Peak Oil - the biggest news you haven't heard
Even though I've spent some time looking at peak oil, I don't bring it up in conversation or posts frequently. It's not that I doubt peak oil at all. (In fact, most of my retirement money is invested in companies based on assumptions about a peak oil world.) Rather, the problem is that the information about peak oil is so alarming and so extreme, it's impossible for other people to accept.
I recently emailed an associate and noted blogger (who has posted on a number of sustainability issues) why she hasn't posted more about peak oil. She said that she posted once, and then was ridiculed by a noted, respected, and seemingly intelligent author and Wired magazine contributor for buying into peak oil.
After hearing that, I felt compelled to post more about peak oil, even if that meant being ridiculed myself. Peak oil is the sort of thing which you ought to at least be informed about, even if you reach different conclusions than I do.
From Peak Oil: Life After the Oil Crash, here is a snippet of the factual and yet hard to grasp economic impact of peak oil:
- In May 2004, Simmons explained that in order for demand to be appropriately controlled, the price of oil would have to reach $182 per barrel. Simmons explained that with oil prices at $182 per barrel, gas prices would likely rise to $7.00 per gallon.
Simmons predictions are downright tame compared to what other analysts in the world of investment banking are preparing themselves for. For instance, in April 2005, French investment bank Ixis-CIB warned, "crude oil prices could touch $380 a barrel by 2015."
$380 a barrel is roughly $14.50 a gallon. It's easy to see why people have a hard time buying peak oil. And remember that most everything we buy, use, or consume has been manufactured and made its way to use using fossil fuel energy. In fact, for every calorieof food energy we consume, ten calories of fossil fuel energy went into bringing that food to us. This means that not only should we expect the price of gasoline to rise 5x over the next ten years, but we should expect the price of everything we buy and consume to rise about 5x over the next ten years. And unless your ten year income plan includes a 5x increase in available cash, then expect to consume a lot less...
The difficulty with "solving" peak oil is that two things are happening simultaneously: oil consumption (demand) is increasing by 2-3% per year, while oil extraction rates (supply) is decreasing by 3% a year or more. While people look to fixes like oil sands, natural gas, and liquified coal, the issue is that these fixes aren't enough even to maintain existing consumption of fossil fuels, let alone the relentless increase in demand.
Read on if you would like to read a few quotes and facts on peak oil from a presentation at a major IT manufacturer.
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…According to industry analysts, there hasn’t been a significant hydrocarbon discovery in the last two decades with production potential in excess of one million barrels of oil per day. In fact, the majority of today’s production is from existing, mature fields that are in decline.
Smith Corporation 2005 Annual Report
(a well drilling services company)
- Abdullah al-Attiyah also said the Organization of Petroleum Exporting Countries (OPEC), already pumping at near-maximum capacity, was powerless to help cool oil prices, which have risen more than 20 percent since mid-February
Reuters, April 17, 2006
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The U.S. lives in an energy trap. We fell into it gladly, dug it deeper and sit fat and happy, with blinders on. We're fed daily meals of imported oil, from countries we pay in IOUs and think we can push around. But now we're starting to see the costs and risks of our dependency—and I don't only mean gasoline averaging $2.74 a gallon at the pump.
For years to come, we'll be in the hands of some of the most dysfunctional governments in the world. Oil prices will rise and economic growth will slow—not this year, but almost certainly a few years out. We'll be paying in both treasure and blood, as we fight and parley to keep ever-tighter supplies of world oil flowing our way.
Jane Bryant Quinn, MSNBC, April 24, 2006 issue -
Some Oil Facts
- The world uses ~84 million barrels/day (mbd). Note that a barrel of oil is 42 gallons, a number leftover from the era of wooden barrels
- The US uses ~21mbd, or ~ 25% of the world total
- Of that 21 mbd, ~60% is imported. US oil production peaked in 1970. Most of US oil use is for transportation
- Natural gas production in the US is already in decline. Gas is used for electric production, home heating, and chemical feedstocks, including fertilizer, pesticides, and plastics.
- Counting fertilizers, pesticides, fuel for tractors, combines and trucks, it is estimated that every calorie of food in the US embodies 7-10 calories of fossil energy
- Today we use 3-4 barrels of oil for every 1 we discover
The world's most productive fields are getting old
- Ghawar, Saudi Arabia. Discovered in 1948, it is the world’s largest. Matt Simmons says when Ghawar peaks, the world peaks, and it may be peaking now. The Saudis won’t share any of their numbers, but SA production has been flat for the last 3 years, turning up slightly of late
- North Sea. Disc.1969 Peaked in 1999, depleting at 7-8%/yr
- Cantarell, Mexico. 3rd largest field ever found, disc. 1977, peaked this year, forecast for 30% depletion in 3 yrs
- Burgan, Kuwait. 2nd largest in the world, disc 1938, peaked this year.
- Prudhoe Bay. Disc late 60’s. began producing in 1977. Even though a huge field, was never enough to offset the depletion in the rest of the US. Peaked in 1997, declining at 11%
- Norway. Disc 1975, peaked 2001, depleting at 16%
- Samotlar, Russia Now producing at 25% of former max production rate
Resources
- Hubbert’s Peak and Beyond Oil by Ken Deffeyes
- Twilight in the Desert by Matthew Simmons
- Energy Bulletin: energy in the news
- The Oil Drum: peak oil info at a technical level
- Powerdown by Richard Heinberg
- Grinzo: an economist blogs about energy issues
- A Thousand Barrels a Second by Peter Tertzakian
- High Noon for Natural Gas by Julian Darley
- a wonky economic look at why price signals may not be adequate to forecast resource shortage
- a look at how the US is getting outmaneuvered in the geopolitics of energy
Comments
The most serious problem for the future is that without oil the planet may not have the food generating capacity to feed seven to ten billion people. We may not literally use the last drop of oil in the earth, but we will face oil depletion so extreme that what remains will not suffice to meet survival needs.
Posted by: Marvin McConoughey | August 16, 2006 5:39 PM