Severe Energy Crunch Looming as Oil Supplies Run Down

Peak Oil is not some myth. It is a very simple equation based on supply and demand related to a very finite resource. And it could arrive sooner rather than later. The US Military says: “By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels a day.”

Paul Syvret in the Courier-Mail (16 April 2010):

RISING oil prices pose a grave threat to global economic recovery, according to some economists.

Thus it was sobering this week to read that the US military has warned the world faces a “severe energy crunch” and looming oil shortages.

According to a Joint Operating Environment report from the US Joint Forces Command, “a severe energy crunch is inevitable without a massive expansion of production and refining capacity”.

The report says the central problem for the coming decade “will not be a lack of petroleum reserves, but rather a shortage of drilling platforms, engineers and refining capacity”.

And it warns: “Even were a concerted effort begun today to repair that shortage, it would be 10 years before production could catch up with expected demand.”

More ominously, the military predicts a “Peak Oil” scenario – where demand outstrips the world’s supply capacity – as soon as 2012.

“By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels a day.”

Current oil demand is about 86 million barrels a day.

The repercussions of Peak Oil have potentially grave consequences both economically and militarily.

On the military front the USFC notes that already Chinese “civilians” are in the Sudan guarding oil pipelines to protect supply, and that this “could portend a future in which other states intervene in Africa to protect scarce resources”.

“The implications for future conflict are ominous, if energy supplies cannot keep up with demand and should states see the need to militarily secure dwindling energy resources,” the report says.

“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 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. At best, it would lead to periods of harsh economic adjustment.”

Energy will be king in the coming decades, and we must exploit our (bountiful) resources wisely, while preparing ourselves for much higher prices and potentially lower domestic economic activity (aside from coal and LNG exports).

Peak Oil is not some myth. It is a very simple equation based on supply and demand related to a very finite resource.

And it could arrive sooner rather than later.

Source: www.news.com.au