Singapore Peak Oil

I like the way David Lamb put it:

"We were deeply concerned that there may not be enough oil to go around,'' he said.

Having a strong economy would not protect Australia from a global oil shortage.

"It's like having a pocket full of money and going into a shop with empty shelves.

"Our lifestyle is totally dependent on cheap oil.'' Report

Excerpt from Dirt: The Erosion of Civilizations, pp. 198-200. This book is available for borrowing at the Singapre National Library.

From 1970 to 1990, the total number of hungry people fell by 16 percent, a decrease typically credited to the green revolution. However, the largest drop occurred in communist China, beyond the reach of the green revolution. The number of hungry Chinese fell by more than 50 percent, from more than 400 million to under 200 million. Excluding China, the number of hungry people increased by more than 10 percent. The effectiveness of the land redistribution of the Chinese Revolution at reducing hunger shows the importance of economic and cultural factors in fighting hunger. However we view Malthusian ideas, population growth remains critical – outside of China, increased population more than compensated for the tremendous growth in agricultural production during the green revolution.

Another key reason why the green revolution did not end world hunger is that increased crop yields depended on intensive fertilizer applications that the poorest farmers could not afford. Higher yields can be more profitable to farmers who can afford the new methods, but only if crop prices cover increased costs for fertilizers, pesticides, and machinery. In third world countries the price of outlays for fertilizers and pesticides increased faster than green revolution crop yields. If the poor can’t afford to buy food, increased harvests won’t feed them.

More ominously, the green revolution’s new seeds increased third-world dependence on fertilizers and petroleum. In India, agricultural output per ton of fertilizer fell by two-thirds while fertilizer use increased sixfold. In West Java a two-thirds jump in outlays for fertilizer and pesticides swallowed up profits from the resulting one-quarter increase in crop yields in the 1980s. Across Asia fertilizer use grew three to forty times faster than rice yields. Since the 1980s falling Asian crop yields are thought to reflect soil degradation from increasingly intensive irrigation and fertilizer use.

Without cheap fertilizers – and the cheap oil used to make them – this productivity cannot be sustained. As oil prices continue climbing this century, this cycle may stall with disastrous consequences. We burned more than a trillion barrels of oil over the past two decades. That’s eighty million barrels a day – enough to stack to the moon and back two thousand times. Making oil requires a specific series of geologic accidents over inconceivable amounts of time…It takes millions of years to produce a barrel of oil; we use millions of barrels a day. There is no question that we will run out of oil – the only question is when.

Estimates for when petroleum production will peak range from before 2020 to about 2040. Since such estimates do not include political or environmental constraints, some experts believe that the peak in world oil production is already at hand… At present, agriculture consumes 30 percent of our oil use. As supplies dwindle, oil and natural gas will become too valuable to use for fertilizer production. Petroleum-based industrial agriculture will end sometime later this century.

In 1998, Colin Campbell coauthored with Jean H. Laherrère an article about the end of cheap oil which was published in Scientific American. According to Laherrère, they were considered crazy when they published that article because oil was averaging about $12/barrel - dirt cheap. Who would have thought back then that oil would hover around $140 today? Certainly not The Economist. Afterall, they wrote in 1999:

The world is awash with the stuff, and it is likely to remain so...$10 might actually be too optimistic. We may beheading for $5. Link

Kenneth S. Deffeyes, Professor Emeritus of Geology at Princeton University and author of the book Hubbert's Peak, on the current oil crisis (excerpts):

May 27th, 2008

http://www.princeton.edu/hubbert/current-events.html

In 2005, world oil production stopped growing and oil prices shot up uncontrollably. My graph of production versus price is now two weeks old and the price is already off the top of the paper. This morning, West Texas Intermediate is $130 per barrel. In Econ 101, they taught us that increasing prices would enlarge the supply. The economists may have envisioned a large inventory of oil wells, temporarily shut down because of low oil prices.

What happened? We hit "peak oil" – also called "Hubbert's peak," – a geological limitation to the oil supply in the ground. With no additional supplies, a bidding war began in 2005 over the remaining oil in the ground. This is not a news story that goes away after a month...

How big is the problem? Multiplying production (barrels per year) times the oil price (dollars per barrel) gives a total cost in dollars per year. It's an enormous number; tens of trillions of dollars per year. To put a scale on it, the three thin curves on the graph show the oil cost in contrast to the total world domestic product; the annual value the goods and services added up for all the world's countries. The three curves show the oil cost at one percent, two and a half percent, and five percent of the total world economic output. At $130 this morning, we are at six and a half percent.

Oil production obviously cannot consume 100 percent of the world's income. My intuitive, uninformed guess is that it cannot go above 15 percent. If we see oil at $300 per barrel, we will be looking out over the smoldering ruins of the world's economy...

So what about the experts and the oil companies who assure us that peak oil won't happen anytime soon? They have plenty of stories to tell:

• The USA is now a service economy; we don't need as much oil as before.
• Energy and food prices are too volatile to be included in the "core price index."
• Oil prices have gone up, but we are still surviving, sort of.
• Oil companies could find plenty of oil if they were allowed access for drilling.
• Alternative energy sources will appear that replace conventional oil.

Despite the all the arguing, the oil problem really does matter.

• Been to the grocery store lately? Agriculture is a heavy user of energy.
• Ford and General Motors are having difficulty selling big SUVs.
• By my count, seven passenger airlines have flown to that great airport in the sky.
• After many consumers pay for gasoline and food; they don't have money left to make their mortgage payments.

What do we do? First – admit that there is a problem. Several analysts are still in the initial denial stage: Jad Mouawad, Michael Lynch, Daniel Yergin, and ExxonMobil...During the upcoming presidential campaign, let the candidates know that peak oil is the issue of overwhelming importance. A modest tax write off for wind energy is too little and too late. It's the oil supply, stupid.

Link

You have to wonder at the kind of long term thinking that goes on at the ministerial level when the government decided to give the go ahead to develop the two Integrated Resorts.

PM Lee Hsien Loong's decision to go ahead with the IRs in 2005 was based on studies that they would boost Singapore's image as a global city, provide jobs, and fuel economic growth.

Oppositions to the IRs were related to social problems such as compulsive gambling, loan sharks, organised crime, and money laundering - all of which are legitimate and are causes for concern.

The point I want to bring up is no one in Parliament questioned the possibility that tourism may plunge in coming years due to sustained rising oil prices caused by possible long-term supply disruptions. Hence, wherefore the IRs?

Our DPM Prof Jayakumar, a member of the ministerial committee which was responsible for evaluating the IR tenders, acknowledged peak oil in a 2006 speech at the Singapore Energy Conference, so it comes as a surprise that he did not raise any of the oil disruption concerns and how it may affect tourism here.

Land is a valuable resource. According to PM Lee's speech, the size of the Bayfront and Sentosa sites are 12.2 ha and 47 ha respectively. It's an absolute waste to utilize such land to build holiday resorts which in no way contribute to our food and energy security in the face of possible supply disruptions. The land could have been used for Vertical Farms. If the 59.2 ha of IR land were allocated for Vertical Farming instead, it could be possible to feed up to 900,000 people per year, or about 20% of our current population.

It would seem that in the worldview of our ministers and MPs, there are no physical barriers to growth and progress. I believe this underscores a deficiency in systems and resilience thinking among our ministers and MPs. Redundancy and resilience are the keywords here to our future survival and our leaders seem to be oblivious to these terms.

When the frightening reality of peak oil and food shortages sets in, our Integrated Resorts will be labelled Immaterial Resorts.

im·ma·te·ri·al (ĭm'ə-tîr'ē-əl)

adj.

1. Of no importance or relevance; inconsequential or irrelevant.
2. Having no material body or form.

Link

THE STRAITS TIMES
March 8, 2008

Oil prices 'unlikely to rise further'

OIL prices are not likely to go higher, Minister Mentor Lee Kuan Yew said yesterday.

As crude oil prices hit US$105 (S$145) per barrel, MM Lee believes it is not likely to creep further up to US$110.

'The oil suppliers are testing the limits. They believe that China and India now form a new long-term base demand. They may be right,' he said.

'I don't think it can go up US$110, US$120, US$150 and the world economy goes on. Inflation will go through the roof.

'Economies of the West will go down, hyper-inflation in many developing countries. So it will go into reverse. There's no projection right to the end.'

He said there is little Singapore can do as it is a price taker and not a price giver.

'We cannot influence Opec, we cannot influence the price of oil or gas.

'All we can do is to adjust our consumption, minimise the amount of power we use to provide the same unit of either goods or services. That's all we can do. What else can we do?' he said.

But, MM Lee said, people should not be rattled by the increase in price. Instead, they should remain alert and adjust to changes.

'We have remained a vibrant economy because we adjust to the market. Whether we panic or don't panic, I think it would be foolish not to be alert to the changes and to take steps to meet them,' he said.

'If the world economy goes into reverse, we are going to be hit. And it's not just us. China, India, the whole region will be hurt. So, this is a worldwide problem.

'Food prices, oil, gas, it's not specific to Asia or South-east Asia. It's worldwide.'


PEH SHING HUEI

"Oil in its various refined derivative forms, such as gasoline, kerosene, and diesel fuel, has a unique combination of many desirable and useful characteristics. These include a current availability in abundance, a currently high net energy recovery, a high energy density, ease of transportation and storage, relative safety, and great versatility in end use. Oil is also useful as more than an energy source. It is the basis for the manufacture of petrochemical products including plastics, medicines, paints, and myriad other useful materials. Finally, the asphalt "bottoms" from refineries have converted millions of miles of muddy trails around the world into paved highways on which transport vehicles fueled by oil run.

Alternative energy sources must be compared with oil in all these various attributes when their substitution for oil is considered. None appears to completely equal oil"

Since Peak Oil is such an important issue with far reaching consequences, you would expect governments around the world to debate the necessary steps to take to mitigate the difficult circumstances that will befall us.

Are we able to use Google to tell which governments have made serious efforts to study the Peak Oil issue?

I used Google to search for the number of occurrences of the term "peak oil" in several government websites where English is the predominant language and here are the results:

United States - 2040
Australia - 1920
New Zealand - 1380
Canada - 1416 (added all "peak oil" occurrences in the provincial websites)
UK - 864
Singapore -2

Of the two times that "peak oil" was mentioned in the Singapore government websites, one was mentioned in a speech by Deputy Prime Minister Professor S Jayakumar in Nov 2006 at an energy conference. The other in the National Library Board as part of a book's title under "New Arrivals".

The Singapore government is aware of peak oil, but why do they seem to be concealing it from the public? Why are there no published government studies made of peak oil's impact on Singapore? Why is there no discussion of this topic in Parliament and our local newspapers?

I posted the following comments on a blog post by a Member of Parliament, Dr. Lam Pin Min, concerning soaring rice prices:

I think the Singapore government is doing the right thing in allowing the SGD to rise, but it is not a good long term solution. Singapore and the rest of the world are not addressing the root causes of the food problem: overpopulation, limits to growth and declining availability of fossil fuels. Just as you cannot cure a cancer patient by treating the symptoms, so you cannot solve the current food crisis by addressing only the symptoms - which in this case is price inflation. A stronger SGD may help in the short term, but it does not address the root causes.

First, we need to understand the "perfect storm" that we are about to face. In a presentation by Paul Chefurka: We are facing a perfect storm of 1) Ecological Collapse, driven by the depletion of natural resources and Climate Change; 2) Energy shortages, driven by Peak Oil and Peak Natural Gas; 3) Economic destabilization driven by American debt loads and a complex and unsustainable global financial system.

I shudder every time I hear our ministers encourage more childbirths and their overemphasis on economic growth. Don't they understand our limits to growth? Have they not read the works and warnings by scientists who have been telling us since the 1970s that humanity's unrestrained growth will result in ecological collapse? Don't they get it?

The Green Revolution of the 1970s was successful due not only to molecular genetics, but also to increased use of pesticides, diesel or gas powered irrigation pumps, and synthetic nitrogen fertilizes - all of which are highly dependent on oil and natural gas. We are unfortunately witnessing a "peak" or decline in the availability of such fossil fuels to which there are no suitable substitutes. How shall modern farmers, who are highly dependent on these resources, grow enough to feed the world in coming years?

Instead of emphasizing economic growth, or should I say Uneconomic growth since such growth only inflates our GDP numbers but not necessarily our well being, our government needs to rethink their priorities and look at how we can become more resilient and sustainable even at the expense of growth. They need to aim for the following:

1) Zero or better still, negative population growth

2) Increase local food production to the point of or near self-sufficiency

3) Increase local energy production to the point of or near self-sufficiency

4) A Steady State Economy


These goals may sound too radical, but I believe it's the only way to ensure our survival and sustainability in the long run. Cuba successfully overcame their oil crisis in the 1990s when they lost 90% of their oil imports after the collapse of the Soviet Union - whom they were so dependent on for oil. It will serve us well to study what they did for this could very well happen to us. In time to come, do not be surprise if such an oil crisis happens to us in a very short period of time because of nationalism and hoarding by oil exporting countries.

Is there anyone in parliament who is perceptive enough to understand these issues? Is there anyone in parliament who is bold enough to bring up these issues and to challenge our flawed assumptions in economics and growth?

I don't wish to sound presumptuous or arrogant, but the following links should be required reading for all our ministers and MPs. I have gone through the links and I am very concerned about our future. These links have altered my fundamental worldview. Frankly, I'm feeling very pessimistic about our survival chances unless we address the above concerns immediately. We don’t have much time left.


Peak Oil Primer

Converging Crisis (PDF)

Youtube lecture on exponential growth and overpopulation

Fossil Fuels and Agriculture

Threats of Peak Oil to the Global Food Supply

The Economist Has No Clothes

Mainstream Economics and the Environmental Crisis

FAQ on Steady State Economy

Peak Oil and Economic Growth

World Scientists' Warning To Humanity (1992)

How Cuba Survived Peak Oil

Cuba's Special Period

Uneconomic Growth

Biophysical Economics

Approaching the world’s environmental problems through the Entropy Law

World Financial Crisis Explained