Peak Oil is Here

It seems almost certain that the rate at which oil is being extracted from the earth is reaching a peak about now and will soon start to decline. The effects will be enormous. As also occurs with many environmental problems, the line taken by official bodies is at first to deny that the phenomenon will occur at all, then to say that it will take place in the distant future, and to imply that magic solutions will be found. For peak oil, we appear to have passed the first stage. An economist named Morris Adelman used to maintain that in-ground supplies were in effect infinite, and that reserves were conjured into existence by investment in exploration:-

"Minerals are inexhaustible and will never be depleted. A stream of investment creates additions to proved reserves, a very large in-ground inventory, constantly renewed as it is extracted... How much was in the ground at the start and how much will be left at the end are unknown and irrelevant." (The Economics of Petroleum Supply, published 1993)

We do not hear this any more, so we are now on to stage 2. The U.S. Geological Survey and the U.S. Energy Information Agency would have us believe that we have so far used something like one third of the useable oil supply, and that the inevitable peak of production will occur well into the future. The date 2037 shown for the peak in some of the models is comfortably far off, so why should we worry now - something will turn up, surely? We have thirty years to develop the "hydrogen economy". That should be ample time.

The difficulties with this are several. First, one must question the validity of the USGS estimates of oil reserves. Then, even if these estimates are realistic, the model that shows peak production in 2037 also shows production plummeting abruptly after that date. Some of the published forecast graphs attempt to avoid addressing the issue by choosing a convenient end date, before the peak. Taking the view that the decline in production is likely to be an approximate mirror image of the rise, one finds that the peak will occur in the not too distant future, even if the USGS is right in its estimate of the amount that will be extracted from the ground.

As for the most often-quoted magic solution, the "hydrogen economy", this is illusory. Hydrogen must be made, and the energy to do it must be found somewhere. What is more, when one uses the hydrogen, the energy one gets back will only be a fraction of the energy used to make it. If production is from electrcity by electrolysis of water, and electricity is made from the stored hydrogen by using a fuel cell, then the round-trip efficiency will be about 35%. By the time one has made allowance for energy used to compress, or worse, liquefy, the hydrogen for storage, the overall energy recovery will be 30% or below. This is truly dreadful performance from what amounts to a battery. If one can find energy supplies, this is not a good way to use them.

The hydrogen bubble is starting to burst. In spite of all the nonsense spouted by politicians who paint rosy picures of a hydrogen-powered future and the "entrepreneurs" who happily accept money from them, the investing public has become leery of fuel cell companies, and share prices have reacted accordingly. Shooting holes in the hydrogen illusion is no longer the province only of scientists and engineers who can do the math on the technical side - the investment community is also coming to similar conclusions. Nevertheless, this illusion still retains enormous appeal, because it helps stave off facing a very difficult situation.

What Solutions Exist?

There is certainly no easy way to deal with this. Conventional oil and gas offer a huge energy return on relatively small energy investments. The only comparable energy source, from this point of view, is nuclear energy, and this doesn't provide liquid fuels for vehicles. Biomass can certainly be used to manufacture liquid fuel, but this is not going to provide the sort of amount that we are now accustomed to using. What is more, as fossil oil and gas run short, producing sufficient food for humanity will itself present a huge challenge, and little agricultural resource will remain for fuel production.

As the production of oil declines, it would at first be possible to match the decline with increases in efficiency of use. Regrettably, it seems more likely that the decline will instead trigger conflict over access to the best remaining deposits. This is of course already happening. The U.S. and the U.K. seem to have formed an unholy alliance attain military control over the oil in Iraq. It remains to be seen how successful this will be, and what domestic price these two countries will have to pay, both financially and as a result of terrorist attacks.

The past production of oil and natural gas for the United Kingdom is shown here, along with projections of future output. The oil production is shown in millions of barrels per day, and the gas as the equivalent (in energy terms) amount of oil.

UK oil and gas production. Source, UK department of Trade and Industry.

The UK's days of exporting oil or gas are almost over. Meeting even present domestic demand will soon require steadily increasing imports of both, and the UK's oil and gas binge will be forever over. Will the population willingly return to the lifestyle of the 1960's or 1950's? People are now used to central heating, either oil ar gas-fired. The coal mines are mostly closed. For an assessment of the UK's position see that of the Association for the Study of Peak Oil and Gas.

US oil production

Source, Association for the Study of Peak Oil and Gas

The US has now used something like 85% of its oil and 70% of its natural gas. Its oil exporting days are long gone, and it now depends on the rest of the world to supply about fourteen million barrels a day. Read ASPO's assessment. What is more, its own oil production is soon set to decline still further, while every forecast assumes that demand will increase.

The invasion of Iraq, if eventually successful in "pacifying" the country, will give control of a considerable amount of oil to the occupying powers. If control of Saudi Arabia can be maintained, most of the oil in the Middle East will be "secure". One wonders how long it will be before the temptation to finish the job by invading Iran will prove irresistible. The Gulf area contains about 60% of the high-grade crude remaining on the planet, in a remarkably small area.

More to come.....

More Information

There are now many web sites at which more information may be found. Try:-

Paul presented a poster on Canadian natural gas at the 2004 ASPO conference in Berlin. Read it here.