rss feedThe Gulf Oil Spill Why Worry ?
I am worried about the “spill” in the Gulf of Mexico for a number of reasons. First whatever it is, it is definitely not a spill. A spill is what happens when you knock over a cup of coffee or accidently ground an oil tanker on an inconveniently placed reef. What is happening on the sea bed of the Gulf is not spillage. In fact, I am at a loss to find the right noun to describe a fountain of oil and gas pushing its way out of the bowels of the earth at enormous pressure before settling, ominously, in a giant slick off the coast of the United States of America. It ain’t a spill it’s a full blown disaster .We all know that, even that nice Mr. Hayward is beginning to come round to that way of thinking; particularly as the share price of BP has plunged and even his chums in the industry are saying that it really wasn’t such a good idea to place considerations of cost over safety and of course they would have done it differently, even though they all share the same safety plan. So, why don’t we take a deep breath and look at the real implications of the disaster. How bad is it, and what does it augur?
Until the recent and partially successful recovery operation, about 25,000 barrels of oil were pumping from the well into the sea. Some observers give a higher figure some, a lower one. For the purpose of the following illustration let’s assume it was 25,000 barrels. Every day, this colossal amount of oil, if not more, was gushing into the Gulf. In four days the sum would have been 100,000 barrels and in forty days a million barrels. If it had gone unchecked for eight hundred days, that is two years and a couple of months the sum would have been 20,000,000 barrels. Imagine for a moment the Gulf of Mexico if that amount of oil were to flow into the sea. Look at what a fraction of that has done and imagine what the mind-boggling amount of 20,000,000 barrels would look like and what an appalling mess it would make. This is not however, a mind-boggling amount of oil; it is the total oil that the USA uses in just one day. Every day, the USA uses the equivalent of just over two years worth of the Deepwater Horizon spill based on our estimate of 25,000 barrels spillage a day.
If you don’t believe my figures look at BP’s Annual Statistical Review for World Energy for the year 2010. You will find it on their website. BP has produced such an annual review for over half a century. In it they show the extent of the world’s energy resources, the rate at which they are being produced and used and the prices that they command. Let’s focus on oil. In the review you will discover that the USA uses roughly one quarter of the world’s daily consumption of 84,077,000 barrels. That world figure is roughly equivalent to the Deepwater Horizon spill carrying on unimpeded for another nine years. That, remember, is just one day’s consumption.
Now turn to the section of the statistics that deal with proven reserves. These are not entirely reliable, not through any fault of BP, but because governments, particularly in the OPEC nations, are prone to overstating their reserves. So the figure given by BP for remaining reserves is undoubtedly optimistic. But let’s take the BP figure at face value. The story here is that there are 1.3 trillion barrels of oil remaining. By dividing the world’s annual consumption for 2009 into this figure for the proven reserves BP estimates that we have a bit over forty years worth of oil left; the tank will then be empty. There will be no more oil. Note that this estimate is based on the assumption that the rate of consumption will not rise. Just how likely is that given the rate of growth in consumer spending in China and India?
Do not by the way assume that there are huge reserves of oil out there, waiting to be discovered. The location of the world’s oil bearing geology is just about fully mapped. What is happening in the field of exploration is the discovery of ways of extracting oil from the most difficult and remote of those known locations. We have forty plus years of oil; then it’s no more oil. We can add in a few hundred billion barrels of oil shale and sand sourced reserves but these require huge amounts of energy to process. In any event they would add only a few years extra breathing space. There are some new, easily accessible fields to be tapped particularly in Iraq, but generally the world’s easily exploitable fields have long been opened. By way of an example, there is some excitement at the moment about oil in the Arctic around Greenland. The reserves, which lie deep under the sea bed, have been described as “vast”. They are estimated as being around 20 billion barrels. That would keep the world supplied for nine months; this is not by any means a vast field. The big oil discoveries were made decades ago in the Gulf States. We are now scraping the bottom of the barrel.
When you open a bottle of champagne the last glass pours as easily as the first. Oil is not like this. As fields age they produce oil more and more reluctantly. At this point, we have to start pumping water into wells to push the oil up, refineries have to be re-configured to enable them to cope with the polluted heavy oils that come from old wells and deep sources, wars have to be fought to ensure the maintenance of supply of a dwindling resource, prices go up in response to the increased cost of production and the imbalance of supply over demand and we find ourselves drilling miles under the surface of the earth and the ocean floor. These things are happening now. Deepwater Horizon is a reminder that the easy cheap oil is over. If it weren’t over we wouldn’t be drilling in extreme conditions in the Gulf of Mexico; full stop. Do you remember the heady days before the collapse of Leeman Brothers? If so, you will remember the oil price at $147 dollars a barrel and the head of Gazprom predicting that it would peak at over $200. Had you been living in Brussels you would have seen fishermen and other groups whose livelihoods were threatened by the cost of fuel, rioting on the streets of the European Quarter. It was only the world recession that pushed the price down. That recession is not over but the price has steadied at around $70. As I write, the people of India are protesting against the high price of oil and China is posting record growth in the numbers of new cars. The price will go up again. That is a certainty.
Forty years is not a long time. Within ten years we will be making huge adjustments to overcome the burgeoning cost of this precious resource that provides fuel, fertilizers, pesticides, medicines, plastics, paints and in fact impacts on just about everything we do. If no action is taken to adapt to the end of oil twenty years on we really will be panicking. Imagine your reaction if you were told that there would be no more wine or coffee or tea or tobacco in forty years. We don’t need these products but we do need either oil or a viable replacement. Until we find such a replacement we will continue drilling in the depths of the earth and, as we have just found out, placing the health of our environment at risk. I’m worried because I don’t see governments warning us about and planning for the impending rise in the price of oil and I don’t hear people asking why we have to drill in such precarious places as the Gulf of Mexico. For governments it appears that the foreseeable future does not extend beyond the date of the next election and voters don’t vote for politicians who tell them bad news. It is a bad combination and it worries me.
Robert Urquhart Collins
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