Singapore Peak Oil

MM Lee Kuan Yew first mentioned the phrase "Golden Period"of economic growth in 2007, but he qualified that with this sentence:

If there are no wars or oil crises, this golden period can stretch out over many years. Speech LINK

Well, MM Lee was right about the oil crises part. The "Golden Period" of economic growth that he foresaw was derailed in the 2008 oil shock when prices hit $147/barrel. Today, we have Dr. Tony Tan, executive director of Singapore's GIC, speaking of a "Golden Age" again for Asian economies.

But my belief is that the next decade could be a "Golden Age" for Asia. (See p. A18 of The Straits Times, 19 Jan 2009, or GIC Link).

Unfortunately, Dr. Tony Tan is going to be proven very wrong in his prognosis. I have no doubt in my mind that another oil shock is under way as our economies recover and oil companies struggle to maintain oil flows from mature, depleted fields. Nature's geology is not on our side. Peak oil will prove to be the undoing of the current economic paradigm and globalization.

Related Link: Singapore Needs to Wake Up to the End of Economic Growth

Watch this captivating video where Jeff Rubin gives a talk about oil and the global economy.

We don't have 15 years to wait for the development of alternative technologies. The solution right now is not to figure out how to turn cow dung into rocket fuel. The solution right now is on the demand side because we don't have the luxury of time for supply-change innovation, and the single most important way that we can make that adjustment on the demand side is to go from a global economy to a local economy because a global economy is an extraordinarily energy intensive - and in particular, oil intensive way of doing business. (Youtube: 19min 20 sec)

Full Speech

Economic growth is all about production and consumption. Economists and politicians love a growing population of consumers because it adds to economic growth. A greying population would slow our growth and so the current 4.6 million on this island is not enough, we need 6.5 million in the coming decades. Now this cycle of growth is vicious and self-perpetuating. In 2030, the government will say 6.5 million of us is not enough, we need 9 million on this island to keep the economy growing. Wash, rinse, repeat.

Spend, spend, spend. Consume, consume, consume. Grow, grow, grow. I remember reading in ChannelNewsAsia last year where SM Goh Chok Tong was encouraging Singaporeans to spend to starve off a recession:

"If all of us go into a power save mode, then the economy will really go into a recession! This is what economists called the Paradox of Thrift. If you have sufficient savings and can afford to spend, you should continue to spend on life's little pleasures.

"Take your family to the movies, shop, dine out at restaurants and hawker centres, go for your regular foot massage, indulge yourself at a spa, take a taxi, donate to charity and so on."

Here's the twist: what are the limits, if any, as to how much we can spend and grow before we turn into an incurable cancerous tumour on this planet? The New Scientist article below addresses this question and our leaders and policymakers would do well to pay attention to this for a truly sustainable Singapore - not the pseudo-sustainable-growth-economy that Mah Bow Tan keeps talking about.

New Scientist
07 August 2009

...According to leading ecologists...few of us realise that the main cause of the current environmental crisis is human nature.

...All we're doing is what all other creatures have ever done to survive, expanding into whatever territory is available and using up whatever resources are available, just like a bacterial culture growing in a Petri dish till all the nutrients are used up. What happens then, of course, is that the bugs then die in a sea of their own waste.

...Epidemiologist Warren Hern of the University of Colorado at Boulder, even likened the expansion of human cities to the growth and spread of cancer, predicting "death" of the Earth in about 2025. He points out that like the accelerated growth of a cancer, the human population has quadrupled in the past 100 years, and at this rate will reach a size in 2025 that leads to global collapse and catastrophe...

...The problem..is that it fails to recognise that the physical resources to fuel this growth are finite. "We're still driven by growing and expanding, so we will use up all the oil, we will use up all the coal, and we will keep going till we fill the Petri dish and pollute ourselves out of existence,"

Full Article: Consumerism is 'eating the future'

Geologist Colin Campbell made a number of astute observations in this 2005 video interview (below) about oil and the financial system. We have to wake up to the fact that we are nearing or at the end of growth.

The boom time of the last 50 years was based on cheap oil which is now coming to an end. The end of growth threatens to bring down our debt-based monetary system which is founded on economic growth to pay off interest-bearing debt obligations.

We can expect decade-long, unprecedented market gyrations and volatility as central bankers resort to every trick in the economic textbooks and their magic bags to starve off a recession. They will ultimately fail because unlike credit, they can't create oil and natural resources out of thin air.

Dear bankers, welcome back to biophysical reality.

Unfortuantely, the growth mentality is still deeply entrenched in our government as can been seen from the Prime Minister's speech in Parliament (27 May '09):

At the broadest level, our approach to economic development and to growth remains valid. We have to stay open to trade and global competition.

So the question is how do we encourage energy conservation to grow more sustainably and to be less affected when energy prices go up from time to time, all in the long term?

The opposition leader Low Thia Khiang, seemingly oblivious to the relationship between cheap oil and globalization, fares no better:

The Workers’ Party chief and Hougang MP defended the long-held growth model, saying in Mandarin: ‘I believe it is correct to attract foreign investments to encourage competition in a free market, to open up our market and to go global and…integrate with the global economy.’

It won't be easy to discard this mentality until we hit a more severe oil crisis of some kind in the near future to awaken us.

Two economists, Jeff Rubin and James Hamilton, have concluded that the current recession was caused by oil spikes.

Graph Source: http://www.theoildrum.com

Colin Campbell Interview:

The first half of the age of oil saw the rapid expansion of industry, transport, trade, agriculture - all of those things allowed the population to expand six-fold. So you have this enormous and brief chapter in history of this rapid expansion, and included in that thing is financial capital....

..the banks lend more than they have in deposit...the banks had confidence that the resulting expansion of all of this investment in debt and loans and everything was sufficient collateral for today's debt...

So expansion tomorrow covered the debt of today.

..But unseen by anybody or unrecognized was that this expansion was not just money. It was the good old cheap energy (oil) to make the wheels turn and do everything. So we now face a situation when the bankers begin to wake up and say "well this expansion cannot go on anymore without the cheap energy to make it happen". That means that the massive amount of debt throughout the world is loosing its collateral...

...[Bankers] will wake up and say "we got bad debt on our hands"....

Every single company market quoted on the stock market have a tacit business-as-usual assumption of continuing cheap easy oil such as they have known in their business. So once you realise that this cheap abundant easy oil isn't there, that tells you that virtually every company quoted on the stock market is now overvalued. There has to be some radical readjustment and capital really has to be reduced in some way to match the declining energy supply that on which it eventually depends. So this is the kind of crisis that is staring us in the face...

Singapore's Ministry of Trade and Industry (MTI) has a published a report (dated Nov 2007) on Singapore's energy policies. You can download it here: Energy For Growth - National Energy Policy Report

There are many things to commend about the report. It touched on the need to improve energy efficiency, reduce CO2 emissions, diversify energy sources, promote public transport and to control air pollution.

But to be blunt, it's better titled Energy For Unsustainable Growth because even though they keep repeating the word "sustainable", their policies really are UN-sustainable as they seem to have a total disregard for the axioms of sustainability outlined by Bartlett and others. Throughout the report, the impression given is that economic growth is always good, essential and limitless. Overpopulation was not touched on.

The core objective of our energy policy must thus be to secure Energy for Growth. (p.22)

If overgrowth in consumption and population are the root causes of our environmental concerns, then why do our policymakers continue to establish growth as the "core objective of our energy policy? Is more growth the answer to our problems? Does it make any sense at all? If smoking is causing you to have poor health, then the natural and logical thing to do is to stop smoking. If overgrowth is the problem, then non-growth or anti-growth is the solution.

Here's an analogy: Eating when one is hungry is satisfying and nourishing. Following our policymakers' logic, if eating is good for you then overeating must be better!

What does "grow" mean? What do you mean when you tell someone to "grow up"? Most people would agree that to grow means to expand; to increase; to gain. But an overlooked definition of "grow" which is more applicable to our economies and population is "to reach maturity".

Let's look at some other definitions of "grow":

American Heritage Dictionary: "to develop and reach maturity"

Merriam-Webster: "to spring up and develop to maturity"

Etymonline: Grown-up (adj.) "mature" is from 1633; the noun meaning "adult person" is from 1813

A child who grows up and reaches physical maturity is said to have "grown-up". If he grows any more, either taller or sideways, then it's a possible sign of ill-health. A "grown-up" continues to grow by developing knowledgeably and spiritually, not physically. Even if he or she develops physically with regard to muscle building, it should be obvious that even then there are limits as we cannot expect a bodybuilder to attain the strength of a gorilla or an elephant. There are, however, no limits to knowledge and creativity.

When our economy has "matured" to a certain stage, or when GDP reaches a certain level, it's time to say enough is enough - the economy cannot grow forever. There must come a point where we have to learn to be satisfied with our material achievements and move on to qualitative or spiritual development for the earth is finite in matter and energy and cannot satisfy all our physical wants. If owning a car makes you happy, will 10 cars take you to heavenly realms?

Now for the most disturbing part of the report:

World proven coal reserves are equivalent to 147 years at 2006 consumption levels, based on the British Petroleum (BP) Statistical Review of World Energy 2007. For oil and gas, proven reserves are estimated to be sufficient for only around 40 and 63 years of 2006 levels of consumption respectively. Nevertheless,oil and gas production is not expected to peak within the next two to three decades. With more exploration and improvements in extraction technologies, substantial new reserves will be added. Since 1980, globally proven oil reserves have expanded by 81 per cent, while proven gas reserves have more than doubled. (p.13)

This is so wrong I am astonished MTI even had this in the report. Compared to climate change, now I know why the Singapore government has paid scant attention to the peak oil problem - because they take BP's Statistical Review as gospel truth.

(Compare the Google search results of "climate change", "global warming" and "peak oil" in the .gov.sg domain. The results are 3000, 1560 and 3 respectively. Climate change and peak oil are related because they result from human dependency on fossil fuels.)

The current CEO of BP, Tony Hayward, disputes the peak oil theory and it was reported that he entered a wager with Kjell Aleklett of ASPO to bet that global crude production in 2018 will be greater than the current daily output of 85.5 million barrels per day. My bet's on Aleklett.

Let's review some points:

• Global oil discovery peaked in the late 1960s
• Since the 1980s, oil companies have been finding less oil than we have been consuming
• Of the 65 largest oil producing countries in the world, up to 54 have passed their peak of production
• Oil production from existing oilfields is declining at a rate between 3 and 5 percent while oil demand has been increasing at about 2% per year
• World oil production growth trends have been flat from 2005 to 2008
• The 81% increase in global oil reserves since 1980 are not "proven" or audited. The large increases in the BP report stems from the fact that BP quoted directly from OPEC members who gave them phony figures. Their REAL oil numbers are a state secret. OPEC members grossly overstated their reserves in the 1980s to increase their production rights.
• Improvements in extraction technology will not add substantial reserves since the cause is geological limits. If it's not there, it's not there. You can't create oil from thin air. The North Sea was developed by private companies using the best technology there is with no restrictions on drilling, yet oil production from those oil fields have been declining since 1999.
• If you factor in dramatic increases in coal usage to make up for oil and gas declines, taking into account also the Hubbert Peak phenomenon and the varying coal qualities and accessibility, Energy Watch Group predicts coal to peak in 15 years.

Sources:
http://www.energybulletin.net/primer
http://en.wikipedia.org/wiki/Oil_reserves#Middle_Eastern_reserves
http://en.wikipedia.org/wiki/Peak_oil
http://www.energybulletin.net/node/5655
http://www.energybulletin.net/node/29919
http://www.energywatchgroup.org/fileadmin/global/pdf/EWG-Coalreport_10_07_2007.pdf

Whoever wrote that part of the report is seriously disconnected from the real world. Note that this report was published in Nov 2007, when peak oil was already making its way into mainstream media. Seriously, who the heck wrote that paragraph?

The Singapore government is clueless as to where we are heading. We are sleepwalking into an energy crisis.