Latest IEA Report Lands Killer Blow
To Energy Crisis Denial
www.nlpwessex.org/docs/rees-moggpeakoil.htm
Rees-Mogg On Peak Oil And Iraq
Taboo Subjects
Are Coming Out Into The Open

"Oil ruled the 20th century; the shortage of oil will rule the 21st.... Last Tuesday the lead story in The Financial Times was the latest report from the International Energy Agency. The FT quoted the IEA as saying: 'Oil looks extremely tight in five years’ time,' and that there are 'prospects of even tighter natural gas markets at the turn of the decade'. For an international agency, that is inflammatory language.... 27 of the 51 oil-producing nations listed in BP’s Statistical Review of World Energy reported output declines in 2006. One projection of world crude oil production actually forecasts a 10 per cent reduction in total world output between 2005 and 2015. That would be a revolution..... Some analysts think that the peak oil moment has already been reached; some still think that it will not come until 2020 – which is itself only 12 years away. Market trends and the statistics both support the IEA’s view that consumption is accelerating and supplies falling faster than expected. Of course, if the 'crunch' point is only five years’ away for oil, and closer for natural gas, it has, for practical purposes, already arrived....The shortage of oil and natural gas, relative to demand, had already changed the balance of world power. Historians may well conclude that the US decision to invade Iraq was primarily motivated by the desire to gain physical control of Iraq’s oil and to provide defence support to other Middle Eastern oil powers. Political motivations are always mixed, but oil is an essential national interest of the United States. If the US is now deciding to withdraw from Iraq, the price will have to be paid in terms of loss of access to oil.... The world is coming to the end of the age of oil, which produced its own technology, its balance of power, its own economy, its pattern of society. It does not greatly matter whether the oil supply has peaked already or is going to peak in five or 12 years’ time. There is a huge adjustment to be made. There will be some benefits, including higher efficiencies and perhaps a better approach to global warming. But nothing will take us back towards the innocent expectation of indefinite expansion of the first months of the new millennium."
Lord William Rees-Mogg
Are these the last days of the Oil Age?
London Times, 16 July 2007

Lord William Rees-Mogg is a pillar of the old-style British establishment, extremely well connected in political, journalistic, and City circles. His sudden entry into the increasingly visible public discussion about 'Peak Oil' (see article in London Times below), is something of a milestone for the subject.

Now a columnist for the Times, Rees-Mogg was once its editor (1967-1981) and then Vice Chairman of the BBC's Board of Governors (1981-1986). His wider influence goes back a long way, even as far as being an assistant political speech writer for Anthony Eden, the Prime Minister who lead Britain into the disastrous failure of the Suez campaign in 1956 - a disaster to which the Blair foray into Iraq has since been repeatedly compared (as Rees-Mogg made clear in an article in the Times in 2006 the Suez campaign was one driven by concerns over access to Middle Eastern oil).

He is a cautious and sober commentator. This makes his unequivocal statements in the Times about the onset of 'Peak Oil' of especial importance. Until now it has usually been taboo for people of his 'weight' to go near the subject, at least in public.

But that is not the biggest taboo that Rees-Mogg breaks in this article. He openly links the global oil situation to the war in Iraq by stating that "Historians may well conclude that the US decision to invade Iraq was primarily motivated by the desire to gain physical control of Iraq’s oil and to provide defence support to other Middle Eastern oil powers."

Rees-Mogg's intervention now makes these subjects viable 'fair game' for discussion around some of the grandest dinner tables in the land. In reality, however, their existence and linkage together is becoming increasingly inescapable no matter how much other 'respected' commentators may have strived to avoid discussing them in the past.

The signs are now so openly visible that the subject can no longer be swept under the carpet.

Rees-Mogg's account was itself preceded only a few days earlier in another frank presentation of the subject of 'Peak Oil' as part of a book review provided by 'Lloyd’s List', the leading maritime and transport news portal serving the world's premier insurance market, Lloyd's of London (Lloyd's List has been providing coverage of the global shipping markets since 1734, but now also reports on marine insurance, offshore energy, logistics, global trade and law). Its review of 'The Last Oil Shock' by David Strahan, published earlier this year, went under the uncompromising title of "What they didn’t want you to know: oil’s dirty little secret".

But what has galvanised Rees-Mogg into action is something published even more recently - a report issued by the International Energy Agency last week that makes clear in no uncertain terms that the world is potentially facing a supply crisis for both oil and gas within the drastically short time period of just five years.

The prominent coverage of the IEA's latest assessment in the Financial Times, as referred to by Rees-Mogg, means that the City Of London and the Palace Of Westminster can no longer pretend that this is not happening.

Now Rees-Mogg has spelled out the implications in the non-financial section of another prestigious London paper for the benefit of a less-specialised 'educated' audience.

http://www.timesonline.co.uk/tol/comment/columnists/william_rees_mogg/article2080497.ece

From The Times

July 16, 2007

Are these the last days of the Oil Age?

William Rees-Mogg

Oil ruled the 20th century; the shortage of oil will rule the 21st. There is now no doubt about the rising trend in oil prices. In 2003 a barrel of Brent crude sold for $29; in 2004 it rose to $38; in 2005 it rose to $54.50; in 2006 it rose to $65. Last Friday the price closed at $77.50. Some dealers expect it to test the $80 level quite shortly.

Last Tuesday the lead story in The Financial Times was the latest report from the International Energy Agency. The FT quoted the IEA as saying: “Oil looks extremely tight in five years’ time,” and that there are “prospects of even tighter natural gas markets at the turn of the decade”. For an international agency, that is inflammatory language. This steep rise in the oil price over a four-year period has been caused by demand rising at more than 2 per cent a year, while supplies had risen more slowly, by a healthy 4.1 per cent in 2004, but by only 1.25 per cent in 2005 and 0.5 per cent in 2006.

This has revived the “oil peak” debate among oil analysts. Some analysts believe that the world will never again be able to pump as much oil as we are pumping at present.

Peter Warburton’s excellent weekly risk analysis has pointed out that 27 of the 51 oil-producing nations listed in BP’s Statistical Review of World Energy reported output declines in 2006. One projection of world crude oil production actually forecasts a 10 per cent reduction in total world output between 2005 and 2015. That would be a revolution.

The oil peak debate can be left to the oil analysts. It is a complex issue, and there are some grounds for questioning the most pessimistic forecasts, including the likely development of the Canadian tar sands, and the success of American enhanced oil recovery techniques. Past forecasts of oil depletion have often proved wrong, and the present forecasts are uncertain. Nuclear power could increase energy supply, but a big nuclear programme has been left far too late in most countries.

The five-year view taken by the IEA is itself a central forecast. Some analysts think that the peak oil moment has already been reached; some still think that it will not come until 2020 – which is itself only 12 years away. Market trends and the statistics both support the IEA’s view that consumption is accelerating and supplies falling faster than expected. Of course, if the “crunch” point is only five years’ away for oil, and closer for natural gas, it has, for practical purposes, already arrived.

Those of us who remember the 1970s and early 1980s know how damaging the oil shocks were. They postponed the economic hopes of more than a decade, from 1974 to 1985. The rise of the oil price led to global inflation; at one point, around 1980, it looked as though global inflation could tip over into global hyper-inflation.

In the democracies, governments lost elections; in the Soviet Union, their regime was rocked. If governments found things very difficult, so did private individuals. Unemployment rose and the trade unions became very militant.

Investors were caught in a trap of rising nominal values but falling real values. In the property market, house prices rose, but the general price level rose even faster. For the first ten years of the inflation, gold proved to be a hedge and a protection; but this was followed by a period when the real purchasing power of gold was falling. Most people became poorer, except for those with access to oil money, but some became much poorer, much more quickly. Life became more of a gamble and societies became less stable. All this happened at a time when the supply of oil was being artificially restricted by the Opec oil cartel. There was no absolute shortage of oil, though analysts already knew that the oil peak would happen eventually. Now the situation has moved from a political problem, open to political settlement, to an absolute geological shortage. For the future, oil supply will be a zero-sum game. Some nations will be “haves” but others will be “have nots”.

The shortage of oil and natural gas, relative to demand, had already changed the balance of world power. Historians may well conclude that the US decision to invade Iraq was primarily motivated by the desire to gain physical control of Iraq’s oil and to provide defence support to other Middle Eastern oil powers. Political motivations are always mixed, but oil is an essential national interest of the United States. If the US is now deciding to withdraw from Iraq, the price will have to be paid in terms of loss of access to oil.

Russia, the leading producer of natural gas and one of the two leading oil producers, is the global winner. President Putin has already used oil and gas as a diplomatic weapon. The relationship between the European Union and Russia will naturally be influenced by increasing European dependence on Russian oil and gas. Germany may well turn towards Russia, out of weakness. The oil shocks of the 1970s had different effects on different European countries. Britain had some North Sea oil and the prospect of more, as did Norway. Germany and France had little or no oil of their own. Differential shocks in the coming period of oil shortage will make it harder to maintain the euro-zone. Differential shocks are a threat to single-currency systems.

The world is coming to the end of the age of oil, which produced its own technology, its balance of power, its own economy, its pattern of society. It does not greatly matter whether the oil supply has peaked already or is going to peak in five or 12 years’ time. There is a huge adjustment to be made. There will be some benefits, including higher efficiencies and perhaps a better approach to global warming. But nothing will take us back towards the innocent expectation of indefinite expansion of the first months of the new millennium.

"The world is facing an oil supply 'crunch' within five years that will force up prices to record levels and increase the west’s dependence on oil cartel Opec, the industrialised countries’ energy watchdog has warned. In its starkest warning yet on the world’s fuel outlook, the International Energy Agency said 'oil looks extremely tight in five years time' and there are 'prospects of even tighter natural gas markets at the turn of the decade'....Oil demand will grow at an annual rate of 2.2 per cent during the next five years, up from a previous estimate of 2 per cent, to reach 95.8m barrels a day in 2012. China, the Middle East and other emerging countries will lead the increase. Rex Tillerson, the chairman and chief executive of ExxonMobil, said recently that he thought non-Opec oil production was close to levelling off. He told the FT: 'We still see capacity for a little more growth, but pretty modest, and then in our own energy outlook it begins to plateau. And that results then in this call on Opec.' UK oil production is set to suffer a dramatic decline from today’s 1.7m barrels a day to just 1.0m b/d in 2012, according to the IEA. The IEA estimates Opec would have to supply about 36.2m b/d in 2012, up from today’s 31.3m b/d. That would reduce the oil cartel’s spare capacity to a 'minimal level' of 1.6 per cent of global demand, down from 2.9 per cent in 2007. The IEA said that supply was falling faster than expected in mature areas, such as the North Sea or Mexico, while projects in new provinces such as the Russian Far East, faced long delays. Meanwhile consumption is accelerating on strong economic growth in emerging countries. The problem is exacerbated by the fact that supply from non-members of the Organisation of the Petroleum Exporting Countries will increase at an annual pace of 1 per cent, or less than half the rate of the demand rise. The widening gap between rising consumption and lagging non-Opec supply will force Opec to sharply increase its production in the next five years."
World will face oil crunch ‘in five years’
Financial Times, 9 July 2007

"The Suez Crisis, which occurred 50 years ago, was the full stop at the end of the British Empire. In 1945, at the close of the Second World War, Britain still governed the world’s largest Empire, with an independent Commonwealth of the Old Dominions. The Raj ruled India. Britain enjoyed a strong influence in the oil-rich Middle East and was still a genuine world power, behind the United States and the Soviet Union.... If one had to pick a day for the end of the British Empire, it might be July 26, 1956, the day that President Nasser of Egypt nationalised the Suez Canal.... In 1956 I was writing leaders for The Financial Times. I had been commissioned to write a brief life of the Prime Minister, Anthony Eden, a man whom I liked and admired. I had also become involved as an assistant speech writer to Eden, specialising in economic policy..... In July to November 1956 I was a convinced advocate of Eden’s Suez policy.....Middle Eastern oil was as essential, in 1956 as now, to the economy and security of the United States, Europe and world trade. So long as Britain had influence in the Middle East, Britain would remain a real world power. Yet Britain could not maintain that influence without American support. Nasser’s nationalisation of the canal was a direct challenge to the West. Eden believed that the challenge had to be met. Eisenhower and Dulles, his Secretary of State, were not prepared to meet it; at the Suez Canal Users Conference held in London it became apparent that American policy could not be trusted. Dulles promised action, which he failed to take. The shift of Western power in the Middle East should have been a relay race, in which Britain would transfer the baton to the United States. Eden was willing to transfer the baton in August 1956 but Eisenhower, with his re-election campaign much in mind, was not ready to take the transfer. Only in October did Eden adopt the joint Anglo-French-Israeli plan that was indeed a disaster. Eisenhower had made the mistake of leaving Eden with no better option. The world community had an essential interest in the free flow of oil through the canal. That could have been secured only by joint Anglo-American action. Eisenhower decided against such action; Dulles’s conduct convinced Eden that he personally was hostile and untrustworthy. The Suez Crisis was indeed the end of the Empire, but it was a blunder of American policy, for which the United States is still paying a very high price."
Lord William Rees-Mogg
Suez: why I blame it on Ike
London Times, 24 July 2006