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Perhaps you know exactly what "Peak Oil" is, or maybe you think it's some petroleum-rich mountaintop in Saudi Arabia. Well, either way, even mainstream corporate media organizations are starting to catch the "big story" scent, and you will soon be hearing much more about Peak Oil and its ramifications for modern society.
Because we know you like to be in-the-know—at least enough to be a hit at cocktail parties—we have assembled answers to the most frequently asked questions about the subject. This Peak Oil FAQ is a joint publication of Grinning Planet and the
Post Carbon Institute.
Peak Oil refers to the point at which oil production reaches its highest level globally and then begins to decline. Because demand for oil will continue to rise, the mismatch between high demand and shrinking oil supplies will continually drive the price upward. So, technically, Peak Oil is just the point of maximum global oil output; but more broadly, it has enormous economic implications because the globalized economy—and all of our lives—have been built on a foundation of cheap oil.
In the US, additional economic risk is imparted to the situation by the high levels of personal debt, federal debt, and trade imbalances. The fact that non-US entities now hold a majority stake in US federal debt—and could dump their holdings or stop buying more at any time—heightens the danger. A recession in the US triggered by relentless increases in oil prices could cause the "debt bubble" to burst.
One common misconception is that reaching Peak Oil means we're out of oil. That's not the case—it's only the halfway point. The ride up the curve was fine—it allowed for expanding economies and higher levels of prosperity for many, as well as greatly increased population levels. The ride down the oil curve is likely to be much less fun.
There is almost no disagreement that we will one day reach Peak Oil, but there is substantial disagreement about when we will reach Peak Oil. Estimates range from "now" to "mid-century." Space is too limited here to examine that debate carefully, but it is fair to say that there are many serious people ringing the alarm bell that Peak Oil is upon us now (or will happen very soon). It's also fair to say that the mid-century "optimists" tend to be vague about the specifics of their calculations. Sometimes the optimists even present evidence that is outright unbelievable; for instance, the US Geological Survey has predicted that the 40-year slide in discovery rates for new oil resources will magically reverse itself (see graph).
USGS Estimates of Future Oil Discoveries
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Consider the following facts:
- Global oil discoveries peaked in 1964.
- Since 1981, the world has consumed more oil than it has discovered. Today, we consume roughly 4 barrels of oil for every 1 barrel that is discovered.
- Saudi Arabia, which is often pointed to as the "go-to country" for increased production when supplies get tight, has been unable to increase production in the last two years.
- Matt Simmons, an industry analyst, examined over 200 technical papers on oil fields in the Middle East—which everyone believes has most of the world's remaining oil—and concluded that oil reserves there are significantly overstated and that production from Saudi Arabia itself may be close to peaking.
- Compounding the Peak Oil issue, global natural gas supplies are predicted to peak around 2020 (though it may happen much sooner). Natural gas in North America peaked in 2001.
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OIL-SUPPLY RISK —
EVEN WITHOUT PEAK OIL? |
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In 2006, the world is producing and using about 85 million barrels per day (MBD) of petroleum. Consider the following scenario in which we don't reach peak for another decade but feel an "oil shock" much sooner than that.
Let's say we're in the year 2016. Global oil output has risen slowly but steadily from 85 MBD to 90 MBD. So, it's apparently clear that the "peak oil alarmists" who predicted in 2006 that oil production would peak sometime in 2006-2008 were wrong. But such a conclusion would miss the real message of peak-oil warnings. Oil production is at least slowing, while demand continues to rise—currently at about 2 MBD per year. Once the demand curve starts bumping up against the production curve, oil prices will skyrocket, and the economic impacts will be severe.
The world's economies are used to having a buffer between the oil-production and oil-demand curves, with low prices and stable availability. One only has to review the chaos that resulted from the temporary minor disruptions in oil supplies in the 1970s to see that the real threat is a mismatch between supply and demand. An actual peak in oil production only guarantees that the mismatch will be disastrously large—and forever.
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When all parties finally agree on the date of Peak Oil, it will already have passed. Examination of what happened to individual countries that reached their oil-production peaks indicates that it is very difficult to see the precise point of peaking in advance, but that it is easily recognized in retrospect (though it may take years to be sure). Waiting to start preparing until we can see Peak Oil in the rear-view mirror is a fool's game.
People always want to believe that our presidents, senators, representatives, governors, regulators, and scientists will solve any problems that pop up, that all will remain well, and that we personally don't have to worry about problems such "where will oil come from in the future." When it comes to Peak Oil, the supposed "magic-bullet solutions" abound and are touted regularly by public officials:
- "The 'Hydrogen Economy' will produce totally clean energy from the most plentiful resource in the universe, hydrogen."
- "The oil in the Arctic National Wildlife Refuge will free the US from oil imports."
- "The tar sands in Canada and the oil shale in the American West have more oil than Saudi Arabia."
- "We all need to drive hybrids."
- "Biofuels will allow us to turn our farm fields into oil fields."
- "Technology will save us."
It is suggested by advocates of these approaches that they will allow us to avoid the coming energy crisis. They won't. The reasons they won't would require many additional articles to explore thoroughly—and we will address these issues in future articles—but let's touch on a few of them.
More Drilling. Increased drilling is always the first thing mentioned when talking about how to get more oil. But the US has only 2% of global oil reserves while using 25% of the annual global production. Still, the supply-siders insist that high prices and tight demand will spur new finds. Don't believe it. A majority of oil-producing nations are already past peak.
The reason more drilling won't save us is that you can't find what isn't there. In the figure below, we see that up until 1980 (the green bars) the world was discovering more new oil than it was using in production, and thereafter (the red bars) the world began using its built-up reserves to meet demand. The black line with the yellow dots plots the number of wildcat wells being drilled in search of new oil, showing that industry responded to the declining discoveries and increasing demand in the late '70s and early '80s by increasing their drilling efforts—until they figured out that the additional drilling was not producing results.
More Drilling Does Not Help
Its also worth noting that the discovery of the huge Prudhoe Bay field in Alaska a few decades ago made little difference in the overall downward trend of the US's oil production curve. Similarly, the proposed drilling in the Arctic National Wildlife Refuge (ANWR) or in the deep waters of the Gulf of Mexico will not solve the problem for the US.
Biofuels. Ethanol, biodiesel, and similar non-petroleum fuels all suffer from one important flaw: The energy required to produce them vs. the amount of energy made available as fuel is much lower than the "net energy" available from petroleum-derived diesel and gasoline. In the case of ethanol, some studies have even shown that it takes more energy to produce ethanol than you get out of it if you use conventional industrial agriculture. Further, there is insufficient crop land to change over from petroleum to biofuels and support today's high fuel usage levels.
Technology and Other Things. Grouped into the vague solution called "technology" are hybrids, hydrogen fuel cells, gas-to-liquids, coal-to-liquids, and many other things like tar sands, oil shale, and offshore drilling. There isn't room in this short overview to examine each of these possibilities, so let's just say this: Each of the technologies will contribute, more or less, to our energy futures, but none can replace oil. Not even all of them in combination will be able to replace conventional oil.
Consider the following:
- Oil accounts for 95% of global energy used for transportation.
- In the US, the average supermarket item traveled 1,500-1,800 miles to reach your shelf. In Canada, the distance is significantly higher.
- We rely upon hundreds of petroleum-based products in our daily lives, including plastics, clothing, disposable diapers, medicines, appliances, shoes, toys, computers, cars, and building materials.
- Housing purchases, job choices, vehicle selection, and many other facets of daily living have been predicated on the continued availability and cheapness of oil and its derivatives.
So, what would you do if the 5-hour gas lines and dry pumps of the 1970s came back—and never went away again? What if gasoline was $7 a gallon—or more? What would that do to the economy—and what effect would that have on your job? What would you do if food in your supermarket started being available inconsistently? Unfortunately, the scenarios get darker from there.
Do two things—learn more and get involved. It's not hopeless—preparation for the energy crisis is possible. People and communities can develop small-scale local strategies. The critical thing is to "relocalize"—to rebuild societies based on the local production of food, goods, and energy. Localized communities will be more resistant to the coming effects of Peak Oil.
To learn more about relocalization, visit the Post Carbon Institute at
www.postcarbon.org
or their Relocalization Network at
www.relocalize.net.
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