Peak Oil - What Is It and Why Should I Care?
Posted: 08-01-2007 3:59 pm by By L. Owens
You have probably heard of the term “Peak Oil.” Numerous articles have appeared in such diverse publications as the Wall Street Journal, National Geographic, and Scientific American. Yet many have little or no awareness about the potential consequences of Peak Oil.
The peak of anything represents the single highest point something ever reaches. When you reach the peak of a mountain, you can’t climb that mountain any higher. The only way you can proceed is ‘down’ from a peak.
Peak Oil means the point in time when more oil is being extracted than ever before or ever will be. If you graph the production of oil over time, a bell shaped curve is formed, similar to the pattern of other natural resources. Peak Oil does not mean “an end to oil”, but it does imply the end of ‘cheap’ and abundant oil.
M.King Hubbert, a Shell Oil geologist and petroleum scientist, predicted in 1956 that oil from the continental US would peak around 1970. Although he was universally criticized by his industry at the time, we now know that his charts and predictions were extremely accurate. Today, the graph of peak oil is normally referred to as “Hubbert’s Peak.” (figure 1)
Note the close correllation of Hubbert’s prediction and actual production!
When is Peak Oil?
Colin Campbell, president of the Association to Study Peak Oil says 2010. Ken Deffeyes, author of “Hubbert’s Peak”, says 2004-2008. Even the most “optimistic” views place Peak Oil within our lifetime. The exact timing of Peak Oil is a guessing game, but it’s occurrence and reality is not.
In August 1999 former Halliburton Chairman Dick Cheney said in a speech at the London Institute of Petroleum: “By some estimates there will be an average of 2% annual growth in global oil demand over the years ahead along with, conservatively, a 3% natural decline in production from existing reserves. That means that by 2010 we will need on the order of an additional fifty million barrels a day.”
Fifty million barrels a day is more than the combined total production coming from Saudi Arabia, Iran, Iraq, United Arab Emirates, Kuwait and Qatar. In 2001 they produced a total of 22.4 million barrels per day according to the Energy Information Administration. As you will see, world demand has far outstripped the 2% figure Cheney stated.
Supply Decreasing, Demand Rising
As worldwide production is peaking, worldwide demand is soaring, especially in the US, China, India, the Middle East and Pakistan. If China and India were to reach just one fourth of US per-capita oil consumption levels, world oil production would need to increase by 44 percent according to the Christian Science Monitor (January 2005). Exxon/Mobile’s study, “A Report on Energy Trends, Greenhouse Gas Emissions and Alternative Energy” dramatically shows that all existing oil and gas production worldwide can’t meet total world demand by around 2003-2004! Have you noticed what’s happened to gas prices in the last 2 years?
Even if production remained constant, the amount of oil available on a per-capita level is declining due to unrelenting global population growth. As third world countries gain economic strength, they want the same standard of living we have, as well as the goods, appliances, cars, and ‘modern’ conveniences.
As cheap, easily extracted oil is depleted, the remaining oil is increasingly difficult and expensive to extract. Environmentally sensitive areas are at risk, and the quality of oil in these less desireable areas is typically lower. For example, at the current rate of oil consumption it’s calculated that all the oil in the Alaska National Wildlife Reserve is only enough to power the United States for 6 months.
Beware of the pundits’ estimates of “Proven Reserves.” They’ll claim, “We have reserves for “n” years.” But reserves are past estimates of oil, made by different people and companies using different methods. Basing reserves on years, not barrels, is also misleading. On January 12, 2004, Shell Oil restated their balance sheet by reducing their “proven” oil reserves by 20 %. On January 14, 2004 the Wall Street Journal suggested all reserves are questionable. In February 2004, El Paso Corporation cuts its proven natural gas reserves estimate by 41%. OPEC sets production quotas based on a percentage of reserves. But does it serve the interest of OPEC to accurately state their reserves or to inflate them so that they can sell more oil and make more money?
Laws of Supply and Demand
We know the connection between supply and demand. Even if demand remained constant, it is inevitable that as supplies of oil decrease the price increases. In March 2004, oil hit $38 a barrel. By October it was $50. Oil reached $57.40 a barrel at the time of this writing. (April, 2005.) Goldman Sachs predicts that oil will surpass $100 a barrel before long. $5~$6/gal gas anyone? We’ve all seen the relentless increases in everything from home heating costs, fuels, and transportation of all kinds.
“Ok, so we’re in for higher prices as the pump. I’ll just drive less, carpool, and maybe buy a hybrid. No problem!” Sounds good, but lets follow the petroleum ‘food chain’. In addition to the cost of your fuel, costs for the fuel needed to grow, harvest and transport your salad fixings from South America, your clothing from the far east, and “everything’’ from China also goes up. Anything that is shipped, flown, trucked, or sent by rail has increasing fuel costs...
All major commercial fertilizers are ammonia based, made from natural gas, which follows the same “Hubbert’s Peak” pattern as petroleum? In 2003, one-fourth of US fertilizer factories permanently shut down due to the high cost of their prime ingredient. Most commercial pesticides come from oil. So, not only are the fuel costs for the tractors, harvesters, combines, trucks, and transport vehicles going to raise your prices, the costs of the fertilizers and pesticides needed by ‘mainstream’ growers will be going up. .
Do you buy food products grown with oil based fertilizers and pesticides, harvested by petroleum fueled vehicles, transported using petroleum, packed in plastic or Styrofoam, and paid for with a piece of magnetically encoded plastic?
Many pharmaceutical products come from or are made by using petroleum, as are the plastics for countless medical products today. The cost to fuel the research labs, production facilities, and offices will all rise too. What will happen to the cost of medicines and supplies, and what consequences will that have on health care issues?
Disposable ‘everythings’ are mostly made from, and wrapped in, plastics. Plastics dominate the modern world. Look around. How many of the daily products we see are made from, or produced using, petroleum?
Social Disorder, Wars, Famine?
What happens the whole world will be clamoring over the ever decreasing oil supplies. Will oil producing countries decide that it’s in their national interest to keep it for their own use? Will powerful countries just decide to ‘take’ what they need regardless of international law? I think the common phrase is “for National Security.” Can we sustain our current way of life? G.W. Bush has stated: “The American way of life is non-negotiable.” What does that mean?
China is aggressively contracting for worldwide oil from the same countries that we buy from, and others. China recently signed a $70 Billion oil deal with Iran, a multi-billion dollar deal in Canada, and energy deals with Nigeria, Venezuela, Qatar, Indonesia, and even Cuba. They’re bidding around the globe for future oil supplies. The US recently denied China’s $13 billion bid to buy Unocal in the US. China has the most stringent vehicle fuel efficiency standards in the world. Think they’re aware of peak oil?
What Can We Do?
There are definite things that we as individuals and as communities can do, and that our local, state, and federal governments can do to smooth the downside of the peak oil curve.
The most important thing to do! Most forecasts are based on current rates of growth and consumption. Drastically reduce demand and we’re on the right track. IF the US had followed the fuel efficiency standards set out by President Carter, we would not need even one barrel of foreign oil today. Overall US fuel efficiency today is actually worse now than it was in the 70’s. Use fuel efficient furnaces, appliances, and forego the motor powered in favor of manual power.
WALK, RIDE, CARPOOL, & PUBLIC TRANSPORTATION:
97% of the US’s transportation fuel comes from petroleum. Drive less, share rides, or walk/bike/skate. [Editor’s note: Telecommute!]
All diesel vehicles can use Biodiesel which is made from crops including soy, canola/rapeseed, mustard seed, and others. (Note: Biodiesel only runs in diesel vehicles, don’t use in a standard gasoline car!) In the US today, only VW and Mercedes sell new passenger diesels, but many used diesel vehicles are available. I drive a 1985 Toyota Corolla Diesel using 100% biodiesel which gets 47 mpg highway. Biodiesel is the only fuel to meet the EPA’s Level 1 and Level 2 health standards. Every penny spent on biodiesel stays within the US. (April 2005: $2.99/gal in Kirkland, WA)
Tough one! It takes about as much oil to construct a new car as that car will consume in its lifetime. If you’re going to buy a new car anyway, yes, a biodiesel, hybrid or high fuel efficiency car is best. Do you really need a new car?
Buying locally produced items reduces the fuel needed to bring them to market. Airplanes and ships are horrible polluters and fuel users. You’ll also be pumping money into local communities and supporting local people. Shopping closer to home or work reduces your petroleum usage.
Buy natural, organic products that don’t rely on petroleum based pesticides and fertilizers. They’re better for your health and less reliant on fossil fuels. Reuse, Reduce, Recycle. Call the 800 number on products that use excessive plastic packaging. Tell manufacturers you want less plastic and more recycled content. Look into natural medicines, cosmetics, clothing... the works.
REDUCE ENERGY CONSUMPTION:
Although most or the NW’s electricity comes from hydro, peak needs are met with energy produced by natural gas, coal, and nuclear plants in other states. Insulate your home, replace incandescent lamps with CFL’s and LED lights, replace aging refrigerators, washers, dryers and other appliances with Energy Star rated products. (A 2005 Energy Star refrigerator uses 75% less energy than most 1992 models). Front loading washers use 75% less water, work better, and are more energy efficient than top loaders. Heating 12 gallons of water per load versus 55 makes great sense.
Solar hot water systems are relatively inexpensive, are efficient, and can reduce your energy consumption significantly. Evacuated tube technology now used for solar hot water systems can produce 160 degree water even when outside air temperatures are freezing cold! Solar hot water gives the best ‘bang for the buck’.
Solar panels work well in the Northwest, contrary to popular belief. Prices have come down over the years, and system reliability is high. Most panels have 25 year warranties. Spin your meter backwards, and the utility will credit you for your production!
GET INVOLVED: (Think Globally, Act Locally, Respond Personally)
1David Pimentel and Mario Giampetro, “Food, Land, Population, and the US Economy,” Carrying Capacity Network, (November 21, 1994).
Photo: Peak Oil is Real by Joseph Carrillo