Peak Oil

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Overview

The peak oil theory (also known as the Hubbert Peak) is, simply put, the proposition that global oil production will one day peak, and then begin an inevitable decline due to consumption of this finite resource.

The theory was first proposed by the late Dr. M. King Hubbert, a geophysicist, who was well known as a world authority on the estimation of energy resources and on the prediction of their patterns of discovery and depletion.

Hubbert realized that U.S. Oil production at the time (1950's: the U.S. was the world's top oil producer in this era) followed the upward slope of what appeared to be a bell curve - one that he projected would peak, and then begin to decline. His prediction in 1956 that U.S. oil production would peak in about 1970 and decline thereafter was scoffed at, but his analysis has since proved to be remarkably accurate, as the Energy Crisis of the early 70s revealed. This began the era of U.S. reliance on foreign oil.

Many prominent scientists and economists note that world oil production is following the same Hubbert curve, with an anticipated peak of 2000-2025, depending on estimates of oil reserves and undiscovered resources. Some more alarming recent estimates are that the oil peak has been passed, and we will only begin to realize this within the next several years.

The world's two largest oil fields are in Iraq and Saudi Arabia; a point that some claim explains the ulterior motives of the 2003 Invasion of Iraq as a means of securing U.S. access to these resources, as they will be the last "easy to extract" oil resources.

After the peak of global oil production, every drop of oil is harder to extract and more expensive to extract than the prior drop. This will result in extreme price inflation, territorial disputes, and a severe limiting pressure on global population.

Why? the entire agribusiness industry is oriented around cheap oil, including the use of petrochemical insecticide and fertilizer. Simply put - the world will have access to as much oil in 2025 as it did in 1975 (assuming a Y2000 peak). However, oil will be significantly more expensive, and the world population will have doubled from ~4 billion to ~8 billion people. Collapse of food production and delivery resulting in massive starvation is not a far-fetched possible result.

Additionally, traditional tensions between developing and industrialized nations will likely flare, as developing nations will (rightly) feel that the industrialized world will have "used up" this precious resource.

The theory was created as a mathematical model for use in predicting the rate of future oil production and subsequent depletion for an oilfield, as well as the combined production of multiple oil fields of entire regions or nations. Before Hubbert's model, no one had created a model that accurately predicted the rate of future oil production applicable beyond a single oil well.

Given past oil production data, the model predicts the date of maximum oil production output for an oilfield, multiple oil fields, or an entire region. This maximum output point is referred to as the peak. The period after the peak is referred to as depletion. The graph of the rate of oil production for an individual oil field over time follows a bell-shaped curve: first, a slow steady increase of production; then, a sharp increase; then, a plateau (the "peak"); then, a slow decline; and, finally, a steep decline. In 1956, Hubbert accurately predicted the peak of oil production would take place in the early 1970s for the continental United States. In 1971, he predicted, using high and low estimates of global oil reserve data available to him at the time, that global oil production would peak between 1995 and 2000. This peak has not occurred, and the implications for the model are controversial. Some petroleum economists, such as Michael Lynch, argue that the Hubbert model is inapplicable globally. Others, such as Colin Campbell, argue that the Hubbert model is fundamentally correct, and that the world faces the start of oil depletion between 2004 and 2015 -- potentially leading to a major global crisis in the early 21st century.

One piece of data in this argument is the World Petroleum Assessment issued by the United States Geological Survey. It estimates, based on current recovery rates, that there are enough petroleum reserves to continue current production rates for at least 50 to 100 years. Reactions to this estimate vary, with Campbell arguing that the USGS estimates are methodologically flawed and that there will be a peak in global oil production anywhere between 2004 and 2015. (Natural gas is expected to peak anywhere from 2010 to 2020.) By contrast, Lynch argues that the USGS estimates are too pessimistic, citing the fact that previous estimates by the USGS have consistently underestimated oil reserves available. As would be expected by any theory that predicts future fuel shortages, the Hubbert model has significant political and economic foreign policy ramifications.

The Hubbert peak theory is most often applied to oil but is applicable to other fossil fuels such as natural gas, coal and non-conventional oil. These and other potential energy alternatives are discussed in future energy development.

The Hubbert curve, devised by M. King Hubbert, predicts future oil availability.

The theory

In 1956, Hubbert created a mathematical model of petroleum extraction which predicted that the total amount of oil extracted over time would follow a logistic curve. The predicted rate of oil extraction at any given time would then be given by the rate of change of the logistic curve, which follows a bell-shaped curve now known as the Hubbert curve.

The general trend of oil availability, both for a single oil field or entire region, barring extraneous factors such as lack of demand, follows the Hubbert curve. When an oil reserve is discovered, production is initially small, because all the required infrastructure has not been installed. Step by step, more wells are drilled and better facilities are installed in order to produce an increasing amount of oil. At some point, a peak output is reached that can not be exceeded, even with improved technology or additional drilling. After the peak, oil production slowly but increasingly tapers off. After the peak, but before an oil field, is empty another significant point is reached when it takes more energy to recover, transport and process one barrel of oil than the amount of energy contained in that one barrel of oil. At that point, oil is not worthwhile to extract, and that oil field is abandoned. Hubbert peak theory proponents claim that this is true regardless of the price of oil.

When people use the phrase "the end of cheap oil," they are referring to two things: price increases due to scarcity, and the increasing inefficiency of oil production (cheap from both a monetary and energy efficiency perspective). When oil production first began in the early twentieth century, at the largest oil fields 50 barrels of oil was recovered for every barrel of oil used in the extraction, transportation and refining processes. This ratio becomes increasingly inefficient over time: currently, anywhere between one and five barrels of oil are recovered for every barrel used in the various recovery processes. When this ratio reaches the point where it takes one barrel to recover one barrel, then oil becomes useless as energy. At that point, all energy used to extract oil would result in a net energy loss; society would be more efficient and better off using that remaining energy elsewhere.

The law of conservation of energy states that energy can not be created, only converted. Despite appearances, even oil adheres to this law of nature. Oil is just a quirk of geologic history, when a finite amount of organic matter decayed underground millions of years ago. Except for geothermal power, tidal power, and nuclear power, all available energy flows and energy reserves (including oil) on earth are or were ultimately provided by the sun.

Background

Hubbert, in 1956, accurately predicted oil production in the continental United States would peak in the early 1970s. U.S. oil production did indeed peak in 1970, and has been decreasing since then. According to Hubbert's model, U.S. oil reserves will be exhausted before the end of the 21st century. Huge, easily exploitable oil fields are likely to be a thing of the past. The Hubbert peak theory, while controversial, is increasingly influencing policy makers both within the oil industry and government.

However, significant criticisms exist. Proponents of peak oil theory point to the fact an increasing percentage of oil fields are either beginning depletion or are already depleted. Critics argue that technology advances and higher prices will allow for the recovery of conventional resources previously thought unrecoverable, and will allow for the exploration of new oil fields.

Exacerbating the potential oil depletion problem is the increasing global demand for oil due to population growth and increased global economic prosperity. In a recent year, 25 billion barrels of oil were consumed worldwide, while only eight billion barrels of new oil reserves were discovered. In 2004, world consumption of crude oil is expected to surpass 82 million barrels per day, which correlates to 30 billion barrels per year. This puts consumption equal to production, leaving no surplus capacity. Even if there are temporarily sufficient oil reserves that could be used to meet rising global demand, there is an unknown limit on the increase of oil production capacity, absent additional investment in oil production, transportation and refining facilities.

Oil production outside OPEC and the states of the former Soviet Union appears to be consistent with a Hubbert Peak pattern: however, as of 2004, OPEC and FSU output was rising. Note that data to the right of the vertical line is a prediction. Source: Strategic Significance of America's Oil Shale Resource: Volume I - Assessment of Strategic Issues

Implications of a world peak

The implications of a world peak, or lack thereof, are large. Economic growth and prosperity over the twentieth century has been due to the use of oil as a fuel and fertilizer. The belief that there will be a world peak in oil production followed by a sharp decline implies that much of the lifestyle and prosperity of the twentieth century is unsustainable, and that limitations of resources will force a drastic change in the way that people live. By contrast, the belief that the Hubbert model is fundamentally incorrect -- that humanity is no where near the fundamental limits of oil production -- implies that the prosperity and lifestyle that has occurred in the twentieth century is sustainable, and that no drastic limits on resource consumption are required.

This argument also impacts development in the third world, as it touches on the question of whether it is possible for the vast majority of humanity to live at standards of living currently found in the United States and Europe. Pessimists argue that resource limitations make this scenario impossible, while optimists strongly disagree.

Catastrophe

Some believe that the decreasing oil production portends a drastic impact on human culture and modern technological society, which is currently heavily dependent on oil as a fuel and chemical feedstock. Over 90% of transportation in the United States relies on oil. Some envisage a Malthusian catastrophe occurring as oil becomes increasingly inefficient to produce. No other known energy source is as cheap to extract, as easy to transport, and as full of energy as oil.

Market solution

A market solution is the belief that the rise of oil prices due to scarcity would stimulate investment in oil replacement technologies and/or more efficient oil extraction technologies. A challenge extant with both non-conventional oil extraction, as well as energy production based on methods other than fossil fuels, is that these sources rely upon fossil fuels for their construction. Were conventional oil and natural gas to become more expensive because of scarcity, alternative energy production costs would grow more expensive in kind.

Presumably, as rising energy costs exceed the labor costs of construction, and as long-term interest rates drop to match the falling productivity of an energy-starved economy, other sources of energy would become increasingly more attractive. However, critics argue that market solution proponents mistakingly phrase everything in terms of money, e.g., they only consider the price of oil when in reality, the important metric is energy efficiency (the ratio of extracted energy over energy used by the extraction and refining processes).

Additionally, some critics believe that a market solution is likely to result in profiteering by energy suppliers from the price shock, due to the scarcity of oil and artificial scarcity of replacement sources of energy, rather than providing a smooth transition from oil to other fuels.

Increased fuel efficiency

Any moderate oil price increase is expected to stimulate an increase in transportation fuel efficiency. This would postpone and lessen the impact of severe oil shortages. In addition, some governments currently mandate a minimum fuel efficiency standard for automobiles.

Political implications

As of 2004, the United States economy is the world's largest user of oil, with a historical reliance on what have been, and still are, some of the world's lowest oil prices. Its position as the global hyperpower rests on its economic supremacy, which in turn depends heavily on oil. At the same time, the world's largest oil reserves are held by Saudi Arabia, followed by those of Iraq, the United Arab Emirates, Iran and Russia. If a Hubbert Peak were to occur, and oil were to become a progressively more scarce commodity, it would be reasonable to expect massive political and economic tension between its principal consumers and producers.

Some observers see the 2003 U.S. invasion of Iraq as the beginning of a geopolitical struggle driven by anticipated oil scarcity, whereby the U.S. will seek to establish a long-term military presence in the Middle East in order to be able to maintain oil supplies, by force if necessary.

Lifestyle choices

Much of today's resource use is based upon lifestyle choices rather than unalterable human needs. The voluntary simplicity movement advocates a shift from consumerism to reduced use of goods and services; by extension, the need to sell one's time for money can be greatly decreased. The decreased use of materials will decrease energy demands. Further, with more spare time, environmentally friendly, low-energy replacements for many current activities become feasible. For instance, one would have time for increased use of bicycles and mass transit as well as time for home-cooked meals instead of highly-packaged convenience foods from restaurants and grocery stores. Also, lower demands for work may give people the flexibility and bargaining power to find jobs that make use of telecommuting or that are nearer to home (and requiring shorter commuting times).

Indeed, some critics of consumerism argue that our current economy has addictive elements, exacerbated by advertising and overuse of credit; this addiction has been dubbed affluenza. If so, any future decline in energy supplies may force people to break out of their current consumer lifestyle and begin to reevaluate their values. Such a re-evaluation may induce a tipping point to further accelerate people away from a high-energy lifestyle. Other processional effects may include healthier lifestyles (reducing demands for medical resources) and improved communities and family relationships (reducing demands for government resources for social problems).

Changes in lifestyle choices have other important practical advantages. First, under extreme conditions, social change can proceed much more rapidly than large-scale infrastructure change. Second, the other alternatives assume the results are technologically feasible, whereas voluntary simplicity relies upon simple common sense. Finally, living simply can reduce one's reliance on the well-being of the global economy. Even so, a serious shift from a high-energy lifestyle could destroy many jobs and bankrupt many businesses.

Others also think that lifestyle changes may reduce energy demand, but that this may not be good and may be forced by higher energy prices. Airplanes and cars may be replaced by railroads, ships and mass transport. People may travel much less, for example staying at home during holidays. Foods like meat, chocolate, coffee, tea, fish, milk may be be replaced by locally produced cereals and vegetables. Air conditioning may disappear. People may move to smaller houses that cost less to build and heat. In general, there will be less consumption since everything will cost more since power cost affects all stages of production and transportation. In extreme cases there will be rationing of electricity and heating. People may not work less, but may actually be forced to work more to somewhat compensate for the reduced work done by machines.

Alternative energy

Main article: Alternative energy

Organizations

See also

Further reading

Non-fiction

External links

Hubbert theory research and advocacy

Hubbert theory criticisms

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References

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