Spencer Abrams, Secretary of Energy for Dubya’s first term, has a piece in today’s Financial Times where, although he doesn’t use the word, he pretty much acknowledges that peak oil is near:

Day of reckoning nears for energy markets

As high oil and natural gas prices continue to take their toll on the bottom lines of households and key industrial sectors, a great deal of speculation is taking place in the business and political worlds about energy markets.

Conventional wisdom and traditional market economic theory suggest high prices and profits will ultimately produce a correction on both the demand and supply side of the energy equation to bring prices back in line.

Yet…

The striking admission that follows, my commentary and more peak oil news below. Jump in!

Yet many believe this analysis is not applicable to today’s challenges. Credible experts are even predicting that oil will reach $100 a barrel. Count me on the side of those who believe that, without significant changes in energy policy, tight markets are likely to continue and potentially worsen.

Bush’s recent secretary of energy, who has not left the administration in bad terms, is effectively giving credence to those that warn of peak oil or at least of major upheavals in the oil markets, and saying that 3-digit oil prices seem realistic to him, in the view of "tight markets".

Tight markets is a codeword for "let’s produce more", of course (I’ll get back to that below), but it is also an acknowledgment that production is not keeping up, and saying that they could potentially worsen means really that supply will not keep up with demand.

He continues with a decent analysis of the current situation:

First, the prices of some fuels – such as petrol in the US – have not really kept pace with inflation. Moreover, much of the growth in demand is a function of cultural and social changes in developing countries that have made acquiring motor vehicles and appliances far more acceptable and desirable. This is why even higher prices and slower economic growth in the developing world are unlikely to lessen the growth of energy consumption there.

As a result, over the next 20 years worldwide oil demand is expected to increase to 121m-130m barrels per day from the current 82m-84m, electricity consumption to grow by 100 per cent and natural gas demand to increase by 67 per cent.

So:

• energy prices are still pretty low (quite a striking acknowledgment for an energy secretary, dontcha think)
• demand growth from developing countries is unlikely to be slowed down much by higher prices as the irresistible lure of cars and the accompanying "freedom" becomes accessible to more and more people.

So far, so good. The diagnosis is sound. Sadly, he goes on to focus exclusively on supply side solutions to the problem:

• make a major push for nuclear energy, including providing federal insurance coverage
• open to exploration and production the vast areas of the US that have been kept off limits for gas production
• stay in good terms with major suppliers like Canada, Mexico and Australia, and keep on talking with China
• develop clean coal technology and (almost as an afterthought) renewables and fuel cells.

There is sadly not a single word about conservation or energy efficiency in his text, not even as a throwaway line like he does for renewable energy. It’s pretty sad really.

Despite this (willful?) blindness, he must at least be commended for acknowledging the fact that the oil supply/balance has become critical. I find it also especially relevant that in his "supply side" proposals, there is not a word about developing new oil production. Is it an acknowledgment that oil is running out and it’s pointless to look for more? Does he really believe that nuclear, gas and coal are good enough substitutes to oil?

But hey, it’s a first step in the right direction. The more people like him, credible within the industry and with the wingnuts, acknowledge that we are heading towards a wall, the better it is, even if their proposed solution for the time being is to accelerate…

The next step will be to see them adopt the more moderate position of Kevin Drum (from Political Animal), who has done a pretty comprehensive series (summarized here) where he acknowledges the problem, uses the words "peak oil" and says that it is realistic to expect it to come in the next 5 to 30 years. He proposes reasonable steps, both on the supply and the demand side to help face that coming crisis, but he remains overall optimistic that we will find solutions in the end.

You may find, like I do, that Kevin Drum’s summary is too optimistic, but at least it acknowledges the situation and looks in the right places for short and medium term action. If the Republicans could be convinced to move towards his position, that would be a GREAT progress, and any step in that direction, like that made by Spencer Abrams, should be seen as a good thing, even as we despair of how much more needs to be done and how time is running out.

Because time IS running out, as this story from today’s same Financial Times makes clear:

Oil production in Russia stagnates for eight months

Russian oil production is heading towards its lowest production increase in five years after figures yesterday showed it stagnated for eight months running under the twin effect of the break-up of Yukos, the oil giant, and a tough new tax regime.

The slowdown to the end of May, greater than the most pessimistic forecasts only months ago, could force the Organisation of the Petroleum Exporting Countries to pump more oil to fill the gap. Opec is already pumping at record levels.
(…)
Russia’s oil production peaked at 9.42m b/d in September. A subsequent slowdown was partly attributed to the effects of the winter on Siberian production, but the spring has not improved the situation.

Figures from the energy ministry released yesterday put production last month at 9.33m b/d, roughly the same level as in the winter.
(…)
Analysts blamed the stagnant production on the Kremlin’s campaign against Yukos together with higher taxation of the oil sector which discouraged new investment.

In addition, analysts said that most of the so-called "low hanging fruit", a term used to describe oil that is relatively easy to recover at west Siberian oilfields, may now have been picked. Substantial investment would be required to develop new more remote and complex deposits.

Sibneft, the oil company that together with Yukos led a surge in production in recent years, has warned that future increases will be not so fast. Alexander Korsik, Sibneft chief operating officer, said that "now the time has come to spend money on exploration because there are no easy reserves left".

Most Russian oil companies have neglected exploration preferring to concentrate on projects that yield fast cash returns.

I may have pointed out already in a thread to this very scary assessment of Russian oil reserves by a US geologist, but today’s news certainly fit in that narrative: the production increases of the past few years were just a catching up phenomenon after the collapse of the early post-Soviet years, but they are unsustainable as fields are already pretty depleted and in bad conditions after years of sub-optimal Soviet exploitation, neglect and the more recent short term production boosting actions of the oligarchs. Russian oil production actually peaked in 1986:

(This slide from Colin Campbell‘ presentation at the recent UK Peak Oil conference)