Peak Oil in a Nutshell
By Dirk Masuch Oesterreich
Summary: Peak Oil is a reality. It is, however, a tough call to predict when world oil supplies will start to run out.
(The original article was published on Dexterity News, a commodities information bulletin from Brookshire Raw Materials.)
The Peak Oil debate is heating up. Even mainstream news media like Business Week and The Economist lately ran pieces about this topic. The discussion is anything but free from emotion and polemics. A bit of theory on the concept of Peak Oil seems in order to gain perspective on the discussion.
The recent discussion goes back to 1956 when Shell research geologist M. King Hubbert predicted
Imagine a graph that plots cumulative production of a determined area on the horizontal axis, and the ratio of annual production to cumulative production on the vertical axis. A falling trend line appears that will at some point intersect with the horizontal axis at which point production will equal zero. This is quite similar to what Dr. Colin Campbell, one of the most prominent advocates of Peak Oil, calls “a simple theory that any beer drinker understands”: Once the glass is half empty depletion is fully under way.
In terms of Peak Oil depletion means that once an oil field / a producing area / a country / the world is on the down side of the approximately bell shaped production curve it is never to recover to older levels on a sustained basis, even, and this is a point that is hotly debated, if new discoveries are made. Peak Oil theory implies that the biggest oil fields and the easy to find oil were already found. It says that the world’s ability to produce oil depends only on the amount of the non producing fraction, which is the amount to still be found. The less there is the harder it is to find. Exploring for what is left will be more difficult and more costly. Cheap oil is a thing of the past.
Let’s look at an example to illustrate this point. World demand for crude oil is presently well over 80 million barrels a day. Assume the discovery of a new oil field is announced with a reserve estimate of 1 billion barrels. It would be a boon for the company that made the discovery. However, at present consumption this would add less than two weeks to world supply. Considering the long time frame it needs to take a newly discovered field to production a dilemma becomes obvious: we need to find new big oil fields and we need to find them fast.
It is a fact of nature that a finite resource at some point will show a production peak and deplete thereafter. Discussion of Peak Oil theory does not evolve around this point but mostly centers on two issues:
1. When is world oil production going to peak (or did it already)?
2. What will be the implications?
In its recently published study “Statistical Review of World Energy” (June 2007) BP says that the world has enough proven reserves to provide 40 years of consumption at current rates. This quickly prompted a comment from the
Though the exact year of peak world oil production will probably only be obvious after it occurred it makes sense to assume that we are presently living in the period of peaking oil production. No need for panic here, this is not the end of the world. It is, however, a transitional period that will be recognized as having profound implications for our way of living and that we will have to adjust for sooner rather than later.
There is, of course, a lot of criticism of Peak Oil theory. One particular argument, for instance, says that it does not take into account
