Peak Oil theory also pays short shrift to what is sometimes called “non-conventional” oil. These include Tar Sands, Heavy Oils, and Oil Shale. Canada's Athabasca Tar Sands is the best known example of this kind of unconventional reserve—estimated at 1.8 trillion barrels. Although this was originally considered cost inefficient, experts working in this area now claim that they have brought down the cost from over $20 a barrel to $8 per barrel. Similar developments are taking place in Venezuela. It is thanks to developments like these that since 1970, world oil reserves have more than doubled, despite the extraction of hundreds of millions of barrels [11].
Except for natural gas and nuclear energy, most of these alternative sources of energy are still highly costly, and are therefore used in only insignificant quantities. But, considering the ever evolving newer and more efficient technologies, they are bound to rise in significance. This means that the prospects of reaching a day in our search for energy sources when conventional oil is no longer the world’s dominant source of energy are quite realistic. Humans did not invent motor vehicles because they ran out of horses or horse-driven carriages; nor did they invent electricity because they ran out of candles.
Finally, and perhaps more importantly, claims of “peaked and dwindling” oil are refuted by the available facts and figures on global oil supply. Statistical evidence shows that there is absolutely no supply-demand imbalance in global oil markets. Contrary to the claims of the proponents of Peak Oil and champions of war and militarism, the current oil price shocks are a direct consequence of the destabilizing wars and geopolitical insecurity in the Middle East, not oil shortages. These include not only the raging wars in Iraq and Afghanistan, but also the threat of a looming war against Iran. The record of soaring oil prices shows that anytime there is a renewed U.S. military threat against Iran, fuel prices move up several notches.
The war also contributes to the escalation of fuel prices in indirect ways—for example, by plunging the U.S. ever deeper into debt and depreciating the dollar, or by creating favorable grounds for speculation. As oil is priced largely in U.S. dollars, oil exporting countries ask for more dollars per barrel of oil as the dollar loses value. Perhaps more importantly, an atmosphere of war and geopolitical instability in global oil markets serves as an auspicious ground for hoarding and speculation in commodity markets, especially oil, which is heavily contributing to the recently soaring oil prices.
As much as 60% of today’s crude oil price is pure speculation driven by large trader banks and hedge funds. It has nothing to do with the convenient myths of Peak Oil. It has to do with control of oil and its price. . . . Since the advent of oil futures trading and the two major London and New York oil futures contracts, control of oil prices has left OPEC and gone to Wall Street. It is a classic case of the ‘tail that wags the dog’ [12].
By purchasing large numbers of futures contracts, and thereby pushing up futures prices to even higher levels than current prices, speculators have provided a financial incentive for oil companies to buy even more oil and place it in storage. A refiner will purchase extra oil today, even if it costs $150 per barrel, if the futures price is even higher.
This has led to a steady rise in crude oil inventories over the last two years, “resulting in US crude oil inventories that are now higher than at any time in the previous eight years. The large influx of speculative investment into oil futures has led to a situation where we have both high supplies of crude oil and high crude oil prices. . . . In fact, during this period global supplies have exceeded demand, according to the US Department of Energy” [13].
The fact that the skyrocketing oil prices of late have been accompanied by a surplus in global oil markets was also brought to the attention of President George W. Bush by Saudi officials when he asked them during a recent trip to the kingdom to increase production in order to stem the rising prices. Saudi officials reminded the President that “there is plenty of oil on the market. Iran has put some 30 million barrels of oil that it can't sell into floating storage. ‘If we produced more oil, it wouldn't find buyers,’ says the Saudi source. It wouldn't affect the price at all" [14].
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