Hot off the press

Hot off the press from this week's THE GUARDIAN WEEKLY.

Darren

http://www.guardian.co.uk/guardianweekly/story/0,12674,1472240,00.html

EXPERT WARNS THAT PRICE MAY SOAR TO $100 A BARREL AND SPARK ECONOMIC
COLLAPSE

Coming oil crisis feared

John Vidal
Guardian Weekly

One of the world's leading energy analysts called this week for an
independent assessment of global oil reserves because he believes that
Middle Eastern countries may have far less than officially stated and
that oil prices could double to more than $100 a barrel within three
years, triggering economic collapse. Matthew Simmons, an adviser to
President George Bush and chairman of the Wall Street energy investment
company Simmons, said that "peak oil" -- when global oil production
rises to its highest point before declining irreversibly -- was rapidly
approaching even as demand was increasing. "This is a new era," Mr
Simmons told a conference of oil industry analysts, government officials
and academics in Edinburgh. "There is a big chance that Saudi Arabia
actually peaked production in 1981. We have no reliable data. Our data
collection system for oil is rubbish. I suspect that if we had, we would
find that we are over-producing in most of our major fields and that we
should be throttling back. We may have passed that point." Mr Simmons
told the meeting that it was inevitable that the price of oil would soar
above $100 as supplies failed to meet demand. "Demand is pulling away
from supply . . . and we have to ask whether we have the resources that
we think we do. It could be catastrophic if we do not anticipate when
peak oil comes." The precise arrival of peak oil is hotly debated by
academics and geologists, but analysts increasingly say that official US
Geological Survey estimates that it will not happen for 35 years are
over-optimistic. According to the International Energy Agency, which
collates data from all oil-producing countries, peak oil will arrive
"sometime between 2013 and 2037", with production thereafter expected to
decline by about 3% a year. While oil from conventional sources is
expected to decline, more and more is expected to come from
"unconventional" supplies found in oil-rich rocks, especially in the US
and in deposits of tar found in Venezuela. The former UK energy minister
Brian Wilson, a supporter of both nuclear power and renewable energy,
said that Britain would be unwise to rely completely on importing gas
from politically sensitive countries as North Sea reserves declined.
"Seventy percent of [UK] electricity by 2020 will come from gas and 90%
of that gas will be imported . .¬*. We should be planning for an
indigenous energy future," he said. But he added that global reserves
were not overestimated. "The concept of peak oil needs to be taken very
seriously indeed, [but] my working assumption is that both global oil
and gas reserves continue to be significantly underestimated." However,
other oil analysts argued strongly that a major financial crisis could
occur as soon as 2008. Chris Skrebowski, of the Energy Institute in
London, which monitors all major oil discoveries and developments, said
depletion of global conventional oil reserves was running at about 5% a
year, according to Exxon figures. "Norway, Venezuela, the UK and
Indonesia and many others are all declining production. I expect
Denmark, Malaysia, China, Mexico and Brunei to peak within three years
.¬*.¬*.¬*I estimate that we have, at best, 32 months before [the crisis]
hits. Mr Skrebowski predicted, using UK government figures, that
production from the British sector of the North Sea would halve within
10¬*years. "We have a congenital bias to optimism . . . 12 fields in the
North Sea basin are seeing rising production, but they are mostly small.
Overall, production peaked in 1999. It fell 10% last year and 8.5% the
year before," he said. "Oil will not run out for many years," said Colin
Campbell, former vice-president of Fina and chief geologist of the oil
giant Amoco. "The information governments give is grossly unreliable.
Oil companies report less than they discover for pragmatic reasons, but
Opec countries have overestimated what they think their reserves are."
He said many Middle Eastern Opec countries, including Iraq, Saudi Arabia
and Kuwait, had all significantly lifted their estimated reserves in the
late 1980s in order to benefit from larger quotas, but they had not
discovered new fields or changed their estimates since then. "The real
issue is not the actual date of peak production -- which I believe is
next year -- but what happens during the decline of production. I think
we are in for an extended period of restricted economic activity. I do
not think that we will adjust very smoothly," he said. Terry Macalister
adds: Oil hit $56 per barrel on Monday before falling back to $55 on the
New York Mercantile Exchange. Refinery problems in North America pushed
up the cost of US light crude more than 60 cents, leaving it close to
the record of $58.28 set in April. Meanwhile the Bush administration
welcomed Saudi Arabia's plan to invest $50bn to boost the kingdom's
crude oil production to meet future demand, but conceded that the plan
may not have an immediate effect on oil prices. President Bush discussed
the plan with Crown Prince Abdullah of Saudi Arabia during a meeting at
the president's Texas ranch. "The crown prince understands that it is
very important to make sure prices are reasonable. High prices will
damage markets," Mr Bush said before welcoming the Saudi leader.