeflation.com/blogs/2012/01/03/the-debtwatch-manifesto/

They can print money, but not oil

Ticky: “except we just print more money… I have been doing this show for months and months and everybody says it’s coming, it’s coming… but we just keep on printing more money”

Richard: “The medicine loses its effect and we seeing it right now with the latest round of quantitative easing. It stimulates for a shorter and shorter time each time”

Ticky: “In your new book, adapting to a new reality, how do you adapt?”

Richard: “We are going to have to create an economy that doesn’t require growth. The economy wasn’t growing prior to the industrial revolution and with coal and oil and lots of inventions we made economic growth happen for a number of decades but it’s not a normal and natural thing. We live on a finite planet. We are going to have to create a kind of economy that’s a steady state economy that exists within the bounds of the Earth’s limits”

Ticky: “And on this radical note for many of our viewers…we have to leave it there”