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Thursday, June 14, 2007

The "end times" for "peak oil"

Scientists led by the London-based Oil Depletion Analysis Center, report that global production of oil is set to peak in the next four years before entering a steepening decline which will have massive consequences for the world economy and the way that we live our lives.

According to “peak oil” theory our consumption of oil will catch, then outstrip our discovery of new reserves and we will begin to deplete known reserves.

Colin Campbell, the head of the depletion center, said: “It’s quite a simple theory and one that any beer drinker understands. The glass starts full and ends empty and the faster you drink it the quicker it’s gone.” Campbell, a former chief geologist and vice-president at a string of oil majors including BP, Shell, Fina, Exxon and Chevron-Texaco, explains that the peak of regular oil - the cheap and easy to extract stuff - has already come and gone in 2005. Even when you factor in the more difficult to extract heavy oil, deep sea reserves, polar regions and liquid taken from gas, the peak will come as soon as 2011, he says.

In recent years the once-considerable gap between demand and supply has narrowed. Last year that gap all but disappeared. The consequences of a shortfall would be immense. If consumption begins to exceed production by even the smallest amount, the price of oil could soar above $100 a barrel. A global recession would follow.

This scenario is flatly denied by BP, whose chief economist Peter Davies has dismissed the arguments of “peak oil” theorists. “We don’t believe there is an absolute resource constraint. When peak oil comes, it is just as likely to come from consumption peaking, perhaps because of climate change policies as from production peaking.”

One thing most oil analysts agree on is that depletion of oil fields follows a predictable bell curve. This has not changed since the Shell geologist M. King Hubbert made a mathematical model in 1956 to predict what would happen to US petroleum production. The Hubbert Curve shows that at the beginning production from any oil field rises sharply, then reaches a plateau before falling into a terminal decline. His prediction that US production would peak in 1969 was ridiculed by those who claimed it could increase indefinitely. In the event it peaked in 1970 and has been in decline ever since.

In the 1970s Chris Skrebowski was a long-term planner for BP. Today he edits the Petroleum Review and is one of a growing number of industry insiders converting to peak theory. “I was extremely sceptical to start with,” he now admits. “We have enough capacity coming online for the next two-and-a-half years. After that the situation deteriorates.”

What no one, not even BP, disagrees with is that demand is surging. The rapid growth of China and India matched with the developed world’s dependence on oil, mean that a lot more oil will have to come from somewhere. BP’s review shows that world demand for oil has grown faster in the past five years than in the second half of the 1990s. Today we consume an average of 85 million barrels daily. According to the most conservative estimates from the International Energy Agency that figure will rise to 113 million barrels by 2030.

Two-thirds of the world’s oil reserves lie in the Middle East and increasing demand will have to be met with massive increases in supply from this region.

BP’s Statistical Review is the most widely used estimate of world oil reserves but as Dr Campbell points out it is only a summary of highly political estimates supplied by governments and oil companies.

As Dr Campbell explains: “When I was the boss of an oil company I would never tell the truth. It’s not part of the game.” Indeed, in 1999, Britain’s oil reserves in the North Sea peaked, but for two years after this became apparent, it was heresy for anyone in official circles to say so. “Not meeting demand is not an option. In fact, it is an act of treason,” he says.

A survey of the four countries with the biggest reported reserves - Saudi Arabia, Iran, Iraq and Kuwait - reveals major concerns. In Kuwait last year, a journalist found documents suggesting the country’s real reserves were half of what was reported. Iran this year became the first major oil producer to introduce oil rationing - an indication of the administration’s view on which way oil reserves are going.

Sadad al-Huseini knows more about Saudi Arabia’s oil reserves than perhaps anyone else. He retired as chief executive of the kingdom’s oil corporation two years ago, and his view on how much Saudi production can be increased is sobering. “The problem is that you go from 79 million barrels a day in 2002 to 84.5 million in 2004. You’re leaping by two to three million [barrels a day]” each year, he told The New York Times. “That’s like a whole new Saudi Arabia every couple of years. It can’t be done indefinitely.”

The alternatives:

Coal - A 150 year supply exists, but coal is also a fossil fuel, and the "clean-burning" technology is a farce.

Natural Gas - Same problems as oil, with about twenty extra years of supply left.

Hydrogen Fuel Cells - Expensive and in short supply. Could be the answer with enough R&D.

Bio-fuels - Good call, but expensive. The space required to grow crops for this source is substantial.

Air-Solar-Wind Power - Another smart choice, but impossible to meet demand by these means.

Nuclear - Clean and efficient. However, increasing the number of reactors also increases the chance for serious accidents. And there's the ever-present threat from terrorists.

We need to explore other energy sources immediately. Can you imagine a gallon of gas rising by $1-2 dollars annually in just a few years? If you can't, think back to 2004. . .

My bets are on Hydrogen Fuel Cells and ramped-up Nuclear Power; what do YOU think?

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Blogger Stan Matuska said...

I think the next few generations will see no natural fuels available. They will have to rely on wind, solar and any other abundunt source of energy besides gas, oil and coal.

Can you imagine what the world will look like in 2300???

title="comment permalink">June 14, 2007 10:10 PM  
Blogger JM said...

I had to chuckle when I read that the recently unearthed '57 Plymouth that was buried as a time capsule was put there with a reserve of gasoline, since they thought that gas might be obsolete by 2007. Their optimism was apparently misplaced, since gas remains with us, unlike tailfins and Plymouths.

title="comment permalink">June 16, 2007 4:42 PM  
Blogger John Good said...

John - I just watched that on MSNBC tonight! It was what, $1 worth of gas? Five gallons. . .sheesh. . .

title="comment permalink">June 16, 2007 11:11 PM  

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