Tawei Liao

United States military on peak oil

For the first time ever, I believe, the United States military publishes a report that contains the word “Peak Oil”. The United States Joint Forces Command (USJFCOM) publishes the Joint Operating Environment (JOE) report each year.  The report is “a strategic framework that forecasts possible threats and opportunities that will challenge the future joint force.” The full report is here.  I have included a copy of it below.

The report is a boiler plate of the usual trends that will affect United States security.  Forces like economic challenges, climate change, globalization, demographics, etc can all have an effect on the US military.   The interesting part is on page 26 of the report:

To meet even the conservative growth rates posited in the economics section, global energy production would need to rise by 1.3% per year. By the 2030s, demand is estimated to be nearly 50% greater than today. To meet that demand, even assuming more effective conservation measures, the world would need to add roughly the equivalent of Saudi Arabia’s current energy production every seven years.

Really?  We need to add a new Saudi Arabia (10 million barrels per day) every seven years?  We are barely keeping up with demand.  That is why oil is still trading above $80 a barrel while the world is recovering from a severe recession.  The energy summary is on page 31:

To generate the energy required worldwide by the 2030s would require us to find an additional 1.4 MBD every year until then.
During the next twenty-five years, coal, oil, and natural gas will remain indispensable to meet energy requirements. The discovery rate for new petroleum and gas fields over the past two decades (with the possible exception of Brazil) provides little reason for optimism that future efforts will find major new fields.

…

By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 MBD.

Think about what was just said there.  We need to add 1.4 million barrels per day to keep up with demand.  But we’re not doing that.  And by 2015 we could be short 10 million barrels per day.  The supply and demand curve ALWAYS match.  We cannot consume more oil than we can produce.  To maintain current oil prices, new oil must be brought online.  If the new supply just is not there, the price will rise dramatically to bring down demand.