News roundup, 17 Jan 2024

- The ceasefire agreement between Israel and Hamas (which both Joe Biden and Donald Trump are trying to take credit for) has experienced a last-minute hiccup after Israeli PM Benjamin Netanyahu delayed the cabinet meeting where this was supposed to be ratified. Netanyahu claims that Hamas made demands for a "last minute concession"; Hamas denies this, and Netanyahu refuses to discuss what part of the agreement Hamas has reneged on. Extremist members of his cabinet had allegedly threatened to resign if the agreement is ratified, which would bring down the government and possibly end Netanyahu's premiership - and with it the protection from prosecution that he has enjoyed until now. In any case, these issues seem to have been contained; Netanyahu now expects the deal to be approved today.

- South Korean president Yoon Suk Yeol, who is suspended pending his impeachment trial in the country's Constitutional Court, has been arrested following a lengthy standoff, something that has never previously happened to a sitting president in the country.

- Residents of the Ukrainian city of Kherson are accusing Russian drone pilots of using civilians for target practice. Local officials say that at least 16 people have been killed and 144 injured in this way.

- The City of Winnipeg has cancelled a plan to save money for the snow clearing budget by deferring residential plowing until 15 cm of snow have fallen, instead of the current 10 cm. Mayor Scott Gillingham says that his office received more complaints about this proposal than about a planned tax increase.

- China's demand for oil seems to have peaked in 2023; an increase in aviation fuel consumption was more than offset by a decrease in other fuel use, as surface transportation has been increasingly electrified. This is good news for the climate, though nowhere near good enough to prevent an awful lot of bad stuff in the coming decades. I suspect it's got the Russians worried too.

- A Donald Trump campaign rally in St. Cloud, Minnesota last summer has left the city wondering how to collect on a $209,000 bill for measures taken to accommodate the rally. Trump's campaign says the costs are the responsibility of the Secret Service; the SS, for their part, claim that the agency "lacks a mechanism" to reimburse states or municipalities for these costs.

- Trump wants to stop the impending TikTok ban, presumably because no other social media platform is as effective at rallying the sheeple for him.

- A SpaceX rocket disintegrated shortly after launch, forcing several flights to alter their courses to avoid falling debris. In response Elon Musk, trying to put the best possible face on the situation, tweeted that "Success is uncertain, but entertainment is guaranteed!"

- The Washington Post has scrapped the slogan "Democracy Dies in Darkness" in favour of a new one, "Riveting Storytelling for All of America". Because journalism is just storytelling, right? I guess in Trump's America, Jeff Bezos doesn't want it to be more than that - certainly not any journalism that the administration can associate with him, lest he fall out a window or something. One is also reminded of Google's abandonment of their old motto "don't be evil" a few years back.

- An employee of a flight training school in St. Andrews, Manitoba was severely injured after attempting to hand-prop an aircraft and getting hit by the propeller.

What's the real story with Saudi Arabia's oil reserves?

A very good question. It's recently been reported (via Wikileaks, once again) that there are serious concerns about this:

The US fears that Saudi Arabia, the world's largest crude oil exporter, may not have enough reserves to prevent oil prices escalating, confidential cables from its embassy in Riyadh show.

The cables, released by WikiLeaks, urge Washington to take seriously a warning from a senior Saudi government oil executive that the kingdom's crude oil reserves may have been overstated by as much as 300bn barrels – nearly 40%.

Interesting. On the other hand, others argue that this is a faulty interpretation:

Asked by the American diplomats what he thought of Mr. al-Saif’s statements, he made what appeared an extraordinary statement: that the reserves figure was inflated by 300 billion barrels. Deducting that figure from the 716 billion barrels created the idea that Saudi reserves were 40% less than it officially said.

As it turns out, however, Mr. al-Husseini’s memory of that conversation is rather different.

He says he has no dispute with Aramco’s official reserves data, but disagrees with Mr. al-Saif’s projection for the future and with the diplomats’ characterization of its existing 716 billion barrels as “reserves”.

In fact, he says, that figure refers to “oil in place” which includes both recoverable and non-recoverable oil.

The kingdom’s “proven reserves”, the oil Saudi Aramco believes it can extract, are officially given as 260 billion barrels (Mr. al-Saif said the actual figure was probably more like 51% of the “oil in place” –- around 358 billion barrels).

So it seems this particular report may have been overstated. However, before one gets too complacent, it's worth considering the bigger picture, which is precisely what Gail the Actuary is attempting to do in this post at The Oil Drum. It sure looks like the overall trend for Saudi is downwards...

Free market won't deliver alternatives before oil runs out: study

A study by American researchers has concluded that oil will run out long before alternatives are ready:

The world will run out of oil around 100 years before replacement energy sources are available, if oil use and development of new fuels continue at the current pace, a US study warns.

Researchers at the University of California, Davis (UC-Davis) used the current share prices of oil companies and alternative energy companies to predict when replacement fuels will be ready to fill the gap left when oil runs dry.

And the study’s findings weren’t very good for the oil-hungry world.

If the world’s oil reserves were the 1.332 trillion barrels estimated in 2008 and oil consumption stood at 85.22 million barrels a day and growing year-y at 1.3 percent, oil would be depleted by 2041, says the study published online last week by Environmental Science and Technology.

But by plugging current stock market prices into a complex equation, UC-Davis engineering professor Debbie Niemeier and postdoctoral researcher Nataliya Malyshkina calculated that a viable alternative fuel to oil will not be available before the middle of next century.

From the Montreal Gazette. This is unsettling, but when you look at the details it turns out it may not be as bleak as it appears:

On the oil supply side, consumption could well decrease in future as more energy-saving measures are introduced and used by consumers, and new oil reserves could become available as extraction techniques improve.

On the alternative fuel side of the equation, the study did not look at nonprofits, government agencies and universities which are developing new fuels, because they are not quoted on the stock market.

And if governments announced new policy initiatives to promote alternative fuel development, share prices of alternative energy companies would rise, and the gap between the end of oil and the kick-in of alternative fuels would shrink.

So the Gazette's headline is more than a little misleading, but we shouldn't be surprised that they didn't use the title I did; it would be unseemly for a capitalist paper to be too obvious about the shortcomings of capitalism. That said, whether governments and nonprofits will step up to the plate is very much an open question. But there's no reason why it can't be done with sensible government policy.

More info on that German peak oil study

Robert Rapier at The Oil Drum has obtained a translation of the main points in that report (not the entire document, but I imagine we'll see that eventually). Here are some highlights:

Overall, higher volatility and loss of trust are seen as possible outcomes in a world where oil supplies are limited, increasing the need for “oil related diplomacy” and thus increasing the risk of moral hazard among all actors, which in turn decreases overall global supply security.

The report then refers to already existing actions of the German government to tie close economic relationships with energy suppliers, and to the tendency of consuming countries to reduce oil dependency, trying to steer clear of risks of future supply shocks.

The Middle East is identified as a very dangerous region with high external involvement from many players and thus a very unstable overall situation.

Overall, the report expects a reduction of the importance of “Western values” related to democracy, and human rights in the context of politically motivated alliances, which increasingly are driven by emerging economies such as China – likely leading to double standards. Emerging economies are equally expected to receive higher recognition in international organizations, particularly those with strength in resources (such as Russia).

That sounds bad. This sounds worse:

In addition to the gradual risks, there might be risks of non-linear events, where a reduction of economic output based on Peak Oil might affect market-driven economies in a way that they stop functioning altogether, leaving the possibility of a relatively steady downward trajectory.

Such a scenario could develop through an initially slow decline of trade and economic activity, combined with higher stress on government budgets from lower tax income, higher social cost and growing investment into alternative technologies.

Investment will decline and debt service will be challenged, leading to a crash in financial markets, accompanied by a loss of trust in currencies and a break-up of value and supply chains – because trade is no longer possible. This would in turn lead to the collapse of economies, mass unemployment, government defaults and infrastructure breakdowns, ultimately followed by famines and total system collapse.

Will it actually come to this? Maybe. Of course, this is a bit vague as to where those famines would occur; would they happen in the developed world? Not out of the question, and if it comes to that a lot of other bad things could happen as well. The biggest question is the matter of widespread international conflict. Some examples:

4.6 Growing conflict potential concerning the Arctic Circle

Germany might have to take positions in case of an upcoming conflict regarding resources in the Arctic Circle, where multiple countries (including Russia) have open claims for accessing oil and gas fields. This requires further research.

4.7 Nuclear technology proliferation

The risk for nuclear technology proliferation and thus more countries with the potential for nuclear weapons (and the risk for terrorists having access to nuclear material) is growing due to the proliferation of nuclear technology for energy generation. Equally, risks for terrorist attacks and accidents on German soil are rising. Both scenarios require more surveillance, intelligence and preventive action.

4.8 Higher conflict potential regarding critical infrastructure

Energy delivery infrastructure for all sources including electricity will have a higher importance in an oil constrained world, thus, securing its reliability, security and availability becomes mission-critical. International cooperation is needed to secure large international supply paths (pipelines, sea routes).

Scary stuff. The Doomsday Clock currently stands at six minutes to midnight, but it could get a lot worse in the next while as tensions over diminishing resources increase.

German study warns of consequences of peak oil

We've already told of the UK's concerns; now it seems that Germany's worried too:

A study by a German military think tank has analyzed how "peak oil" might change the global economy. The internal draft document -- leaked on the Internet -- shows for the first time how carefully the German government has considered a potential energy crisis.

The term "peak oil" is used by energy experts to refer to a point in time when global oil reserves pass their zenith and production gradually begins to decline. This would result in a permanent supply crisis -- and fear of it can trigger turbulence in commodity markets and on stock exchanges.

The issue is so politically explosive that it's remarkable when an institution like the Bundeswehr, the German military, uses the term "peak oil" at all. But a military study currently circulating on the German blogosphere goes further.

The study is a product of the Future Analysis department of the Bundeswehr Transformation Center, a think tank tasked with fixing a direction for the German military. The team of authors, led by Lieutenant Colonel Thomas Will, uses sometimes-dramatic language to depict the consequences of an irreversible depletion of raw materials. It warns of shifts in the global balance of power, of the formation of new relationships based on interdependency, of a decline in importance of the western industrial nations, of the "total collapse of the markets" and of serious political and economic crises.

From Der Spiegel. The article goes into a fair bit of detail, postulating that countries that still have a lot of oil will wield a great deal of influence in the coming years, among other things. Even more interesting is one of the report's recommendations:

The scenarios outlined by the Bundeswehr Transformation Center are drastic. Even more explosive, politically, are recommendations to the government that the energy experts have put forward based on these scenarios. They argue that "states dependent on oil imports" will be forced to "show more pragmatism toward oil-producing states in their foreign policy." Political priorities will have to be somewhat subordinated, they claim, to the overriding concern of securing energy supplies.

For example: Germany would have to be more flexible in relation toward Russia's foreign policy objectives. It would also have to show more restraint in its foreign policy toward Israel, to avoid alienating Arab oil-producing nations. Unconditional support for Israel and its right to exist is currently a cornerstone of German foreign policy.

One hopes that Israel is taking these issues seriously as well; their current favourable treatment in the foreign policy of most Western countries (not just Germany) is bound to be weakened by this. How they handle this, of course, could make all the difference, not just for them but for much of the world. If they completely pull out of the West Bank, for instance, they'll likely be fine (or at least no worse off than a lot of countries), as much of the animosity the Islamic world has towards them will be dissipated. On the other hand, if they refuse to do so, they could become vulnerable as Western aid starts to decline. The consequences of this could be catastrophic, and not just for Israel (Samson is still lurking, you know).

UK government fears peak oil

They don't want to talk about it in public, though:

Speculation that government ministers are far more concerned about a future supply crunch than they have admitted has been fuelled by the revelation that they are canvassing views from industry and the scientific community about "peak oil".

The Department of Energy and Climate Change (DECC) is also refusing to hand over policy documents about "peak oil" – the point at which oil production reaches its maximum and then declines – under the Freedom of Information (FoI) Act, despite releasing others in which it admits "secrecy around the topic is probably not good".

Experts say they have received a letter from David Mackay, chief scientific adviser to the DECC, asking for information and advice on peak oil amid a growing campaign from industrialists such as Sir Richard Branson for the government to put contingency plans in place to deal with any future crisis.

A spokeswoman for the department insisted the request from Mackay was "routine" and said there was no change of policy other than to keep the issue under review. The peak oil argument was effectively dismissed as alarmist by former energy minister Malcolm Wicks in a report to government last summer, while oil companies such as BP, which have major influence in Whitehall, take a similar line.

But documents obtained under the FoI Act seen by the Observer show that a "peak oil workshop" brought together staff from the DECC, the Bank of England and Ministry of Defence among others to discuss the issue.

From the Guardian. If they're so reluctant to share this information, it makes one wonder just how bad the situation is.

Saudi king orders halt to oil exploration: report

This is a bit odd, no?

RIYADH (Zawya Dow Jones)--Saudi Arabia's King Abdullah has ordered a halt to oil exploration operations to save the hydrocarbon wealth in the world's top crude exporting nation for future generations, the official Saudi Press Agency, or SPA, reported late Saturday.

"I was heading a cabinet meeting and told them to pray to God the Almighty to give it a long life," King Abdullah told Saudi scholars studying in Washington, according to SPA.

"I told them that I have ordered a halt to all oil explorations so part of this wealth is left for our sons and successors God willing," he said.

Source (h/t Mega at iTulip). Then the very next paragraph backtracks a bit:

A senior oil ministry official, who declined to be named, told Zawya Dow Jones the king's order wasn't an outright ban but rather meant future exploration activities should be carried out wisely.

So what does this mean? Has Saudi oil production peaked? What will be the political implications if it has? This could get interesting...

Bank of Canada approaches its day of reckoning

Canada's central bank has announced that it will not be raising rates yet. However, sooner or later this will change. The thing is, setting the rates is a tricky balancing act. If they don't raise them eventually, inflation will become excessive; on the other hand, if they raise them too soon or too much, they will choke off the recovery. After all, high rates mean more of people's previously disposable income will be going towards paying their mortgages and credit cards, and businesses that might want to expand will face higher borrowing costs. And this is likely coming within the next couple of months, whether we like it or not.

Unfortunately, rising oil prices are likely to complicate matters further. The thing is, expensive oil is both inflationary and anti-growth, so we could see a burst of stagflation within the next few years. Hang on; it's going to be quite a ride.

Some comments on those green shoots

We're hearing everywhere that the economy is now recovering. Hugh McFadyen and his motley crew are using this as ammunition against the Selinger government, saying that there's no reason to run deficits any more, because the recession is supposedly over. Now technically that may well be true, since recessions are generally defined solely in terms of the overall growth rate of the economy. And there have been gains in jobs lately, too -- but what sort of jobs are they? Armine Yalnizyan at Progressive Economics has some comments:

Forget total employment numbers, it’s the types of jobs coming back that count.

There is a shadow side to this recovery that may undo it in the end. Uncertainty is fast becoming the new normal in the labour market, and that has long-term implications for aggregate demand, household indebtedness, and the rate of defaults on mortgages and credit cards.

The latest Labour Force Survey results show that — though there are still 253,000 fewer jobs than when the recession began in October 2008 — employment growth continues its slow path upward. As Erin Weir noted on Friday, this month’s rising head count is driven by part-time jobs.

By March 2010 there were 47,800 more part-time jobs than when the recession began, but we are still down 300,000 full-time jobs. That mirrors another shift from stable to unstable jobs: more temporary jobs, fewer permanent ones.

And that's based entirely on "pure" economics, and doesn't take into account the fact that oil is likely to get a lot more expensive soon. Throw in that element and things could get quite unpleasant indeed.

More oil news...

Further to yesterday's post about peak oil, the International Energy Agency is very concerned about what will happen as the price rises:

Recovery in the world's biggest economies could be jeopardized if crude oil prices stay over $80 (U.S.) per barrel, the International Energy Agency said Tuesday.

The IEA also reported that OPEC posted the first “significant drop” in output in March in more than a year – falling 190,000 barrels per day to 29 million barrels a day – largely due to a near 10-per cent drop in Iraqi output.

The agency, the energy arm of the Organization for Economic Cooperation and Development, a grouping of the world's richest nations, said concerns remain that global oil markets are “overheated,” with crude around $85 per barrel.

“Ultimately, things might turn messy for producers if $80-100 (per barrel) is merely seen as the new $60-80 (per barrel), stunting economic recovery while prompting resurgent non-oil and non-OPEC supply investment,” the Paris-based IEA said in its monthly oil market report.

From the Globe. The use of the word "overheated" is interesting, as it would seem to suggest that the current oil prices don't reflect fundamentals. But if peak oil is as close as yesterday's post suggests, oil might well be undervalued. Also interesting is the comment about "resurgent non-oil and non-OPEC supply investment"; they seem to think this is a bad thing. Admittedly, some of it is (given that it could include stuff like the tar sands, coal liquefaction, etc) but this could also include proper investment in better alternatives. I have my doubts that the IEA wants this, though. Indeed, they've been accused of distorting their numbers to avoid rocking the boat, presumably because it might lead to investment in alternatives before the established energy companies can corner the market.

Peak oil... when again?

One thing pretty well everyone can agree on is the fact that the amount of oil in the ground is finite. The big unknown, of course, is how much there actually is, and thus when demand will outstrip supply. Well, America's finest military minds fear that it may happen soon:

The US military has warned that surplus oil production capacity could disappear within two years and there could be serious shortages by 2015 with a significant economic and political impact.

The energy crisis outlined in a Joint Operating Environment report from the US Joint Forces Command, comes as the price of petrol in Britain reaches record levels and the cost of crude is predicted to soon top $100 a barrel.

"By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day," says the report, which has a foreword by a senior commander, General James N Mattis.

It adds: "While it is difficult to predict precisely what economic, political, and strategic effects such a shortfall might produce, it surely would reduce the prospects for growth in both the developing and developed worlds. Such an economic slowdown would exacerbate other unresolved tensions, push fragile and failing states further down the path toward collapse, and perhaps have serious economic impact on both China and India."

From the Guardian (h/t Mega in this iTulip thread). Of course, they're particularly concerned with the national security implications, just like the CIA's Center on Climate Change and National Security.

Rubin: Expect a new peak for oil next year

They aren't making any more of it, so this should come as no surprise:

What does $80-per-barrel oil say to you?

Three years ago, it would have told you that global oil markets were at record tightness. Back then, the U.S. president was making a personal pilgrimage to Saudi Arabia to vainly plead for more production. And economists were worrying about the implications for global economic growth.

Today, it seems the goalposts have suddenly moved. After filling up on $4-per-gallon gasoline only two Memorial Day weekends ago, today’s $2.20-per-gallon average gasoline price doesn’t seem so expensive to American motorists anymore.

And suddenly, $80-per-barrel oil is no longer seen by the Saudis as threatening global oil demand, but is instead viewed as a minimum price for their nation to invest in new supply. And as far as my fellow economists are concerned, we’ve heard not even a peep from them about what these types of oil prices may mean for the global economy in the days ahead.

But how much longer can the world pretend that it won’t soon be facing another energy shock, one every bit as challenging as the one it faced two years ago?

From the Globe.

UK oil output falls 10%

Not good news for Britain, though it might at least force them to move towards alternative energy more quickly:

Oil production from, the UK Continental Shelf in the third quarter last year fell by 10% despite a total of seven new fields being brought onstream, providing further evidence that the UK can no longer rely on output from the North Sea.

From here, via Mega in this iTulip thread. I presume Norway is in the same boat, since they're on the North Sea as well. In any case, we can expect to see a lot more of this in the near future.

A rather important question goes unasked

This morning the substitute host on Information Radio interviewed a futurist by the name of Richard Worzel on how we can expect the world to look in 2020. The interview was not uninteresting, with Worzel making predictions about such things as how we can expect the economy to do (for what it's worth, he seems to think it will remain poor to very poor for a few years, take off midway through the decade, and then be booming with a possible commodities bubble and/or inflation), demographics (expect a lot more grey hair than today) and technological advances (more and better robots being the most striking). But he was utterly silent on the issue of climate change, or indeed environmental issues in general, and how these issues might be mitigated (or not). There was also no mention of peak oil. Furthermore, the interviewer failed to raise these issues with him either. I'm sure that if he'd asked, Worzel would have said something, so why did he not ask? I find it hard to believe that he simply forgot; perhaps he (or CBC management) thought it would be bad form to raise such a depressing issue during the holidays?

Peak oil - when?

Almost everyone knows, deep down, that the amount of oil on the Earth is finite. The question is when it will run out. Actually we'll have a problem, economically speaking, long before it actually runs out, because the price of oil will skyrocket, and like it or not our economy, as things stand now, is heavily dependent on the stuff. From an environmental point of view this would be a good thing, because it would virtually force us to reduce our CO₂ emissions, but the transition will be tough on a lot of people.

Given this, one would hope that the experts have reliable information. After all, if we have an idea when oil production will peak, we can plan ahead for it and work to reduce our dependency. So how reliable is the information that they have?

The debate has intensified in recent weeks after whistleblowers claimed the IEA figures were unreliable and subject to political manipulation – something the agency categorically denies. But the subject of oil reserves touches not just energy and climate change policy but the wider economic scene, because hydrocarbons still oil the wheels of international trade.

Even the Paris-based IEA admits that the world still needs to find the equivalent of four new Saudi Arabias to feed increasing demand at a time when the depletion rate in old fields of the North Sea and other major producing areas is running at 7% year on year.

From the Guardian. We'll have to see where this goes; if the peak comes when the experts aren't prepared, things could get rather ugly.