The Peak Oil Crisis: Alarms Are Sounding
By Tom Whipple Thursday, May 17, 2007
In Paris, the International Energy Agency has announced that the demand for oil is likely to exceed the supply later this year, unless, of course, OPEC steps up production. In the Middle East OPEC spokesmen reiterate time after time that all is well, there is plenty of oil, and there is no need to increase production.
[Sep. 26, 2005 issue of TIME magazine:
"The likelihood that Saudi Arabia can increase its output to even 15 million bbl. a day is remote. The bottom line: the global oil supply has probably peaked."]
In Ottawa, a parliamentary hearing on energy security broke up in turmoil last week when a distinguished professor pointed out that, unless Canada stops selling 60 percent of its oil to the US, Canadians would soon be "freezing in the dark." In Nigeria, Chevron is evacuating hundreds of employees to forestall the possibility that they too will be hauled off to the swamps as hostages in an increasingly bitter insurgency. The Chinese just announced that their April oil imports were 23 percent higher than last April`s. Iraq, Saudi Arabia, Venezuela -- everywhere you look - there are unmistakable warnings of troubles to come.
These, however, are issues for later. Right now, on the top of every American`s agenda should be the question of whether we are going to get through the summer without shortages and gas lines- opinions are mixed.
First, all seem to agree that gasoline prices, which set new highs last week, will continue to rise. Even the Director of the Energy Information Agency, whose job it is to put a rosy spin on adverse developments, told a Senate Committee earlier this week that retail prices will go higher heading into the vacation season because not all of the recent rise in wholesale costs has been reflected in what consumers pay at the pump. So far high prices, which are approaching $4 a gallon in some places on the West Coast, seem to have done little to dampen demand although they may be cutting into WalMart sales.
Since significant cuts in US gasoline consumption don`t seem to be in the cards, at current price levels, then we are back to refinery output, gasoline imports, and our stockpiles to see us through.
Two years ago, before the hurricanes put so much stress on US refineries, they were being operated at 95 percent of capacity. We got through last summer by importing 1.5 million barrels of gasoline a day during May from foreign refineries. According to a senior EIA oil analyst, 800,000 barrels a day of US refining capacity is still shutdown. This translates into about 400,000 barrels of lost gasoline production each day or nearly 3 million barrels a week.
Last week the situation eased a bit. Although US refineries are still operating below 90 percent of capacity and processed only a trivial 30,000 barrels a day more of crude than in the previous week, our refiners managed to squeeze our more gasoline, so that production increased by 200,000 barrels a day to 9.1 million. The "good" news, however, is that gasoline imports jumped to 1.5 million which resulted in the first significant (1.7 million barrel) increase in our stockpiles in many weeks. However, 1.2 million of the 1.7 million barrel increase was on the isolated West Coast. The increase in gasoline stocks east of the Rockies was only 500,000 barrels last week - way lower than necessary to forestall problems later this summer.
The questions now become: Will this increased supply, which is based on imports of foreign gasoline be sustained over the summer; and are the stockpiles already so low that they will not be sufficient to meet the increased demands of the summer driving season which starts in about two weeks?
Last year the demand for gasoline jumped from 9.1 million barrels a day in the spring to 9.6 million during the summer months. Unless very high prices start reducing demand for gasoline we will be looking at new highs this summer.
contact Obama! 