I do not lie GM. That I leave to you.

The figures are easy to checked. They are not my figures but those of the
CDC.

The bad news is that AIDS is going to be eclipsed and soon too.

http://www.thebulletin.org/issues/2004/jf04/jf04cavallo.html

Oil: The illusion of plenty
By Alfred Cavallo

One hundred and twelve billion of anything sounds like a limitless
quantity. But in terms of barrels of oil, it's just a drop in the gas
tank. The world uses about 27 billion barrels of oil per year, meaning
that 112 billion barrels--the proven oil reserves of Iraq, the second
largest proven oil reserves in the world--would last a little more
than four years at today's usage rates.

In the future, 112 billion barrels will likely prove even
shorter-lived. In the United States, gas-guzzling sport utility
vehicles and larger homes are deemed essential. As the underdeveloped
world industrializes, demand for oil by billions of people increases;
China and India are building superhighways and automobile factories.
Energy demand is expected to rise by about 50 percent over the next 20
years, with about 40 percent of that demand to be supplied by
petroleum.

Ever-increasing supplies of low-cost petroleum are thought to be vital
to the U.S. and world economies, which is why the invasion of Iraq and
the belief that controlling its 112-billion-barrel reserve would give
the United States a limitless pipeline to cheap oil were so dangerous.
The war in Iraq will definitely have an effect on the U.S. and world
economies, but not a positive one. The invasion, occupation, and
rebuilding of Iraq will cost the people of the United States both
blood and treasure. But more to the point, Iraq could be a fatal
distraction from many fundamental and extremely unpleasant facts that
actually threaten the United States--one of which is the finite nature
of petroleum resources.

Petroleum reserves are limited. Petroleum is not a renewable resource
and production cannot continue to increase indefinitely. A day of
reckoning will come sometime in the future. The point at which
production can no longer keep up with increasing demand will mean a
radical and painful readjustment globally to everyday life.

In spite of that indisputable fact, people behave as if the global
petroleum supply is unending. Predictions of the exhaustion of oil
reserves seem to have lost all credibility. The public assumes that
inexpensive oil will be available essentially forever. The idea that
petroleum resources are finite and that petroleum production might
peak in the near future seems to have vanished from all discussions of
energy policy in Congress, in the press, and even among public
interest groups.

This surreal situation is due to several factors. One, certainly, is
that pessimists have cried wolf too often. Forecasts of imminent
shortages of oil, food, and other natural resources are confounded by
the enormous display of material goods that envelops consumers in the
West. For most people, the market price of any commodity is what
signals shortage or plenty. Time and again, collapsing oil prices have
succeeded rising oil prices, leading to the belief that oil will
always become cheap again. That oil supplies are currently abundant
and inexpensive and have been for nearly 20 years, and that the models
used to predict peak oil production are not easy to understand, appear
to ignore economic factors, and are based on proprietary data, explain
to some degree the present feeling of permanent abundance.

In reality, the differential between petroleum production cost and
market price is so large that market price cannot be used as a measure
of resource depletion. For example, the variation in the average price
of oil between 1998 ($10 per barrel) and 2000 ($24 per barrel) had
nothing to do with depletion of reserves and everything to do with an
attempt to exercise "market discipline" by the Organization of
Petroleum Exporting Countries (OPEC).

But the most important reason there seems to be an unending supply of
oil is the activity of non-OPEC producers. Oil production is immensely
lucrative. Large amounts of petroleum have been and will continue to
be produced outside the Middle East at costs that are very low, $5-$10
per barrel, compared to the desired OPEC price range of $22-$28 per
barrel. The opportunity to realize extraordinary profits provides
irresistible pressure to produce as much oil as possible, as soon as
possible.

Yet oil is a finite resource, and there are only so many places to
look for it. Sooner or later petroleum production will decline, so
sooner or later the prophets of depletion will be correct. The
question then becomes: Can a peak oil forecast be made that is useful
to the petroleum industry and to consumers, one that will alert them
to the problems and allow for a redeployment of resources?

Answering that question requires an understanding of why the world's
rising petroleum needs are being met without skyrocketing prices or
supply shortages.

Everyone knows that the science and technology underpinning computers,
telecommunications, and medicine have advanced dramatically over the
last 20 years. The proof is everywhere, from ever more powerful
personal computers, to increasingly sophisticated cell phones, to new
medical imaging technologies and pharmaceuticals.

Unknown to most people, however, advances in geological sciences and
petroleum technologies have been equally profound and dramatic. Since
the 1970s, plate tectonics has been providing a uniform framework for
understanding the geology of the Earth's surface (including petroleum
formation). Much as X-ray and nuclear magnetic resonance tomography
examine structures within the human body non-invasively,
three-dimensional seismography now allows potential oil-bearing
formations to be evaluated in great detail. Nuclear magnetic resonance
probes are used to determine porosity and hydrocarbon content as well
as to estimate the permeability of these formations. Petroleum
deposits are being brought into production on the continental shelves
off Texas, Brazil, and West Africa in water up to 8,000 feet
deep--areas that were, until recently, inaccessible. Technological
advances like sub-sea terminals, directional drilling, and floating
production, storage, and offloading ships have been developed to
exploit smaller, previously uneconomic or unreachable deposits.
Sophisticated science and technology coupled with unparalleled
profitability has provided the foundation for the wide availability of
oil.

Yet the same advances in geology and engineering that have provided
consumers with seemingly limitless petroleum also allow much better
estimates to be made of how much oil may ultimately be recovered.
After a five-year collaboration with representatives from the
petroleum industry and other U.S. government agencies, the U.S.
Geological Survey (USGS) completed a comprehensive study of oil
resources. The "USGS World Petroleum Assessment 2000" is the first
study to use modern science to estimate ultimate oil resources. [1]

The importance of this assessment is difficult to overstate. Previous
world oil resource evaluations have ranged from crude
"back-of-the-envelope" calculations to estimates based on proprietary
databases, and have often lacked enough detail to allow a comparison
between production and estimated reserves. We now have credible,
easily accessible long-term production records and science-based
resource estimates for all of the important oil producing regions in
the world--crucial for understanding how oil production might evolve
over time.

The USGS assessment allocates reserves to three separate and distinct
categories. The first is "proven reserves," or petroleum that can be
produced using current technology. The second category is
"undiscovered reserves"--oil deposits that are highly likely to exist
based on similar areas already producing oil. The third category is
"reserve growth" and represents possible production from extensions of
existing fields, application of new technology, and decreased well
spacing in existing fields. Oil in this last category can be extracted
much less rapidly than oil in the proven and undiscovered categories.
(For purposes of determining the approximate year of peak or constant
output, the best that can be hoped for is that all proven reserves are
produced and all undiscovered reserves are found and produced as
rapidly as needed. Petroleum from reserve growth, produced at much
lower rates, can be ignored. According to the USGS, it is available
only to lengthen the period of peak production or to reduce the
decline in a field's output.)

As of January 1, 1996, OPEC's proven and undiscovered reserves
amounted to about 853 billion barrels, while similar non-OPEC reserves
were 769 billion barrels, according to the USGS assessment. Based on
actual production patterns in many non-OPEC oil producers, output can
increase until there remains between 10 and 20 years of proven plus
undiscovered reserves (as determined by the USGS), at which point a
production plateau or decline sets in, depending on the reserve growth
that is actually available.

Given that non-OPEC production rates are nearly twice as great as OPEC
rates, and assuming stable prices and 2 percent per year market
growth, non-OPEC production will reach a maximum sometime between 2010
and 2018 based on resource limitations alone (assuming complete
cooperation of producers and that all undiscovered oil is actually
found and produced as rapidly as needed). [2] Once this happens, OPEC
will control the market completely, and it is unlikely that production
will increase much longer.

Yet this simplistic analysis is too optimistic. There is no such thing
as "non-OPEC oil," but rather U.S. oil, Norwegian oil, and oil
produced by various other countries. In particular, about 39 percent
of non-OPEC proven plus undiscovered reserves are located in the
former Soviet Union. It is only a matter of time before these
countries reach an agreement with OPEC on how to divide the oil
market, at which point the current illusion of unlimited oil resources
will end, not due to resource constraints but to political factors.

Yet the U.S. public, industrial and political leaders,
environmentalists, and policy-makers in general do not believe that
they need to be concerned with the finite supply of oil and its
unfavorable (from the U.S. perspective) geographic distribution. As
noted earlier, the overwhelming majority behaves as if inexpensive oil
will be readily available far into the distant future.

This attitude is reflected in U.S. policy toward Iraq. One might
expect that a major consequence of the U.S. conquest of Iraq would
have been full control of Iraqi oil reserves, reducing or eliminating
the ability of OPEC to set prices, and giving the United States a
permanent--because oil is forever--overwhelming strategic advantage.
It would allow the United States to dictate production rates and lower
prices, which would serve two important aims. Reduced prices would
reward consumers in the West, buying their support for U.S. policies.
It would also deprive oil producers of the revenues with which they
could challenge the U.S. domination of the Middle East. Oil prices
could be expected to drop to between $15 and $20 per barrel once
existing Iraqi fields were refurbished and large new deposits were
developed.

However, lower prices would stimulate consumption and decrease the
incentive to develop more inaccessible reserves, essentially those of
the non-OPEC producers. If non-OPEC producers fail to develop those
harder-to-get-at reserves, peak oil production will more likely occur
earlier, at the front end of the 2010-2018 forecast. So the very
success of the current effort to seize control of the Middle East
would doom U.S. imperial ambition to failure within the next 10 years,
from an oil supply standpoint.

This scenario is now implausible given the bitter Iraqi resistance to
U.S. occupation, and it is not clear when Iraqi production might
reach, much less significantly exceed, its pre-invasion level.

To understand what may unfold, given current levels of sabotage and
chaos in Iraq, one must examine how the petroleum marketing system has
changed over the past year, and in particular the role that OPEC
producers have played.

In 2002, Iraqi oil production averaged two million barrels per day.
The United States must have understood that an attack might interrupt
production, which would in turn cause a large increase in the price of
oil. Since this would have a severe negative impact on the world
economy, it would further inflame anti-American sentiment throughout
the world and even turn U.S. voters against the enterprise. The
conclusion: Lost Iraqi production had to be replaced. Thus, an
agreement was reached with OPEC to stabilize the markets by increasing
production levels as needed.

In March 2003, the Saudi oil minister reassured the International
Energy Agency of Saudi Arabia's longstanding policy and practice of
supplying the oil markets reliably and promptly, and highlighted the
collective responsibility that producing countries have shown in
addressing the concerns of world oil markets. This was most likely
viewed as a temporary measure, as it was assumed that Iraqi production
would be restored and expanded rapidly after the United States took
charge.

In addition to the impending interruption of Iraqi production, in
early 2003 Venezuelan oil production was far below its OPEC quota due
to a conflict between populist president Hugo Chavez and the business
community; Nigerian production was also depressed by civil strife.

OPEC rose to the occasion (or, more likely, felt compelled to rise to
the occasion, given the huge U.S. military presence in the Persian
Gulf in preparation for war) and increased production by about 3.2
million barrels per day--equivalent to the production of the Norwegian
North Sea sector--virtually overnight, more than compensating for lost
Iraqi, Venezuelan, and Nigerian production.

About 65 percent of the increase came from just two countries, Saudi
Arabia and Kuwait; Saudi Arabia alone contributed more than half and
probably controls what remains of any spare production capacity.

The critical role that OPEC, in particular Saudi Arabia, plays as the
swing producer for the world oil market is clearly evident from this
episode, which allows one to quantify the ability of the Saudis to
affect the world oil market and the world economy.

The U.S. assault on Iraq has not undermined the power of OPEC and
Saudi Arabia. On the contrary, it has if anything enhanced that power.
This will not change until Iraqi oil production significantly exceeds
its pre-invasion level. Thus, even in the short term, and on the most
cynical level, U.S. Iraq policy vis-à-vis oil has been a failure.

Oil supplies are finite and will soon be controlled by a handful of
nations; the invasion of Iraq and control of its supplies will do
little to change that. One can only hope that an informed electorate
and its principled representatives will realize that the facts do
matter, and that nature--not military might--will soon dictate the
ultimate availability of petroleum.

Alfred Cavallo is an energy consultant based in Princeton, New Jersey.

1. T. Ahlbrandt (project leader), "The USGS World Petroleum Assessment
2000." The assessment is available at www.usgs.gov and on compact
disc. A detailed analysis using the assessment appears in Alfred
Cavallo, "Predicting the Peak in World Oil Production," Natural
Resources Research, 2002, vol. 11, pp. 187-195. Production statistics,
based on data from the International Energy Agency, are available in a
variety of trade publications, including Oil and Gas Journal, World
Oil, and Petroleum Economist.

2. The most popular method used to predict a peak in oil production is
in M. King Hubbert's monograph, Energy Resources: A Report to the
Committee on Natural Resources, National Academy of Sciences-National
Research Council, Publication 1000-D, December 1962. Hubbert noted
that resource production often (but not always) could be described by
a logistic growth curve, and used oil production records and estimates
of proven oil reserves made by the American Petroleum Institute's
Committee on Petroleum Reserves to estimate the year of U.S. peak
production. Hubbert does not discuss the assumptions implicit in his
model, among which are stable markets, excellent profitability, and
affordable prices for oil. See also Colin Campbell and J. H.
Laherrere, "The End of Cheap Oil," Scientific American, March 1998,
pp. 78-83. The Oil and Gas Journal has also recently published a
series of articles discussing the future of petroleum and its
alternatives. See Bob Williams, "Special Report: Debate Over Peak Oil
Issue Boiling Over, With Major Implications For Industry, Society,"
Oil and Gas Journal, July 14, 2003.