Folks,

It’s Halloween night, and since I’m not in a neighborhood with any trick-or-treaters, I’m free to experience some real-life chills by catching up with reports from the Boston World Oil Conference last weekend, an event sponsored by ASPO-USA.

How about these items for scares, thrills, & chills? (Emphasis mine) From Greg Jeffers’ blog, Mentatt:

• while conventional oil and lease condensates have more than likely peaked, “all liquids” might not peak for 2 to 8 years, because of coal to liquid, tar sands to liquid, and heavy oil to liquid technologies
• Natural Gas production (“NG”) is in such a state of crisis in North America that one of the speakers said that using NG for the purposes of converting Tar Sands in Canada into synthetic crude was akin to lighting candles with $100 bills during a blackout. Another said using NG for processing Tar Sands was “taking gold and turning it into lead”. Not one of the scientists presenting thought NG production could be expanded in North America – Peak Gas has arrived for the continent.
• “Natural gas is increasingly of more urgent concern in North America than Peak Oil. If we stopped drilling right now, our production would decline by 30% next year, and 30% the year after, etc. LNG will compete against other countries, a 35% energy loss in transportation, and Not-In-My-BackYard opposition. There still exists some demand side destruction left, but then we will be close to the bone” Nate Hagens.
• While the resource base is large, the recoverable reserves from Tar Sands, Shale Oil, Heavy Oil… is less than 10% of the resource. It was stated over and over again that as far as these resources were concerned we are severely limited in our ability to deliver them to the market. Further, the environmental impacts from these reserves will severely limit their production.
• What about alternatives? Not one of the scientists presenting felt that any alternative fuel would have a significant impact before 2030, if ever.
• Across the country from the Boston Conference a CEO of one of the world’s largest oil companies was telling his audience:“The ease with which we all lived in the last 50 years, with cheap energy, is coming to a close,” John Hofmeister, president of Shell Oil Co., told a City Club luncheon crowd Friday in Portland. “The next 50 years cannot be like the last 50 years.” “The oil demand-and-supply equation”, Hofmeister said, “now constantly flirts with crisis. Americans need to develop a sense of privilege rather than entitlement when it comes to energy use.”
• Alternative energy sources (Ethanol, Bio Diesel, Wind, Solar) will have little impact.Coal will not be able to come to the rescue in the near term due to its impact on the environment, and because 100% of the electricity generating plants built in the U.S. over the past 7 years were NG fired plants, not coal fired plants.Non-Conventional Resources (Tar Sands, Oil Shale, Heavy Oil) will not move the peak back at all, but will lessen the steepness of the decline. However, we might find that their environmental impacts are not worth the price of admission.

  The Media is doing a great disservice to the American people with their irresponsible reporting of the issue. What I heard from America’s best and brightest scientists bears no resemblance of what I see reported in the media. Presumably, the media is getting its data from these scientists. I am not a big believer in conspiricy theories – so I will chalk it up to incompetence.

1) There’s not a huge gap between the optimists and the pessimists on peak oil.2) Increased exploration and drilling isn’t paying off.

3) Worldwide demand is increasing despite high prices

4) The most optimistic assessments keep getting shot down by new data.

5) Major oil producers have inflated their reserve numbers, generally by a factor of two.

6) The alternatives to conventional crude oil are expensive and a long way off.

7) Many alternatives to conventional oil take too much energy to be practical.

8) The energy profit on fossil fuels is declining

9) Market forces won’t work.

10) All the factors above will combine to impose sudden and dramatic lifestyle changes on us.

The only thing that could change fast enough to make a difference would be human behavior.

FTW: We are currently in a plateau area of oil production. Jean Laherrere has detailed the “bumpy plateau” of oil production, and FTW has recently written about this. Professor Michael T. Klare says this plateau could last “a decade or more.” What do you think about that?

Matt Simmons: It’s so hard to try and accurately predict this. But what is easy to predict is the fact that there is just no way – with the limitation we have of oil rigs compared to projects – to keep supply growing: That’s an impossibility. But to stabilize the base for some period of time – if we didn’t have such an incredible limitation of drilling rigs that would take at least a decade to correct – I think that would probably be possible. But given the fact that we are not going to have significantly more rigs for at least another decade, and how old the fleet of rigs is, the size of the fleet is going to drop before it goes back up. I’d say sustaining the base for 5 or 10 years is not impossible but extremely long odds.

FTW: I saw you speak in Crystal City recently, but FTW did not publish a report after that because, unfortunately, our offices were burglarized 5 days later and we spun into turmoil. At this speech you brought up a number of ideas that I would say are radical including; 1) liberating the work force, 2) having people live and work in “villages,” and, 3) changing the way we ship goods to the degree that we have to ship them, among other suggestions. Little-to-none of this is being addressed today at this conference. Are we nearing the point where conferences such as these that focus on the problem might be irrelevant or may need to be updated?

MS: First of all we won’t implement any of these changes until our back is against the wall and we realize that we have to. These aren’t things that people say, “OK, 1-2-3, let’s jump in the lake!” I think it’s so important that we educate people that this is coming. I liken this to almost every major war. We could have prevented it five years before it started, but all of a sudden you realize we’re beyond the tipping point, and now we’re at war. What’s interesting is that liberating the workforce is actually in motion right now in Houston, Texas. Our Mayor has initiated a program in September called “flex in the city.” It’s all about flexible work rules and recognizes companies that figure out programs to start this. It’s really addressing Peak Traffic. Our highways have been expanded as much as they can be and it won’t work anymore. Unless we create a flexible work force and stop this compulsion of long-distance driving, Houston doesn’t have a future. And it’s amazing how popular it has been, and company leadership is saying that this is really a good idea. This is the easiest to do because it’s basically just a mind state change. The key to it is basically paying people by productivity instead of 9 to 5.

FTW: In Crystal City you also said that there needs to be an “end to globalization,” but that this is harder to do than the other suggestions you gave. Do you have any ideas about how we can address this, and if you don’t, can you at least speak to this?

MS: Well by globalization I don’t mean talking to someone in India by telephone. What I mean is the concept that we can get increasingly inexpensive things to purchase because we broke them apart into the simplest unit and we found the cheapest sweatshop economy in the world to have it built in and then we basically ‘zing’ the parts around until finally you’ve built a car. And the energy used up in doing that wasn’t even thought about but it was one more element that gave rise to this astonishing rise in oil demand over the last 15 years. When we finally have to start shrinking the supply we’re going to have to do without something. One of the easiest things to do without is to stop this process in its tracks and start building things very close to where they are used. But none of this will happen until it has to – not until there is a crisis.