I had a little bit of free time after church on Sunday and decided to see if there was any interesting resource extraction news I had missed in the past few months. Here is what I found.
A January 2014 article in the journal Energy reexamined a group of 10-year oil production scenarios proposed in 2004. A comparison of the scenarios to available figures shows that global conventional oil production peaked in 2005, with additional peaks from 2008-2011 for broader definitions of “conventional oil”. The article is available open access for anyone to examine the math, but it looks rather solid to me. Cheap oil is already in decline. So, why does oil production appear to be stable, or even increase? This is due to artificially increased production from a short-term burst of capital expenditures, as well as the explosion in shale gas, tight oil, and easily transportable liquified natural gas, which are usually improperly labeled as conventional oil in media and industry reports. The optimistic (industry) view is that these new sources, combined with decreased demand in the post-industrial West, will be able to keep things humming for some decades while more renewable options (or nuclear developments) are worked out. On the pessimistic side, John Michael Greer considers these options to simply be delaying the inevitable for a decade at most. In any case, there can no longer be any doubt that we are in the peak oil era.
On April 10, the Club of Rome released a book on peak mining, Extracted: How the Quest for Mineral Wealth Is Plundering the Planet. I have not read it yet, but based on what I have heard about peak mining so far, I expect that it will reveal a hidden crisis. The geopolitical consequences should be fairly obvious. In a peak oil world, oil exporters have political leverage, which is why Saudi Arabia was treated with kid gloves after 9/11 and the sanctions against Russia’s Crimea actions were basically symbolic. Mining has even sharper consequences: if one country should control the world’s supply of a basic element, the only options for industrialized nations are to give in to political demands or suffer massive economic damage.
In March the WTO ruled that China has been imposing illegal tariffs on rare earths. China controls over 90% of the world’s rare earth reserves used for making cell phones etc., and by restricting its exports temporarily quadrupled the price of rare earths outside China in 2011, causing some manufacturers to relocate their major operations to China. The WTO ruling was appealed on April 18 and we have yet to see whether China will actually abide by it: the quote offered to reporters, “No matter what the result of the appeal is, China’s policy goal of protecting resources and the environment will not change,” is not encouraging. It is interesting that the international ruling “prohibiting” Japanese whaling, which resulted in a mere reduction of the year’s catch from 380 heads to 210 heads, was blanketed all over the airwaves despite its economic irrelevance, while the international ruling against China is met with popular disinterest, although I am sure Western governments are watching it closely. Whales are at least in theory a renewable resource; rare earths are not.
In financial news, last year we heard that the Dodd-Frank financial reform was a death knell for American small banks and had homogenized our financial system. In March of this year, the IMF reported that these changes were likely to become permanent because there is no real way to avoid them. This basically means that the Western financial system is extremely fragile and there is no way to tell what the impact of another economic bubble could be. It is interesting to note that China and Japan have adopted a radically different approach to their financial systems, but I cannot find a really reliable article about that at the moment.
Anyway, that’s all I got for now… I’ll continue to be on the lookout for reliable information about this.