Peak Oil: High Tide for an Oil Addicted World/Oil in Detail
- 1 What is oil’s place in the history of energy?
- 2 Why is oil so useful?
- 3 What do we use it for?
- 4 What doesn’t depend on oil?
- 5 How much of our energy mix is oil?
- 6 How does oil compare with other sources of energy?
- 7 What do you mean that economic growth is predicated by energy growth?
- 8 How was oil created?
- 9 Where is the remaining oil?
- 10 Who uses all that oil?
- 11 How much do we use a day?
- 12 How much oil is left?
- 13 So how long will it take us to use that much oil?
- 14 Isn’t it true that oil reserves have just been growing and growing?
- 15 So aren’t we discovering more?
- 16 Why aren’t reserves the important thing?
- 17 Didn't I read that oil is renewable?
- 18 Can’t we just spend more money on discovering it?
- 19 Can’t we use technology to improve extraction?
- 20 What is the official view on when we will peak?
- 21 When do others think we will peak?
- 22 Why do people think we will peak now?
- 23 Have people made wrong predictions about peak oil before?
- 24 Have we passed any peaks?
- 25 What do the oil companies think?
- 26 What happened to all the spare capacity?
- 27 Wasn’t all this predicted in the 1970s? Didn’t it turn out to be wrong?
- 28 What influence has oil had on agriculture? What effects have oil and gas had on agriculture & food distribution
- 29 What influence has oil had on population?
- 30 Can’t Saudi Arabia pump more?
- 31 The markets will sort it out.
- 32 We’ll find something better, won't we? We always find a better fuel!
- 33 Does the market have a role to play?
- 34 Necessity is the mother of invention. Technology will save us. Somebody will think of something.
What is oil’s place in the history of energy?
Oil was not the energy source that enabled the industrial revolution to begin; water, wood, and coal powered machines were working long before the first commercial oil well was drilled in north western Pennsylvania in 1869 . The next thirty years after that first drilling saw oil wells spring up all over the United States and then the rest of the world as companies such as Standard Oil, Shell and Royal Dutch battled to explore and drill.
The influx of this new form of energy acted as an accelerant to industrial growth in the latter part of the industrial revolution. Initially oil replaced whale oil used for illumination, but soon it was refined and used for lubricating faster, more efficient machinery, and by the start of the 20th century for fuel and roads. Oil as a cheap energy source created massive economic growth in the late 19th and early 20th centuries and soon became central to industrial society.
Oil crucially also enabled other forms of energy to become viable. The infrastructure supporting natural gas, nuclear and even renewable energy is dependent on oil as an energy resource. The changes oil has made to the way we live means that contemporary, modern society views cheap and plentiful energy as a natural part of human existence. Not having this energy on tap is incomprehensible to most people in the modern world, despite the fact that mankind's tenure on this planet stretches back over hundreds of thousands, if not a couple of million years. Agriculture emerged 10,000 years ago fundamentally altering the way humans lived, and the discovery of oil has arguably had an even bigger impact.
 James Howard Kuntsler,'The Long Emergency', Atlantic Books, 2005
Why is oil so useful?
Energy density is the measure of how much energy you get out of a given amount of a fuel. Approximate energy densities of combustible fuels include coal at 17-30 MJ/kg, and wood at 10-20 MJ/kg. The energy density for petroleum products is 30-460% greater, at typically 40-46 MJ/Kg. [Source?]
In terms of energy density only uranium, when it is used for fission [find figure MJ/Kg] does better than oil.
Because it is a relatively stable liquid at normal temperatures, oil is easy to transport. It used to be poured into barrels and transported around on trains. Nowadays it is more common for it to be transported through pipelines, seaborne tankers or, once refined, by road tanker. This also means it is easy to use - imagine the days of steam ships, and having first to load thousands of tons of coal, and then shovel it into the furnaces. Now compare that with how easy it is to power an engine with oil - think of filling a car with petrol and driving away!
Storage and stability
At normal temperatures oil is relatively stable and does not degrade quickly. This means that oil is relatively easy to store, especially in its crude (unrefined) form. Most countries hold large strategic reserves in case of supply disruption - the US holds these in vast underground caverns [capacity?].
Price of extraction and processing
For many oil reserves, once the well has been drilled, the oil flows out freely due to the natural high pressures. As this pressure starts to decrease, secondary recovery techniques are often used. For both primary and secondary recovery the energy inputs required to get the oil out of the ground are far less than for other fuels (natural gas excluded). As the easy to extract oil is used up then these figures will increase, for example deep sea oil takes much more energy to get to a refinery than does some of the onshore reserves in Saudi Arabia.
Crude oil and natural gas have been relatively abundant over the last fifty years. Indeed at some periods so much has been extracted from the earth that the price has dropped so low as to seriously effect the income of some oil producing nations. This in essence led to the formation of the OPEC countries and their self imposition of production quotas. Its ready availability and cheap price has helped increase our dependency.
The vast number of uses of oil, both in energy, heating, transport and products mean that today's society is highly dependent on its availability. More details on its uses are outlined in the next section.
What do we use it for?
Look around you. There is a phenomenal amount of plastic all about us in the modern world. Think about your computer - the tower, monitor, keyboard, mouse, webcam, speakers, printer, scanner; all substantially plastic.
What about the chair you are sitting on? The pens around your desk? Your CD and DVD or video collections, encased in or made from plastic. From disposable cups to car dashboards to PVC window frames to radios and televisions, not to mention your mobile phone, every electrical cable or plug, and the shrink-wrap on almost everything you buy. Creating plastics from oil has transformed our world.
In the UK most of our space heating comes from natural gas. In more rural areas, and other countries, heating oil plays a greater role.
Petrol and diesel
Over 500,000,000 vehicles [source?] around the world aren't much use with empty tanks. And how would your lifestyle change if those vehicles were to be out of action?
Aviation fuel - both for light aircraft and jets There are roughly 20,000 commercial aircraft [source?] carrying people and goods around the world at the moment.
Whilst natural gas, coal and nuclear make up the bulk of our electricity generation in the UK, oil fired power plants still play an important role in electricity generation around the world.
Without lubrication much of our society would literally grind to a halt.
Many man made fibres [examples?] used in carpets, curtains, clothes and other materials are made from petroleum products.
Fertilizers and Pesticides
Current intensive farming techniques rely on huge quantities of oil and natural gas derived fertilizers and pesticides. [Source and number for quantities?]
Many of our manufactured drugs are petroleum derived. [Examples and source?]
Another important petroleum derived product is hydrogen from natural gas. Elemental hydrogen does not naturally exist in large quantities and must be generated using either electrolysis or from natural gas, with natural gas being the major source at present.
Examples of other petroleum derived products include food additives, non-soap detergents, ink dyes, photographic film, wax, rubber, backup generators, insulation, packaging, paint and the list goes on and on.
It is also important to realise that our society relies on oil and its products to an even greater secondary degree. For example, although our vegetables aren't made out of oil, it is used in fertilizers, pesticides, powering farm vehicles, preserving, packaging, transporting. Another example is the manufacture and transportation of goods to market, from plasma screens to ping pong balls.
In essence, oil underpins most facets of our lives, in terms of keeping people employed, keeping things going and keeping things alive.
What doesn’t depend on oil?
Look around you and identify anything that is not made from oil. If it isn’t made from oil did it get where it is due to oil-based transportation? Was oil used in its production or manufacturing process? Did the people who were involved in that process use oil to get to work? When you look at it this way you see just how dependent on oil we are.
How much of our energy mix is oil?
Electricity (2004) [Are more recent figures now available?] Gas 40%, nuclear 19%, Coal 33%, Hydro 1% Imports 2%, Other Fuels 4%, Oil 1%
Inland Energy Consumption: Gas 41%, Oil 24% and Coal 17% out of a total of 234.9 million barrels of oil equivalent.
Oil and Gas have the following percentage inputs to each of these parts of society:
Industry Domestic Transport Services
Oil 24% 6% 99% 46%
Gas 37% 70% 0% 8%
Combines 61% 76% 99% 53%
[Data taken from the dti publication: UK Energy In Brief July 2005 http://www.dti.gov.uk/energy/inform/energy_in_brief/energyinbrief2005.pdf]
[Speak to Paul Mobbs and get Fig 11. A Flow Diagram of Energy Use in the UK 2003 from page 29 of Energy Beyond Oil]
How does oil compare with other sources of energy?
Oil presents many advantages when compared to other sources of energy such as coal, nuclear power, hydroelectric generation or other renewables. These advantages fall into the six catagories mentioned above: energy density, transportability, storage and stability, price of extraction, abundance, and versatility.
Coal, for example, fails to surpass oil in nearly all of the catagories: First, it has a about half the energy density of oil, (17-30 MJ/kg compared with the 40-46 MJ/Kg of oil). As coal is a solid, it is much more difficult to transport—simply compare the effort it takes to fill-up at the petrol station with images of men stoking the coal furnace on old steam trains! This solid state means it's also more difficult to extract, as it must be mined from seams in the earth rather than pumped out of underground reservoirs. The main advantages of coal are that it's much more abundant than oil, with significant quantities being found in most countries.
The nuclear energy generated from uranium ore compares nearly as poorly. The uranium must not only be mined like coal, but also separated from the surrounding ore and "enriched" by isolating the correct type of uranium. Even this enriched uranium cannot be used directly, but must be safely transported to the nuclear reactor before any of its energy can be obtained. This all means that the high energy density of the uranium itself is less important, as so much energy is required before that energy is available. The energy is finally produced as electricity, which although convenient for transport along power lines and usable in any household applicance, is unsuitable as a portable fuel in cars and planes, and cannot be used to make plastics or other chemicals.
Energy from renewable sources suffers mainly from the last point as well. Wind, solar, and all forms of hydroelectric generation produce only electricity. While electric cars are in use today, their electric batteries have a much lower energy density than oil: they either force the car to travel shorter distances before recharging, or take up far more space than a conventional fuel-tank. The abundance of renewable sources, however, is a promising advantage: whether it's strong sunlight, large rivers or frequent winds, nearly every region on Earth has access to local renewable energy.
Historically, oil has also been the cheapest form of energy, and readily available. Both the cost and availablity of energy are crucial to our modern society, as economic growth is predicated by energy growth.
What do you mean that economic growth is predicated by energy growth?
If there was not cheap, plentiful energy, and more of it every year, the world’s economy would not grow. Because oil has all the advantages and uses outlined above, the oil price is extremely influential on the rate of world economic growth. If there is not more oil every year the laws of supply and demand push the price up until the economy will not bear the price rise and we experience economic depression.
The economy is a system like any other, it needs inputs to create outputs, you put energy in and you get all the products and services our modern society uses out. Of course this seems obvious, to grow something you need more of what makes it grow: more fertilizer, more plant. Modern economics requires constant growth, its logic assumes that there is no limit to energy consumption, forgetting that constant growth will eventually use up all resources in a finite environment.
To understand economic growth and energy you must understand how money is created, and how money and the banking system work together. This is covered in Section Five - Oil & The Economy.
How was oil created?
Around 360 to 286 million years ago, climatic conditions on Earth favoured a huge proliferation in plants such as trees and ferns. Over millions of years, the remains of plants and animals were washed into the world's oceans, along with large quantities of sediment carried by rivers. The organic matter sank to the bottom of the oceans and was buried under layers of sediment, where it decayed. As more and more layers of sediment buried the organic matter, the pressure and temperature increased. Certain bacteria that thrive in anaerobic (oxygen starved) conditions began the process of transforming the rotting matter into crude oil, gas and coal.
The high pressures compacted the sediments into rocks (sandstones and limestones). The oil and gas slowly migrated into the pores of these rocks, which are referred to as "source rocks" by petroleum geologists. In many cases, the oil and gas seeped through cracks in the overlying rock strata and leaked away to the surface. However, in some cases the oil and gas deposits were prevented from reaching the surface by an impermeable rock layer (often a thick layer of salt). This caused a build-up of pressure behind the impermeable layer, pushing the overlying strata upwards. The distinctive salt "dome" is regarded as being indicative of potential oil and gas deposits.
Where is the remaining oil?
This graph demonstrates where [declared?] oil reserves are located. You can see by a long way, it is concentrated in the Middle East. Western Europe has a small endowment, rapidly declining.
Who uses all that oil?
The USA is by far the largest consumer, followed by the European Union, China and Japan. It is largely the countries with decreasing native supplies that are using more and more. As countries such as China, India and Japan increase their economy and living standards increase, their demand for oil will continue to grow at a fast rate. [Graph to show rate of increase of consumption?]
How much do we use a day?
The Chevron website (http://www.willyoujoinus.com/) has an automated ticker that shows how many barrels of oil the world uses as time progresses. At present this is roughly 85 [update] million barrels a day. In 1986 that figure was 60 million barrels a day. In 1966 it was 33 million barrels a day.
85 million barrels is:
3,570,000,000 US gallons
or 2,972,450,000 imperial gallons
or 13,515,000,000 litres
or 637,500,000 tonnes
or 485,350,000 giga joules
or 5406 Olympic size swimming pools - (1,973,190 swimming pools a year)
Its always difficult to work out the average oil use per country due to the different energy mixes, the different uses of oil and problems such as production in one country and consumption in another. However as a rough comparision the world average per capita consumption (excluding UK and US) is 1.6 litres a day, the UK average is 4.9 litres a day and the US average is 11 litres a day.
How much oil is left?
This is quite a controversial subject. For example, do we include unconventional oil? Can we know the ultimate recoverable reserves figure? If we include unconventional oil we can reach figures of 3 trillion barrels, but if we stick to conventional oil, it is about 1 trillion.
So how long will it take us to use that much oil?
If we go with the assumption touted by many that we have 1 trillion barrels of oil left (CIA, Chevron etc), that would give us about 35 years of usage at current rates of consumption before we ran out. But this also assumes oil production can be kept at a steady pace for 30 years. However, due to the nature of oil production, the 'Hubbert Curve', geological factors mean we will be forced to use less, earlier, meaning we will have oil for longer, but at an increasingly lower level.
Isn’t it true that oil reserves have just been growing and growing?
If you look at this first graph, of oil discoveries as reported, you would think that is true.
So aren’t we discovering more?
This second graph shows all you need to know. Colin Campbell of ASPO went back and charted all the real discovery data, not the reported discovery data. What this shows is that oil discovery peaked in the mid 1960s, and from around 1980 we started consuming more than we discovered. The reason why oil discovery has peaked is that oil companies know where oil will be, so it is easy to find the largest reserves first. Despite increased investment in finding new oil fields, there really is little of any significance being found.
Why aren’t reserves the important thing?
Quite simply, it is the supply rates that are the most important thing. If you've got a house on fire by a lake but can only use one bucket of water at a time to put the fire out, it is clear to see that it is flow rates that is the important thing.
Didn't I read that oil is renewable?
You might have done, but it's not a generally accepted view.
The conventional scientific explanation for the origin of oil is that organic matter, buried under sediments millions of years ago, gradually became "pressure cooked" into crude oil by high temperatures and pressures (see "How was oil created?" above). This is why oil is referred to as as "fossil fuel". This theory is backed by the collected evidence from a century of oil drilling and scientific analysis, and is the basis for all modern oil prospecting methods.
An alternative theory, originally proposed by Russian scientists, is that oil has a non-biological (abiotic) origin. The abiotic theory proposes that oil originates from methane and carbon dioxide deep within the Earth's mantle, which is converted to heavier hydrocarbons by high temperatures. This implies that oil reservoirs will be continuously refilled after oil extraction has taken place. However, as author Richard Heinberg notes:
"If there are in fact vast untapped deep pools of hydrocarbons refilling the reservoirs that oil producers drill into, it appears to make little difference to actual production, as tens of thousands of oil and gas fields around the world are observed to deplete, and refilling (which is indeed very rarely observed) is not occurring at a commercially significant scale or rate except in one minor and controversial instance[...]" 
The abiotic theory of petroleum origin is not taken seriously by the majority of scientists in the field. Even if it were found to be true, we are consuming oil at a far higher rate than could be sustained (as is shown by the graph of the US peak - after all, if it was being replenished at a sustainable rate, there would be no decline!), and there will still be a peak and decline in global oil production.
Can’t we just spend more money on discovering it?
The major oil companies such as ExxonMobil, Chevron, Shell, BP etc have been doing just that. However, they are increasingly finding that the record amounts of money they've been spending on exploration are not being covered by the value of new oil discoveries. 
Can’t we use technology to improve extraction?
We have been. From water injection to superstraw drilling, technology has been implemented to improve the extraction rates from oil fields. That is why newer oil provinces tend to peak earlier after discovery than older fields There hasn’t really been any improvement in technology in recent years though that will not make much of a difference. If you look at Prudhoe Bay in America, where they have the access to the technology, you can see it has made little difference.
“Of course it is possible to go back to an old field developed long ago with poor technology and extract a little more oil from it by a range of well known methods, such as steam injection. But this is a phenomenon of the dying days of old onshore fields of the United States, Soviet Union and Venezuela. Most modern fields are developed efficiently from the beginning. In any event the addition contributes little in global terms and has no impact on peak. Technology serves mainly to hold production rate as high as possible for as long as possible. That obviously makes the most profit. But it adds little to the reserves themselves and clearly accelerates the rate of depletion. The high depletion rate of Norway shows how efficient they have been at extending plateau production. The decline slope now becomes a cliff.”
Another problem is that technology may actually be counter-productive. For example, Matt Simmons talks of the Saudi oil fields being damaged by inappropriate water injection.
“Pumping large amounts of oil at the maximum rate can damage the geological structure of the field, usually referred to as "rate sensitivity". Basically the hole falls in on itself, making large amounts of oil within it un-extractable.”
What is the official view on when we will peak?
[We need to build in the July 2007 IEA Medium Term Report]
According to the UK Government's Energy white paper 2003, "Our Energy Future - Creating a Low Carbon Economy"  "Globally conventional oil reserves are sufficient to meet projected demand for around 30 years, although new discoveries will be needed to renew reserves. Together with non-conventional reserves such as oil shales and improvements in technology, there is potential for oil reserves to last twice as long".
This is consistent with the assessment made in the International Energy Agency's 2004 World Energy Outlook, which concludes that "...global production of conventional oil will not peak before 2030 if the necessary investments are made". However, this assessment rests on the assumption that oil discoveries have been declining purely as a result of reduced explortion activity, and that greater investment in exploration will yield massive new reserves.
This date is premised on the USGS Mean estimate of 2626 Gb (billion barrels) for remaining conventional oil. It goes on to state that if this estimate should prove too high, the peak of production would come by 2015 or before. This means that the IEA accepts the notion of peak oil, that the date ranges from 2015 to 2033, but even sooner if all assumptions are not fulfilled. “ It follows that Governments are now on notice that they must make energy plans for the future that accept peak oil as a reality.” Kjell Aleklett
When do others think we will peak?
There are a range of predictions being advanced by independent experts, starting as early as 2005 to around 2020. Here is a summary taken from the Hirsch Report :
2006-2007 Bakhitari, A.M.S. Iranian Oil Executive
2007-2009 Simmons, M.R. Investment banker
After 2007 Skrebowski, C. Petroleum journal Editor
Before 2009 Deffeyes, K.S. Oil company geologist (ret.)
Before 2010 Goodstein, D. Vice Provost, Cal Tech
Around 2010 Campbell, C.J. Oil company geologist (ret.)
After 2010 World Energy Council World Non-Government Org.
2010-2020 Laherrere, J. Oil company geologist (ret.)
2016 EIA nominal case DOE analysis/ information
After 2020 CERA Energy consultants
2025 or later Shell Major oil company
No visible peak Lynch, M.C. Energy economist
NB: Deffeyes has since revised his prediction and believes we passed peak oil in late 2005.
Why do people think we will peak now?
There are several key indicators for this.
The main approach, using Hubbert’s model for oil production, points to a Peak in the first decade of the 21st century. This is championed by the likes of Colin Campbell at the Association for the Study of peak oil and Gas. A refined version of Hubbert’s model has been created by Prof. Kenneth Deffeyes and he believes the Peak occurred at the end of 2005. Because this model relies a lot on the ultimately recoverable reserves it can be refuted by some by pointing to things such as unconventional oils from, for example, tar sands in Canada. If unconventional oil is included reserves can be pushed up to 3 or 4 trillion.
Much more useful, now that we are near the Peak, is the work by Chris Skrebowski, editor of Petroleum Review. He conducts a yearly review of all the oil fields in the world, looking at the data for oil fields coming online over the next few years, and looking at the decline rates of current oil fields. It is the only field by field analysis conducted. This is a very useful approach as it is the flow rates that are the important thing. It presents a clear view of how future production flows are going to work. He notes that “90% of known reserves are in production,” and that “as much as 70% of the world’s producing oil fields are now in decline” with decline rates averaging between four and six percent per year. When you get to the point where you can no longer offset the decline of current oil fields with the increase in production at current oil fields or bringing on new oil fields, then you have global oil decline. That is why it is so important to understand depletion, not just increases in production – you have to take into account the full sum. Chris Skrebowski’s work strongly suggests a Peak occurring by 2011 [update?].
Other points to take into consideration:
Global rates of discovery have been falling since the mid 1960s as has been confirmed by ExxonMobil [source?]. This is a well established trend.
We are consuming much more than we discover – In 2005, according to IHS Energy Inc., a total of 4.5 billion barrels of oil were discovered in new fields, while 30 billion barrels of oil were extracted and used worldwide. Thus, currently only about one barrel of oil is being discovered for every six extracted.
The 100 or so giant and super-giant fields that are collectively responsible for about half of current world production were all discovered in the 1940s, ’50s, ’60s, and ’70s and most are now going into decline. These days, exploration turns up only much smaller fields that deplete relatively quickly.
Have people made wrong predictions about peak oil before?
Absolutely. People have been talking about the end of oil almost as long as the oil industry has been around. People have made pessimistic predictions, but there have also been optimistic predictions made too.
“In 1968 the USGS released predictions of US oil production showing continuing production growth far into the future. This report was discredited in 1974 but not after it had done serious economic damage due to errors in economic planning. History appears to be repeating itself. Recently on Channel 4 news the retired head of exploration at the Saudi state owned oil company Aramco, Sadad Al-Husseini, had this to say about the USGS estimates. ‘They’re not only overestimating the Middle East, but they overestimate non-Opec, they overestimate Russia, they overestimate the whole global resource base. And I think this is a rather dangerous situation for the US government policy to be based on.’”
However, there is much more knowledge about the nature of oil production now, about discovery & decline trends, and what is likely to happen. This is one of the reasons why many analysts see a Peak very likely the first decade of the 21st century.
Have we passed any peaks?
In terms of energy, world oil production per capita [also peaked in 1979??] and his since fallen faster than world energy production per capita.
Oil production has also peaked in 33 of 48 major oil-producing countries
1955 – Austria
1966 – Germany
1970 – Venezuela, Libya, Ukraine, Bahrain
1971 – US48
1973 – Canada, Turkmenistan
1974 – Iran
1976 – Romania
1977 – Indonesia
1978 – Algeria, Trinidad, Brunei
1981 – Tunisia
1982 – Chile
1983 – Peru, Albania
1986 – Brazil, Cameroon
1987 – Russia, Netherlands, Hungary
1988 - Croatia, France
1991 – UAE, Turkey
1992 – Pakistan
1993 – Papua
1995 – Egypt
1996 – Gabon
1998 – Argentina, Angola, Uzbekistan, Sharjah
1999 – UK, Colmbia, Yemen
2000 – Australia
2001 – Norway, Oman, Congo
2004 – Mexico, Nigeria, Qatar, India, Malaysia, Ecuador, Denmark, Italy
2005 – Vietnam, Sudan, Thailand
2009 - Chad?
2010 - Azerbaijan?
2013 – Saudi Arabia?
2015 – Kuwait?
What do the oil companies think?
On November 19th 2007 the Wall St Journal's front page was headlined "Oil Officials See Limit Looming on Production". The article goes on to say 'A growing number of oil-industry chieftains are endorsing an idea long deemed fringe: The world is approaching a practical limit to the number of barrels of crude oil that can be pumped every day. Some predict that, despite the world's fast-growing thirst for oil, producers could hit that ceiling as soon as 2012. This rough limit -- which two senior industry officials recently pegged at about 100 million barrels a day -- is well short of global demand projections over the next few decades.'
Other oil industry executives have also expressed a view.
‘My view is that “easy” oil has probably passed its peak.’ Jeroen van der Veer, Chief Executive, Royal Dutch Shell
"Energy will be one of the defining issues of this century, and one thing is clear: the era of easy oil is over. What we all do next will determine how well we meet the energy needs of the entire world in this century and beyond."
A senior BP executive has said:
"Discovered hydrocarbon volumes have been declining since the end of the ’60s. The deepwater theme of the ’90s and a renewed search for gas has helped to reverse this trend but the last few years have been poor for exploration. The number of supergiantfields and the number of giant provinces have fallen off markedly in recent decades. Field sizes are declining..."
Exxon on the other hand says:
"Contrary to the theory, oil shows no sign of a peak"
Jeremy Gilbert is the recently retired Chief Petroleum Engineer of BP with a lifetime of experience in the oil industry. Although he does not represent the official BP position, the fact that he has now come out and [agreed that peak oil is soon] is important to note.
What happened to all the spare capacity?
Rapid growth demand in emerging economies such as China and India, combined with increases in production failing to offset the rate of decline fast enough has meant there is now no spare capacity. Saudi Arabia used to be the swing producer, able to turn on the taps as and when needed, but now it cannot provide as much of the cheap, easy oil. The spare capacity remaining is dirty heavy oil , about 1 million barrels, with no refining capacity to deal with it.
Wasn’t all this predicted in the 1970s? Didn’t it turn out to be wrong?
‘The Limits to Growth’ by The Club of Rome was published in 1972. Using sophisticated computer models from MIT, it said the world would ultimately run out of many key resources. Over the following few decades it was mocked by economists as the supply of resources just kept on increasing and prices dropped. People now refer to it as having predicted that we’d have run out of oil by 2000, and then use this to discount all other warnings about oil supplies.
“Nowhere in the book was there any mention about running out of anything by 2000. Instead, the book's concern was entirely focused on what the world might look like 100 years later. There was not one sentence or even a single word written about an oil shortage, or limit to any specific resource, by the year 2000.
The members of the "Club or Rome" were also not a mysterious, sinister, anonymous group of doomsayers. Rather, they were a group of 30 thoughtful, public spirited-intellects from ten different countries. The group included scientists, economists, educators, and industrialists. The book then postulated that if a continuation of the exponential growth of the seventies began in the world's population, its industrial output, agricultural and natural resource consumption and the pollution produced by all of the above, would result in severe constraints on all known global resources by 2050 to 2070. The most amazing aspect of the book is how accurate many of the basic trend extrapolation worries which ultimately give raise to the limits this book expresses still are, some 30 years later. In fact, for a work that has been derisively attacked by so many energy economists, a group whose own forecasting record has not stood the test of time very well, there was nothing that I could find in the book which has so far been even vaguely invalidated. To the contrary, the chilling warnings of how powerful exponential growth rate can be are right on track. The thesis that it is easy to misjudge this type of growth has also been proven by the volumes of misguided criticism that the report engendered.”
Matt Simmons went back, looked at everything the Club of Rome said and found they were far more right than wrong.
What influence has oil had on agriculture? What effects have oil and gas had on agriculture & food distribution
It is approximately fifty years since horses finally disappeared completely from commercial agriculture. In that time crop yields have increased phenomenally. Wheat for example increased from 1 to 1.5 tonnes to the acre to 3 to 3.5 tonnes to the acre, with the better farms achieving nearer 4.5 tonnes. This increase duplicated across many crops throughout the world is what has enabled the growth in population [discussed earlier - need to amend or build in earlier section].
Yet the United Kingdom has become less self sufficient in food down to 64% for all food in 2004 (John Nix, Farm Management Pocketbook 36th edition) meaning that our food supply is much more reliant on other countries. When oil is plentiful and cheap, this isn't a problem - and indeed, that's exactly why our self-sufficiency has declined.
The supermarkets themselves didn't exist as a significant force until the 1950s and they have grown their reach and perfected their centralised distribution systems on the back of cheap oil and gas. Next time you go into a supermarket just think about how much energy is being used keeping those open decked chillers running and the freezers and the lighting 24/7, let alone the amount of energy used to shift lorry load after lorry load around the country.
Lifestyles have also changed. People lead more rushed lifestyles and food often takes a back seat, squeezed into the day, with many people picking food up on the run and grabbing an energy intensive chilled or frozen ready meal from the supermarket on the way home from work. Processed foods have become the norm with only a minority of the younger generation with the desire, time or skills to cook an indigenous food meal from scratch from fresh and basic ingredients. Cars have enabled people to do a big shop once a week and with the use of the refrigerator and the freezer in some cases once a fortnight or once a month. Diet has become more varied with exotics such as pineapples and mangos widely available and fine green beans from places like Kenya and Thailand available year round by the use of exceptionally energy intensive air freight.
The average spend on food as a percentage of average income has also dropped significantly in this time meaning that people have more to spend on other things such as cars (consume energy), central heating systems (consume energy), entertainments (consume energy). Cheap food has come about for various reasons; commonly attributed to the cheap food policies followed by governments and the increasing competition of the supermarkets, the effect on food prices of cheap oil and gas for production and distribution is frequently overlooked. The reality is that cheap food would never have existed without cheap energy, nor would the supermarkets or the cars or the refrigerators in every home.
During the twentieth century for the first time in the history the total of energy use from seed to plate has vastly exceeded the energy consumed. [source?]
Originally farms produced all their own energy. Cultivation was carried out by horses which were fed on grass and grain produced on the farm. Horses usually required 20% to 25% of the land in both grass and grain to provide their food requirements. Fertilisers were non existent other than via manure from livestock kept on the farm. All farms were mixed farms, right across the UK. Now the eastern counties are predominantly arable or crop farming and the western counties predominantly livestock, meaning that livestock products such as meat and milk have to be transported east and south to their markets and crop products such as feed wheat have to be transported west to their markets. The only exception to this is industrial poultry and pig farming where the animals are largely kept indoors and these farms tend to be predominantly in the eastern grain producing regions. Vegetables are mainly grown in and around the Wash in Lincolnshire, Cambridgeshire and Norfolk where the soil is supremely suited to their production. These then have to be distributed accordingly around the country. Much of this area owes its existence to drainage systems pumped and dug and maintained first by coal and steam pumps and now by oil. Irrigation is used extensively in this area on some crops although overall the U.K's reliance on irrigation is much lower than that of many other countries, irrigation relies mostly upon diesel powered pumps to move and pump water to where it is needed.
The mechanisation that was enabled on the back of oil through tractors, combine harvesters and all the tasks that they can accomplish has significantly reduced the labour required on British farms, meaning that more people were "free" to go off and seek their living in other industries. The mechanisation meant that timeliness was increased, and therefore only two or three different crop species were a possibility on a big farm. Even a small tractor can plough more in an hour than a team of horses and work for more hours a day.
Originally everything was organic because there was no other way to be. Then early in the twentieth century guano, a deposit of bird faeces rich in Nitrogen with some Potash and Phosphate content, was found in abundance on cliffs in places such as Peru and Africa. This was mined and transported to other countries where its value as a fertiliser was soon realised. As with all natural substances used on a large scale this commodity soon could not keep up with the demand and other substitutes were found. Nitrogen fertiliser based on the Haber-Bosch process was soon in use on a wide scale. This process uses large quantities of natural gas.
Soon after the Second World War a lot of effort was put into finding chemicals to control weeds, pests and diseases. These chemicals are also reliant on oil for feedstock and for the energy to manufacture, distribute and apply them. Seed breeding and development has been thanked for a great deal of the increases in yields and is probably the least energy intensive part of the new style of agriculture. However a lot of the varieties that have been bred have been very successful when supplied with copious quantities of fertiliser and pesticides and it remains to be seen how many of them are viable without these inputs.
What influence has oil had on population?
This graph says it all. Oil has been incredible for the human population. It has improved healthcare, agriculture, trade, water supplies and shelter, and for these reasons people have been living longer and mortality rates have decreased. It has created an artificial carrying capacity for the world. Oil increased the quantity of people we were able to sustain, but when oil goes into decline, it is not hard to consider that population will go into a decline too. Whether this is sudden or gradual will vary around the world.
Can’t Saudi Arabia pump more?
The true answer here is that outside of Aramco (the Saudi Arabian public oil company) nobody really knows. Some argue (most prominently Matt Simmons in "Twighlight in the Desert") that there is evidence that Saudi is nearing its peak of production and has in all probability passed its peak of light sweet crude (low sulfur and shorter carbon chains - far easier to refine). Others, including Aramco officials argue that Saudi production can be raised over a period of time to greater than 15 million barrels per day (it is currently around 9.5 million barrels a day).
We do know that most of the big Saudi fields were found over 40 years ago and that they have been producing for tens of years. Very little significant reserves have been found in the past few decades.
We also know that Saudi is the world's last swing producer. A swing producer is a country that can increase its production to cover for short term supply disruptions elsewhere. The rest of the world is pretty much pumping as fast as they can. If Saudi does peak then the world will have almost certainly reached a global peak but even before that time, Saudi needs to increase its production at a rate higher than the global decline to stave off the global peak - something that gets progressively harder as more fields and countries start to decline, while demand continues to grow.
Until we have publicly available field by field data from the Saudi oil wells, the only way to know how much Saudi can produce is to wait and watch.
The markets will sort it out.
A number of factors come into play discussing the role of the markets and solutions to the coming energy crisis - 1) are theoretical free market principles reflected in our current society 2) to what extent are energy costs factored into the markets 3) to what extent do we commit the cardinal sin of using past performance to predict the future 4) how will supply and demand work in the energy crisis 5) what are the limits to market capitalism 6) how will our reliance on debt and growth be effected.
1) for markets to function properly there needs to be transparency of information and an absence of coercion or undue influence.
2) considering virtually all of the raw materials used in energy production, space heating and transport are finite, and for the vast majority, their cost of production does not factor in the millions of years of sunlight, heat and pressure required to make them, their true value is not reflected in their market price. In essence the last hundred years have been the equivalent of the ground giving people $100 a barrel and us having to pay back $10 for it. Our current market model has not been subjected to a situation where a fair price is paid for fuel inputs, it can then be argued that our current model is theoretically if not practically flawed. Perhaps it will work when energy costs reflect their true price of production but our testing of its robustness have historically not included these pressures.
3) the technological and medical advances that have been possible over the last few hundred years through the availability of cheap fossil fuels have led the human race to fall into the trap of predicting the future to be a continuation of the status quo. Humans have become arrogant in the belief that we can overcome any obstacles placed in our path. Our belief is that our ability to invent technologies for any eventuality is unlimited. A key to financial theory is not to see past performance as an indication of future performance.
4) supply will always match demand (in a market with an unregulated price) but the emphasis needs to be placed on the supply being the determining factor rather than the demand. Due to a few hundred years of the ability to increase supplies (of most things) to meet demand, the usual focus on the supply and demand equilibrium is on the demand side. Peak oil will cause a supply constraint. The only possible outcome is demand destruction - i.e. the price of oil, as it becomes more scarce, will rise so that more and more people simply can't afford to buy any.
5) our current guise of the free market, i.e. capitalism, has the ability of infinite growth as one of its fundamentals. If you are of the belief the land and resources are finite then you will understand that when these are no longer freely available then the model begins to crumble. It takes a true hard headed capitalist to believe that the earth and the beings on it have an infinite potential to expand.
6) Our debt based (mortgages, loans, bonds) society's continued viability is predicated on growth - between 2 and 3 percent a year on average, and that growth it can be argued is dependent on cheap fuel sources. The energy crisis therefore has the potential to destroy our capital markets; now whilst this does not necessarily mean that the theoretical market will not continue, it may mean that our global market as we know it now may cease to exist or be radically changed.
We’ll find something better, won't we? We always find a better fuel!
Not always. For example, in the case of Easter Island, wood was their major fuel source. They used it all up and there was nothing to replace it. Until the industrial extraction of coal, Britain experienced plenty of wood shortages, and there were decades where use of wood was limited. We went from wood to coal, and then oil and gas. Nuclear also emerged making a small overall contribution. But there is nothing we know of that is better than oil or as flexible as oil.
Does the market have a role to play?
The market can be considered to be reactionary not proactive. In that sense solutions tend to be found when problems arise and someone comes up with an idea that they feel they can make a profit on. As such the market tends to be short sighted. It could then be argued that declining oil production is a problem that needs longer term thinking and planing and therefore, a reactionary system such as the free market will not be suitable mechanism for change by itself. However, as part of an overall effort to a more sustainable, post peak society it is possible that the free market might have a role to play if it is integrated in with other measures. Although, there are some people who would argue that it should not be part of a solution as it will allow those with more spending power to force a solution for themselves rather than opting for an overall strategy that benefits society as a whole.
Necessity is the mother of invention. Technology will save us. Somebody will think of something.
The magical technology fairy saves the day. Seems like a good plan to me, let’s not do anything because someone else with think of something. We will invent the technology to save us all! OK, sarcasm aside, the obvious problem there is basing our hopes on something yet to be invented. That’s putting our faith in something that doesn’t exist. Maybe it will work, maybe it won’t but a wise course of action would be to assume that it doesn’t and plan accordingly. Then you will be covered both ways. It doesn’t take much of a look at history to find that there are plenty of examples where new technology doesn’t actual do much more than make the situation worse. For example, new machinery introduced into a factory that then breaks down or requires more effort to maintain than the old machinery. It could suffer from a bit of teething trouble. There is also the problem of time. We can make a good guess as to what is coming our way and we know that we need to act now and there is no time to wait. There is not much activity at the moment in research to find alternative technologies for a post carbon world. Most research is aimed at developing technology to maximise company’s profits or in some way or other to keep going as we are. When it is realised that we can’t it may be far too late to develop new technologies even if such things could be developed.
Now, lets go back to the beginning. The problem we are dealing with is not so much a technology problem but an energy problem. Anything and everything we do requires energy and post peak there is a good possibility that we will be running short of energy. Technology does not make energy it can only use it. We already know what energy we have available and how to use it. We also have the technology to use it more efficiently. Therefore, it can be argued that we do not need any new technology to tackle this problem. It can then be argued that we need to look at the way we are doing things and change or socio-economic system rather than trying to invent new things to keep partying a little longer.
Another thing to consider is that we wouldn’t be in the position of an oil dependent world if the invention of the mass produced automobile hadn’t occurred – the invention of the car led to it becoming a necessity, and now we find ourselves in the position we are in!