The alarm has rang: the scarcity of oil will affect everyone and annalists alert for the risks.
'Peak' oil is no longer a fracturing theme. The projections for the year, quinquennium or decade when global oil production would start declining "are now part of history", underlines Luís de Sousa, member of ASPO-Portugal and collaborator of the blog "The Oil Drum", talking to the Expresso. "There is a generalized idea that such period of peak is already being lived. Predicting it is no longer relevant", he adds.
According to this specialist, the vast majority of the important mathematical and accounting models of oil production used by entities independent from the oil industry point to an interval of about a decade centred between 2008 and 2010, for a production interval between 78 and 85 million barrels daily.
Luís de Sousa underlines that "since 2005 world liquids production has been bound between 80 and 82 million barrels per day in clear consonance with those models", but this plateau "has been sustained by the increase of natural gas liquids, with pure crude [petroleum] in decline since that year".
Nonetheless the 'peak' has returned to the spotlight due to a secret report by the futurist studies group of the German Centre for the Armed Forces Transformation, a military think thank work for the Berlin Ministry of Defence. The study was published by "Der Spiegel" casting consternation on those less used to the issue and its geopolitical implications.
The diplomacy of Oil
The report has an alarming tone: "scarcity shall affect everyone" and "oil price increases pose a systemic risk, not only for transport systems, but also for all other sub-systems". And left a message: "It is vital to secure access to oil", for in an horizon up to 2040 we shall assist to "a change of the international security panorama with new risks - like that of fuel transport - and new actors in a possible conflict around the distribution of an increasingly scarce resource".
The german report concludes that "the free oil demand and supply market will shrink" and that oil diplomacy will sky-rocket relatively to its geo-politization.
The rising scarcity referred by the Germans is linked to "an almost rigidity of oil production, fixed within a band that formed since 2004" underlines Luís de Sousa. This variation "band" is called by many specialists, with some humour, "undulating plateau". Meaning, in this plateau, production variations oscillate, like a wave, from year to year, independently of price variations. The present crisis, whose end continues a source of polemics, "will likely prolong this undulating period, flattening what otherwise would have been a prominent peak".
More important than the peak itself or the production plateau is the volume of oil available to the international market, or in other words, what is transacted beyond what is consumed by the producers. "The maximum was reached in 2005, with 44 million barrels daily (mbd), since then entering into a slow, but irreversible, decline", says the ASPO specialist. Presently it is 42 mbd and in 2020 it should be under 35 mbd. Luís de Sousa also adds that in the dispute for that oil available in the international markets it shall be felt "the transfer of consumption from the countries that form the OECD (developed countries) to those emerging - if in 1990 half of the oil produced was consumed by the OECD, today that fraction is down to 1/3". The world market underwent an overturn.
This long term structural setting, deriving from the scarcity of this commodity and growing geopolitical risks (including those of navigation through strategic straits), has been aggravated, in recent years, by what was dubbed "financialization" of the crude futures market, with the entering of financial speculators nicknamed "Wall Street refiners" buying and selling "paper barrels", prompting an additional disturbance in the market, with sometimes "wild" oscillations.
PIIGS are the most affected
One of the groups in the OECD that will suffer most with the contraction of available oil is the one formed by those more dependent of this energy in their mix, underlines Luís de Sousa. "A detail must be noted - those countries in greater difficulties will precisely be those called the PIIGS, that have an oil dependence over 45%, highlighting Greece with 58%, Portugal and Ireland with 55%, Spain with 48% and Italy with 46%, contrasting with the European Union average of 37%. Adding the four countries with oil dependence above the european average, but below 45%, we get a complete map of the zone where the 'undulating plateau' will have the greater impact, adding to the PIIGS are Austria (44%), Holland (42%), Belgium (41%) and Denmark (39%)."
The weakest point of the five more vulnerable countries of the euro-zone (Portugal, Ireland, Italy, Greece and Spain) is the transport sector, particularly when road-based, "deriving from geographic location, inappropriate urban and national planning or both" says Luís de Sousa. The promotion of maritime and railway modes is underlined by this specialist, not sufficing the modernization of the electrical infrastructure or the promotion of other sources of energy.
Thanks to Jorge for keeping raising awareness to a subject that, as he writes, shall affect us all. Thanks to Samuel for the prompt collaboration.