Gordon Brown Calls on OPEC to Increase Output
Posted: 13 Sep 2005, 17:46
More details on Powerswitch News Items: http://www.powerswitch.org.uk/portal/in ... 9&Itemid=2
and on BBC News Reports:
http://news.bbc.co.uk/1/hi/uk_politics/4239772.stm
I've several comments on this story:
One wonders if he really believes they can raise output without running ever deeper into the 'rate sensitivity' issues that Matt Simmons has warned about i.e. risk leaving substantial amounts of oil behind. Is any potential output increase by OPEC a suitable refinery mix or more heavy sour mix which refineries can't readily handle?
Has he agreed with Tony Blair that raising oil output (and burning the extra) is more important than what TB recently called the 'greatest threat i.e. that of climate change'? It's widely accepted that using more of one leads to more of the other.
GB has also been calling for more N Sea Investment. Only 4 years ago he unexpectedly imposed a 10% windfall tax on the industry and papers such as the Press and Journal subsequently reported a significant downturn in the NS by drilling contractors. If he really wants more output now the exact way to ensure it can't happen was to discourage investment 4 years back (given that lead times in NS for new projects or infill drilling are around 4 - 6 years).
GB is an economist therefore he should know quite a lot about exponential growth. I'd like to share with this forum a post I made this week on another forum with regard to fuel price protests. I wonder just how long GB thinks OPEC can continue meeting world demand growth for oil or whether he is 'simply making the right noises so that when the crisis starts he can point to the problem originating from elsewhere'. Here's the article:
++++++++
Oil Demand and Exponential Growth
Let's assume that the peaking of oil production will be postponed so that it's something for future generations to worry about. Btw peak oil is certain to occur but for now let's put it on the 'back burner'.
Demand for oil between 2004 and 2005 has increased by 3.7%. Why is this? Well people in OECD nations, especially the US, have been on a steady trend towards buying vehicles with greater engine efficiency but these efficiency gains have been offset by extra power, weight or add-ons (such as air conditioning, automatic transmission etc). All these things are nice for drivers and passengers to have but they all require extra fuel. One only has to look at many roads today and you can see powerful saloons, sports models and SUV's - all use far more fuel than (say) a VW Polo. At the same time average annual distances have increased steadily, again using more fuel.
Now let's look at China where its own auto industry is adding 530,000 units to their roads every month (and that excludes vehicles imported into China). All require between 60 and 70 bbls oil equivalent to manufacture and then will require fuel over their lifespan.
Now 3.7% growth does not sound much but let's take a look at some arithmetic to see what it really means. The first key point is that the 3.7% pa is not linear but is exponential. In other words it's 3.7% on an amount which is itself increasing each year. I'll not go into the laws of natural logarithms but simply state here that if we divide the growth rate into the constant of 70 the result is the number of years for the amount we started with to double.
The result is actually 18.91 years but we'll call that 19 years for simplicity. Therefore at just 3.7% pa growth rate oil demand doubles in just 19 years. (You can easily check this using a hand calculator, start with '1' and multiply by 1.037 a total of 19 times.)
Now let's consider what happens when 3.7% growth in oil demand persists for a typical human lifetime i.e. 80 years. Believe it or not consumption would increase no less than 18.5 times! With world oil demand currently running at 84 million bbls/day (bopd) that would mean we would need to find an additional 1470 million bopd (or 1.47 billion bopd). What does that mean in terms of oil provinces? Well it means we simply need to find another 507 oil provinces the size of the UK North Sea (at peak) or another 147 Saudi Arabia's (and neither allow for ongoing declines in mature oilfields).
Now most people faced with the above numbers would say 'that's impossible'...and I'd totally agree with them. Even if the reserves were out there no one would want to live in a world where so much was being consumed. The question now arises - 'when do we stop the 3.7% exponential growth?' Do we stop it now, in 5 years time, in 10 years time or when the current generation have all died?
The point I'm getting at here is, peak oil or no peak oil, current trends are totally and utterly unsustainable. So how do we stop demand growing - do we go to China and US and try to persuade folks there to drive less? Do we impose worldwide rationing and if so would all Governments agree to do so? Or do we simply let the market price of oil impose the rationing for us?
I don't have the answers but I do know that we cannot continue present trends. One of the main reasons why US is currently consuming so much gasoline is that it's been so cheap there for decades. US has 5% of the world's population but consumes 25% of the world's oil and 46% of the world's gasoline. China apart, US consumption patterns is one of the main reason why fuel prices have risen so much recently.
Do we really want to encourage UK to embark on a US type consumption 'party' by substantially reducing fuel taxation?
++++++++
and on BBC News Reports:
http://news.bbc.co.uk/1/hi/uk_politics/4239772.stm
I've several comments on this story:
One wonders if he really believes they can raise output without running ever deeper into the 'rate sensitivity' issues that Matt Simmons has warned about i.e. risk leaving substantial amounts of oil behind. Is any potential output increase by OPEC a suitable refinery mix or more heavy sour mix which refineries can't readily handle?
Has he agreed with Tony Blair that raising oil output (and burning the extra) is more important than what TB recently called the 'greatest threat i.e. that of climate change'? It's widely accepted that using more of one leads to more of the other.
GB has also been calling for more N Sea Investment. Only 4 years ago he unexpectedly imposed a 10% windfall tax on the industry and papers such as the Press and Journal subsequently reported a significant downturn in the NS by drilling contractors. If he really wants more output now the exact way to ensure it can't happen was to discourage investment 4 years back (given that lead times in NS for new projects or infill drilling are around 4 - 6 years).
GB is an economist therefore he should know quite a lot about exponential growth. I'd like to share with this forum a post I made this week on another forum with regard to fuel price protests. I wonder just how long GB thinks OPEC can continue meeting world demand growth for oil or whether he is 'simply making the right noises so that when the crisis starts he can point to the problem originating from elsewhere'. Here's the article:
++++++++
Oil Demand and Exponential Growth
Let's assume that the peaking of oil production will be postponed so that it's something for future generations to worry about. Btw peak oil is certain to occur but for now let's put it on the 'back burner'.
Demand for oil between 2004 and 2005 has increased by 3.7%. Why is this? Well people in OECD nations, especially the US, have been on a steady trend towards buying vehicles with greater engine efficiency but these efficiency gains have been offset by extra power, weight or add-ons (such as air conditioning, automatic transmission etc). All these things are nice for drivers and passengers to have but they all require extra fuel. One only has to look at many roads today and you can see powerful saloons, sports models and SUV's - all use far more fuel than (say) a VW Polo. At the same time average annual distances have increased steadily, again using more fuel.
Now let's look at China where its own auto industry is adding 530,000 units to their roads every month (and that excludes vehicles imported into China). All require between 60 and 70 bbls oil equivalent to manufacture and then will require fuel over their lifespan.
Now 3.7% growth does not sound much but let's take a look at some arithmetic to see what it really means. The first key point is that the 3.7% pa is not linear but is exponential. In other words it's 3.7% on an amount which is itself increasing each year. I'll not go into the laws of natural logarithms but simply state here that if we divide the growth rate into the constant of 70 the result is the number of years for the amount we started with to double.
The result is actually 18.91 years but we'll call that 19 years for simplicity. Therefore at just 3.7% pa growth rate oil demand doubles in just 19 years. (You can easily check this using a hand calculator, start with '1' and multiply by 1.037 a total of 19 times.)
Now let's consider what happens when 3.7% growth in oil demand persists for a typical human lifetime i.e. 80 years. Believe it or not consumption would increase no less than 18.5 times! With world oil demand currently running at 84 million bbls/day (bopd) that would mean we would need to find an additional 1470 million bopd (or 1.47 billion bopd). What does that mean in terms of oil provinces? Well it means we simply need to find another 507 oil provinces the size of the UK North Sea (at peak) or another 147 Saudi Arabia's (and neither allow for ongoing declines in mature oilfields).
Now most people faced with the above numbers would say 'that's impossible'...and I'd totally agree with them. Even if the reserves were out there no one would want to live in a world where so much was being consumed. The question now arises - 'when do we stop the 3.7% exponential growth?' Do we stop it now, in 5 years time, in 10 years time or when the current generation have all died?
The point I'm getting at here is, peak oil or no peak oil, current trends are totally and utterly unsustainable. So how do we stop demand growing - do we go to China and US and try to persuade folks there to drive less? Do we impose worldwide rationing and if so would all Governments agree to do so? Or do we simply let the market price of oil impose the rationing for us?
I don't have the answers but I do know that we cannot continue present trends. One of the main reasons why US is currently consuming so much gasoline is that it's been so cheap there for decades. US has 5% of the world's population but consumes 25% of the world's oil and 46% of the world's gasoline. China apart, US consumption patterns is one of the main reason why fuel prices have risen so much recently.
Do we really want to encourage UK to embark on a US type consumption 'party' by substantially reducing fuel taxation?
++++++++