printer friendly version

What's Peak Oil?

Most people haven't heard about “peak oil,” or if they have most really don't understand what the buzz is about. Well, we'll tell you.... The world is just about out of cheap and abundant oil, and natural gas.

No, we're not out of all the oil and natural gas, just the affordable stuff. According to Jim Buckee, just retired as President and CEO of Talisman Energy, a major independent Canadian oil company, "Oil running out is sort of wrong terminology. It will continue to produce in large quantities, but increasingly less quantities at higher prices. So we'll still be using a lot of oil in 20 or 30 years time, but it'll be rationed by price to the most essential uses of oil and that's generally transportation." But the significant decline in available quantities, and the much higher prices, will severely impact the availability of transportation...and a lot of other things. Mr. Buckee, in a radio interview with ABC Radio Australia in February, 2008 stated that he anticipates oil prices to trade in the range of $150-200 per barrel by the fourth quarter of the year.

All of the why’s and wherefore’s of this reality are too extensive to include here, but enormous amounts of information are available on the subject via the internet. Just conduct a search on Google or Yahoo! for “Peak Oil”. You’ll find millions of references.

And then start studying; because this issue is going to have an enormous effect on your life in just the next few years. For societies leveraged on ever increasing amounts of cheap oil, such as the United States, the consequences will likely be dire. Without significant and successful cultural and behavioral reform, profound economic and social decline appears inevitable. Do you think you ought to know about this? Do you think your elected officials ought to be talking more publicly about this?

Some Basic Facts:

• More oil wells have been drilled in the past 15 years than in all the previous years of exploration combined, and there is now a worldwide shortage of drilling rig equipment. And, the last major oil discoveries were made in 1967, 1968, and 1969: that’s 35+ years ago.
• The average total reserves of each new oil field discovered today, worldwide, is about 10 million barrels of oil – that is less than 1/2 the amount of oil consumed, in the United States alone, in a single day. We are using roughly 300 billion barrels of oil per day, worldwide, but have only been discovering about 6-8 billion barrels per year -- for the past 20 years.
• The USA consumes approximately 21 million barrels of oil per day -- 25% of all the oil produced on the planet. The world consumes approximately 86 million barrels of oil per day.
• Nine of the world’s top ten International Oil Companies have now reported virtually flat or declining global production for two or more years in a row.
• Five of the six largest fields of the world have now “peaked”, four of them in just the past three years. The largest field in the world, Saudi Arabia’s Ghawar field, has reduced production over the past year and has been pumped heavily for thirty years. Many experts claim Ghawar is near peak, or has peaked. Saudi Arabia’s overall production is down 11% this year (2007).
• Of the 65 largest oil producing countries in the world, more than 50 have peaked and are now in decline.
• To meet the projected global demand for oil in the next 25 years, oil companies and governments around the world have forecast that the world will need to produce, refine, and transport to market more than 120 million barrels of oil per day. But they must also make discoveries to offset the declines in existing oil fields around the world.
• The highest volume of total global crude oil production in a single month, in all of history, occurred in May of 2005 and production has not reached these levels again since.
• More than 95 regions or countries around the world are already experiencing energy shortages.

"Peaking" means an oil-producing well, basin, or region has reached the point in time where (due to geological constraints) the maximum amount of oil is being pumped from it, and from that point on it produces less and less, averaging about 4-8% per year but sometimes in a very rapid production decline of even 10-15 % or more per year. This peak and decline typically occurs when approximately one half of the oil in a given well, basin or field has been extracted. Many fields, sometimes off shore, far from markets, smaller fields, or of lesser oil quality, take ever more money and energy to extract and refine. Under these conditions, the rate of extraction inevitably drops. Oil companies then may employ enhanced recovery techniques by injecting water or gases into the wells to increase the pressure and force the oil out. Eventually, however, all oil fields reach a point where they become economically, and energetically unviable – it simply costs too much to pump.

Oil is a finite resource. And numerous experts report that we have likely discovered all the big fields on the planet, which further infers that as the existing giant fields deplete, less and less oil can be made available to the world. To discover, produce, and transport to market 120 million barrels per day appears utterly implausible.

There are some other big problems -- the oil demands of the global marketplace have been expanding very rapidly in the past decade and are now on the verge of an even more explosive and extraordinary expansion. Today, China’s economy is growing at 11-14% per year and is now the second largest importer of oil in the world, after the USA. And they have just begun the industrialization of their nation -- which has four times the USA population. India is close behind. Further, most of the largest oil exporting countries of the world are now developing economies themselves, which means more oil demand within their borders reduces the amount of oil they have to export to other countries.

So, we have a very rapidly rising consumption demand across the world at the same time the world oil supply is peaking and starting to decline. That simply means there isn't going to be enough oil to go around – global competition for limited valuable resources. And THAT is the peak oil issue.

Worse yet, natural gas will be peaking shortly thereafter. Natural gas is used to generate roughly half of all the electricity used in Washington County, and heats more than half our homes in natural gas furnaces. Homes that use electricity to heat are receiving half of that electricity supply from natural gas.

Today, 63 percent of all the energy generated on the planet comes from oil and natural gas.

What are the implications?

The answer is very complex. But it can also be made very simple: Transportation, and the economy. Oil is very, very cheap -- cheaper than bottled water. There are precious few liquids on the planet that are as inexpensive as oil. At $100/barrel, oil costs less than 20 cents a cup (8 ounces.)

Today, 70 percent of all the oil produced goes to make transportation fuel -- for cars, trucks, trains, planes, and ships. Looking at it another way -- 95 percent of all transportation utilizes petroleum as its fuel source. As we run low on oil to manufacture these fuels, there is nothing on the planet that can replace those liquid fuels in the quantities we are using today, or at a similar low cost, let alone meeting global projected growth rates. And for certain methods of transport, such as air travel, no other energy source can currently be substituted for oil.

One of the most profound impacts we can expect is the impact on our food supply. The agriculture industry relies very heavily on petroleum. 95 percent of all fertilizers and pesticides are made from petroleum products, which generates the crop yields we enjoy today. And oil is used to till, plant, irrigate, harvest, transport, and store all that food. In fact, 95 percent of all the energy used in the agriculture industry comes from petroleum.

What will happen to the cost or availability and crop yields of food when the price of transportation fuels and fertilizers double, triple, and quintuple? The average distance a typical food item travels today, before ending up in your home kitchen, has been found to be about 1500 miles (makes you think about that fresh produce sold in the USA which is grown in the southern hemisphere.) And for every calorie of food produced, it takes 10 calories of petroleum energy and petrochemicals to produce it and get it to your kitchen table. Where is that energy going to come from if not from oil? Add to that the reduced global harvests available to humans for consumption as they are diverted to making bio-fuels.

Further, petrochemicals are the base ingredient used in the manufacture of more than half a million identifiable products that we use and count on every day; like lipstick, plastics, and fabrics. So, if there is a shortage of oil, and oil becomes very expensive, then all the products made from oil also become scarce or expensive.

The entire world economy is based upon the abundant availability of this cheap liquid fuel. It is what makes it possible for our food and other products to get from the producers to the market, people to get to and from work or school or the grocery store, and a large part of the enormous amounts of energy that are used to light and heat our homes and businesses. A healthy and growing marketplace is fundamentally required to enable Americans to live at our current standards of living.

When abundant, inexpensive oil is no longer available to support that growth, the economic growth model upon which the world is currently based will quite likely fail. When the economy fails many companies and industries suffer, and also fail. Virtually all businesses are heavily dependent upon other businesses to enable what they do – it’s called the “supply chain”. In fact, the viability of entire supply chains can be fully dependent upon the availability of a single petroleum product within that chain, or the energy produced by it. When companies fail, jobs and incomes are lost. When jobs and incomes are lost people can't buy stuff. When people can't buy stuff more companies fail, more jobs are lost, and more people can't buy stuff. It is a downward spiral that snowballs as it goes. The end result of this snowball effect across all industries could very realistically be a collapsed global economy -- quite probably a very serious economic depression similar or worse to that of the 1930's -- only this time it won't end easily, or quickly. There won’t be sufficient energy available.

With chronic oil shortages, and the resulting higher prices affecting both availability and cost of transportation fuels, we stand to face some very, very serious problems in transporting our food and virtually all other products to the marketplace. And again, it won't be temporary – the problem will increase in severity month after month as oil production depletes further and further and gets more and more expensive, and as more and more countries compete to secure desperately needed supplies.

Finally, consider the average miles-per-gallon your car currently provides you. Imagine yourself pushing your car for that number of miles. THAT’s how much energy is in a single gallon of gasoline -- and there is nothing we have now that can replace it in the volumes we currently consume.

Preparation

We all need to prepare…including you, and your family. Preparation consists of four primary approaches, and one major reality check:
1. Adapt to a profoundly simpler lifestyle as compared to your current norm. Call it, “powering down” (see the Resources section). Research how to do this. (Adapting to new ways of life takes time and effort so it’s to your advantage to start now). Learn to conserve as much as possible;
2. Develop the necessary skills to become as self-sufficient as possible; in terms of food, water, energy, and personal transport. That means a large productive home vegetable garden to compensate for reduced commercial food production and higher prices, canning and preserving supplies and skills, bulk food storage, even renewable energy generation (like passive and active solar power);
3. Promote community re-localization to your family, friends, neighbors, colleagues and community leadership; reducing your dependency on long-distance supply chains. Redirect your purchases toward locally produced agriculture and goods, local services, and local and decentralized energy production.
4. Reduce or eliminate your fossil fuel use as much as possible, especially for transportation -- use mass transit, bike, or walk. Work closer to home. Support alternative, renewable fuels. Increase the energy efficiency of your home. Withdraw support for further development of highways, urban sprawl, and large personal vehicles.
5. Reality Check: If you wait to start preparing, the resources you need or the conditions you count on to adapt may be exhausted, too expensive, or no longer viable. For example, if you wait until things get tough to trade in your SUV for a hybrid or plug-in car, there may not be any left (due to demand), and there may be no one willing to take that SUV in trade.

Further reading:

An exceptional article on the issue, Peak Oil: Alternatives, Renewables, And Impacts
Government Reports and Studies
Alternative Energy
Oil-Derived Products
About Abiotic Oil

For still further information, review the rest of this website.

Submitted by Peter Lunsford © 2007, Petraworld