NYT Sees Oil Demand Crisis As Production Falters
That means a lot, in the short run, for Brazil, but for the world, it means little. Eight billion barrels cannot reverse a developing situation wherein oil production cannot possibly meet future demands, and the theories propounded fifty years ago by M. King Hubbert that world oil production would peak about now and begin a sharp descent in future years will be realized.
At present, as oil prices shoot toward $100 a barrel (moved in part by the sharp decline in recent months of the American dollar), oil production stands about 85 million barrels a day. Some optimists believe, despite Hubbert's estimates, that it could still rise to about 115 million barrels a day, supplemented by the development of natural gas resources, oil sands (Alberta province) and oil shales (Colorado and elsewhere). As the prices increase, high cost retrieval operations become more feasible.
But a New York Times Page 1 article this morning contains an estimate that if China and India continue to develop their economies at the present pace, by 2030 those two countries alone will need to import as much oil as the United States does today. In that case, to keep pace, oil production worldwide would have to rise to 200 million barrels a day.
This kind of development is hard to foresee. As the years pass, the oil in the more accessible areas is being used up, and new discoveries, such as in the Arctic, or deep beneath the oceans, become ever more costly to bring to production.
Hubbert may not have been right about the peaking date, but, according to most analysts, he will be proved right at some point in the not too distant future, and at that time, the optimists say, alternative fuels be developed, or, the pessimists say, the world will go into an economic shock that may mean the end of industrial civilization as we know it.
The New York Times story this morning, by Jad Mouawad, is about what he calls "a third energy shock in a generation."
But, he observes, "Unlike past oil shock, which were caused by sudden interruptions in exports from the Middle East, this time prices have been rising steadily as demand for gasoline grows in developed countries, as hundreds of millions of Chinese and Indians climb out of poverty and as other developing economies grow at a sizzling pace."
Already, even at 85 million barrel daily production, the world's oil supply is clearly at a point of strain. Relatively small developments, such as strikes in the Nigerian fields, or the threat of a Turkish incursion into the oil-rich Kirkuk region of northern Iraq, can send world markets into new price spikes. As we see in the stock market every day, these markets are often moved more by panic than by rational market conditions, grim as those might be.
Oil prices are up 56% this year, according to the NYT article, and 365% in the last decade. Now, $100 a barrel oil seems likely to put new strain on the American economy, and some analysts believe the price could soon mount to $120 a barrel.
The Times article points out that milk, and even bottled water, are more expensive than that, but they don't have the same sensitive immediate implications for the American and world economies.
Some theorists, it should be noted, remain hopeful that oil prices could yet spike and then return to the vicinity of around $65 a barrel. But some of these same people were saying, when oil was in the $65-a-barrel range, that the price would descend to $50 a barrel.
It would be foolish not to assume that the tensions in the Middle East are compounding the pricing crisis. We can see that every little new report has immediate ramifications in the market.
It all raises the possibility of some kind of crisis, perhaps not too far in the future.
Fundamentally, the reason the U.S. has troops in Iraq and is heavily involved in the present developing crisis in Pakistan is to keep Muslim extremists from getting into position where they could dominate the Middle Eastern oil markets, (or take possession of nuclear arms already developed in Pakistan). Some liberals in America may be willing to accept either possibility, but most Americans are not.
Nearly every political crisis in the world today has oil or gas implications. Even in Burma, the Chinese government has been supportive of a military junta nobody likes, because the Burmese are developing natural gas resources which China can import. They are all the more important to the Chinese than the oil resources in The Sudan, another dictatorship the Chinese have supported, because they are thousands of miles closer to China.
The New York Times story this morning comes at a crucial time, and it does more to sum up where the oil supply and pricing situations stand than anyone else has been doing in the American media.
Elsewhere, media attention is often focused on temporary expedients that may improve a supply situation regionally, such as the recent development of liquefied natural gas supply lines from the Arctic waters off northern Norway to the American east coast, or the construction of a liquefied natural gas terminal in Baja California, to receive shipments from Indonesia that could assuage natural gas demands in California.
But these developments in the long run will not be terribly significant, if the world supply situation continues to worsen.
And, we are aware as well, more fossil fuel burning in the world compounds the problems of global warming. The situation facing mankind, all in all, is a somber one.
Latest polls in the race for the Republican presidential nomination show an old standby, and hero of the American people, Sen. John McCain moving back into second place. One such survey this week has shown former New York Mayor Rudolph Giuliani holding the lead with 33%, but McCain having passed former Sen. Fred Thompson, with 16%. Surveys in Iowa and New Hampshire also show McCain running better than he did.
Now that the situation in Iraq has turned better, the New York Times quotes a recent poll as showing that 33% of Americans now feel the "surge" of troops ordered by President Bush and supported so strongly by McCain has done some good. (Still, 41% think it hasn't).
But if those 33%, probably mostly Republicans, turn to the most stalwart candidate on the war, it will be McCain, the old Vietnam war hero, and a man still with a reputation for honesty and straightforwardness.
Wouldn't that be a big surprise?