Cornwall ON – As we saw in the previous article, Peak Oil is something that will happen, whether we like it or not. No politician or government can stop it, and no amount of denial can stop it. It will happen, period.
North Americans, on the other hand, have always been spoiled rotten when it comes to paying for energy, and very soon will have to start paying the consequences. As oil becomes scarcer, supply and demand will rear its ugly head. If anyone thought that 2008 prices for gas and diesel were excessive, “you ain’t seen nothing.”
However, it is the Indian/Chinese/Japanese bloc which should give rise to sleepless nights. This area is accelerating its oil consumption at ever increasing rates, far higher than North America, Europe and the rest of the world, but has very few oil reserves. Don’t forget, when the Japanese attacked Pearl Harbor in 1941, for them it was a war to secure natural resources in the Pacific, (what US administrations now refer to as “energy security”). Will this same pattern repeat itself?
Simple morals and ethics complicate the situation. Why shouldn’t the Chinese and the Indians increase their standards of living? Why shouldn’t the Japanese maintain their standard, which is comparable to our own? Who are we to say to almost two billion of the world’s population that they must remain in poverty so we can drive gas guzzling Chryslers?
In the middle of this free-for-all stands OPEC, which controls a major part of the world’s oil reserves, and which is steadily accelerating its own consumption, thanks to massive internal subsidies. At the moment it is in OPEC’s best interest to maintain stable oil production and prices. It tries to keep a fine line, keeping the price for crude as high as possible, to maintain their own economies, yet low enough not to push the world into another recession, which would lower both price and demand.
However, we must remember that OPEC began as a political organisation in response to the Arab-Israeli war in 1973, and it was never its intention to be a friend to the west. The aim was to end western support for Israel by withholding oil. This led to massive oil price increases, an almost continent wide 55 mph speed limit to conserve gas, and a recession. The sanctions were lifted only when the Americans forced Israel to get serious at the Camp David peace accord.
OPEC controls oil, and it can sell it to whomever it wants, and there is little the Americans, or anyone, can do about it. As Chinese (and Indian) demand increases, more and more oil is going to be diverted to the east, rather than to the north and west, especially if these countries are ready to offer the right price, or can offer OPEC countries goods for which there is a demand.
There would probably be little problem if OPEC could just turn the taps higher, and produce more to account for world demand. However, this simply isn’t going to happen, because OPEC doesn’t have the capacity. Even Saudi Arabia, the world’s largest single oil supplier, is starting to feel the effects of peak oil, and has to use enhanced recovery techniques to squeeze the last oil from one of its major oil fields.
Next time – the Impact of China – you can post your comments below.
Rick
Did we miss something in History?
The war with Japan was goaded by Roosevelt for the sole purpose to allow the US justification to fight against Germany. It had little to do with to secure natural resources in the Pacific. I mean where in 1941 was there a vast amount of resources in Hawaii in 1941. I mean maybe Pineapples
There was no reason to enter the war officially until after Pearl Harbor. Was it not Roosevelt that stated “America will not to send their sons into foreign war unless attacked”
Now the US entered the war 11 September 1944 , four years after the attack on pearl harbor. With plenty enough time to stock pile the aging war machine. Not to mention rebuild an aging fleet. It was also a huge boost to the economy, everyone was working.
The Americans forced Israel? Is that possible??
The only venture that occurred at Camp David was for the US to be a puppet for Israel. They now support each other in destroying all other countries and their economy. The oil sanctions were in place by Arab countries on the US trying to stop their support of Isreal. The same type of scenario occurred prior to dessert storm. They lost control of the oil wells in Kuwait by giving them to Sadam.
But I do agree eventually we will run out. out.
Rick
Up to ’39 Japan, which has no oil, relied on the US for oil. Japan’s adventures into China prompted the US to impose an embargo. The japanese needed to conquer the Dutch East Indies (Indonesia) to get at their oil. The US had a naval presence in Hawaii that could stop that thought. So to get the oil Japan needed to remove that US capability. There was at the time grave doubt that the US could fight a war on two fronts. The last thing Roosevelt needed at that time was to go after Japan. But in this case most would think he had no option.
I think the “Oil Shock” of ”73 was a both an attempt to get oil prices somewhere to reality, they had been too low for too long, but also served to wrap some in the west for supporting Israel. Both objectives were met. Oil went to $10-$15 pbrl and Israel was forced to cede back the Sinia and the Golan (though not completely). By any stretch Camp David was a blinding success. The deal was between Egypt and Israel and has been kept to this day. They are the closest of allies, I am sure you would concede.
I can not comment on the first gulf war, I dont think we have all the information for the “why” of that yet. Though my gut tells me that this was really a continuation of the Iraq-Iran war which most definately was a “resource war”.
Thank you Larry!
After reading Smee’s comment and view of history, I was really starting to think I was losing it. I even wondered why the Americans would bother Saving Private Ryan right after D-Day, 6 June, 1944, if they didn’t enter the war until September 11, 1944.
I didn’t really want to respond directly to Smee’s opinions directly or immediately — I was waiting to see if anyone else would pick up on this.
Or perhaps Smee is perfectly correct, but is really a future reincarnation of Dr. Who, and he plans on going back in time to rectify history to confirm with his comment.
Holy crap *lol* had to re read what I wrote. I stand corrected. True Ryans privates were saved in the Normandy was from June 6 to July 6 1944
The US were sent as aid in 42 serving as support for the british,
However the reason is still the same the US goaded Japan to attack the embargo Just think of the logic. What benefit would there be in attacking a fleet of old ships launched in 1915 the arizona, Nevada 1922, west Virginia 1921. In the middle of the Pacific away from most major manufacturing.
Just an excuse to enter the war and nothing else
Oil demand/prices over the next decade will to a large degree be driven by emerging economy demand at the margin. Here is a simple thought experiment using Chinese demand to generate some rough “back of the envelope” forecasts:
– China moves from 3 bbls/person/year to the South Korean per capita consumption level of 17 bbls/person/year over the next 30 years
– No peak in global production
Result: In next 10 years we must find 44 million BOPD – 26 million BOPD to maintain supply and 18 million BOPD to keep up with demand increases.
If you superimpose peak production on top of this demand profile using the following parameters oil prices would increase approximately 250% in real terms over next 10 years – most likely something would give far before that price level:
– Oil demand elasticity of -0.3
– Current production 84 million BOPD, current price US$ 80
– Peak production 100 million BOPD
– Post peak decline rate of 3-4%
If you want to try the china oil demand or the peak oil models for yourself using your own assumptions they can be found at Enquirica in the “Research” section: http://www.enquirica.com/index.php?option=com_content&view=article&id=11&Itemid=13
r
retyur
your math is sound.
How do you think the need will rise. There is no room in most Asian cities for an increase in automobiles and it is not affordable by most citizens. I doubt the demand scenarion will rise by that much unless . However that theory in itself would explain why the US is trying to control the natural resources of so many place in the middle east. If The east explodes in their need for oil it would be the next multi billion dollar lift for the oil trade all owned by the Americans oh and Isreal.
I wonder how long it will take them to get into kazakhstan and steal ownership of their resources.
I bet most north americans wouldn’t mind paying the fee provided it is justified.
Unlike now where about 40% for fuel is taxes and a cost driven by hedge funds.
Energy security, is that not what Kuwait, and afghanistan is all about?
Just some short notes on why Japan attacked, something to do with the US not keeping agrements
World War I. Japan had been our ally. But when she tried to collect her share of the booty at Versailles, she ran into an obdurate Woodrow Wilson.
Wilson rejected Japan’s claim to German concessions in Shantung, home of Confucius, which Japan had captured at a price in blood. Tokyo threatened a walkout if denied what she had been promised by the British. “They are not bluffing,” warned Wilson, as he capitulated. “We gave them what they should not have.”
In 1921, at the Washington Naval Conference, the United States pressured the British to end their 20-year alliance with Japan. By appeasing the Americans, the British enraged and alienated a proud nation that had been a loyal friend.
Japan was now isolated, with Stalin’s brooding empire to the north, a rising China to the east and, to the south, Western imperial powers that detested and distrusted her.
When civil war broke out in China, Japan in 1931 occupied Manchuria as a buffer state. This was the way the Europeans had collected their empires. Yet, the West was “shocked, shocked” that Japan would embark upon a course of “aggression.” Said one Japanese diplomat, “Just when we learn how to play poker, they change the game to bridge.”
Japan now decided to create in China what the British had in India – a vast colony to exploit that would place her among the world powers.