Oil & Water

This talk surprised me in the sense that Matt Simmons used to be very focused on energy. He comes from the oil investment world. He has now expanded the discussion to include other resources - mostly water. He sees ocean energy as the way forward. I often find Matt Simmons to be ahead of curve - not that he needs my endorsement.

I am seeing more references everday to the interplay between energy and water. Jeremy Rifkin mentioned in a recent talk that during the heatwave in Europe that killed 10K people, one of the reasons France's nuclear power plants could not generate more energy to drive the air conditioners and mitigate the problem is that the power plants were constrained by their water availability. Here Matt Simmons suggests that USA's power generation uses 40% of the fresh water. Arnold Schwarzenegger, Governor of California, in a talk claimed that 20% of the energy generated in the state of California is used for pumping water around.

Twin Threats to Resource Scarcity: Oil & Water Marsh’s National Oil Companies’ Conference 2010, February 24, 2010

Simmons marsh-talk

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Looming Oil Crunch

A couple of things caught my attention. First, peak oil is mentioned very casually. Even Richard Branson has apparently made a statement about how he believes that the peak is in the next five years. I have been paying attention to peak oil discussion for the past several years. The peak oil group has been fighting this battle for attention for many years now. I dont know at what point the idea of peak oil went from being a fringe notion to a mainstream idea. Second, Ambrose and other economists seem to forecast a high oil price-driven economic crisis. Jeff Rubin, former chief economist, CIBC World Markets believes that the high oil price of 2007 triggered the current economic crisis. He points to declines in the export economies of Germany and China that occurred before the subprime crisis hit. In the next iteration, we will know which other non-CDO financial instrument emperors have no clothes.

Aside, I am a fan of Ambrose Evans-Pritchard. His logic is consistent, and his articles reflect an attention to details. I always learn something new in each of his columns.

Barclays and Bank of America see looming oil crunch

For oil markets, it as if the Great Recession never happened. Surging demand in China, India and the Middle East is making up for decline in the debt-crippled West, ensuring another global crunch within three or four years.

Bank of America and Barclays Capital, two leading oil traders, have told clients to brace for crude above $100 (£64) a barrel by next year, before it pushes relentlessly higher over the decade. This is a stark contrast from recessions in the 1980s and 1990s, when it took years to work off excess drilling capacity built in the boom.

"Oil has the potential to flirt with $100 this year. We forecast an average price of $137 by 2015," said Amrita Sen, an oil expert at BarCap. The price has doubled to $78 in the last year.

"The groundwork for the next sustained step up in oil prices is now almost complete. Global spare capacity is likely to be reduced to low levels within a relatively short time. The global economic crisis has postponed, but not cancelled, a crunch which would otherwise be starting to bite now," said Barclays.

...
Supply is scarce. Sir Richard Branson warned this month that the world faces 'peak oil' within five years. "Don't let the oil crunch catch us out in the way that the credit crunch did," he said.

Toyota's Jim Lentz Predicts Peak Oil by 2020

Jim is president of Toyota USA. Jim says that their plans are based on that assumption. The interviewer asked if it was his personal opinion or it is Toyota's. Jim confirmed that it is Toyota's view. This is indeed news. Presumably GM and other car makers also take this view.

Toyota's Jim Lentz Predicts Peak Oil by 2020

Peakoil Contingency Planning Talk Goes Mainstream

This is a small group but pretty influential - Virgin and Yahoo in UK. But the fact that they have publicly asked for a contingency plan is interesting. They mention 2013 as the year of the peak. There is an interesting alignment between Climate and Energy. Both require going green in a big way and fast!

Energy security body calls for 'urgent' review of impact of oil shortages

Virgin, Stagecoach and Yahoo among firms calling for measures to address economic dislocation from a sudden rise in oil prices....
An industry organisation that includes Virgin and Yahoo has called on the government to "urgently" reassess its dismissive view about the potential threat and impact of oil shortages.

The call from the UK Industry Taskforce on Peak Oil and Energy Security comes after revelations in the Guardian that there is dissent inside the International Energy Agency (IEA) about how soon the world may run out of supplies.

It also comes alongside a petition to Number 10 which calls on Gordon Brown to take up the issue more seriously amid a growing number of reports that indicate the situation is more urgent than many believed.

The Wicks Review into energy issues, published in August on behalf of the Department of Energy and Climate Change, gave scant regard to peak oil issues.

Will Whitehorn, the taskforce chairman, who is also president of Virgin Galactic, Sir Richard Branson's space travel business, said: "Given the revelations from within the IEA, we hope the government will be urgently reviewing the complacent approach to peak-oil risk evident in the Wicks Review."

Other members of the taskforce include Scottish and Southern Energy, Stagecoach, the transport group, and Arup, the civil engineering consultancy. Work already undertaken by the taskforce has suggests that more needs to be done to prepare for the potential economic dislocation from a sudden huge rise in crude prices.

The report of this group is called The Oil Crunch. More about the group:

The UK Industry Taskforce on Peak Oil and Energy Security (ITPOES) is a group of British companies concerned that threats to energy security are not receiving the attention they merit.

The Industry Taskforce on Peak Oil and Energy Security

The aim of our first report is to engage government more proactively on the peak oil threat, and also to alert the public to the problem. We aim to encourage collaborative contingency planning by government, industry, and communities on measures that can be taken to accelerate independent energy supply within the UK.

In preparing this report, we asked ourselves three related questions: How big is the risk from peak oil? How big is the alternative-energy opportunity? How do the two conflate?