Category Archives: Oil

Sustainable UK – what might it look like?

Thing is, there are two, I kind of want to call them ‘attractors’ working here.

Population keeps increasing, oil (and gas etc) supply dwindles as demand increases, there isn’t enough land to use solar/biomass to keep present standard of living.

The other one is that the oil (and gas etc) lasts long enough to totally fuck things up through climate change instead.

We seem to be headed into one or other of those attractors, and it does seem completely inevitable as long as market forces and economic growth continue to take total precendence over any other human considerations whatsoever.

Most of the post-oil solutions that we hear about aren’t too plausible either when you look at them in detail. For example if you work out exactly how much arable land you need for biofuels and compare it to what’s available, and to what’s required for the people we already have to eat food.

There is a sort of steady drip drip in the media of partial solutions that does tend to make it sound like answers are near at hand. This is accompanied by a steady drip drip of PR effort designed to convince us that there isn’t actually a problem. So people don’t know what to think unless they go do the research for themselves.

It’s subject to assumptions. For example, Pimentel (in ‘Food, Energy and Society’) offers the following assumptions for ‘business as usual’

0.5 ha/cap for food production.
1.5 ha/cap for energy systems.
1.0 ha/cap for pasture/biodiversity etc.

On those assumptions, and assuming soil erosion etc is effectively dealt with using known methods, we get 2 billion sustainable global population with ‘EU-average energy use’. Unfortunately we already have 6 billion and rising, so there are obviously some tricky issues to be figured out here.

What does this mean for the UK?

Given that the policy of the leaders of the US and hence the UK appears to be to continue business as usual, at gunpoint where necessary, albeit with some cosmetic programmes here in the UK, I’d really like to understand what that is likely to mean for all of us.

An increasing weight of evidence has been emerging over the last few years, since the Shell announcements, that the production peak for conventional oil is pretty much imminent. Given rising demand and the failure to implement programmes which could control demand, presumably this means a rising trend in oil prices, and energy prices generally. As far as I’m aware this always causes a recession, and if prolonged, is likely to result in an economic depression of unprecedented dimensions.

The UK is particularly vulnerable, because due to ‘free-market’ policies we’ve been following since Thatcher, we’ve trashed our coal mining infrastructure, burned through most of our oil; we’ve also, since WW2, trashed a whole lot of our arable land and our population has grown to about 6x what it was before the industrial revolution.

It appears to me that any transition to renewable energy is urgent, and best accomplished right now, while we’re still relatively well-off in terms of these resources. While we have it, we should be using it to make the transition. If we wait until we’re in a depression, then the transition becomes much harder.

This is pretty clearly not the likely outcome though. So what are we in for?

I’d be very interested in having a more substantial discussion of the likely implications of this situation for people living in the UK, over the next few decades. Assuming that we carry on with business as usual.

We can do Pimentel’s calculation above for the UK. Here are some very rough numbers.

CIA world factbook says there are (I’ve converted from square miles to ha)

24.4million ha of land in the UK and 6.4 million hectares of it is arable land.

Pimentel says that on the assumptions given in his book, you need per cap:

1.5 ha for energy systems (to get EU average levels of energy supply)
1 ha pasture, biodiversity, etc. (because we’re assuming no petrochemicals)
0.5ha for growing food

If we just look at growing food and assuming (as an approximation) you can only do this on arable land, that means that in the absence of oil (as a limiting case) we have a sustainable population of about 12 million, so 1/5 of the numbers we presently have. This is pretty close to the 10m of the census of 1800, before the industrial revolution got started.

We can also be fairly sure that the remaining non-arable land isn’t all usable or available for pasture, biodiversity or energy systems such as bio-fuels. So we can conclude from this that with our present population, whatever the real sustainable figure is, it probably isn’t the 60million we have right now.

We aren’t going to be totally without oil in the forseeable future though, so this is definitely a limiting case, rather than an immediate problem. It does however give you a pretty good feel for how bad things could potentially get.

The gap between these numbers and present day reality is largely plugged by oil and gas, in a variety of different ways. Fuels, fertilisers, pesticides, etc. Those are all going to become much more expensive and much less available, producing economic hardship on a very large scale over the coming decades. Once we’re in a major economic depression, as a result of global oil shortages, something I think is likely within a decade or so, then we’re in a much worse position to make any investments in sustainable alternatives.

With our current political system, only pro-capitalist parties can get elected, so if we’re assuming ‘business as usual’ then we’re assuming this is happening in a capitalist context, with major unemployment due to economic depression.

Assumptions are obviously being made to arrive at Prof. Pimentel’s figures. You can find them articulated in great detail in his book ‘Food, Energy and Society.’ What he’s assuming, roughly, is business as usual, only with sustainable energy and agriculture. So he’s not for example assuming big changes in population distribution. This is quite important. In practice, a fairly large amount of the energy used by the average family is spent in putting food on the table, far more than on running cars or heating their homes for example.

The relatively massive energy use in food production arises because of the process that puts food on the table. Pimentel offers a figure of 10 units of oil energy to put 1 unit of food energy on an average US table. This breaks down as petrochemicals used as fertiliser, drugs for animals and pesticide, transport of fertiliser, drugs for animals and pesticide, harvesting, transport of cereals, vegetables and fruit, transport of animals, transport and disposal of wastes, food processing, packaging, transport to supermarkets etc. See for example what’s in your bag of supermarket salad? for a discussion of just some of these process stages in a bit more detail.

If I eat a tomato grown organically 3m from where I’m sitting right now, then clearly these costs don’t apply. I don’t want to spend my whole life growing food however. So in order to minimise these kinds of costs, but maximise the efficiency of food production and hence radically reduce the energy needs of our way of life, I would suggest that one should cooperate with others to grow food close to where one lives. Eco-villages with a population in the 2-500 range are optimal and experience with these models seems to imply an average of say 8 hrs per cap per week spent growing food.

You can do a fair bit better than Pimentel’s assumed 1.5 ha for food, pasture, biodiversity etc, and also reduce his 1.5 ha for energy. You need about 0.25 ha per cap for this system to produce a complete and balanced diet, but you still need some space for energy systems, to heat your home etc. But around 0.5 ha or somewhere around one acre per human, is enough to provide for a decent way of life.

Assuming that acre is decent arable land, that still only implies a sustainable UK population of around 12m though, while we have 60m citizens at present. If you assume only half of it needs to be arable, you get 24m, but in practice, you mostly don’t get land that’s half arable and half marginal and that matters if were talking about something as localised as an eco-village.

I think that you still need to find some way to recover land that presently isn’t viable, in order to sustain our present population in the absence of oil, but assuming big changes in our way of life.

I think it’s in the realms of the possible, but not with ‘business as usual’ assumptions, or population distribution.

Let’s break down where the oil inputs to agriculture go and analyse them a bit. I suggest we separate two cases.

1) The difference between agricultural efficiency using pesticides etc and by standard organic methods. Typically organic gives about 20% less yield (see e.g. this 21 year study ), but is much more efficient in its use of say nitrogen inputs. Nor does it damage the soil, which petrochemical agriculture does. Given that erosion is also a major food security issue, this is pretty important.

2) All the other stuff. This includes fuels for farm equipment, which is mostly replaceable by work animals given sufficient land for pasture. It’s mostly a matter of fuel for food distribution and packaging and waste disposal though.

The solutions to the latter case would appear to me to be localisation of food production so that you don’t need to use lots of oil for fuel, packaging etc.

So we need to look at the localisation model to see how much extra labour would be required. If a vast amount of extra labour is required, that’s presumably where it comes from, as we can get fairly comparable yields from conventional organic vs chemical farms without the need to greatly increase the labour inputs.

The furthest extreme is everybody just grows their own. Even on that basis, organic smallholders who seek self-sufficiency (rather than those farming commercially) generally seem to manage to produce their food with a fairly reasonable *average* day, although this means pretty heavy labour at some times of year, with relatively light labour the rest of the time. You can get a pretty good feel for what’s involved from Borsodi

It makes more sense to share the labour over a locality though. With an eco-village of 400 people, the figure I’ve seen quoted is 20% of working time spent on growing food, which I believe is based on Swedish eco-village results (I’ll check this)

Now to be sure, the resultant way of life is not at all that promoted by the corporate ‘lifestyle’ industry, but it’s about as comfortable as that of village life circa 1910, plus a few low energy impact forms of modern technology. It’s interestingly, rather similar in some important ways to what Kropotkin describes in ‘Fields, Factories and Workshops’ although he’s coming at it from a rather different direction and isn’t aware of some of the resource issues.

I would argue that if we keep using unsustainable methods to provide food and energy, no matter how cleverly we do it, we just defer the problems. I think that unsustainable energy sources will probably be needed to enable a sane transition to sustainability, given any believeable projections of global population, food and energy supply vs demand etc over the next century.

I don’t think we have any acceptable choice besides making such a transition, but I think that the political influence of capitalists, religious fanatics and other nuisances will make that transition more difficult than it needs to be and may even succeed in making it disastrous for billions of us.

What needs to be done is pretty clear to me though, global population has to be reduced over time (ideally by family planning rather than by the Four Horsemen), unsustainable energy use needs to be phased out, while we still have sufficient of it to boot-strap the transition to sustainable energy use.

Our way of life has to change to make this happen. It won’t be business as usual, but it needn’t be some hellish dystopia either. It depends how we do it. The problem I forsee is that we’ll wait too long to take the necessity seriously and end up trying to make the transition to a lower energy society after the demand for energy has overtaken the supply permanently, with predictably dire economic results. At that point everything gets much harder.

åIf we mess it up badly enough, instead of reducing energy demand through appropriate technology, improving food security through sustainable forms of agriculture and reducing demand for both food and energy by managing global population down over the course of a few generations; we all just pretend that there isn’t any problem until those Four Horsemen arrive to solve these problems for us the hard way. This appears to be the solution favoured by certain factions within those countries most able to do something about it.

Corporations to control Iraq’s Oil: so how is this meant to work exactly?

As you’ve probably heard by now, control of Iraq’s oil is to be handed over to certain corporations, under what are known as Production-Sharing Agreements (PSAs). These agreements are long term (decades long) deals which give the oil corporations the lion’s share of the profits, and which bind the Iraqis to terms agreed by their current government. Terms which a reasonable person might conclude are not exactly favourable to the Iraqi people.

Here’s the main article in which the story was broken in the English-speaking world, by yesterday’s Indepedent on Sunday.

And Iraq’s oil reserves, the third largest in the world, with an estimated 115 billion barrels waiting to be extracted, are a prize worth having. As Vice-President Dick Cheney noted in 1999, when he was still running Halliburton, an oil services company, the Middle East is the key to preventing the world running out of oil.

Now, unnoticed by most amid the furore over civil war in Iraq and the hanging of Saddam Hussein, the new oil law has quietly been going through several drafts, and is now on the point of being presented to the cabinet and then the parliament in Baghdad. Its provisions are a radical departure from the norm for developing countries: under a system known as “production-sharing agreements”, or PSAs, oil majors such as BP and Shell in Britain, and Exxon and Chevron in the US, would be able to sign deals of up to 30 years to extract Iraq’s oil.

PSAs allow a country to retain legal ownership of its oil, but gives a share of profits to the international companies that invest in infrastructure and operation of the wells, pipelines and refineries. Their introduction would be a first for a major Middle Eastern oil producer. Saudi Arabia and Iran, the world’s number one and two oil exporters, both tightly control their industries through state-owned companies with no appreciable foreign collaboration, as do most members of the Organisation of Petroleum Exporting Countries, Opec.

Critics fear that given Iraq’s weak bargaining position, it could get locked in now to deals on bad terms for decades to come. “Iraq would end up with the worst possible outcome,” said Greg Muttitt of Platform, a human rights and environmental group that monitors the oil industry. He said the new legislation was drafted with the assistance of BearingPoint, an American consultancy firm hired by the US government, which had a representative working in the American embassy in Baghdad for several months.

“Three outside groups have had far more opportunity to scrutinise this legislation than most Iraqis,” said Mr Muttitt. “The draft went to the US government and major oil companies in July, and to the International Monetary Fund in September. Last month I met a group of 20 Iraqi MPs in Jordan, and I asked them how many had seen the legislation. Only one had.”

Blood and Oil

We haven’t yet seen the final bill, which is due to be rammed through this week, but the draft, familiar to the oil majors and the IMF, but not apparently to most Iraqi MPs, contains things which give rise to understandable concern. From the Independent, who have seen a copy of this quasi-secret draft:

“A Foreign Person may repatriate its exports proceeds [in accordance with the foreign exchange regulations in force at the time].” Shares in oil projects can also be sold to other foreign companies: “It may freely transfer shares pertaining to any non-Iraqi partners.” The final draft outlines general terms for production sharing agreements, including a standard 12.5 per cent royalty tax for companies.

It is also understood that once companies have recouped their costs from developing the oil field, they are allowed to keep 20 per cent of the profits, with the rest going to the government. According to analysts and oil company executives, this is because Iraq is so dangerous, but Dr Muhammad-Ali Zainy, a senior economist at the Centre for Global Energy Studies, said: “Twenty per cent of the profits in a production sharing agreement, once all the costs have been recouped, is a large amount.” In more stable countries, 10 per cent would be the norm.

While the costs are being recovered, companies will be able to recoup 60 to 70 per cent of revenue; 40 per cent is more usual. David Horgan, managing director of Petrel Resources, an Aim-listed oil company focused on Iraq, said: “They are reasonable rates of return, and take account of the bad security situation in Iraq. The government needs people, technology and capital to develop its oil reserves. It has got to come up with terms which are good enough to attract companies. The major companies tend to be conservative.”

Dr Zainy, an Iraqi who has recently visited the country, said: “It’s very dangerous … although the security situation is far better in the north.” Even taking that into account, however, he believed that “for a company to take 20 per cent of the profits in a production sharing agreement once all the costs have been recouped is large”.

Immediate Value

So, it appears that the bloody shambles the incompetents in Washington have made of Iraq is turning out to be advantageous for at least some, those oil companies who will obtain PSAs at extremely favourable terms, justified by the risks implied by the horrific security situation in Iraq.

PSAs in which shares are, you will notice, tradable and hence can become the subject of very profitable speculation before a barrel of oil is pumped under their terms. Consider for a moment the value to a speculator of a share in the long-term rights to exploit some of the largest and potentially most profitable reserves of oil left on the planet. These deals are very long term, so the security situation may improve, in which case such shares would become far more valuable as a result, and and a canny speculator can bet profitably against that possibility.

The enormous and rapidly growing (as we use up active reserves) potential value of these PSAs could potentially underwrite, if I’m not mistaken, a hugely valuable speculative market.

In addition, it’s very likely that large additional supplies exist in the relatively unexplored regions, regions which seem to have been of great interest to Cheney’s Energy Task Force. So the potential exists for proving out those fields and radically increasing the reserves controlled by the relevant oil majors (along with their share prices and executive stock options) Those parts of Iraq are lightly inhabited, so at least as far as exploration goes, if not production, the security issue isn’t too much of a worry.

Future Value

Of course, at some point, let’s say in a decade or so, the necessity of actually pumping that oil will start to become overwhelming. It’s the last really big pool of relatively unexploited, easy to access, high quality oil on the planet. There are plenty of places with a very great deal of heavy oil, Venezuela being one obvious example, but that costs so much more to turn into something useful.

Ultimately though, someone is going to want to pump that oil. So the question is, now that they’ve got these deals locked in for a few decades, or rather assuming all this gets rammed through the Iraqi parliament on schedule, just how are they going to actually lift the oil?

Presumably security is a key concern. From the point of view of the oil companies, the motivation is to secure pipelines and infrastructure, but not necessarily to do anything particularly positive about the overall Iraqi security situation unless it happens as a side effect of their primary concerns.

A couple of things now seem very obvious. The US may withdraw troops from the cities, but it’s certainly going to want to maintain large bases from which to deploy its high-tech super weapons in defence of all that precious oil. I also doubt that any of this comes as a surprise to James Baker’s ISG or to Dick Cheney, so perhaps the US debate about Iraq can usefully be interpreted in terms of the specific commercial problem of exploiting Iraq’s oil. An issue that seems to have faded from the mainstream discussions about Iraq, but which is no doubt foremost in the minds of at least some US leaders.

There’s a lot of room for speculation here, and I’d be very interested in any comments on how the oil companies might think this could be best achieved.

A cynical person might for example, look at what happened to the PSAs negotiated after the fall of the Soviet Union with a weak Russian government and which have recently been overturned by Putin’s government, which has just re-negotiated much more more favourable deals now that it’s strong enough to do so.

A cynical person might conclude that from the oil companies point of view, a weak and divided Iraqi government, terrified that if the US doesn’t protect them from their own citizens, they and their families will be tortured to death by angry zealots from a multitude of rival militias, gangs and whatnot, might actually be advantageous to the oil companies, who would therefore have no particular reason to want the overall security situation in Iraq resolved as long as they’re able to lift and ship ‘their’ oil. After all, while their cut remains at 70% of all those hundreds of billions of dollars worth of oil, they can afford to spend a bit on pipeline security and so on. Whereas if the Iraqi government ever became strong enough and the country stable enough to tell them to fuck off as Putin has done recently, they’d be making considerably less money on the deal.

Further thoughts on Bush’s proposed troop surge

What's around the corner?

Have you seen this jolly little bit of news in this morning’s Sunday Times?

“Israel plans to nuke Iran”

In the light of this, I see another possible explanation or two for the apparent confusion over the military objectives behind the planned ‘troop surge.’

Even if, as seems likely the ‘Israel to nuke Iran’ story is a deliberate ‘intelligence source’ leak via the Murdoch press intended as part of somebody or other’s media disinformation campaign, it’s still demonstrating just how deranged things are in that region, in no small part due to neo-conservative foreign policy adventures, which appear to still be ongoing and dedicated to the challenge of making things worse. The lack of any announcements of a coherent plan for the use of these troops makes me wonder if they’re actually being sent to deal with the expected backlash when the US and/or Israel attacks Iran. After all, the neo-cons handed Iran a massive strategic gain by making such a mess of Iraq that they had to let a bunch of pro-Iranian parties form a government. They can’t be at all happy about that, so I really wouldn’t assume they’ve finished causing disasters yet.

Another plausible provocation would be the attempt to privatise Iraq’s oil, another as-yet unrealised neo-con objective, that they’re apparently going to try to ram through in the next few weeks.

Blood and Oil: How the West will profit from Iraq’s most precious commodity

Perhaps this is why Bush intends to send extra troops but is being extremely vague about what they’re supposed to be doing? If he’s expecting massive unrest to kick off because of something he plans to do, e.g. this, or bombing Iran or something, then it would make sense to send more troops (plus the extra carrier battle group that just arrived) but he’d have a hard time explaining coherently exactly why he’s sending them, because it wouldn’t necessarily look to good to say ‘we’ll need the extra forces because we plan to annoy the Iraqis even more’

The neo-cons are going to be tied up pretty soon by subpoena-waving Democrats dragging all kinds of horrible mediapathic skeletons out of the White House’s closets in preparation for the 2008 elections, so if they want to privatise Iraq’s oil, start a war with Iran and so on in order to tick off the last few items on their ‘must do’ list of global foreign policy disasters, then this is probably their last chance at act. Once the US public has seen the traditional ‘Last helicopter taking off from the US Embassy roof’ scene played out in Baghdad’s Green Zone, which can’t be more than a couple of years away now, the chance of getting them onside with any new foreign policy adventures is likely to be over for another generation.

On those assumptions it’d make a lot of sense for them to try to get their last few acts of irresponsible craziness in fast and hence also to reinforce as far as possible before the shit really started to hit the fan. Once they’ve kicked it all off, it doesn’t really matter what the Democrats do, because they’ll be committed. As the Oxford Study Group point out, it’s a lot easier to start a war with Iran than to finish it.

Although US or Israeli attacks would severely damage Iranian nuclear and missile programmes, Iran would have many methods of responding in the months and years that followed. These would include disruption of Gulf oil production and exports, in spite of US attempts at pre-emption, systematic support for insurgents in Iraq, and encouragement to associates in Southern Lebanon to stage attacks on Israel. There would be considerable national unity in Iran in the face of military action by the United States or Israel, including a revitalised Revolutionary Guard.

Indeed for a variety of reasons, a war with Iran would possibly be saleable to the US public once they’d actually started it, despite them being totally fed up with the war in Iraq. For a start there is all that unpleasant holocaust denial stuff Ahmadinejad keeps coming out with. Then there’s the US Embassy hostages humiliation, which even liberal Americans seem to be quite angry about decades later and finally, something that’s almost an existential issue for the US. If the neo-cons did manage to start their war with Iran, most of the likely scenarios would put oil prices way up, which means intolerably high fuel costs.