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Hey, we heard a rumor that gas stations will soon be installing systems to vacuum your car and your wallet at the same time. Yeay efficiency!
Most of us are aware that
gasoline prices are on the high side these days. Many people may also be aware that the price of a barrel of crude oil is also quite high. We have a tendency to put the blame for these petroleum miseries on hateful
oil-producing nations, greedy oil companies, or maybe even on environmentalists who attempt to thwart extraction of new sources of oil in wilderness areas.
The truth is, oil supplies are getting tight relative to demand, and the prices simply reflect the law of supply and demand. But that's just the tip of the problem. The real story is about "peak oil"—the point in history when global petroleum production will peak—forever. Once oil supply can no longer keep up with oil demand, an economic shockwave will hit us and wreak havoc with our economies, all of which are dependent on (relatively) cheap oil.
The official line from our political leaders and government scientists is that there's enough remaining oil that the peak won't hit for several decades. Other people who study the field say the evidence points to a peak within just a few years, which certainly sounds a lot scarier. But which is it?
Today we have a peak oil article, the first of a two-part series adapted from the works of Richard Heinberg, a journalist, educator, and author. Part 1 presents the evidence that peak oil will hit us sooner rather than later. Part 2, Oil Wars or Adaptation, will describe our options for dealing with the end of the oil age.
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Peak Oil and Options for a Post-Carbon World, pt 1
by Richard Heinberg
It's important that we have an accurate picture of where we are relative to peak oil so we can take actions that make sense and can have some effect, given the context.
There is an approaching "perfect storm" of global problems that we will be facing over the next couple of decades, including:
- a peak in global oil production ("peak oil");
- continued population growth;
- declining per capita food production;
- climate change, pollution, habitat destruction, loss of biodiversity;
- unsustainable levels of US debt;
- international political instability.
This article will deal mostly with peak oil, but some of the other issues are relevant.
OIL, POPULATION INCREASE, AND FOOD PRODUCTION
Over the last century, we have used oil to increase the carrying capacity of planet earth and increase our population:
- We've used petroleum-derived products, oil-powered groundwater extraction and irrigation, and oil-powered machinery to create "industrial agriculture" and greatly increase the human food supply.
- We use oil-powered vehicles to carry resources from where they're abundant to where they're scarce so that we can, for instance, build cities in the middle of deserts, where people really shouldn't be living.
We have increased the global human population by over 500% in just the last 150 years. We were at fewer than 1 billion in 1800 (toward the beginning of the Industrial Revolution), and we passed 6 billion in the 1998-1999 timeframe. In the next half-decade after that, we added another 400 million—essentially a North America's worth of people. Unfortunately, we haven't added another North America's worth of resources or support infrastructure.
The rate of growth is beginning to taper off, but the overall numbers are very worrisome, given the fact that per capita food production is declining. The reasons for the decline include:
- Decline in amount of arable land — We had been increasing the amount of farm land by clearing forests and irrigating dry land, but that strategy has reached a point of diminishing returns. Today we are paving over farm land and losing acreage in some areas to soil salinization and erosion.
- Green Revolution burnout — The great yield enhancements achieved through the use of chemical pesticides, fertilizers, and increased irrigation have peaked. In some cases, yields are starting to decline again.
- Collapse of ocean fisheries — Many ocean fisheries are near collapse or have collapsed.
Environmental problems like global warming are likely to exacerbate food production problems. The high levels of US debt and inherent economic instability will mean there won't be a lot of free-flowing cash available to fix these problems once they become more obvious to everyone.
PEAK OIL AS A DETERMINING FACTOR IN THE U.S. ECONOMY
America, which today has become notorious as the world's biggest importer of oil, actually still produces much of its own oil. Moreover, it was once the world's largest exporter of oil. The chart below compares some of the characteristics of the US in 1950 and 2005.
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World's foremost oil producer and oil exporter |
World's foremost oil importer |
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World's largest exporter of machine tools and manufactured goods |
World's largest importer of manufactured goods, with manufacturing jobs now fleeing to other countries |
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Self-sufficient in nearly all resources |
World's foremost importer of non-petroleum resources |
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World's foremost creditor nation |
World's foremost debtor nation |
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Much of this is certainly the result of bad management over the last several decades, but much of the cause is rooted in the depletion of US reserves of the resource that made the United States the most powerful nation in history—oil.
PEAK OIL IN THE U.S.
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When it comes to oil, the US is the most explored place on the planet. More oil wells have been drilled in the continental US than in the rest of the world. So, if you want to understand the oil industry, petroleum geology, and how it's going to go globally, the experiences in the US can be seen as a template.
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DEFINITIONS |
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Oil discovery — the identification of new oil reserves (but without extracting them from the ground)
Oil extraction / oil production — the removal of oil from the ground for conversion into fuels and other products
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Figure 1 shows that US oil discoveries peaked around 1930 (blue arrow), with the discovery of huge oil deposits in eastern Texas. But discovery of new oil then began to decline very quickly, and very little oil is being discovered in the US today. With the exception of relatively small amounts of oil in Alaska and the Gulf of Mexico, experts are finding that it's simply not worth investing any more money in the hunt for new oil in the US. About 40 years after the US hit its oil-discovery peak, the country hit its oil-production peak (in 1971). The US discovery peak had been successfully predicted (to within 12 months) 14 years earlier by geologist M. King Hubbert.
Figure 1. U.S. Oil Discovery and Oil Production
FACTORS FOR PREDICTING PEAK OIL
The phenomenon of oil-extraction peaks has been well studied by now. There are several factors that relate to the physical and economic practicality of getting oil out of the ground at any particular location:
- Oil deposits vary in quality (grade of oil), which affects how easily the oil can be refined.
- There are different levels of difficulty for extracting a given field of oil from its surrounding geological formations.
Different levels of effort and energy are required to extract oil from various oil fields; thus, the economics of oil extraction vary from field to field. On the oil-refining side, poor-quality oil is harder to convert into useful products like gasoline.
In any given region, it's natural to first go after the "easy oil"—the best quality oil in the most easily extracted locations and geological formations. After about the first half of the oil has been extracted, what remains gets more difficult to extract, and the rate of extraction hits a peak and then begins to decline.
The actual peak of the extraction rate for a given field can vary slightly relative to what percentage of the field's oil remains, but the bell-shaped curve used to represent oil extraction rates seems to have held true for every oil reservoir, oil region, and oil-producing country—and will undoubtedly hold true for the world as a whole. The only question is exactly when the global production peak will occur.
WHEN WILL PEAK OIL HIT?
Figure 2 below is from the Association for the Study of Peak Oil (ASPO), a group based in the United Kingdom. The chart shows actual and projected petroleum production, by region. One can see the contraction of oil use in the late 1970s and early 1980s (blue arrow) as a result of the OPEC embargo, price shocks, and subsequent conservation measures. Since the mid-1980s, demand and production have recovered and soared.
Until recently, ASPO had been predicting an oil-production peak for 2015. But recent events, including higher-than-expected demand and bad news regarding the oil-production outlook in Saudi Arabia, have caused ASPO to revise its estimate for peak oil to 2007 (red arrow). Other analysts are predicting peak oil as eary as 2005 or 2006.
Figure 2. Global Oil Production
The green curve on Figure 3 below shows that the peak in global oil discoveries occurred in 1963-64. If we remember that the lag time between the peak in US oil discovery and the peak in US oil production was 40 years, we can use that as a rough predictor of when the global oil-production peak will hit, and it predicts the peak will be soon.
Figure 3. Global Oil Discoveries
The source of the chart in Figure 3 was Henry Longwell, Vice President for Exploration of Exxon-Mobil. Thus, we can see that industry itself acknowledges that global oil discoveries peaked about 40 years ago. (If you're wondering what the little uptick in the green curve is in the late 1990s, it was due to the discovery of large oil deposits in Kazakhstan. Data for 2001 and 2002 show the trend going back down again.)
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In 2003, Chris Skrebowski, the editor of Petroleum Review, described the year's very low oil-discovery results as "little short of horrifying," noting that "we would probably have to go back to the early 1920s to find a year when fewer large oil discoveries were made." In 2003, the industry spent $8 billion on exploration but only found $4 billion worth of oil. Based on an analysis of oil demand vs. new oil-production projects that will be coming online during this decade, including the major new off-shore drilling projects now in the works near Brazil, West Africa, the Gulf of Mexico, and elsewhere, Skrebowski is predicting that a global oil-production peak will likely occur in 2006 or 2007.
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Drawing Down |
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At this point, we are now extracting about 5 times as much oil each year as we discover.
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MORE EVIDENCE FOR PEAK OIL HAPPENING SOON
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In Figure 4, the green bars show that up until 1980, the world was discovering more new oil deposits than it was using in production, and thereafter (the red bars) the world began eating into its reserves to meet demand. The black line with the yellow dots plots the number of wildcat wells being sunk in search of new oil. It shows that industry responded to the declining discoveries in the 1970s and early 1980s by increasing their drilling efforts—until they figured out that the additional drilling was not producing results.
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A FIT OF PEAK |
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Of 45 major oil-producing countries around the world, roughly 25 of them are past their production peaks.
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Figure 4. Net Oil Discovery Minus Production
Some economists predict that peak oil is still far away because rising oil prices rise will provide incentive for oil companies to go out and find additional oil. This data calls such claims into question—there may not be that much oil out there to find! There is no question that more oil will be found in the future, but it's likely to be smaller fields and oil of lower quality.
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The International Energy Agency (IEA), which is sort of the global equivalent of the US Department of Energy, tends to be very optimistic in its oil projections. But even they are predicting a future oil shock (though officially they still say its decades away). Some of the reasons they give for predicting a future oil shock are:
- we've already captured much of the "low-hanging" fruit (the "easy oil");
- older oil fields are mature and declining;
- new discoveries are smaller fields;
- the oil industry is extracting oil from fields more quickly;
- more effort is being expended just to offset oil depletions;
- global reserves have been overstated for political reasons.
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Quoth the Maven |
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"We estimate that world oil and gas production from existing fields is declining at an average rate of about 4 to 6 percent a year. To meet projected demand in 2015, the industry will have to add about 100 million oil-equivalent barrels a day of new production. That's equal to about 80 percent of today's production level. In other words, by 2015, we will need to find, develop and produce a volume of new oil and gas that is equal to 8 out of every 10 barrels being produced today. In addition, the cost associated with providing this additional oil and gas is expected to be considerably more than what industry is now spending."
— Jon Thompson,
President of ExxonMobil
Exploration Company, 2003
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The last point about declared oil reserves being overstated is worth looking at further. The reason that OPEC countries have done this is that, under OPEC rules, member countries have previously been allowed to export oil based on their level of stated reserves. This created an incentive for OPEC countries that wished to boost their exports to over-report their reserves.
Another measure of OPEC's ability to meet higher oil demand in the future is spare production capacity—how much they could ramp up production if they wanted to. Figure 5 shows that OPEC's spare production capacity is now nearly non-existent. They are currently producing almost flat-out from their existing wells.
Figure 5. Historical OPEC Spare Production Capacity
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This is some pretty convincing evidence that the oil crunch—and side effects like higher gas prices—are likely to continue to worsen. And because our current lifestyles, level of prosperity, population, and food production are all tied to the availability of cheap oil, the arrival of peak oil could produce a disastrous economic shock. High gas prices may turn out to be a very minor problem, comparatively.
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Richard Heinberg is a journalist, educator, editor, lecturer, and musician. He has lectured widely, appearing on national radio and television in five countries. His most recent book is Powerdown – Options and Actions for a Post-Carbon World. He also publishes a monthly newsletter offer a continuing critique of corporate-capitalist industrial civilization and a re-visioning of humanity's prospects for the next millennium. For more information, see www.museletter.com. |
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In Part 2, Oil Wars or Adaptation, we'll present two very different scenarios for moving forward into the post-petroleum world.
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