David Strahan, author of The Last Oil Shock gave me this fascinating interview at the recent Cool Earth event in Dun Laoghaire
You’ve said that you believe Peak is still a few years off…
The narrowing envelope of forecasts is from about now to 2020; ASPO have 2010- there is a range.
Those who think we are there already- there is a lot of this on the Oil Drum- are going on the basis that crude oil and lease condensate production- the most tightly defined definition of oil- is marginally lower than July 2005- and total liquid production is actually lower than it was this time last year; and the reason that total production is lower than it was is that OPEC production is lower.
So the burning question I think is whether the OPEC reduction is voluntary or involuntary. You will find a lot of people on the Oil Drum assume that this must be involuntary. We do hear a lot of dark noises coming out of Saudi Arabia about the number of drilling rigs doing so-called “work-overs” on existing wells and It does seem there is difficulty at the northern end of Garwhar; but I’m not so sure the reduction is involuntary. I think we would have seen an even more dramatic price increase had it been involuntary. $70 where we are now- a lot of the speculative money has come out of the oil price and people are worried about the future demand growth because of the problems of the debt markets and stock market collapse- that $70 is not even anywhere near the inflation-adjusted peak of the oil price which would be about $90 looking back to 1980. No-one would get me to claim that markets are perfect and price indications are the only measure, but I feel if the marginal reduction in production we have seen over the last two years was involuntary, we would see a much larger price increase.
We may not be very far off at all, but based on the relative calm of the oil price, we may not be quite there yet.
Would you agree that we are effectively on a bumpy plateau and that any future increase will be minimal?
I wouldn’t say that. There are too many models that I trust for example PFC Energy, a reputable oil consultancy whose forecast appears to be around 2020. I trust their approach and they see production rising until 2020. Their chief economist says he cant see a world that produces more than 100m b/d; I doubt we will even reach that, but these people are well aware of the dangers of relying on Saudi claimed reserves. I would also say, that the date is not the important thing, that even 2020 is far too close for comfort. ASPO have spent a lot of time debating the date but I hope that at their upcoming conference in Cork we can stop stressing the importance of the date and all agree that it will be within this period and we should move forward and look for ways to mitigate it right now.
As Colin Campbell has said, it is not the date that matters so much as the unrelenting decline afterwards.
Yes.
One of the important scoops of your book is in the opening chapter where you discuss documents you uncovered show that the Iraq invasion was not just about oil, but about peak oil. Can you tell us more about what these documents said?
The publicly available material is very suggestive. You don’t have to read between too many lines- just look at what the Bush administration did as soon as it took to power: First of all there was to institute the Cheney Energy Taskforce document that absolutely reeks of energy paranoia. They are really really concerned about their energy security. That is of course a process that Matt Simmonds helped develop before the election. They are talking in that document about trying to lift various embargoes- Cheney has a history of being opposed to sanctions and embargoes which impact on American companies; Iran-iraq-Liybia eg; on the other hand, at the first meeting of the Security Council, they discuss attacking Iraq. O’Niell, the treasury Secretary, gives his account in his book “The Price of Loyalty”. The account of this first meeting is absolutely gripping- it had clearly all been orchestrated in advance and even though the other members had not heard of it; on top of that there was a leaked document in the New Yorker referring to instructions to officials to co-operate with the Cheney taskforce because that taskforce was charged with both acquisition of oil and gas assets around the world, as well as our approach to “rogue states” –an official document had clearly tied these two areas together.
On top of that, there are the documents referring to the US-UK Energy Dialogue which was a diplomatic liaison set up in April 2002 at the Crawford Summit with Tony Blair and Bush where is commonly accepted that Blair told Bush, Yes, I will support you attacking Iraq come what may. We will try the UN route for international legitimacy, but I will support you anyway. They spent a long time alone together unminuted. They kept this secret, and it was only revealed subsequently by a Freedom On Information release by the Guardian. It is quite clear in these documents they are considering energy security in very strategic way. In February 2003 just before the invasion they are discussing in one meeting with high-ranking officials the investment requirements of the Middle East if it were to meet the demand forecasts of producing an extra 15million b/d by 2030.
This is very interesting of course because the west and Western companies at this stage had practically no access to the Middle-East at all. The major oil companies were then and essentially are still now hired hands. There is no equity involvement. But this is what was being discussed on the eve of the war and we are invited to believe this had nothing to do with it.
It is quite true, there is no document I can produce in which Tony Blair writes to Georg Bush saying “It’s all about Peak Oil “- no such document exists. But I think you have to be pretty credulous given the intense thinking around all this on both sides of the Atlantic not to think this didn’t play an important role.
We also know that the Security Council was well aware that the sanctions were wrecking the Iraqi oil industry, because of lack of materials and equipment. They were denying them chemicals, high pressure pumps, explosive charges for drilling new wells, and so on, and as a result the Iraqi oil industry was pursuing production methods such as unmanaged water injection that were likely to cut off very large areas of reservoir.
It was quite clear that Iraq was the only country left in the world that could easily increase its oil production, potentially from 2m b/d to 6m b/d. So the thinking was, we need to lift sanctions, but we cant do this while Saddham is still there, so find a way of getting rid of Saddham – hey presto WMD. The thinking was then to hopefully replace Saddham with some kind of democratic government friendly to the West, release more of the Iraqi oil and therefore put off the date of Peak. The logic seems pretty good to me- if Id been in their position Id have done the same thing!
Has this strategy worked? If you are saying that sanctions had lead the Iraqi oil fields into a state of disrepair- what has been the effect of an invasion?
It has been an unholy catastrophic failure. A complete mess. Its not sanctions that are now doing the damage, but the insurgency, with daily attacks on oil facilities, and I mean for goodness sake, the deputy oil minister was kidnapped the other week.
Some people would argue that that means it cant have been about oil, and I think that is completely wrong. Dick Cheney and his pals all thought they were going to be garlanded when they arrived in Iraq. If they got it that wrong about their reception in Baghdad, no wonder they got it wrong about the oil as well. All the failure means is the arrogance and stupidity of those who planned the attack, not that it wasn’t about oil in the first place.
What is the situation in Saudi Arabia? The U.S. has had a long-standing arrangement with the Saudi Royal Family to secure cheap oil, but now seems to be a rapidly growing young and perhaps angry Islamic population there.
It’s a kind of a pact with the Devil on both sides really. On the American side, it goes back to the meeting between Roosevelt and Ibn na Saad just after the second world war. America was to get access to oil and in return they would guarantee the Saudi Royal Families’ position, and that has been the arrangement pretty much ever since. But in some respects the Americans have had to put up with some humiliation since- the cutting off of the oil in 1973, the fact that most of the 9/11 hijackers were Saudi.
Bush appeared to have somewhat back- tracked on this deal with his recent State of the Nation speech, talking about the need for energy independence, and that he plans to eliminate dependence on Middle East oil- clearly a fanciful idea! It would be quite easy for America to reduce its consumption by the amount that it imports from the Middle East if he had the spine to do it, but that’s not how the oil industry works- it’s a fungible product, so if the Middle East goes up in flames- whether from a US attack on Iran, or as a consequence of the collapse of Iraq- America will still be vulnerable to the price impacts of that even if it doesn’t import a single barrel from there. So it is a relationship they are stuck with.
Is an attack on Iran likely?
There are some very respectable journalists like Seymour Hersh http://www.newyorker.com/archive/2005/01/24/050124fa_fact who suggest this is being discussed, but it is very difficult to read the tea-leaves concerning who is in the ascendant in Washington; you would think that the neo-cons would be in headlong retreat given the disaster of Iraq, that even Bush wouldn’t be so stupid as to try the same tactic again, but having said that perhaps they still can be, and perhaps the Bush administration is uniquely dangerous now that it is on the flight path to oblivion with no more than two years left and if it wants that agenda tidied up it hasn’t very long in which to do it; but I don’t really know.
Is this the beginning of the end of the American Oil Empire? Especially given the current economic implosion that is happening there.
That comes from the other end of the equation. An economic slow-down will put off the date of Peak.
But there could be a serious recession…
It depends how deep it goes. We need to put it in context. The demand increase in China is a factor; but if America goes into recession that will presumably impact on China as well since it exports so much stuff to them. But I do think that in terms of Amercian Hegemony, yes the situation has flipped in the last 10years. It is pretty obvious now that Russia won the Cold War hands down- of Russia, China and Amercia, Russia is the only one with nukes AND oodles of oil and gas which both China and America- and Europe- and the rest of the world of course- need. The political structures in Russia do seem to work in their own terms so no one is going to be able to invade Russia for its oil! They might be able to attack Iraq, Iran maybe…
…Canada?
… well I don’t know they need to attack Canada- Canada is part of NAFTA and did not choose to opt out as Mexico did form its obligation to provide oil to America -while Canadians freeze- so maybe they have already achieved their objective there. No, the flashpoint is between America and China over access to Middle eastern Oil, and Iran is very important there in that it continues to make deals with China to develop oil and gas and it continues to irk the US that their strategy is to buy up access to whole fields rather than just individual barrels as America would prefer them to. The US have set up a special commission to look at this, they are obviously worried about it and so they should be- basically, every barrel that China gains access to in the Western hemisphere is one less barrel for the US.
This is one of the reasons that I think Oil Peak is quite near, because both superpowers are behaving already as if it is a zero-sum game.
Moving onto the effects and responses to Peak Oil. You’ve said in the book that there is no need worry about congestion because the roads will be empty soon enough anyway, and yet the idea that we may have to say good-bye to the car-based economy in the not-too-distant future is not on the radar screen at all in public discourse. How does this make you feel?
Its frustrating- and it’s fascinating to watch. How can governments be so blind?
How can invading Iraq be apparently their only response?
Yes indeed- how can governments pursue such totally dysfunctional transport policies such as expanding Heathrow Airport we are seeing in the UK knowing what they do about Peak Oil? There is a huge chasm there and it is frankly schizophrenic. This is the Politician’s Dilemma. They are terrified of confronting “The System” and voter’s expectations- the politician who actually stands up and says, sorry but it is belt-tightening from now on can hardly hope to get re-elected. Politicians also have a natural difficulty with taking pre-emptive action- it is difficult enough to convince enough people of this anyway- predictions of peak Oil have come and gone in the past and the sky hasn’t fallen in so…
But they apparently managed to convince a whole nation to go to war on the completely spurious story of weapons of mass destruction…
Yes but that was only to help them prepare people for what they had decided to do anyway, and although it may have required people to take leave of their senses it didn’t require them to take leave of their car keys.
You go through in the book the limitations of various renewable options and how they cannot replace oil, but you do seem to come down on the side of nuclear. Is this just a reluctance to acknowledge that we cant keep an unsustainable system running without cheap oil, that Peak Oil means the end of growth.
Don’t paint me as an enthusiastic supporter of nuclear. Clearly there are a lot of problems with nuclear and were we simply able to dispense with it the world might be a better place in many respects.
I approach it mathematically. In Britain something like 20% of our capacity is nuclear- that’s a big chunk of low- CO2 emitting capacity. If we were to simply close that down and say “no more nuclear” and if we were to replace that with low CO2 emitting sources, then about our next 9000 wind turbines that we build in Britain will simply get us back to the starting line by replacing that lost capacity, and we currently have only 1700 and have to fight to get each one built so my worry when I hear for example GreenPeace and Friends of the Earth argue that we don’t need it, that we can do it all with efficiency gains and decentralised district heating and so on, particularly as neither of those two organisations are doing anything to address Peak Oil, and given that our own oil production is set to fall off steeply, we are cutting off a low-CO2 emitting chunk of our supply at a time when we are going to need every last scrap we can get.our hands on.
Even allowing for your “Powerdown” approach and everything else, the outcomes of energy shortages would be that much more brutal and that much more short-term.
**It still sounds like a supply-side solution rather than a demand-side one. You don’t really cover powerdown approaches in the book. **
It calls the techno-optimists bluff. We are going to have to mechanistically impose reductions on our consumption- and deal with it- but I don’t say renewables cannot replace oil. There is actually no shortage of energy. This may not be the case in a couple of hundred years’ time, but in the actual supply of energy, there is no shortage. What there is is a massive shortage of time, in order to convert from certain forms to others. There are absolute shortages of primary resources like land, but it is also a question of time.
In theory, the offshore wind resource in Britain is massive. In theory it could supply all of our electricity and a whole big chunk of our total energy demand should we choose to do it.
It would require a complete change of infrastructure- as would nuclear- to run electric vehicles for example.
Yes electrification is the big challenge. What I find frustrating in the climate change camp is that in a sense they are dealing with the easy bit- there are lots of options for producing clean energy and we are still screwing it up, particularly in Britain, it’s pathetic, and there are lots of potential sources of clean energy and in fact concentrated solar thermal power in North Africa could make a real difference for example.
I am absolutely not saying that we are going to have as much energy in the future. But even with current technology it could make a massive difference to our supply.
I was surprised to hear there are already 6 high-DC sub sea connections from North Africa to Europe.
We are clearly going to need both a supply and demand response, and I hope if we had something like TEQs or Richard Douthwaite’s Cap and Trade system, we can get to a point that is equitable and sustainable.
To go back to the nuclear issue, the difficulty of that position is that you are trying to persuade people to relinquish something that is available. And that is a really difficult political sell. It wont fly in the democracies of the western world.
Peak Uranium?
Yes maybe. I’m sceptical that stated uranium reserves are all that there is. I’ve talked to a number geologists about this, I’m satisfied that the world is not as well explored for uranium as it is for oil. But we will hit peak uranium sometime. I just think at one more generation of nuclear will help us ride some of the fossil peaks that are coming. We have to deal with the waste of course. Given the choice I would of course say- concentrated solar power, that’s a great idea- although . I havn’t yet read Ted Trainers’ Renewable Energy Cannot Sustain a Consumer Society . Probably the difference between us is that I think are problem is largely to do with time and deadlines more than actual resources.
Thankyou.
