Peak Oil - An Introduction

It seems as if every year or so there will be a scaremongering article or news report, telling us that our days are numbered, as the fuel that is that basis of our capitalist world’s infrastructure is about to run out. Oil is used to power almost all of our conventional means of transport – cars, trucks, ships, aeroplanes. It is risky to be so dependant on one substance, and it is easy to conceive how a lack of supply could bring about economic collapse – the petrol shortages in the UK revealed how even a small restriction to supply could have large effects. In fact, the economic recession in 1973 was caused by a restriction of oil supply by OPEC (organisation of the petroleum exporting countries). Simply put, oil is big business.

So, it is clear that maintaining oil supply is a problem that weighs heavy on many minds – the Bush administration has been accused of taking an interest in Iraq for the very reason of oil supply security fears. When you look at the statistics, it is clear to see why:
The USA produces only 8% of the world’s oil, but consumes 25% of it – while only having 5% of the world’s population.
And there are the ever increasing fears that the oil will run out…



…well, oil will run out. It is an undeniable fact – oil is a non-renewable source; no new oil is being created (at least not on anything other than a geological timescale), so there will come a point where there is no more oil that can be extracted. Note the ‘extracted’: we cannot extract 100% of the oil within a reservoir with current levels of technology. At the moment, only 40% of the oil can be extracted, on average. Depending on the specifics of the site, this percentage can vary from as bad as 5% to as good as 80%.
But even considering this, most experts estimate that we have only extracted half to one third the oil we possibly can.

Nothing to panic about.

Right?

Well, the bad news is that world oil consumption is increasing each year. Also, the amount of new oil discoveries has been declining since the mid 60’s. Combine this with declining output from old oil fields, and the decreasing size of new found ones, and we come to the problem known as peak oil.
The concept is not difficult – oil production will, at some point, reach a peak, and then start to decline. The problem is when this will occur, and how it will affect the world’s economy.
The idea that oil production would peak was first made by M. King Hubbert in 1949, and at the time his prediction seemed quite unbelieveable, however as time has gone on, world oil production is increasingly following Hubbert’s curve. Not everyone believes that this crisis point will occur, notably economist Peter Odell (Link to Guardian article) , who received a 2006 OPEC award earlier this year…

There are arguments that our oil supply will be supplemented by oil from ‘unconventional’ sources – for example; oil extracted from oil shales and tar sands (at higher cost, however).
Our technological prowess at extracting oil may increase, allowing far higher percentages of oil to be extracted, further pushing away the day when oil will run out.
Some experts feel that global oil reserves are much higher than expected, due to underestimation of reserves in Russia, Iraq and Iran. But one thing is clear – there will be a peak at some point. Oil demand is increasing, and the amount of oil in the world is finite. The only question is; when will this occur? Well, some people think that it is just about to happen. Many oil producing countries are already past peak production – the USA passed this point in the 1970s.
The International Energy Agency has current oil market reports.

With the decreasing rate of new oil field discoveries, and the decreasing size of these discoveries, it looks as if we are on the point of reaching the peak. Others argue that the peak is not due until 2025. However, any predictions are based upon estimates of the amounts of oil reserves (that is oil left to be extracted), and these estimates can vary wildly. The truth is, no one can really know the true capacity of any oil field – they can only make an educated guess. It is worth noting that the reserve oil amounts of certain countries should be viewed with suspicion – experts think that some governments may overestimate reserves, and some countries’ oil reserve estimates have not changed over several years, despite the fact that oil production would be draining these reserves…

What will be the effects?
Demand will begin to outstrip supply. This will lead to sky-rocketing oil prices, and fuel poverty will be a major issue. Prices of pretty much everything else will rise accordingly – shipping costs will be higher, so food prices will rise. Fewer people will be able to afford transportation. Knowing the significance of the military in most government’s eyes, it is likely that military fuel supplies will be of high priority.
Hoarding of fuel will exacerbate the problem. In the worst possible case, the world’s economy would tip into recession, or even suffer a major collapse.
For more details on the effects of passing the oil peak, see Life After the Oil Crash.

All this can be avoided!
The peak oil situation will only be a problem if there is not an alternative fuel to take its place. The main problem is that oil is a transportation fuel, and the alternatives (batteries, fuel cells) do not have oil’s advantages – high energy density, an existing distribution infrastructure. Other alternatives are biofuels, such as ethanol and biodiesel, with the advantage that existing infrastructure could be easily adapted to these fuels. Most biofuels require little or no modification to existing internal combustion engines – though biofuels come with their own problems.

Alternatives to oil are therefore of vital importance for two reasons – avoiding a peak oil crisis, and decreasing greenhouse gas emissions. We need to start taking steps to phase out our dependence on oil and other fossil fuels – any finite resource will have a peak in production. The Swedish government is already taking steps.

There is a wealth of information about this issue out there – simply type ‘peak oil’ into google or wikipedia. More links:
The Oil Drum
Peak Oil in the News
Peakoil.com