The scourge of 'Peak Oil'

The following article is not remarkable for its content but for the fact that al-Jazeera (owned by the state of Qatar) is acknowledging Peak Oil.  Dahr Jamil is an independant, US-based journalist who amongst other things covered the war in Iraq.

When demand for oil consistently surpasses supply, experts warn that our lives will look "very differently".

Dahr Jamail Last Modified: 25 Jul 2011 13:21

al -Jazeera

Energy derived from oil reaches, quite literally, every aspect of our lives. 

From the clothes we wear, to the food we eat, to how we move ourselves around, without oil, our lives would look very differently. 

Yet oil is a finite resource. While there is no argument that it won't last forever, there is debate about how much oil is left and how long it might last.

Tom Whipple, an energy scholar, was a CIA analyst for 30 years - and believes we are likely at, or very near, a point in history when the maximum production capacity for oil is reached, a phenomenon often referred to as "peak oil".

"Peak oil is the time when the world's production reaches the highest point, then starts back down again," Whipple told Al Jazeera. "Oil is a finite resource, and [it] someday will go down, and that is what the peak oil discussion is all about."

There are signs that peak oil may have already arrived.

The International Energy Agency (IEA) recently increased its forecast for average global oil consumption in 2011 to 89.5 million barrels per day (bpd), an increase of 1.2 million bpd over last year. 

For 2012, the IEA is expecting another increase of 1.5 million bpd for a total global oil consumption of 91million bpd, leaving analysts such as Whipple to question how production will be able to keep up with increasing consumption. Whipple's analysis matches IEA data which shows world oil production levels have been relatively flat for six years.

"This is getting very close to the figure that some observers believe is the highest the world will ever produce," Whipple wrote of the IEA estimate in the July 14 issue of Peak Oil Review. He told Al Jazeera that peak oil could be reached at some point in the next month, or at the latest, within "a few years".

Low-hanging fruit

Marion King Hubbert, a geoscientist who worked at the Shell oil research lab developed the "Hubbert curve", a logistical model that accurately predicted that oil production in the United States would peak between 1965 and 1970. 

His model has described fairly accurately the peak and decline of production from oil fields, wells, regions, and countries. According to Hubbert's model, oil production rates will follow a roughly symmetrical distribution curve based on exploitability and market pressures. 

Optimists estimate that peak oil production and global availability will decline beginning in 2020 or later, and don't see a crisis happening that would affect major changes in lifestyles of oil-consuming nations. 

A study published in the Energy Policy journal, however, predicts that demand will surpass supply by 2015 unless sustained economic recession constrains demand.

The IEA says that production of conventional crude oil already peaked in 2006, and economic indicators show that, through the first two quarters of 2008, the global economic recession was made worse by a series of record oil prices.

Both production and discovery of new oil fields appear now to be relatively stagnant compared with recent decades, and world oil generating levels reached a plateau several years ago, reports the IEA.

Richard Heinberg, author of ten books related to peak oil and its impact on our economic, food, and transportation systems, believes peak oil is a function of the dominant principles of resource extraction.

"Many people believe it's about running out of oil, and it's not," he told Al Jazeera. "It's about finishing off the low-hanging fruit."

Oil is an energy dense, portable resource, and the energy that has been expended finding and extracting it is minute when compared to the energy it produces. 

But Heinberg argues that we have likely already reached the maximum production limits for oil.

"Prices are almost at all-time highs, global output of oil has been stagnant for six years, and look at the cost of the BP disaster in the Gulf of Mexico," he said. "The cost of producing oil has increased dramatically in the last decade, both financially as well as the cost to the environment."

Meanwhile, world demand for crude oil grew at nearly two per cent each year between 1994 and 2006. In 2007, global demand peaked at 85.6 million bpd, but decreased in 2008 and 2009 by a total of 1.8 per cent, reportedly due to rising fuel costs. 

Despite the lull, world demand for oil is projected by the IEA to increase more than 21 per cent over 2007 levels by 2030, from 86 million bpd to 104 million bpd, due largely to increases in demand from the transportation sector.

According to the US Energy Information Administration, current world oil consumption is approximately 88 million bpd, enough to fill roughly 5,500 Olympic-sized swimming pools each day.

In 2007 the IEA issued a warning in their World Energy Outlook publication: "Although new oil-production capacity additions from greenfield projects are expected to increase over the next five years, it is very uncertain whether they will be sufficient to compensate for the decline in output at existing fields and keep pace with the projected increase in demand."

The report added, "A supply-side crunch in the period to 2015, involving an abrupt escalation in oil prices, cannot be ruled out."

As consumption continues to increase in such major users as China, India, and the US, existing oil fields are being depleted and new discoveries are not keeping apace in order to offset growing demand. 

"One thing to remember is that there is global depletion," Whipple said. "If you don't come up with new sources every year, you can't keep up. Wells are going dry daily. World depletion is three to four million barrels less oil available each year in existing fields."

Whipple is blunt about what life will look like in a post-peak oil world. 

"You're going to see major changes in industrial civilisation," he said, adding that he expects oil to once again approach $150 per barrel in the next 18 months. "In the US, where we aren't used to paying $10 for a gallon of gas like they do in Germany, that [$150 per barrel of oil] will really slow things down."

He believes discretionary driving will basically stop, and added: "Anything with a parking lot out front is going to be in trouble."

Transportation

Transportation is by far the largest user of oil. In 2006, the transportation sector in the US consumed 68.9 per cent of the total oil used in the country. Fifty-five per cent of worldwide oil use is attributed to transportation, according to the 2005 report Peaking of World Oil Production, created for the US Department of Energy.

A continuing escalation in the price of oil could wreak havoc on current systems of conveyance. 

Professor Anthony Perl, Director of the Urban Studies Program at Simon Fraser University in Vancouver, Canada, says: "Things that can't go on forever, don't."

Los Angeles highway traffic will likely diminish as fewer people are able to afford to drive [EPA]

"We've built a perpetual motion machine, and act like we'll be able to travel further, faster, and infinitely," said Perl, co-author of Transport Revolutions: Moving People and Freight Without Oil. "It [peak oil] is a crisis in the sense that someone is going to have to change their expectations about mobility, and the idea that anyone can go anywhere is unlikely to continue. Sooner or later, people are going to start wondering how they will get from place to place without their cars."

Due to rising fuel costs, Perl sees flying becoming less of an option for the global population.

"I tell people to go to their favourite travel website like Expedia, and pick your destination and dates, and hit the fare selector for first class, because that's the price it will be in the future for travelling. And ask yourself if you will make the trip. Flying cheap will no longer exist as an option."

Peak oil's 'open secret'

In March 2010, Oxford University published a report claiming that estimates of conventional oil reserves were inflated by one-third.

The report, headed by Britain's former chief scientist, Sir David King, said it was an "open secret" that the Organization of the Petroleum Exporting Countries (OPEC) inflated its reserve figures in the 1980s to claim a larger share of the market, and that official sources, such as the IEA, continue to use these inflated figures.

The Oxford experts said that conventional reserves should be put at 850 billion to 900 billion barrels, instead of 1,150 billion to 1,350 billion. They estimate that supply production will "peak" in about 2014 - that is, demand will outstrip production.

The oil and gas industry disputes the notion of peak oil, arguing that new discoveries can keep up with demand. But the facts appear to counter this viewpoint.

Based on IEA data on the rate of decline in existing reserves, new finds with the equivalent oil of Saudi Arabia's reserves, the largest on Earth, would have to be found every four years just to keep pace.

A report by the UK Energy Research Centre, which reviewed more than 500 research studies, suggests that global oil production could peak at any time from right now to 2030 at the latest. 

The lead author of the report, Steve Sorrell, said discovering new fields, like the giant Tiber field in the Gulf of Mexico that was discovered by BP, "will only serve to delay peak oil by a matter of days". He added that, of the 70,000 oil fields on Earth, "just 100 giant fields account for 50 per cent of the oil we use. Most of these giant fields are quite old and past their peak of production, and we're not going to find many new ones."

Life without oil

Professor Michael Bomford, a research scientist at Kentucky State University, said that, in the US, far more energy is used when food leaves the farm than the amount of energy required to grow it.

"The long supply chain with food makes consumers particularly vulnerable to spikes in energy prices," Bomford told Al Jazeera.

Evidence of this is clear.

On June 23 French President Nicolas Sarkozy urged world leaders to take action against the "plague" of food price surges. World food prices have risen 37 per cent in a year, driving 44 million more people into poverty.

Wheat nearly doubled in cost during the past twelve months, as Russia and Ukraine cut exports after droughts decimated crops. The UN estimates nations will spend $1.29 trillion on food imports this year alone, making it the most money spent on imports in one year, and a 21 per cent increase over 2010.

Heinberg believes oil prices are now acting as a cap on global economic activity.

"Every time the economy starts to recover it pushes [the price of] oil up, and then the economy falters," he said, "We're damned if we do and damned if we don't. If oil price declines, it is because the economy is in the toilet. Global oil scarcity has triggered the limits to growth scenario and we've seen the last of economic growth as we know it, at least in the US."

According to Whipple, compounding the problem is the likelihood that other resources such as coal and natural gas "are not that far behind" oil in their depletion.

"In 40 to 50 years fossil fuels will not be the predominate source of energy, so you'll learn to get a long with a lot less of it," he said, pointing to the fact that it would likely be that amount of time when peak coal and peak natural gas are reached.

Whipple said that crude oil production has effectively not been growing since 2005, and that while we may not be past peak oil now, he says, "we're on the plateau, but won't be there longer than another year or two. Then we'll see incontrovertible proof of this [peak oil]."

Bomford is hopeful that we will change the way we feed ourselves before diminishing availability of oil creates even greater crises. 

"We won't always have access to fossil fuels, and the apocalyptic part is, will we be forced to change from famine and price spikes, will we be able to change before it's forced upon us? One way or another, change is coming."