US military warns oil output may dip causing massive shortages by 2015

[Subdivisions]

• Shortfall could reach 10m barrels a day, report says
• Cost of crude oil is predicted to top $100 a barrel

The US military has warned that surplus oil production capacity could disappear within two years and there could be serious shortages by 2015 with a significant economic and political impact.

The energy crisis outlined in a Joint Operating Environment report from the US Joint Forces Command, comes as the price of petrol in Britain reaches record levels and the cost of crude is predicted to soon top $100 a barrel.

"By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day," says the report, which has a foreword by a senior commander, General James N Mattis.

It adds: "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 both 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."

...snip...

http://www.guardian.co.uk/business/2010/apr/11/peak-oil-production-supply


Isn't it nice that the U.S. media continues to ignore the serious situation with regard to oil production and depletion?

[HysteryDiagnosis]

1. Hot dogs being as bad as they are for you... perhaps we could do

something like this?? No?

http://www.popsci.com/diy/article/2008-10/pedal-powered-panzer

Pedal-Powered Panzer

A tank welded from junkyard parts -- that shoots hot dogs

[Gman2]

2. We dont need half our military, and that is all the oil we need.

[safeinOhio]

3. There is a glut of oil and gasoline at the moment.

In the U.S. refineries are closing due to the glut of gas. $20 to $30 of the current price/barrel is due to speculation, not supplies. While the fear of demand from India and China is real, those two countries are in the led for high milage and alternative fuels. If I was betting, I'd short oil.

[Subdivisions]

4. Since you won't need the money to prepare for a world with less and less oil,

you may as well go ahead and do just that.

[Statistical]

10. I would be the counterparty to that bet any day of the week.

Never in the history of commodities did prices decline after production peaked. Exactly when we hit peak oil is hard to say until we pass it but we are very close. Some people say it hit in 2007, some day it will hit in 2012.

Good thing you aren't a betting man you likely could lose your life savings with a stupid bet like that.

[safeinOhio]

11. I'm wrong again

Here I thought oil was over a hundred bucks/barrel a year or two ago. Must not have been if "Never in the history of commodities did prices decline after production peaked." I think your statement has been proved wrong many times when a commodity has been replaced in it's use. Whale oil? Non-modified seeds? Obsolete farm animal breeds, ie dairy cattle, low milk and butter fat production ones like Brown Swiss? Once replaced with new cheaper alternatives, prices can fall on any commodity.

[Statistical]

13. 18 months doesn't make a trend.

I guess I should have said long term. Energy prices are volatile. Oil went down to $35 per barrel. If you think long term price of oil is $35 you are headed into a world of hurt.
There is some debate on exact when we will hit peak oil. Extreme volatility is a sign of the peak ($50 to $146 to $35 to $86 in course of 2 years). Once we are 4 or 5 years past peak oil the trend will be very clear. Oil output will decline every year, year after year and oil prices will increase every year, year after year.

Recession kind wiped out demand for a little bit it will be back eventually though. Oil will be over $100 a barrel by end of year. It will be over $150 in a couple years.

Don't trust me? Trust the DOE.

http://www.eia.doe.gov/oiaf/aeo/overview.html
DOE estimate for oil (in 2008 prices)
2020 - $119.36
2030 - $133.80
2035 - $133.22

Of course these are in inflation adjusted dollar. You won't be able to buy oil in 2020 with 2008 dollars (although you may wish you could).

Say inflation is only 3%. In nominal dollars that would be:
2020 - $160.41
2030 - $241.66
2035 - $278.93

In inflation is higher than 3%. Say 3.5% or 4% those prices will be even higher.

If you are right and DOE is wrong you could make enough money over next decade to never work a day for the rest of your life (and leave a small fortune to your children).

"Once replaced with new cheaper alternatives, prices can fall on any commodity."
What is the price premium of an EV over a gasoline powered car?
What is the the cost to convert a vehicle to run on natural gas?
How would the prices compare if natural gas doubled or tripled (prices are at a historical low right now)?

Comparing the current spot price of one commodity as proof billions of people will switch is kinda silly.

[Subdivisions]

15. 18 months doesn't make a trend, but five years does...

The peak of conventional (cheap) oil production was in 2005. The peak in ALL LIQUIDS was in 2008 (so far). Without $100+/barrel oil, that 2008 peak will not be exceeded.

[safeinOhio]

16. I already never have to work another day in my life

"If you are right and DOE is wrong you could make enough money over next decade to never work a day for the rest of your life (and leave a small fortune to your children)."

I have no children to leave it to either. I seem to make a lot of money betting against what the experts say.

Here is what this non-expert predicts. 100 years from now gas powered cars will be in museums, not on the road. The price of oil will have little or no effect on the economy then. The new change in CAFE standards of an increase of 10mpg will reduce demand in this country by 20%. 25 years from now, most cars will be powered by a combination of natural gas, electric, hydrogen, compressed air, steam, ethanol and who knows what else? Oil will go the way of horse and buggies.

I'm now involved in thermology and home weatherization and insulation. The amount of waste in home energy is unreal. Most homes waste 30 or 40% of the energy they now use. Just repairing and improving the duct work in American homes could save enough energy to close 1 in 4 coal plants. There is enough energy savings in roofs, windows and calking to reverse global warming.

[Statistical]

17. "The new change in CAFE standards of an increase of 10mpg will reduce demand in this country by 20%"

Nope. Less than a third of all oil is used in passenger vehicles.
Population is also growing in the US (both naturally & by immigration). In two decades there will be nearly 50% more people in this country.

While natural gas vehicle & EV will slowly gain marketshare they will be a minority of vehicles for decades.
CNG vehicles have been around for decades. As of 2009 there are about 110,000 vehicles in the United States.

While I agree with this statement:
100 years from now gas powered cars will be in museums, not on the road.

100 years is a long time. The greatest hardship from peak oil will be the first 20 years after peak oil hits. Even if we were selling 1 million "alternative energy vehicles (CNG, Hydrogen, Electric) a year it would take decades to replace the majority of just passenger vehicles.

[safeinOhio]

18. If oil production goes down by

5%/year, and other fuels increase by 10%/year, I'm not going to worry. As I stated before, most of the increase today is driven by speculation, not supply. I think we can both agree that the future is not in oil. I see the glass as half full. If I can reduce MY dependence on oil I'll save. In the mean time I'm betting on green jobs and technology. I've invested in equipment in the last 6 months that will make me money and reduce energy use by those that hire me. I'm not doing this to get rich or save the world. I'm doing it because I'm bored sitting around and it's fun. It is fun to discuss all of this on the net, but more fun to get out there and do it.

[Statistical]

19. The future isn't in oil but inertia is a bitch.

Oil demand in first world will drop however the innovative technology is expensive and poorer countries will not adopt them initially.

So while oil demand "may" eventually start dropping 5% a year in the US, other countries like China, India, Africa will more than makeup for that and net result in world wide demand will be static or slowly rising. When production peaks and you have even a small amount of unsatisfied demand that is a recipe for massive price escalation.

I do agree those that those who transitions off of oil early will prosper and those clinging to a dying resource the longest will suffer. This applies to individual, businesses, and governments.

Sweden has a proposal to ban new internal combustion vehicles by 2020 and ban used ones by 2030. Now likely those dates will get pushed back but how popular do you think that would be in the United States? 30%? 10?

The US is innovative when it comes to technology, not so much when it comes to public/social policy. I fear we are far more likely to be in the "cling to a dying resource" camp than the "get off oil early" camp. :(

Still I hope I am wrong. The good thing with being a realist is that if I am wrong it likely is to the upside. :)

[Speck Tater]

5. When oil goes to $200/barrel the Walmart business model becomes unsustainable.

And big box stores all over the country with close up shop and go away.

Business and manufacturing will once again become local, and outsourcing will be a thing of the past.

[pscot]

6. That's not the only thing

that becomes unsustainable. Suburbia starts looking like a big mistake at $200/bbl. Air travel becomes problematic along with those Chilean strawberries we enjoy in January.

[Confusious]

7. That's not the only thing

Most of the fertilizers we use are petroleum based.

Any and every food will go up in price.

[Statistical]

12. Fertilizer is made from natural gas which tends to not correlate with oil prices.

Technically Fertilizer production requires hydrogen.

Natural gas is used because it is the cheapest source of hydrogen (steam reforming).
CH4 + H2O → CO + 3 H2

Technically fertilizer could be made from any source of hydrogen.

[safeinOhio]

8. right now they are putting in a

compressed natural gas station in my town. Several companies are going to be running fleets of small trucks. The cost per mile is equal to a dollar less than gasoline right now. Then there are plug ins that you'll be able to buy within a year. While the sky may be falling, it is not going to crash.

[Strelnikov_]

14. Seems Suburbia is already looking like a mistake

http://www.startribune.com/local/90584664.html?elr=KArksLckD8EQDUoaEyqyP4O:DW3ckUiD3aPc:_Yyc:aUac8HEaDiaMDCinchO7DU

New estimates suggest that the movement into suburban and exurban counties within commuting distance of Minneapolis and St. Paul has stopped cold for the first time in recent memory.

For many years, the combination of robust growth, a multitude of freeways and plenty of open space helped ignite an explosion in exurban living. People were commuting for hours from towns such as Mora, Glencoe and Owatonna. National experts classed the Twin Cities as having the nation's third-largest exurban flight from 2000 to 2005, ahead of even sprawling Atlanta.

[Joanne98]

9. Another reason NOT to drill in Anwar!