On oil, and peaks political, geographic and economic

October’s Oilwatch Monthly is out, and discussion can be found over at The Oil Drum. I found its introduction to be quite interesting:

As more months pass by, we shall see that Saudi Arabia will increase production, by 500,000 barrels per day, as announced, leading to higher conventional crude oil production. This is by itself insufficient to surpass the present maximum level of production reached in 2005. However in combination with increases from other supplies and/or more from Saudi Arabia the standing level of maximum production reached in 2005 will be surpassed.

Recently, on 8 October, Shell lifted it’s force majeure from the Forcados oil export terminal in Nigeria. The oil fields surrounding this facility that are currently shut-in normally produce 380,000 barrels per day. A large amount of conventional crude that can start flowing again over the coming months. Also, addition supply is to be expected from other countries amongst which are Brazil, Angola, China and Azerbaijan.

The bottom line is that it is too early to tell whether we have passed the peak in conventional crude oil production. A rebound, appears to be in the making.

The suggestion being that the peak observed since 2005 is/could be as much/more political than geographic. The economic peak argument remains, more or less as usual – the peak for the cheap stuff has been and gone, but a willingness to burn all our money on oil would get us what’s left in the ground: everything between here and there is up for discussion. The discussion that followed at The Oil Drum, regarding just that issue, is very interesting.

Following that line of thought: while I was there, I noticed a post concerning Canadian natural gas (needed for getting some of that non-cheap oil out of the ground, but also for things like keeping Canadian houses warm, etc.).

Since the year 2000, total Canadian production has been maintained at about 480 million cubic metres per day. This has been achieved only by a very considerable increase in the number of wells drilled each year … It is evident that such increases cannot be continued indefinitely. Under these circumstances, when drilling levels off, output begins to fall, and an actual decrease in drilling leads to even faster decline.

When gas prices were in the region of $15 per gigajoule in late 2005, there was considerable enthusiasm for drilling, but in the last year the price has wandered erratically in the range of $5 to $9 per gigajoule, and costs have been high. At $7 per gigajoule, drilling has been falling, and companies are laying workers off.

I can’t imagine that anyone downstream from these enterprises (tar sands, etc. which also use water – hurting water tables, hurting almost anything the vented water touches) is overly concerned about the loss of the opportunity to pump gas and water into the ground just to get evermore energy-intensive oil out. Cost is the typically metric applied to economic peaks, but – personally – I’d prefer to see either or both of

• The return-on-energy used to get at, and extract oil from, shale, tar sands, and so forth;
• The environmental cost, properly discounted (meaning hyperbolic, accounting properly for the increasing cost of cleaning up damaged ecosystems, and/or increasing value of such ecosystems, as fewer and fewer remain)

I won’t hold my breath. Back to this idea of more difficult catch-up, once you’ve slacked-off in the pursuit of gas or oil – at what cost is OPEC going to be expanding their output? The Saudis were flatlining their finds, despite throwing drills at the problem. For both gas and oil, of course, the size of the deposits found shrink – so search and extraction (fixed) costs per deposit will continually increase.

It seems that, as crude is accepted to be in decline, our interest in liquids (increasing) will intensify. The report is worth the read – if only to catch up with how much energy the OPEC countries are demanding themselves, how much motor gasoline the US has on hand – properly useful measures, going into Winter.

North Sea Cod and farmland birds

Two articles on management – fisheries, land and wildlife – in the Guardian:

Cod levels in the North Sea are showing signs of recovery, but limits must be enforced to ensure it continues, experts warned today.

For the first time in six years, the annual report on fish stocks in the north east Atlantic by the International Council for the Exploration of the Sea (Ices) has not called for a complete ban on North Sea fishing.

…

To continue this recovery, Ices, which advises governments on fishing quotas and coordinates marine research in the North Atlantic, has recommended that catches be limited to less than 50% of the 2006 catches in the North Sea, Eastern channel and Skagerrak, an area off the coasts of Norway, Sweden and Denmark.

Cod fishing in Kattegat, the Irish Sea and the west of Scotland, should be reduced to zero as the stocks are at dangerously low levels, Ices warned.

The committee of scientists said overall removals – including fish landings, discards and unaccounted-for removals – of less than 22,000 tonnes would allow the fish stock to recover to the minimum target of 70,000 tonnes by 2009.

Being neither a catcher nor an eater of fish, I wouldn’t say I’m directly invested in this sort of thing. Being a human being, I’m at least indirectly dependent upon life in the sea to sustain life on land (not least through the oxygen it makes for me). As an econometrician, I find the pursuit of the metrics of fish wonderful:

Ices calculates whether a stock is considered to be within safe biological limits by looking at its spawning stock biomass, estimates of fishing mortality and catch estimates. Ices classifies cod as being “at risk of being harvested unsustainably and suffering reduced reproductive capacity”.

That sounds like so much fun.

On to birds!

A European-wide ruling to increase wheat supply could have a “devastating effect” on Britain’s already threatened farmland birds, the RSPB warned today.

The decision this summer by the EU to reduce “set-aside” land across Europe in a bid to increase next year’s wheat crop by 10m tonnes will have a direct impact on populations of specialist farmland birds like the yellowhammer, grey partridge and skylark, the RSPB said.

The claim comes as new government figures show that populations of specialist farmland birds – birds that breed or feed mainly on farmland – have declined to a record low.

…

The RSPB called on the government to make more funding available for “agri-environment” schemes. These allow farmers to farm in a “wildlife friendly way,” Mr Madge said. “Maintaining hedgerows, ditches, building beetle banks and skylark plots all help.”

Honestly, it’s less interesting than the fish, econometrically. Economically, moreso: declining-to-extinction cod stocks will prompt a response, even from the vector of extinction. Fishing businesses will lay off overfishing, if/as/when they realise that they’re truly putting all future fishing yields at risk.

Farmland birds, not so much. We don’t hunt them, we don’t eat them. Their value is (almost purely) in terms of species’ diversity. Which is not to be under-estimated, but bloody easy to under-value, because there’s hardly any market. Ornithologists won’t muster the resources to save set-aside lands from being farmed for highly profitable (in the short-term) food crops.

‘We’, meanwhile, will remain fairly non-responsive. We see ‘birds’, so we figure ‘birds’ can more or less take care of themselves. Even if we acknowledge that the birds we see are not the species dying out, we don’t much respond – there are still ‘birds’, right? Isn’t ‘birds’ all we need? Good luck selling the argument that every species depends upon a minimum level of diversity in every other species to a mother of 3 in the cereal aisle of her local supermarket.

Eco 1 students: this is the scarcity problem. We need the land; the birds need the land. The land can’t serve both our needs, and we need to decide whether the food that the land can yield serves our needs better/more than the ’service’ provided by the contribution of farmland birds to species diversity.

It’s the new “if you can’t the sucker in the room …” joke. If you spot the external market for your survival in the room, you won’t.

UAW/Chrysler deal slowly failing

Having just written a UAW story. I’m not even a labour economist (hell, I don’t even drive).

Workers at three more United Auto Workers locals have rejected a tentative contract agreement between the union and Chrysler LLC, casting doubt on whether the deal will be ratified.

…

Although final totals from the 45,000 workers voting on the pact won’t be made known until next week, the size and locations of the locals voting no are not good signs for leaders in Detroit, said Harley Shaiken, a professor at the University of California at Berkeley who specializes in labor issues.

“The early results are abysmal,” Shaiken said. “Members have sent a message of considerable unrest.”

Given that the UAW/GM deal barely passed, overall (65% or so for, from memory), the pessimism and bad feeling setting in is a fairly bad sign (I think), concerning the ultimate prospects. The factories voting differ somewhat, though – specifically in terms of the future expectations of workers.

… 14 of 21 factories … have no future products to make after the current product life cycle or the life of the new contract. Seven were to get future products.

… McDonaugh, who favors the contract, said the vote was better than expected because the Newark plant is slated to be closed by the company. He was appalled at locals voting down the agreement at plants with future product guarantees and accused dissidents of spreading misinformation.

Many “noncore” workers at his plant thought their pay would be cut in half to around $14 per hour under the new contract, but McDonaugh said that isn’t true.

“The language states, no current seniority worker will be assigned entry-level wages even if they are classified in non-core jobs,” McDonaugh said. “They will be on the fork trucks, handling the material and working in the tool stores until they retire, quit or die,” he said.

One can see a problem asking a plant set for closure to vote on a new contract. However, this is still a workers’ union – is there solidarity or is there not? Surely the UAW can reasonably expect it. Given the high risk of the two-tiered workforce driving big splits in unionised labour, the smooth functioning of the workforce (the power of collective bargaining when it’s only half of the collective), to see bitter votes pushing towards the first failure of ratification in a couple of decades (and maybe it’s about time?) can hardly raise smiles in union offices.

There is also the voting itself – is a majority of members, or of plants, required? Reading the AP story, it seems that their success stories come from substantially smaller plants than those at which the ratification is failing.