Brace for the oil, food and financial crash of 2021
80% of the world’s oil has peaked, and the resulting oil crunch will flatten the economy
New scientific research suggests that the world faces an imminent oil crunch,
which will trigger another financial crisis.
Solution : 85 mph Water-Gas Hybrid Kit
The HSBC research note
Last September, a few outlets were reporting the counterintuitive findings of a new HSBC research report on global oil supply. Unfortunately, the true implications of the HSBC report were largely misunderstood.
The HSBC research note — prepared for clients of the global bank — found that contrary to concerns about too much oil supply and insufficient demand, the situation was opposite: global oil supply will in coming years be insufficient to sustain rising demand.
Yet the full, striking import of the report, concerning the world’s permanent entry into a new age of global oil decline, was never really explained. The report didn’t just go against the grain that the most urgent concern is ‘peak demand’: it vindicated what is routinely lambasted by oil majors as a myth: peak oil — the concurrent peak and decline of global oil production.
The HSBC report you need to read, now
INSURGE intelligence obtained a copy of the report in December 2016, and for the first time we are exclusively publishing the entire report in the public interest.
Read and/or download the full HSBC report by clicking below:
Headquartered in London, UK, HSBC is the world’s sixth largest bank, holding assets of $2.67 trillion. So when they produce a research report for their clients, it would be wise to pay attention, and see what we can learn.
Among the report’s most shocking findings is that “81% of the world’s total liquids production is already in decline.”
This heightens the risk of a major global oil supply shock around 2018 which could “significantly affect oil prices.”
“Even in a world of slower oil demand growth, we think the biggest long-term challenge is to offset declines in production from mature fields. The scale of this issue is such that in our view rather there could well be a global supply squeeze some time before we are realistically looking at global demand peaking.”
Four Saudi Arabias, anyone?
The HSBC report examines two main datasets from the International Energy Agency and the University of Uppsala’s Global Energy Systems Programme in Sweden.
The latter, it should be noted, has consistently advocated a global peak oil scenario for many years — the HSBC report confirms the accuracy of this scenario, and shows that the IEA’s data supports it.
Technological innovation exacerbates the problem
Much trumpeted improvements in drilling rates and efficiency will not make things better, because they will only accelerate production in the short term while, therefore, more rapidly depleting existing reserves. In this case, the report concludes:
“… the decline-delaying techniques are only masking what could be significantly higher decline rates in the future.”
This does not mean that peak demand should be dismissed as a serious concern. As Michael Bradshaw, Professor of Global Energy at Warwick University’s Sloan Business School, told me for my previous VICE article, any return to higher oil prices will have major economic consequences.
The HSBC report takes the position that prices will have to rise eventually, because the drop in investment due to declining profitability amidst the current glut will make a supply squeeze inevitable. Better and more efficient drilling creates a glut now: but it also accelerates depletion, meaning that the lower prices and oil glut today is a precursor of tomorrow’s higher prices and supply squeeze.
Price spikes, economic recession
But what if the HSBC supply forecast is correct?
Firstly, oil price spikes would have an immediate recessionary effect on the global economy, by amplifying inflation and leading to higher costs for social activity at all levels, driven by the higher underlying energy costs.
Secondly, even as spikes may temporarily return some oil companies to potential profitability, such higher oil prices will drive consumer incentives to transition to cheaper renewable energy technologies like solar and wind, which are already becoming cost-competitive with fossil fuels.
The demise of fossil fuels
The HSBC report’s specific forecasts of global oil supply and demand, which may or may not turn out to be accurate, are part of a wider story of global net energy decline.
A new scientific research paper authored by a team of European government scientists, published on Cornell University’s Arxiv website in October 2016, warns that the global economy has entered a new era of slow and declining growth. This is because the value of energy that can be produced from the world’s fossil fuel resource base is declining inexorably.
Crisis convergence
Seen in this broader scientific context, the HSBC global oil supply report provides quite stunning confirmation that for the most part, global oil production is already in post-peak. That much is incontrovertible, and derived from industry-validated data.
HSBC believes that after 2018, this is going to manifest in not simply a global supply shock, but a world in which cheap, high quality fossil fuels is increasingly hard to find.
Exxon: 20% of global oil & gas reserves may be WIPED OUT
6 Aug, 2020 14:41
After a grim Q2 season for Big Oil, the world’s third-most valuable energy company is warning that 20% of the world’s oil and gas reserves may no longer be viable.
According to Exxon Mobil, one-fifth of the world’s oil and gas reserves will no longer qualify as “proved reserves” at the end of this year if oil prices fail to recover before then.
