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Energy Insights:107: Big Oil Strike in Brazil has Tongues Wagging, but We Continue Towards Peak Oil

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107: Big Oil Strike in Brazil has Tongues Wagging, but We Continue Towards Peak Oil



Since the 1980's, the world has discovered less oil than it has consumed every year.

Editor's note: This was translated from the Spanish original by Miss Machetera, proprietor of the Machetera blog.

The world press, especially the Western press and specifically the financial press, has jumped all over the headlines of the discovery of a huge oil field in Brazil's continental shelf.

It's a concession within a series of blocks or zones earmarked for exploration, over which very little technical data has been offered and which apparently involve the Brazilian


company Petrobrás, the Spanish company Repsol-YPF and the British concern, British Gas. The press in each country involved (an involvement created when the head offices of these enormous multinational firms are in a certain country and have close links with political power in their country of residence) has exulted in the discoveries, as something truly impressive. So much so, that stock markets have experienced significant fluctuations.

Naturally, if verified, it would be the greatest discovery in several decades and would skew, to a certain extent, the observed tendency toward a steady but inexorable decline in the volume of the world's discovered petroleum, while worldwide consumption continues its relentless increase.

Peak Oil and its Impact

This trend was emphasized a decade ago by Colin Campbell and Jean Laherrere, two important oil geologists, who published a well-known article titled "The End of Cheap Oil," in Scientific American, which touched on the problem of the arrival at the maximum limits of production of a substance as vital as petroleum, and what it would mean for humanity, given that logically and obviously, oil's geological and physical limitations are finite; its underground formation taking tens of millions of years under geologic pressure and temperature, but its exhaustion by man taking place in barely two hundred years, with the proverbial voracity of an industrial capitalist society in perpetual growth.

A basic rule of thumb, for which no engineering or serious economic knowledge is needed, is that undiscovered petroleum can't be consumed. It's known that plenty of oil producing countries have gone through gradual growth in their discoveries of petroleum deposits, until they've reached their peak. As a consequence of not finding any more oilfields, or of finding smaller ones and producing (actually, extracting) more than what is discovered, the peak of production comes some 30 or 40 years afterwards.

We know that this has happened in the United States and in the North Sea, in Kuwait, in Indonesia (a curious case, continuing to be a member of OPEC through incomprehensible inertia despite the fact that it is already a net oil importer) and dozens of other countries.

We're already seeing that the world as a whole, reached the peak of its discoveries in the 1960's. Yet we haven't wanted to draw the conclusions from this relevant fact.

Scientists and experts who do want to draw those conclusions, created the Assocation for the Study of Peak Oil (ASPO,, which went on to extend its studies to the analysis of the arrival of peak natural gas production worldwide, coming a few years or decades after that of oil.

The data put forth at the time has been updated as the industry has released its own jealously guarded data, but without any significant variation in the scientists' predictions that we are at or near oil's peak (between now and 2010) and the peak for natural gas will come a decade or two later, in accordance with the quantities that are going to replace petroleum where functionally possible.

In Spain, ASPO is represented by the Association for the Study of Energy Resources (Asociación para el Estudio de los Recursos Energéticos - AEREN), which publishes studies and reports at its website: ASPO already counts on resources from groups in a variety of countries, all of them nonprofit, including those of such importance as the United States, China, the United Kingdom, France, Spain, Portugal, Italy, Ireland, Belgium, Norway, Denmark, Sweden, South Aftica, Egypt, Japan, Switzerland, Hungary, Finland, Australia and Holland.

This group of scientists and geologists has as its unique nexus, its concern for humanity as this historic moment comes about. For this societal model, the moment when the oil and gas runs out is not as important as the one that comes much earlier; the moment when geology and physical reality combine to extract resources at the maximum level, followed by an inexorable decline in production which must clash with economic growth (and therefore the energy consumption demanded by an industrial capitalist society). This type of growth is imagined to be automatic and infinite, without alternative energies in sight to fill the growing abyss created by a forseeable drop in production.

More than 55 of the world's oil producing countries have already passed this moment respectively, and can be found with declining production or in clear decline. This decline is in the approximate form of a bell curve, with slight variations due to certain relevant political or economic events that may affect its shape; in any case, the end of stable or flat production never comes as a vertical drop. But the peak moment is very delicate and important for humanity. Therefore, it's also known with some accuracy, how fast production can fall, through the dwindling deposits of countries already in decline: between 4 and 12% less for every passing year, depending on the field and above all, the more or less rational or irrational form of exploitation it has experienced.

M. King Hubbert was the first geologist to detect, in his own country, that oilfield production followed a bell curve. Observing the tendency of individual wells and oilfields in various places throughout the U.S., he deduced as early as the 1950's that the United States, which was then the world's largest producer, consumer and exporter, would reach its production peak around 1970.

Although Hubbert was the object of much ridicule and criticism during the same period when films such as "Giant," about an apparently unlimited and abundant fuel supply, were being shown in theaters, a few years after 1970, both the accuracy of his prediction and the curve as a predictive model for the behavior and limitations of a limited and finite production, were verified. Neither the entire technological nor financial power of the United States (paper currency cannot produce physical assets where none exist) have been able to avoid the fact that today the United States finds itself in the unfortunate position of having to import around 70% of the oil it consumes; a percentage that increases visibly every year.

After Hubbert, other techniques such as "linearization" of the Hubbert curves or so called "skimmed curves" have been developed, and geologists and economists still argue over their degree of precision and predictive value, while oil prices continue to rise and the resource demands increasing effort to extract.

The imminent arrival of peak oil production will be the first historical moment in which fuel production diminishes, globally and without remission. There will be no corner of the world left to explore and provide hope of further production, or in any case, to bridge the growing gap between growing demand and shrinking supply.

For this reason, the discovery of a "gigafield," a gigantic oilfield in Brazil, has brought recriminating, or at least condescending glances at the ASPO scientists, in the sense that much more remains to be discovered and that their predictions, categorized by many as "catastrophic," were wrong. Nothing could be further from the truth. A "gigafield," according to the definition of those who coined the term, is a field that has between 500 million and a billion barrels of oil, from which a flow of at least 1 million barrels a day can be extracted.

ASPO has always asserted that the world's oil resource supply has not been completely discovered. In general terms and with the profound knowledge that has come from more than 150 years of scientific exploratory activity, much has been learned. Exploratory technology has improved considerably, and geologists and geophysicists know with a fair amount of accuracy which areas may have "possibilities" (prospects) where money can be directed at exploration, although there may be rare exceptions that simply confirm the rule. ASPO says that it believes that a figure of around 10% of all petroleum discovered so far and classified as proven reserves, remains to be discovered.

Given that the proven reserves are around 2 billion barrels, of which 1 billion has already been extracted, if the latest discovery in Brazil proves to be confirmed, we would be talking about approximately 6% of what remains to be discovered; although calculating an exact number is an exercise in futility. What matters are the orders of magnitude of the known major oil deposits around the world; an order of magnitude impossible to escape.

Developments of recent decades toward unconventional oil provide proof. According to some press releases, they concern the world's third largest oil reserve and could reach 33 billion barrels.

Since the 1980's, the world has discovered every year less oil than it has consumed, with the difference having been enlarged and reaching such an outrageous level in recent years that almost no-one wants to think about it. In recent years, despite a considerable increase in exploratory activity and the application of the most up-to-date quadra-dimensional seismic technology, annual discoveries amounted to between 4 and 6 times less than what was being consumed at the same time from known and proven reserves. That is, in the words of the geologist Mariano Marzo, we are pawning our grandmother's jewels in order to throw the proceeds away.

To put the figures in their proper context, something that the financial press tends to blur at its convenience, the maximum supposed quantity of the discovery in Block BM-S-9, known as Carioca, 2,000 meters under the Atlantic Ocean, would represent one year's worldwide consumption of petroleum, well above the 30 billion barrels. This is more or less the result when the 85 million barrels produced as a daily average are multiplied over 365 days.

Also, to clarify the importance of the oil discoveries, certain characteristics must be considered that are not always emphasized by the press, but are essential to achieving an accurate valuation.

1. Conventional and Unconventional Oil

So-called "conventional" oil is that which is generally found underground or very close to a coastline at a depth of less than 500 meters under the water's surface, in accessible zones and reasonable depths and with certain qualities that can later be processed with a reasonable degree of certainty in refineries and existing installations. Since 2006, this oil, which represents around 66 million barrels of daily production, has reached its peak and is at a plateau with a clear downward trend. The decline is compensated for only with great difficulty by what geologists call "unconventional" oil; that which has begun to be drilled in less accessible and more costly places in order to satisfy a demand that conventional oil cannot cover.

Thus, in 2007, "unconventional" oil accounted for more than 22% of worldwide petroleum production: 19 of the 85 million barrels produced daily come from the following:

• 4.5% of some 3.9 million barrels daily from heavy or extra-heavy crude (Canada's tar sands, oil shale such as that of Venezuela and others).• 7.6% of some 6.5 million barrels daily are from deep water. Deep water means a depth of more than 500 meters in seas or oceans which demand sometimes astounding technological force. This is the case of the platforms in the Gulf of Mexico or the gulf of Guinea and that are now claimed off the coast of Brazil.

• 1%, or 900,000 barrels daily are extracted from polar regions. It is considered "polar" oil if it must be extracted above the Arctic Circle, given the extreme difficulties of the attempt.

• 9% or some 7.7 million barrels daily are the result of liquefication of certain combustible gases in order to give them a more versatile use. This is very important, because it shows the other great weakness of conventional oil and the worldwide demand that drives the liquefied gas refineries with increasing force, through costly and complex processes so that the resulting liquids can be diverted to a society that demands more and more fuel of all kinds, but of liquid more than any other, which accounts for more than 90% of transportation worldwide.

This is a clear indication of the growing difficulties the oil sector has in finding fields in more accessible areas and how geologic limits have forced the industry to go to increasingly difficult and inaccessible places.

2. Calculus of Probabilities

In today's world of petroleum production and reserves there are several important additional factors to consider. In the first place, the product's valuation. The industry describes reserves as P4, P50 or P95, according to the theoretical probability, in percentages, of finding supposed oil. For example, the extremely optimistic U.S. Geological Survey (USGS), estimates that proven reserves could be as much as 3.8 trillion barrels, but qualifies that by saying that there is only a 5% probability of this. There is a 50% probability of 3 trillion barrels, and a 95% probability of 2.2 trillion barrels (very close to the two trillion calculated by most sources).

Probabilities are also described as P, PP or 2P, and PPP or 3P, which means respectively, Proven, Proven + Probable, and Proven + Probable + Possible, in decreasing categories of probability assigned to exploration or development.

Another way of classifying petroleum is the following: "Oil Initially in Place" (OIIP). Still another is the recovery factor which will give an idea of the extractable resources, or Ultimately Recoverable Resource (URR) which are data pertaining to geologic values that help clarify the state and viability of recovery of underground resources. Suffice it to say that for reserves in situ, for physical reasons (porosity, type of rock, pressure, etc.) the recovery percentages for many wells do not surpass 35 or 40% of the underground total.

In the past, geologists and oil businesses tended to be very conservative when it came to the valuation of their discoveries and generally estimated less than they thought they could extract, once the field's dimensions and structure had been well measured. This was done by carrying out the exploration in the zone whose geological formation seemed promising, and once something had been discovered in one of the drilled areas (a "dry hole" if nothing was discovered), quality, density, depth, type of rock, width of the field and various other data were measured. Then they went on to drill the surrounding area, in order to establish the field's perimeter. If the field was of a certain size, many exploratory holes were drilled before delimiting the field, in order to see if it was fractured, contiguous or not, and other questions. Finally it was catalogued as a "proven reserve," leaving possible interconnecting or nearby spaces that had not been drilled as "probable."

The nature of "unconventional" oil, such as that in Brazil, or the polar regions, is that it is breaking with these best practices of delimitation, declaring with certainty and with the greatest possible precision a figure that is merely possible, due to the stratospheric economic and energy costs of marine or polar exploration platforms. There is also the factor of industry pressure to make increasing appearances before the financial world in order to continue to have the necessary credibility to acquire funds.

The world suffers today, paradoxically, more than in the past, from confident publications about the certainty of prospecting, discoveries, level of exhaustion in existing reserves and so on, while the explorations are being handled exclusively by the Seven Sisters - the largest capitalist oil businesses whose technological supremacy is disputed by practically no-one. What a time to be longing for a measure of scientific and accounting seriousness from the big multinational oil companies!

3. Second Helpings were Never Very Good

It should be noted that the type of petroleum extracted brings with it various difficulties when the time comes to turn it into liquid fuel for the market. The quality of the resource is always essential.

In a recent debate between the economist Michael Lynch and the representatives of ASPO USA, the argument supporting their analysis was that generally, given that man has a certain intelligence, the richest fields tend to be exploited first; in other words, the largest, the least buried, with the most internal pressure (this saves quite a bit on pumps and pressure injections) and the least contaminants, like sulfur, which is measured in varying degrees of acidity or density (light or heavy crude) in grades assigned by the American Petroleum Institute (API - which sets the measurement standards) that refer to its density in comparison to the density of water.

These are important factors, because they demand more work and expense in refineries that may not be prepared to handle them. It demands increasing quantities of energy to result in the same quantity of combustible fuel at the gas station, at the service of society, when dealing with fields of poorer quality which are what remain.

It should also be remembered, although there are economists who have denied the basic principle that peak oil production occurs more or less toward the middle of the resource's possible extraction; worldwide, as we've already seen, the second half of the petroleum era will take place increasingly through oilfields further away, deeper and smaller, demanding the same maneuvers of prospecting machinery to obtain less fossil fuel. That is, by definition the oil is less accessible, of worse quality, and demands a greater economic expenditure and above all, energy, leaving less net energy delivered to society in the end, for the same effort.

If on the one hand the technological advances are admittedly impressive, on the other they indicate the fragility that comes with them. Let's look at some examples.

Improved Techniques

In the large fields already in existence (called "mature," meaning they are old and well exploited) various techniques are being used to try to extract the maximum possible at the greatest possible rate of extraction, because the market has a fierce demand that is beginning to exceed availability, as is openly acknowledged; for example in the El País daily newspaper on April 13, which reads:

The demand for crude oil is expected to grow to an average of 87.5 million barrels a day, according to the IEA (International Energy Agency) which at the present time does not believe it necessary to go to strategic reserves in order to reduce the price. The oil producers believe that in the present situation it's impossible to imagine that the oil supply would reach 95 million , because of the simple fact that there are not sufficient reserves or production capacity. The result is that demand may exceed supply capacity sooner rather than later.

In these conditions, the large producers resort to very sophisticated and expensive (always speaking in energy rather than economic terms) techniques, with mixed results. Among them, the "Enhanced Oil Recovery" type; improvements in the recovery of oil it was said would end up remaining underground because it costs more money and energy to extract than it returns.

Horizontal drilling to arrive at layers that previously couldn't be reached is one of these. Another is the injection of gas or water, usually saltwater, in the wells in order to augment decreasing pressure that results from the extraction of a resource from a space. Apart from the extra cost assumed by these complex techniques, in some cases they are proving that in the long run, they provide bread for today at the expense of tomorrow's hunger. The multimillionaire Texan Matthew Simmons, a specialist in oilfield investing and president of Simmons International, suggests that the "water cut" or level of water injected into some of Saudi Arabia's important oilfields, while initially allowing an increased recovery rate, once it reaches a certain level in the oilfield, can contaminate (and indeed has contaminated) the drilled holes and lead to a sudden fall in production.

Oil Mining Instead of Drilling

The extraction of heavy oil in Canada or Venezuela is demanding enormous quantities of water and natural gas and even hydrogen, which comes from treating natural gas with steam in order to perform the necessary "lightening" process to extract fuel (obtaining a molecular structure shorter than that of heavy crude) in a form ready for the commercial market, so as not to strand around a billion of the world's internal combustion engines, designed to work with refined fuel.

This, without even mentioning the environmental problems posed by these gigantic transfers of material and the resulting muddy water, which can be seen from space by satellites. The limits of such production are set by the difficulty of extracting a sufficient quantity at the necessary speed, by the availability of water and natural gas and the low net return.

According to Professor Charles A.S. Hall, at the University of Syracuse in the state of New York, and one of the worldwide authorities on the study of net energy (that which is obtained after subtracting the cost of energy to obtain it), conventional U.S. oil in the 1930's had an energy rate of return of 100 to 1 (in other words, an expenditure equivalent to one barrel of oil for every hundred barrels of oil put at society's disposal). Today, U.S. oil has fallen to a rate of one barrel's energy equivalent for every 8 to 20 barrels delivered from an oilfield. Heavy oil such as that in Canada remains below that considered a "minimal level to sustain civilization," that according to him, is a rate of five to one, for all the talk of hundreds of billions of "potential" barrels in reserves made up of tar sands or oil shale.

A mordant comment is attributed to Sheik Yamani, Saudi Arabia's oilfield manager, criticizing those who would have us worry about the gradual exhaustion of fossil fuels, something the sheik refuses to acknowledge even peripherally, that "the Stone Age didn't end because the rocks ran out." He has a point. The age of oil will come to an end and huge quantities of oil will remain underground, without a doubt. But printed banknotes and technologies will not be enough to extract them, because the first don't pump and the second consume more energy (which was the whole point to begin with) the more advanced and complex they are, and it has been so on a global scale ever since we've had industry at our disposal.

This is a very important aspect, essential to emphasize, because there are many people trained in classical economics, amongst whom can sometimes be found engineers, for whom it is very difficult if not actually impossible to understand that if the extraction of a unit of energy resource costs more than this unit's value to extract, the resource may exist, but it will remain underground through the simple laws of geology and physics, which have nothing to do with money spent to investigate or extract it. That's how you get to oil at $20,000 a barrel; if it costs more than a barrel of energy to extract a barrel, the barrel will not be extracted. Although this would seem self-evident, it appears not to have entered the minds of many big thinkers.

Very Deep Water

In the case of deep water, it's impressive to see the technology that's been acquired by Petrobrás, a company that knows how to drill to depths that hardly any other business has managed.

Petrobrás said at the time that its Tupi oilfield, near to the newly discovered Carioca had some 6 billion barrels. But aside from doubts over the number of delimiting holes drilled which would grant the figure some credibility, the oilfield is found under more than two thousand meters of ocean water, another two thousand meters of salt layer and yet another two thousand of rock. In other words the drilling tubes have to extend more than six kilometers through very different media in order to arrive where the oil is.

For example, the ocean's depth makes it impossible to anchor a platform to the ocean floor, and even that would be subject to winds and currents. This demands a permanent expenditure of energy to maintain the platform with many and very powerful motors, which consume highly refined energy, not the crude oil that is being extracted through exactly the same vertical sounding at all times, in order to avoid breaking the extremely long tube. This is done with a lot of energy and sophisticated GPS controls. When there are storms, the rig has to be disconnected and put on standby, in order to avoid breakages, cutting production for a world that has no desire to stop its consumption for meteorological reasons.

Moreover, the enormous salt layer that must be traversed is in a viscous state at such depths, very corrosive against the material employed (not the normal deep-sea drilling tubes, because these depths require very special and costly tubes with enormous capacities of resistance) with the result that it is very difficult to penetrate. Finally, the fluid obtained 6,000 meters below has to be pumped to the surface. This is equivalent to 20 Eiffel Towers stacked one on top of the other [translator's note: or 13 and a half Empire State Buildings]. To obtain a flow of half a million barrels a day from this field, which would barely manage to cover a tenth of the annual fall in production after peak oil, would require many drilled holes at a depth of 6 kilometers, given the viscosity of the crude and the depth from which it must be pumped to arrive at the surface.

The recently announced Carioca field appears to be of a similar geologic structure, although the rambling and disjointed news that trickles out is more financially than geophysically related, and doesn't allow a clear glimpse of the underlying geography. As if that were not enough, Petrobrás' own news agency indicated on April 16, 2008 that:

Following the normal exploration schedule, on March 22, 2008, the company began to explore a second well, 1-BRSA-594-SPS (1-SPS-55) which is located in the smaller area of the block, but it has yet to reach the pre-salt layer. The ongoing exploratory activities include drilling new wells, long-duration formation tests and new geological studies to prove the range of the discovery.4. All that Glitters is not Black Gold

Ultimately, it seems that the announcement of this new discovery of 33 billion barrels at Carioca, some two hundred plus kilometers from the coastline off Rio and Sao Paulo, conforms less to a proven geologic reality than to the new game of "paper barrels" that feeds the stock market rather than the energy market; it's apparently necessary to play in both.

Harold Lima, the Brazilian manager issuing the statements that have stirred the speculative dust in stock markets worldwide and the values of the companies involved in the explorations, has disassociated himself from the statements' evident stock implications.

However, I believe it's useful to reflect on the societal model that triggers such voracious and immediate speculative action in the world's stock markets (tens of billions in euros on a day of frantic movement) on the basis of barely tested information. This speaks volumes, none of it good, about the general state of the social system in which we are immersed, with sharks willing to eat everything up to and including the sucker fish that are meant to clean them, at the least opportunity.

This fever over "paper barrels" happened before in the middle of the 1980's when Kuwait in particular, taking advantage of OPEC's rule for allocating quotas which depended on declared reserves, presented itself at one of the organization's meetings (at that time the war between Iraq and Iran was in its heyday) and said that it suddenly had twice the reserves it had reported up until then. The rest of the OPEC membership, instead of throwing up a fuss and demanding proof of geologically tested explorations, swallowed the tale and Kuwait walked out of the meeting with the largest quota on the market.

But the joy was short-lived. In a couple of years, the rest of the OPEC countries were appearing at successive meetings with increasing declarations about their own oil reserves, of the same size and bulk percentage as that of the Kuwaitis, and equally doubtful exploratory justification. The result was that the OPEC production quotas returned to where they began, but with all the members in a brotherhood of mutual deception that no-one dared to put in question.

These overstatements were calculated by Colin Campbell to be not less than some 200-250 billion "paper barrels," that today are officially counted as part of the almost trillion barrels of reserves remaining on the planet. Almost a quarter.

To make matters worse, the figures countries give each year on their oil reserves appear untouchable, unchangeable, despite the fact that they continue to be extracted continuously according to well known rhythms. Hardly any are declaring less reserves each year. It's a kind of miraculous multiplication of loaves and fishes because such "stability" does not correspond with the discoveries resulting from serious exploration. The secrecy is tremendous. And there's a formal excuse and a real reason for this departure from reality.

The formal excuse is that the oilfields are experiencing the famous "reserve growth," that is, growth in the proven reserves that were initially declared. Given the secrecy of the majority of the sources, it's impossible to verify if this is true or false.

It may be that some cases were certainly founded on the conservative estimates of the good old professional geologists of yore, who were not under the kinds of political and economic pressure from their supervisors that their counterparts face today, and when it came time to declare the results of their work, always estimated the discoveries toward the low end.

It also could happen that some technological improvements have actually increased the percentage that was initially believed possible to extract. But the fact that the reserve figures for each country, given by the International Energy Agency (IEA) or for example, British Petroleum's annual estimates, continue to remain constant (neither cold nor hot, but always at zero, as the joke goes) in many cases, is very suspect and likely to be an accounting based more on financial engineering and accounting artifice, than on geophysical reality.

The formal excuse mentioned, is that oil producing countries enjoy greater financial credibility. Quotas have ceased to be a problem for quite some time; now each country may produce more petroleum, if it cares to. The question is whether you can. The only country that seemed to be able to put additional barrels on the market quickly and in a sustained manner, if necessary, was Saudi Arabia, and now even this great totem is in question. Therefore, if the credibility that comes from a patrimony of mortgageable oil deposits ("collateral" in financial terms) can be used to access so much more credit in the international financial system, the declaration of more reserves than one has, is useful to convince worldwide monetary authorities that there's sufficient oil underground to back it, which judging from the visible evidence is not all that hard to do. A whole world of "subprime" energy mortgages dangles over the oil producing and exporting countries in these turbulent times.

The difference between oil and bricks is obvious, yet it appears that the economy of use is not capable of assimilating it: energy is not simply a consumer good, which is how it's treated in the markets;
energy is the imperative prerequisite that makes all other goods possible.

If there is a shortage of plastic, perhaps its price will rise and metals or cereals will not be affected. But if there is an oil shortage and furthermore, this occurs for the first time in the history of the new world (non plus ultra!*), every other good is necessarily affected, because oil is the lifeblood of our modern society. It accounts for 95% of transportation worldwide. It's 6/7 of the food consumed in Europe and 9/10 of that consumed in the United States (yes, we eat oil!) and the reason that food prices are shooting up so dramatically. Money can be printed. Barrels, no.

The Carioca reserve, if confirmed, would add another year of oil to the world's supply. It would mean only a few months delay in the arrival of peak oil (all liquids, not just the conventional kind), or if we have already reached that point, it would be a minor mitigating factor in the fall of worldwide production once the field's petroleum reaches the surface, no sooner than five years from now, and in no case without having already spent the equivalent of tens of millions of barrels of oil in energy which will have to be discounted against the future supply. Too slow to catch up with the speed with which existing energy resources are being exhausted.

Despite the fact that it is the largest oilfield discovery announced in the past 30 years and has engendered such fierce speculation, oil continues to dance with wolves at levels of $100-110 a barrel, accompanied by explanations from the economic media that would make you laugh if they didn't also make you weep: In February of 2002 a barrel was at $20. And now, as I write, it's approaching $110, more than five times as much. But in the world of flatland economics, there's always an explanation to justify any kind of upward jump as something circumstantial (an explosion in a pipeline, a strike in some sector, off-the-cuff declarations from an oil-producing country's leader, a hurricane near the ocean platforms, a guerrilla attack on some facilities, and so on). Curiously, there are never any explanations for why the price remains at a high level after the temporary event has passed, nor for why the trend over the last five years has been always upward, to the point of quadrupling over that period of time. There's no choice but to accept that perhaps it is something structural, not cyclical, in other words, that we are touching the untouchable limits of the physical world. There's no choice but to acknowledge that the system is finished. And we'd rather die than admit it.

The comedian Groucho Marx wanted the epitaph on his gravestone to read "Pardon me for not getting up." By way of farewell, I might add that this is what occurred to me when I saw the news about the supposedly impressive oilfield at Carioca.

Spanish author Pedro A. Prieto is Vice President of the Association for the Study of Energy Resources (AEREN) and co-editor of the Energy Crisis website (

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