Peak Oil

World Oil Consumption

Peak oil is the point in time when the highest rate of global petroleum extraction is reached, after which the rate of production enters into absolute decline.

Peak oil is not some “off the wall” theory that has been dreamed up by the gloom and doom forecasters of the world.  The first use of such terminology was born in 1956 when it was predicted that the United States would reach a Peak Oil point sometime between 1965 and 1970.  Most reserve / production studies say by the way that the US production peak was in fact reached in 1970.

An optimistic estimation of peak production forecasts that global decline will not begin until 2020 or later, while on the opposite end of the spectrum much more pessimistic predictions of future oil production operate on the assertion that either peak has already occurred, that oil production is on the verge of the peak, or that peak will occur very soon.  A recent study published in the journal “Energy Policy” predicted that world demand would surpass supply by 2015.

Over all, world crude oil demand grew an average of 1.76% per year from 1994 to 2006, showing a growth high of 3.4% in 2003-2004. Demand reached a high of 89.3 million barrels per day in November of 2011, although world consumption decreased in both 2008 and 2009 by a total of 1.8%, due to rising fuel costs and undoubtedly helped along by a weak world wide economy. Despite this lull, world demand for oil is projected to increase 21% over 2007 levels by 2030; that will equal 104 million barrels per day from 86 million barrels per day in 2007, primarily due to increases in the transportation sector as well as the rapid growth rates of China and India.

Energy demand is spread between 4 broad sectors: 1) transportation, 2) residential, 3) commercial, and 4) industrial. In terms of oil use, transportation is by far the largest as well as the one that has displayed the largest growth rate in demand in recent years.  This sector has (as indicated above) the highest consumption rates, in fact it accounted for approximately 68.9% of the oil used in the United States back in 2006 and 55% of the oil used worldwide that same year.  This growth has occurred on the whole resulting from greater demands for personal-use vehicles powered by (you guessed it) the internal combustion engine.

As long ago as 2005, a company spokesman for Exxon-Mobil (William J Cummings) painted a some what bleak picture for the future of oil, when he said:   “All the easy oil and gas in the world has pretty much been found. Now comes the harder work in finding and producing oil from more challenging environments and work areas.”

In short, in order to pump oil, it first needs to be discovered. The peak for worldwide oilfield discoveries occurred back in 1965 and according to the Association for the Study of Peak Oil and Gas (ASPO), the rate of discovery has been falling steadily since then. The point being: It is un-likely that modern exploration techniques will find a large enough reserve to meet the ever growing demand. The shorter version of that statement is “it’s not going‘t happen”.         

The impact of peak oil on the world’s economy will depend heavily on the rate of decline (which is an unknown) along with the development and adoption of effective alternatives. If alternatives are not offered and in a timely manner, the products produced with oil such as fertilizers, detergents, solvents, adhesives, and most plastics, not to mention the obvious, gasoline / petro, will not only become scarce, they will be very expensive as well.

As we all know, oil prices began to increase dramatically of most recent date during the 2000s when it hit a historical high of $143.00 per barrel on June, 30, 2008. Today’s (December 1, 2011) price per barrel hovers around $101.00 US. 

So as to possibly avoid the serious social and economic implications a world wide decline in oil production could entail, a 2005 “Hirsch Report” provided at the request of the US Department of Energy, stressed the need to find alternatives to oil, at least 10 to 20 years prior to the peak, and to phase out the use of petroleum over a period of several years.

There is however a few observers in the industry who have been quick to point out that peak oil should be viewed as a positive event. Such reasoning suggests that as the price of oil rises, the use of alternative clean fuels will help control pollution from fossil fuel use, and therefore ease global warming.

Alternatively, not everyone in the oil production industry (just as you would expect) necessarily agrees that such a thing as peak oil even exists. As a matter of fact, the President of Royal Dutch Shell's U.S. operations John Hofmeister;  BP Oil chief, Dr. Christoph Rühl; CEO of Shell Canada, Clive Mather; and Daniel Yergin of CERA, which is a U S based consulting company that specializes in advising governments and private companies of the world on energy markets such as oil, natural gas, and coal; all more or less argue that the concept simply does not exist.  Daniel Yergin of CERA has even argued that the high price of oil (now read this carefully) may very well ultimately force the oil production companies out of business by way of the implementation of alternative fuels.

Add to that short list, Oil Industry Blogger Steve Maley who has echoed some of the points voiced by Hofmeister, Rühl, Mather, and Yergin, as being more fact than fiction. Surely if we choose to embrace these positions, we all must realize that conservation, bio-fuels, electric cars, coal gasification or any other alternative to, or even a reduction in, the daily consumption of petroleum based fuel is surely best described as folly or just plain old un-necessary! What do you think about peak oil?

Sources ...

http://en.wikipedia.org/wiki/Peak_oil                                                                                       http://www.oil-price.net/                                                              http://culturechange.org/issue10/alternative-to-oil.htm                      http://www.bloomberg.com/news/energy/