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Daniel L. Davis is a field grade officer in the United States Army, having served four combat deployments (Desert Storm, Operation Iraqi Freedom, and Afghanistan twice). He has a master’s degree in International Relations from Troy University. He has been writing on oil and energy issues in major national publications since 2007, but has been writing on foreign, diplomatic, and military affairs for over two decades. His work has been published in the Washington Times, Armed Forces Journal, Dallas Morning News, Defense News, Philadelphia Inquirer, Army Times and other publications. He has appeared on CNN, Fox News, PBS News Hour, NPR, Democracy Now, and other broadcasting organizations on defense-related subjects. Davis is also an advisory board member for the Association for the Study of Peak Oil and Gas, United States (ASPO-USA) and was awarded the Ridenhour Prize for Truth Telling in 2012. [See link at bottom to full report]

Introduction

Since January 2012, at least three prominent energy authorities have heralded an “oil revolution” and “energy independence” in the United States that a thorough analysis suggests is built on flawed assumptions that renders their conclusions unsupportable. These three separate yet corroborative reports, released by Pulitzer Prize-winner Daniel Yergin, Harvard University’s Belfer Center for Science and International Affairs, and the US Energy Information Administration (EIA), have predicted that North America has the potential to become the “new Middle East” of oil and that the concept of American energy independence is a legitimate possibility. However, a rigorous analysis of these arguments reveals critical, foundational flaws in their conclusions. Moreover, evidence, logic, and observed oil field performance strongly suggest that the world in general may be unable to meet its crude oil needs at some point between now and 2017, though possibly as early as next year.

To many, it is inconceivable that these reports could be wrong – particularly as the list includes the industry’s best-known analyst plus the EIA and Harvard University – and thus are encouraged by the prospect of an energy-secure America. The projections these studies offer fail to properly consider several critical factors and dismiss some of the more significant problems involved in future oil production.
This paper examines the arguments offered by these three sources in detail, including several major articles and Congressional testimony given by the Chairman of Cambridge Energy Research Associates (CERA), Daniel Yergin; a June 2012 report written by former Italian oil executive Leonardo Maugeri through Harvard University; and the June 2012 release of the EIA’s Annual Energy Outlook 2012. The first section deconstructs the arguments presented by each author, analyzing the fundamental underpinnings of each message, and compares them with basic data and alternative analysis. In particular, the piece examines one of the main sources of optimism cited by all three sources: the Bakken “tight oil” play in North Dakota.

The second section explores several fundamentals of oil production that the three sources fail to cover. In order to understand how the legitimate increase in production from the Bakken contributes to the overall energy mix in the United States, it is crucial to concurrently examine several other components of oil production. The paper looks at global production in terms of historical performance as well as estimated future production.

Next, it examines consumption patterns in oil exporting countries and OECD countries, with a focus on expanding patterns in China and India (which directly affects the amount of oil globally available for export). It then considers the economic implications of the findings. Finally, this paper outlines the flawed track record of past projections made by many of the aforementioned organizations.

The bottom line: Those who contend the US is on the cusp of energy independence have relied on incomplete, selective, and in some cases unsubstantiated evidence on which to base their projections. They have failed to account for a measurable and considerable decline in the amount of oil globally available for export; they have significantly understated observable declines in production from mature fields (not even mentioning that since 2005, six former oil exporting nations have gone into net importer status); and have failed to examine political realities in the remaining oil exporting countries which may adversely affect future production levels.

Should the US Administration, Congress, and other leaders base policies on these flawed studies, the economic and national security consequences to the United States could be severe.

Why These Flaws Matter

A common theme among the many optimistic reports and studies is that there are massive amounts of petroleum resources presumed to exist throughout the world. These estimates range from a low in the 2 trillion range to as many as 9 trillion barrels of oil beneath the ground. This paper does not argue for one figure over another, but shares the view there are likely trillions of barrels of oil and its equivalent under the earth. But to what extent does this treasure trove of resource matter in terms of rates of oil production in the near term (which this paper defines as the next five years)?

Long-term projections of oil production capacity and knowing the extent of oil resources and reserves are necessary and useful. However, for this generation and its ability to emerge from the current global economic recession, a more realistic estimate for how much oil may be produced in the next five years is of far greater significance than knowing how much exists in total and may someday be produced. “Possibilities” will not fill American gas tanks. Based on an analysis of the key factors necessary to produce oil to scale, it is likely neither the world nor the United States will be able to produce the amount of crude oil necessary to meet current demand, let alone to enable economic growth, over the next five years.

If the United States bases its future economic and national security decisions on the belief that energy independence by 2020 is possible, we may make decisions in the near future that will greatly complicate what will already be a precarious situation. Taking a rational view of the situation as it genuinely exists, however, may help us more effectively navigate a future of oil shocks and economic turmoil.

You can read the full report at this link.

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ASPO Ireland has invited Australian economics professor, Dr. Steve Keen, to Dublin to give a series of lectures as part of his global tour to support the recent publication of a revised edition of his book ‘Debunking Economics‘.

His visit is already generating debate over on the IrishEconomy website.

During his trip he will be presenting at several events:

TASC Economists (4:30pm Tuesday 15th)

ASPO Ireland/Feasta (7pm Tuesday 15th)

IIEA Economics group (open event) (11am Wednesday 16th)

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Morning Seminar – Oct 10th – National Gallery, Dublin 10am

Assessing the Risks

Energy Security and the Global Economy

 

Dr. Roger Bentley [slides]

Prof. Robert Ayres [slides]

Dr. Michael Kumhof [slides]

Following up on our June seminar Energy Security and Competitiveness in a Rapidly Changing World, our next seminar expands on the recent warning from the IMF, published in their April 2011 World Economic Outlook, on the risks of oil scarcity to the global economy.

Access to affordable, reliable, and sustainable energy is a matter of national security, particularly so for a state such as Ireland, heavily dependent on increasingly expensive imported fossil fuels. Since the last seminar we have seen the unprecedented release by the International Energy Agency of their strategic oil reserve in an attempt to ease pressure on rising prices, further oil price volatility, and continuing economic stagnation in Europe and the US.

Dr. Michael Kumhof, a Deputy Chief at the International Monetary Fund will present his latest research on energy augmented macroeconomic models which formed the basis of Chapter 3 of the IMF’s April World Economic Outlook, entitled ‘Oil Scarcity, Growth, and Global Imbalances’. This work is a noteworthy departure from classical economic growth modeling methodologies. He will be joined by Dr. Robert Ayres (INSEAD) and Dr. Roger Bentley (UK ERC), whose respective work on the role of energy in economic growth and oil production forecasts, were referenced in the IMF study.

This seminar will highlight how

  • traditional models of economic growth exclude energy as a factor of production
  • present a new model incorporating energy as a factor of production (Ayres)
  • present an overview of a comprehensive study of future oil production forecasts and their attendant risks (Bentley)
  • an updated IMF model for economic growth incorporating oil and considering different future availability scenarios (Kumhof)
  Dr. Michael Kumhof Deputy Chief, Modeling Unit, Research Department, International Monetary Fund Dr. Kumhof prepared the economic model and ran the oil supply scenarios published in Chapter 3 of the IMF’s April 2011 World Economic Outlook.He will present his latest work on the impact of different future oil availability scenarios on economic growth.
  Dr. Robert U. AyresProfessor Emeritus, INSEAD Prof. Ayres is a co-author of The Economic Growth Engine: How Energy and Work Drive Material Prosperity and Crossing the Energy Divide: Moving from Fossil Fuel Dependence to a Clean-Energy Future. He has published ground-breaking research into the role of energy in determining economic growth, raising fundamental questions about our conventional models for economic prosperity.
  Dr. Roger BentleyUniversity of Reading Dr. Bentley is a leading expert in energy and oil production forecasts. He co-authored Global Oil Depletion (2009), a report commissioned by the UK Energy Research Council. He has studied the often controversial debate on oil production forecasts since the oil crises of the 1970’s and attended the IEA’s meeting in 1997 on oil reserves which formed the warning in their 1998 World Energy Outlook, a warning repeated in their 2008 WEO.

ASPO Ireland has teamed up with SEAI, who will host the event.

RSVP by Wednesday 5th October to Jackie O’Dowd events@seai.ie
Attendance is free and we advise you to book early to avoid disappointment

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To see what is in front of one’s nose requires a constant struggle – Orwell

ASPO Ireland was invited to return this year (last year) to Cultivate‘s Rethink Tank at Global Green, a part of the Electric Picnic festival, to participate in a panel discussion on How green is Ireland? The panel was chaired by Davie Philip of Cultivate, and participants, along with yours truly, were Gavin Harte, Taja Naidoo, and Eamon Ryan.

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Watching Barack Obama walk off Airforce One this morning in Dublin airport into a very blustery day, it inspired me to take a look at the Eirgrid website to see what kind of power our wind turbine fleet is generating.

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ASPO Ireland Director, Richard O’Rourke, remarked during his introduction of Vinay Gupta’s Collapsonomics talk in Dublin last September, that he hoped the government is secretly working on an energy security plan to deal with a crisis situation, should one arise.

The speech below was given by Energy Minister, Eamon Ryan, at the IIEA yesterday, to mark the signature by Ireland on 3 December, 2010 of a Memorandum of Understanding with nine other European countries (Denmark, Norway, Sweden France, Germany, the Benelux countries and the UK) on the North Seas Grid initiative. In his speech the Minister recalls a similar question posed by a Russian diplomat at a Council of Minister’s meeting last year. The speech is a reflection on 3.5 years as Minister and the triumphs, trials and tribulations of the role. (more…)

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ASPO Ireland is going through a period of transition, much as the world is, as we move into a post-peak oil world.

ASPO’s origins has been in the technical expertise of largely former oil industry executives, who’s work developing oil production forecast models is and will always continue to be a cornerstone of ASPO’s work. However, we now formally acknowledge (although it’s always been evident from the eclectic followers of Peak Oil) the need to broaden the scope of expertise within ASPO Ireland to include the softer sciences: social, economic, and political.

To that end we are delighted to announce the appointment of Dr. John Barry of Queens University Belfast and Dr. Colin Sage of University College Cork. Their respective expertise in politics and human geography will add enormously to the work still to be done by ASPO Ireland. (more…)

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