Here’s what can happen if you neglect to feed your cash cow:
Former Pdvsa CEO shows concern about production level
Luis Giusti, former CEO of Venezuelan state-run oil firm Pdvsa, said the statements made by the former Chairman of the Federal Reserve Alan Greenspan about the Venezuelan oil industry confirm his view that Pdvsa oil production has collapsed.
“The industry is faced with a process of drastic deterioration. I wish people only thought what the collapse of Venezuelan production means. This is dramatic. Pdvsa has dropped 2 million bpd,” said Giusti.
He told local Unión Radio that it was “impossible” to accomplish Venezuelan President Hugo Chávez’ plans to take domestic oil output to 5 million bpd by 2011. According to Giusti, “with 130 operational rigs -which do not exist at the present time- and sustained investment of USD 6-7 billion production could be increased by some 200,000 bpd on a yearly basis.”
He added that such goals could be attained through well-structured efforts and in a Pdvsa that is “operational and efficient, but the present Pdvsa is a company seriously wounded that lacks capacity. You could take some 15-18 years to take output to 3.5 million bpd.”
Some will point out that such mismanagement may lengthen the lifetime of the reserves. True. Unfortunately for Chavez, that is not his intention. His intention is to greatly ramp up production. But he miscalculated the amount of capital it takes to produce oil, diverted that capital to social programs, and is now reaping what he has sown.
Chavistas will say that Giusti just has sour grapes over being forced out. When Chavez was elected he derided PDVSA as being “a state within a state” and having a “gold card culture”. But at least under Giusti, PDVSA was professional and competent.
From what I have seen firsthand and in discussions with others, I believe that Giusti is right, Chavez has reduced Venezuela’s productive capacity by at least 2 million barrels per day and with the takeover of the Orinoco he is probably looking at further losses.
Bad for Chavez. Good for the world.
Hugo Chavez is inadvertently doing everything he can to make your Peak Lite scenario unfold. Remind me to send him a Christmas card.
This is the problem. Not Peak Oil. It should be called “Thug Oil.”
Thug states control the world’s oil exportable reserves. (Yes, excluding Norway and Canada).
2 mbd sidelined just in Chavez-land. The Orinoco trench has perhaps 1 trillion barrels of heavy crude.
Well, the world will have oil reserves for a long, long time, anyway. Decades hence, perhaps our grandchildren will lift that crude.
How many mbd are sidelined in Russia, and the former SU, Libya, Iraq, Iran, Nigeria? we would have a glut right now, if there were sensible governments in oil-exporting nations.
KSA is flatlining production. Only Qatar and Kuwait will start pumping more soon. KSA may pump moe next year as new fields come online. KSA saw what happened in 1979-1983, when world oil consumption fell by 11 percent.
If oil stays above $60 a barrel, we have seen Peak Demand, not Peak Oil.
Thug oil isn’t a problem. It’s a cause for optimism.
Peak oil, and peak-lite, are both real, physical, and inevitable phenomena. The only question is timing, and the world’s voracious and growing appetite for energy ensures that even under the most “favorable” of scenarios, those hard limits aren’t too far away.
Mitigating this problem and transitioning to other energy sources is a challenging problem that will take time to solve. Human nature seems to dictate that we respond only to urgent problems, while ignoring important but non-immediate problems.
“Thug oil syndrome” means that we are getting a taste of a peak oil future due to geopolitical drivers, before we run up against geological limits on production. So we are being forced to confront and try to solve the problem before the absolute last minute (in terms of oil supply — this may already be “the last minute” in terms of climate change). This is a very, very good thing for the future of human technological civilization.
GE, you’re pretty hilarious! Hugo Chavez as saviour of America! I have a T-shirt idea for you.
I see no real difference between high prices now (Thanks to your hero) or later. A crisis is a crisis. Once it hits, we’ll get to work. Until then we just keep arguing about whatever, like we’re doing now.
Optimist, you’re being silly.
Two scenarios for consumption of a finite resource:
1) Unrestrained exponential growth of demand at a low price per unit, until the physical limits of resource availability are hit.
2) Growth of demand is moderated by a high price per unit created by non-physical limits.
In both cases, the available resource is the same, mod technology. However, development of technology that enhances resource availability is more strongly incentivized in scenario 2 (by a high unit resource price) than in scenario 1.
And you’re telling me that both of these situations will play out in the same way. Right… Are you sure you’re not a troll?
To put it another way: After Chavez’s regime collapses, we can invade and take control of the remaining resource (provided we still have a military at that point). If, on the other hand, he extracts the available resource with the maximum efficiency until it’s in permanent depletion (and then his regime collapses), we can’t step in and take it because IT’S GONE.
(Not saying we should do this, but we probably will eventually, if someone else doesn’t get there first.)
Green Engineer;
I have pondered that too; are we getting a running start in Peak Oil thanks to “Thug Oil.”
But, given the enormous reserves of heavy oil and tar, especially in KSU, SU and former states, and Venezuela, I would guess it would be another century before oil became prohibitively expensive, if the whole world were constitutional market economies.
The long, long, history of the oil industry is producers colluding to hold down production, and price busts. Texas Railroad Commission etal.
Remember, the price mechanism sends the right signal, if a resource becomes scarce. While it may be that a single field or region declines, there will be other regions opening up, or more-expensive deposits accessed. Meanwhile, as prices rose, demand would abate. We are seeing that now. I see no reason why the price mechanism would not aid in an orderly transition to a post-fossil economy.
Peak Oil? In North America, we likely will hit all-time fossil oil output in the next two-three years, thanks to Canadian heavy oil and the Chevron gulf strike, and higher prices propping up what’s left of domestic light oil production. This is 35 years after Hubbert’s Peak.
In other words, Hubbert’s Peak failed to predict even North America fossil oil production. What makes anyone think it will accurately predict an even more heterogenous globe?
But man is resourceful. So the thugs raise the price of oil. We will use less, and less every year, as long as they keep it above $60 a barrel.
On global warming, I probably concur with you. But keep in mind, most long-range climatologists are mindful of numerous Ice Ages, and mini-Ice Ages, and not in the so-distant past.
Given past patterns, we may be on the cusp of an Ice Age now. Another oddity: It was warmer when Leif Ericson came to America than it is now. That is why he came to New Foundland actually. Colonies had already been established in Greenland, which survived. Colonies then (14c) seemed practical in those northern climes. Those Greenland colonies were wiped out when it got colder again.
Later settlers (15-17c) picked more southerly latitudes.
Now, people are thinking about re-introducing dairy cows to Greenland.
I think I am right when I say an Ice Age would be worse than a continued warming spell, although past a certain point…..
For me, the big reason to cut fossil oil consumption is simply pollution. It makes cities less pleasant. Pollutants despoil the natural areas.
Imagine PHEVs, and the radical reduction in oil consumption. Imagine walking down a city street and smelling the trees. Imagine a car driving down the street, and you can barely hear it.
I think in time we will have all those enjoyable things. The environmental ethic seems to be permeating society more and more. What used to be considered left-wing is now the norm.
Optimist, you’re being silly.
No – you are oversimplifying.
1) Unrestrained exponential growth of demand at a low price per unit, until the physical limits of resource availability are hit.
Like many in the PO community you are treating the world’s oil supply like it’s a bunch of cookies in a jar: Just when we really start gouging ourselves, we put our hand in the jar and… hey, where did all the cookies go? Luckily for us, the world’s oil supply is not in one cookie jar.
A better metaphor would be fruit in a tree. Sure, at first the low hanging fruit encourages increased consumption. But soon enough you have to start climbing ever higher into the tree, and it starts to make sense to conserve. In other words, consumption moderates well before you run out of supply, thanks to the appropriate market mechanisms (price signals). Scenario 1 = scenario 2.
Let Hugo bang his fists on his chest if that makes him feel better, in the bigger picture he is not making much of a difference…