Welcome to the last ODAC Newsletter, the final news roundup from the Oil Depletion Analysis Centre.
2012 saw US oil production grow to its highest level in 15 years, largely because of surging tight oil production by fracking, and many pundits such as Ed Morse of Citi are claiming "peak oil is dead". So has ODAC been worrying its silly little head entirely unnecessarily for the last five years, and could all our energy troubles soon be over? We continue to think not.
While non-conventional production in the US has indeed risen, global crude oil — or 'easy oil' — has definitively peaked, and this has played a significant part in the worst economic dislocation for a century. We have previously highlighted analysis by Steven Kopits of consultants Douglas Westwood, which shows Chinese demand for oil is squeezing out consumption in the west — high oil prices and recessions are the mechanism by which this reallocation happens in a resource constrained world. We have also reported analysis by economists at the IMF showing how the increasing geological difficulty of producing oil implies $180/barrel by 2020, so the waterboarding of western economies looks set to continue. Economic peak oil, it seems clear, has arrived with a vengeance.
And geological peak oil may be far from dead, merely briefly deferred. We have previously highlighted the findings of Bernstein research who forecast that US tight oil production will peak before 2020. In a forthcoming report due for release in February 2013, geologist David Hughes of the Post Carbon Institute will present the conclusions of his detailed study of shale gas and tight oil formations in the United States. Some preview charts from Hughes report, available in a blog-post by Professor James Hamilton, demonstrate that the shale boom looks likely to bust rather sooner than IEA predictions would lead us to believe. The reasons are extremely high decline rates — production in a typical Bakken well falls to just a fifth of peak output within 2 years - and the commercial imperative to extract the best resources first. This means that an ever greater number of wells will need to be drilled just to offset decline. Based on current drilling rates of 1500 wells per year, and EIA data on available well locations, that means Bakken production should peak in 2017 followed by a very sharp decline.
In the UK, fracking for gas faces even greater obstacles since the country is far more densely populated than the US, and the state, rather than individual landowners, controls the mineral rights. Yet fracking-fever is in full swing, stoked up by chancellor George Osborne and ex-chancellor Nigel Lawson. Tim Yeo, Chair of the Climate Committee, described some of his colleagues this week of having been "seduced" by shale gas - "A golden calf that can meet all of our energy needs cheaply and even revive lost manufacturing industries". We explained last week why any UK fracking boom is very unlikely cut gas prices and rather more likely to make a few developers rich. Meanwhile we still face a Hydra of our combined energy, financial and climate crises and time is running out.
Sadly, time has run out for the ODAC Newsletter too. Since April 2012, when ODAC ceased to exist as an independent charity we have been able to continue due to the generosity of nef (new economics foundation), but now our funds are exhausted, so this is likely to be our last edition.
However, nef has expressed an interest in reviving the newsletter if the necessary funds can be raised. So if any of our readers know of any potential source of funding please do get in touch at info@odac-info.org.
Thanks for following us over the years, many of you since our first edition in this format in February 2008.
Happy Holidays, and all the very best for 2013.
Oil
American Oil Growing Most Since First Well Signals Independence
Future production from U.S. shale or tight oil
Oil Declines Most in Two Weeks as U.S. House Delays Budget Vote
Gas
Yeo takes on Chancellor with renewed push for decarbonisation target
Fracking splits coalition over future for British energy
Fracking lobbyists prepare case against Matt Damon's Promised Land
Putin tells Ukraine to compromise on gas pipelines
Coal
Coal to equal oil as world's top energy source within 10 years
Will US colleges kick coal out of their endowments?
UK
Thousands more households could be in fuel poverty by Christmas
Government strikes solar support compromise
Government sets five-year plan to spur solar, biomass energy
Europe
Three EU states condemn UK's energy savings 'accounting trick'
German cabinet agrees to expand power grid faster
Wind power hits peak to cover half of all electricity production
German firms invest in generating energy themselves
Oil
American Oil Growing Most Since First Well Signals Independence
Asjylyn Loder, Bloomberg, 19 Dec 2012
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The U.S. expanded its oil production this year by the most since the first commercial well was drilled in 1859, upending a belief that Americans were increasingly hooked on foreign crude.
Domestic output grew by a record 766,000 barrels a day to the highest level in 15 years, government data show, putting the nation on pace to surpass Saudi Arabia as the world's largest producer by 2020. Net petroleum imports have fallen by more than 38 percent since the 2005 peak and now account for 41 percent of demand, down from 60 percent seven years ago, moving the U.S. closer to energy independence than it has been in decades...
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Future production from U.S. shale or tight oil
James Hamilton, Econbrowser, 18 Dec 2012
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I attended the American Geophysical Union meeting in San Francisco two weeks ago at which I heard a very interesting presentation by David Hughes of the Post Carbon Institute. He is more pessimistic about future production potential from U.S. shale gas and tight oil formations than some other analysts. Here I report some of the data on tight oil production that led to his conclusion.
A number of analysts have issued optimistic assessments of the future production potential of U.S. shale or tight oil. For example, the International Energy Agency recently predicted that the U.S. would be producing over 10 million barrels per day of oil and natural gas liquids by 2020 before resuming a gradual decline. Citigroup is even more optimistic...
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Oil Declines Most in Two Weeks as U.S. House Delays Budget Vote
Lananh Nguyen & Ben Sharples, Bloomberg, 21 Dec 2012
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Oil declined the most in more than two weeks because of concern that U.S. lawmakers may fail to avert spending cuts and tax increases that threaten the economy of the world's biggest crude consumer.
West Texas Intermediate dropped as much as 1.6 percent, paring a second weekly gain, after House Speaker John Boehner scrapped a plan to allow higher tax rates on annual income above $1 million, throwing talks on budget issues known as the fiscal cliff into turmoil. Oil rose a fifth day yesterday, the longest rally since September, after government data showed the U.S. economy grew at a 3.1 percent annual rate in the third quarter, higher than a previous estimate of 2.7 percent...
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Gas
Yeo takes on Chancellor with renewed push for decarbonisation target
Jessica Shankleman, Business Green, 18 Dec 2012
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Tim Yeo has this morning launched a blistering attack on the Chancellor and his pro-gas allies, accusing them of embracing a "short-sighted", "extremely risky" and potentially "costly" energy strategy.
Speaking at an event at Bloomberg's HQ in London, the Conservative MP and chair of the Energy and Climate Change Select Committee confirmed he would table an amendment to the Energy Bill that would deliver a decarbonisation target for the electricity sector...
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Fracking splits coalition over future for British energy
Terry Macalister, The Observer, 16 Dec 2012
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Cuadrilla Resources, the tiny company pioneering shale gas exploration in Britain, caused two minor earthquakes with its drilling near Blackpool. But the business, which has former BP boss Lord Browne on the board, has triggered much larger political tremors in London.
These culminated in Ed Davey, the energy and climate change secretary, giving the go-ahead in parliament last Thursday to what optimists believe will be a shale "revolution" similar to the one that has sent gas prices spiralling downwards in America...
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Fracking lobbyists prepare case against Matt Damon's Promised Land
Suzanne Goldenberg, The Guardian, 17 Dec 2012
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Hollywood's discovery of fracking has caused some unease in the oil and gas industry — even in the midst of America's energy boom.
A leading lobby group, Energy in Depth, has put out a "cheat sheet" of pro-fracking talking points to counter any bad publicity that may arise following the release of the new Matt Damon film, Promised Land. The film, directed by Gus Van Sant, stars Damon as a gas company salesman who travels the dying towns of the American heartland, buying up drilling rights from struggling farmers. It is due for a limited release on 28 December, with a wider run in January...
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Putin tells Ukraine to compromise on gas pipelines
Alexei Anishchuk and Vladimir Soldatkin, Reuters, 20 Dec 2012
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Russian President Vladimir Putin criticised Ukraine on Thursday for its failure to strike a compromise deal on gas supplies, a stance which led to the last-minute cancellation of a visit to Moscow by President Viktor Yanukovich this week.
Russia has been pushing for Kiev to cede control of its gas pipeline network, through which Europe receives around two thirds of its transit supplies of Siberian gas, holding out the prospect of a cheaper gas price for Ukraine in return...
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Coal
Coal to equal oil as world's top energy source within 10 years
Matt McGrath, BBC Online, 18 Dec 2012
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The International Energy Agency (IEA) says that coal will catch up with oil as the world's leading energy source by 2022.
In a report, the Agency says that increased demand from India and China are fuelling the push...
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Will US colleges kick coal out of their endowments?
Kate Sheppard and Tim McDonnell for Mother Jones, The Guardian, 19 Dec 2012
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Can college students reshape energy politics in the US by reforming their colleges' endowments? That's the hope of idealistic students on 189 different campuses across the country, who have launched campaigns to encourage their school administrators and trustees to dump all their investments in fossil fuels. The campaign, the students say, gives them a direct check on the power of the oil, coal and gas industries, which they hope will have broader effects nationwide.
"We were feeling, like the rest of the climate movement, pretty frustrated with the political situation in the US," said Alli Welton, a sophomore at Harvard University and the co-coordinator of the school's divestment campaign. "We felt that fossil fuel corporations just had too much control over Congress, and it was really hard to see how we could overcome that barrier."...
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UK
Thousands more households could be in fuel poverty by Christmas
Hilary Osborne, The Guardian, 17 Dec 2012
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About 300,000 more households could be in fuel poverty by Christmas, according to reports published on Monday, which warn that a government scheme to improve the energy efficiency of homes could take 30 years to succeed and add to energy prices in the meantime.
The reports are being published as the energy secretary, Ed Davey, attends a summit with electricity and gas company bosses, regulators and consumer groups to discuss rising energy prices and how the industry serves its customers. At the Fair Energy Summit, organised by Policy Review Intelligence, Davey will meet the heads of British Gas, E.ON and Co-operative Energy...
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Government strikes solar support compromise
Business Green, 18 Dec 2012
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The government has today announced it will reduce subsidies for large solar installations by less than it originally planned, arguing that its new support package will unlock a wave of investment in large onsite solar arrays.
In its long-awaited response to a consultation published earlier this year on the level of Renewable Obligation support for solar installations with over 5MW of capacity, the Department of Energy and Climate Change (DECC) confirmed that from next April ground-mounted systems will receive 1.6 Renewable Obligation Certificates (ROCs) per MWh, while a new band will mean building-mounted systems will received 1.7 ROCs/MWh...
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Government sets five-year plan to spur solar, biomass energy
Oleg Vukmanovic, Reuters, 18 Dec 2012
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The government set out a five-year plan on Tuesday to unlock the solar and biomass investment needed to achieve the country's 2020 green energy targets.
The Department of Energy and Climate Change (DECC) sought to give investors the certainty they need to build new solar and biomass power plants by deciding subsidy levels over the 2013-2017 period...
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Europe
Three EU states condemn UK's energy savings 'accounting trick'
Arthur Neslen, EurActiv, 20 Dec 2012
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Germany, Austria and Finland have called for the withdrawal of an "absurd and unjustified" gentleman's agreement that allowed the United Kingdom to sign up to the Energy Efficiency Directive. The plea was made in a letter, seen by EurActiv, to Energy Commissioner Günther Oettinger.
The three countries' economic ministers said that if the agreement was allowed to stand, "the level of ambition of the Directive would be substantially reduced and the fulfilment of the EU's 20% energy efficiency target jeapordised."...
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German cabinet agrees to expand power grid faster
Madeline Chambers, Reuters, 19 Dec 2012
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German Chancellor Angela Merkel's cabinet agreed on Wednesday to accelerate the construction of 2,800 km of new high-voltage power lines to push forward the country's shift to renewable energy.
However, in a sign of the complexities of formulating energy policy in Europe's biggest power market, two of her ministers said they had failed to agree a common position on a proposed reform of Europe's system of permits to cut carbon emissions...
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Wind power hits peak to cover half of all electricity production
Portugal News, 19 Dec 2012
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Wind power in Portugal had its most productive day ever last Friday churning out 85 Gigawatts per hour and accounting for 54 percent of the country's electricity consumption that day, according to statistics released on Tuesday by national grid operator REN.
More specifically, at 2.45pm, the winds were blowing and the turbines turning to generate some 3,765 Megawatts (MW) and providing the national grid with 51 percent of the electricity being consumed at that time...
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German firms invest in generating energy themselves
AFP, Deutsche Welle, 17 Dec 2012
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An increasing number of German companies are in the process of decreasing their dependency on external energy suppliers by generating energy themselves. They're wary of the government's current course.
More and more German firms are accelerating their investments in the generation of their own energy, the Association of German Chambers of Industry and Commerce (DIHK) said on Monday...
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