SPA Annual Conference
Population, Peak Oil & Climate Change
15th of March 2008
Peter Strachan
B Sc. SF Fin
Peter Strachan 2
Where in the world are We?
The Big Issues• Climate Change
• Peak Oil/Resources
• Water Security
• Fuel Price & Security
• The rise of the East/China
Peter Strachan 3
Oil Finding & Development Costs
•F&D Costs up from $5/bbl to >$20/bblProduction costs up same amountNow need $50/bbl to break even on new oil
Peter Strachan 4
IEA Stats Point to Oil’s Peak
Peter Strachan 5
Current Oil Market Status
Peter Strachan 6
Peak Oil Production
• Oil production is peaking NOW!• US recession will slightly stall peak
• A substantial, real oil price rise is expected over coming 5-10 years
• Renewables & alternatives fuels plus technology can not bridge the gap in time
Peter Strachan 7
Response to Peak Oil
• Replacing 2-3 mmBOPD with renewables will not be achieved
• Technology will not come to the rescue in time
• Economies already jostling for a place at the energy security barrier.
• Market & Political Response!
Peter Strachan 8
Golden Age of Cheap Oil Passes
1990’s an, infamous age of waste and cheap oil
Today we buy 1/3 of the energy per dollar of average income
Peter Strachan 9
A World of Scarce Oil
• China in Africa & Sth America securing supplies
• National oil companies ~60-70% of world supplies
• Nigeria, Venezuela, The Gulf, Mexico, North Sea – all in decline
• Giant fields – all in decline• Market breakdown
• Rationing, Competitive bidding, violence!
Peter Strachan 10
Gold Production has Peaked!
Peter Strachan 11
Gold Close Up - What Next?
Peter Strachan 12
Gold, Like Food
• Response to Ag & Mining technology
• New products • Seeds, genetics, fertilisers, pesticides
(petrochemical)• Metallurgy, satellite telemetry, Geophysics
• New mining & agricultural methods• Irrigation, large diesel powered tools• Open pit mining & economies of scale
Peter Strachan 13
Food Supply
Corn, grain, oil seed
prices all through the
roof
Peter Strachan 14
Peak Resources – No Magic Pudding
• Driven by 80 years of population growth from 2 to 6.7 billion ( +4.7 Bn!! )
• Long period of sector under-investment
• Rapid wealth expansion – globalisation
• Secular decline in real commodity prices appears to be at an end – real price rises now expected
Peter Strachan 15
What a Coincidence!
8,000 BC population was 5 million, year 1 pop 200 million.
Peter Strachan 16
Where Are We?Hot
spots
Peter Strachan 17
Some Estimates
• The more robust estimates calculate that between 90 to 110 billion humans have ever walked the planet.
• Global population rising at 1.5% pa 65-100 million pa!
• 40% live in Brazil, India & China
• getting richer & demanding a higher protein diet.
Peter Strachan 18
As Goes Taiwan, so Goes China
Peter Strachan 19
Per Capita Consumption
•Grains steadyProtein risingFuel Parabolic
Peter Strachan 20
Where will the People Live?
Peter Strachan 21
And what will they Eat?
A quadrupling of crops for fuel leaves little on the
plate
Peter Strachan 22
Food or Fuel
The SUV ate my dinner!
Contribution to Increase in global corn consumption
Peter Strachan 23
China Struggles to keep Up•Less Arable land per capita
Area under farms struggles to keep up
Pollution reduces yield?
Peter Strachan 24
Where is This Leading?
•Destroying the Planet!
Oceans dying
AirWaterClimate . . .
Peter Strachan 25
Let’s Talk About Implications?
Peter Strachan 26
Factors for Human Advancement
• Localised Critical Population Mass plus Enlightened Leadership
• Early China• Alexandria• Constantinople• Florence of the Medici
• Harnessing Energy• Ox, Horse, Water, Steam and• Oil & Gas
Peter Strachan 27
What Have we Achieved
• 61 countries with 44% of the World’s total population have TFR <2.1 children per woman
• But large demographic bulges ensure growth will continue
• Amongst them China, Spain, Italy & Australia
Peter Strachan 28
Way Forward
• Global response required
• Tackle corruption & Lack of education
• Individuals can make a difference
• Reducing Fertility• Carrot and stick• Educate & empower women• Resist fiscal measures which encourage births• Grameen Bank, Micro Credit, etc• Political & social approaches
Peter Strachan 29
Way Forward• Deal with existing demographics
• Can not be altered• Bulge coming through• Hugely skewed to young population in:
» Middle East» Turkey» Africa & Sth America
• Work to restrict the demographic Bulge• Legal systems
• Humans have proved to be inventive
Peter Strachan 30
Where Are we Going?
Peter Strachan 31
If we fail, the ecosystem will sort
itself out with unpredictable
consequences for human life on Earth
Peter Strachan 32
Peter Strachan 33
How do you monitor risks?
Peter Strachan 34
How Does StockAnalysis Work?
• Bottom Up
• Stock Picker
• Resources & General (anything that makes us money!)
• Driven By Top Down Philosophy
Peter Strachan 35
Finding Less Conventional Oil
Past discovery by ExxonMobil
0
10
20
30
40
50
60
1930 1950 1970 1990 2010 2030 2050
Bil
lio
ns
of
Ba
rrel
s
0
10
20
30
40
50
60
Past
Future
Production
“GrowingGap”
Peter Strachan 36
The Oil Age Ends
Peter Strachan 37
Time
Production
History :
1 Trillion barrels already consumed
Some Forecasters: 1 Trillion barrels
already consumed peaking about now
EIA: Add 900 Million barrels, Gain 10 years.
ADDING ALMOST A TRILLION BARRELSGAINS ONLY 10 YEARS