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August 11, 2007 11:49AM
http://www.energyandcapital.com/articles/peak+oil-renewable+energy-shortages/490

Peak Oil Hits the Third World
High Oil Prices Bring Energy Shortages

Sometimes it takes a strong stomach to weather the ups and downs of the market, and this last two weeks was one of those times.

Crude oil reached a new all-time high of $78.77, then promptly fell 8%, taking most of the energy complex down with it.

Does this mean peak oil fears are overblown? Does it mean we're headed back to $60 oil?

Not likely.

What we saw in the last week has more to do with the sub-prime mortgage meltdown than anything else. It put the fear of freefall into fund traders, causing them to sell perfectly good stocks indiscriminately--especially perfectly good energy stocks, where they were sitting on some nice gains--in order to raise cash. It also gave a sell signal to oil futures traders, who had built up a record level of long positions.

In other words, it was the blowing off of some speculative froth, and little more.

The true bottom line on energy is quite another matter.

Douglas Low, the director of the Oil Depletion Analysis Centre in Britain, recently warned of a "crisis coming up" with real shortages of oil, noting that the world used 1.5 mbpd more crude than it produced in June. "It's not a very happy message," he says. "A lot of people want to slip it under the carpet."

Indeed. Like all the cheap oil cheerleaders who used this occasion to predict that oil was going back to $40 or (snort) $20.

I would like to refer those Pollyannas to a little-noticed opinion essay published two days ago by the CEO of Royal Dutch Shell, one of the world's largest oil companies. Jeroen van der Veer laid out his "Three Hard Truths About the World's Energy Crisis":

The first hard truth is that demand is accelerating.

The second hard truth is that the growth rate of supplies of "easy oil," conventional oil and natural gas that are relatively easy to extract, will struggle to keep up with demand.

The third hard truth is that increased use of coal will cause higher carbon dioxide emissions possibly to levels we deem unacceptable.

I'm not sure what motivated Mr. van der Veer to make such a bold statement. Since his prime directive is to maximize shareholder value, he must feel that it's time to take a defensive position and get out in front of the peak oil story, now that the recent reports from the IEA and the National Petroleum Council have confirmed the basic message that supply is struggling to keep up with demand.

Indeed, given this year's worldwide tapering off of exports, and worse news for our imports, some of those chickens seem to be nestled into the roost already. Mexico, the world's number-five producer, and our number-four source of imported crude (accounting for 11% of our imports), admitted two weeks ago that its oil reserves will be done, kaput, in just seven years.

I've been watching and waiting for these signs for about five years now: Not just high prices and declining exports, but the slowing of commerce, interstate trucking and air travel, food shortages and similar indications.

But the actual feeling of peak oil didn't really hit me until this week, as I perused a page on Jim Kingsdale's excellent Energy Investment Strategies site, listing countries that are currently experiencing serious fuel shortages and grid blackouts.

Here in the first world, we still have the luxury of armchair theorizing about peak oil, and paying a bit more for gasoline, but the third world is actually feeling the pain of peak oil today. Rising oil prices are acting as a regressive worldwide tax, pricing poorer countries right out of the market............
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