Peak oil

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On a country by country (or oilfield by oilfield) basis, some areas have already "peaked".  In the [[United States]], for example, oil "production" hit its all-time high decades ago.
 
On a country by country (or oilfield by oilfield) basis, some areas have already "peaked".  In the [[United States]], for example, oil "production" hit its all-time high decades ago.
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There is considerable debate about when we will have used 50% of the oil on the planet.  Evaluations range from the most pessimistic "it has already happened" to the most optimistic "in fifty years".
  
 
== Effects ==
 
== Effects ==
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===Environmental===
 
===Environmental===
 
Some people<ref>See, for example,  ''The Long Emergency'' by James Howard Kunstler, in which he asserts that every form of renewable energy is either "vaporware" or impossible to meet current energy consumption needs, not even in combination.  He believes only oil, coal, and nuclear are viable, and as oil depletes civilization will collapse with mass starvation, riots, fire raining down from the sky, 8 by 10 glossy photographs with circles and arrows on the back of each one, etc.  And no cars.  Probably no internet, either.</ref> believe that it is unlikely that [[renewable energy|renewable energies]] will have been developed by the time oil becomes less practical as a high energy density source of fuel, in order to take over oil's fundamental role in the world's economy, and it is likely that more coal will be used.  Coal is generally a dirtier source of energy than oil.  Proponents of [[nuclear energy]] get excited at this point.
 
Some people<ref>See, for example,  ''The Long Emergency'' by James Howard Kunstler, in which he asserts that every form of renewable energy is either "vaporware" or impossible to meet current energy consumption needs, not even in combination.  He believes only oil, coal, and nuclear are viable, and as oil depletes civilization will collapse with mass starvation, riots, fire raining down from the sky, 8 by 10 glossy photographs with circles and arrows on the back of each one, etc.  And no cars.  Probably no internet, either.</ref> believe that it is unlikely that [[renewable energy|renewable energies]] will have been developed by the time oil becomes less practical as a high energy density source of fuel, in order to take over oil's fundamental role in the world's economy, and it is likely that more coal will be used.  Coal is generally a dirtier source of energy than oil.  Proponents of [[nuclear energy]] get excited at this point.
 
==When==
 
 
There is considerable debate about when we will have used 50% of the oil on the planet.  Evaluations range from the most pessimistic "it has already happened" to the most optimistic "in fifty years".
 
 
 
 
 
== Counter arguments ==
 
== Counter arguments ==
 
It is argued that the projected increase in the price of oil will stimulate exploration and exploitation of presently uneconomic or prohibited oil production areas, such as in the [[Arctic]] or [[Antarctica]].  This is certainly true. However this will not greatly change the picture of rapidly rising oil prices as the exploitation of these alternative areas will be very expensive, and this cost will be passed on to consumers.
 
It is argued that the projected increase in the price of oil will stimulate exploration and exploitation of presently uneconomic or prohibited oil production areas, such as in the [[Arctic]] or [[Antarctica]].  This is certainly true. However this will not greatly change the picture of rapidly rising oil prices as the exploitation of these alternative areas will be very expensive, and this cost will be passed on to consumers.

Revision as of 19:58, 31 May 2009

The Weekly World News tells all!

The concept of peak oil refers to a belief that world oil production[1] levels are in the form of an inverted V and will drop off at around the point where 50% of the world oil supply has been used, even as demand continues to increase. At the point where production drops while demand continues to increase then significant economic disruption may occur while the world hurriedly looks for an alternative energy source.[2]

According to a report produced by by the US Department of the Environment: The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem. As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigationb the economic, social, and political costs will be unprecedented.[3]

In the most extreme interpretations, all manner of societal disruptions are proposed to occur, including, but not limited to: famine, economic collapse, and ecological collapse. One is advised to hoard canned tuna and ammo just in case.

Peak oil is based on the earlier "Hubbert's Peak theory", developed in 1956 by M. King Hubbert of Shell Oil, who used this same concept in an attempt to predict a point at which United States oil production would drop. Hubbert predicted 1965 as the most likely time and 1970 as an optimistic scenario. In fact, U.S. oil production actually peaked in the early 1970s, either vindicating his prediction in some people's views, or making it accurate though several years premature.

Peak oil is not exactly the same thing as the fact of petroleum being a finite resource, which is true and not seriously disputed (although a few continue to hold to an older, now largely abandoned Russian hypothesis of abiogenic oil formation continually replenishing the resource). Peak oil is rather the belief that societal and economic disruptions begin when depletion of world oil supplies passes the 50% mark while demand keeps going up.

It should be noted that there is no real argument about the fact that oil production must peak at some point in time. However, there is debate about when it will happen and what the consequences will be.

Contents

The problem

It is frequently supposed that our problems with oil will occur when we actually "run out" of oil, but this is clearly not the case. Up until now global oil production and oil demand have increased more or less in step with each other. But at some point it is obvious that we will have used most of the readily available oil on the planet and global production will start to drop. At this point the demand line on an imaginary graph will continue to rise while the supply line starts to fall - and the price line will go off the chart. According to its proponents, this is not an "if" scenario, but a "when".

Indeed, former US Energy Secretary Dr James Schlesinger claimed on 18 Sep 2007 that the intellectual arguments over peak oil had been won, and that in effect "we are all peakists now".[4]

Although it will only really be possible to identify when peak oil arrived with the benefit of hindsight, some question whether oil at 100 dollars per barrel will (or did) signify the start of the crisis.[5]

On a country by country (or oilfield by oilfield) basis, some areas have already "peaked". In the United States, for example, oil "production" hit its all-time high decades ago.

There is considerable debate about when we will have used 50% of the oil on the planet. Evaluations range from the most pessimistic "it has already happened" to the most optimistic "in fifty years".

Effects

As mentioned above, there is much debate about the consequences. The sources mentioned in the introduction (New Scientist and the US DOE report) suggest that the consequences could potentially be quite significant: others suggest there is nothing to worry about as human ingenuity and free market liberalism always fixes things.

Economic

The most obvious consequence will be an increase in the cost of fuel for transport, resulting in pricing of all transported goods rising, leading to inflation.

Also, since plastics are produced from oil, along with fertilizers, explosives, and many other things, all these will go up in price.

Environmental

Some people[6] believe that it is unlikely that renewable energies will have been developed by the time oil becomes less practical as a high energy density source of fuel, in order to take over oil's fundamental role in the world's economy, and it is likely that more coal will be used. Coal is generally a dirtier source of energy than oil. Proponents of nuclear energy get excited at this point.

Counter arguments

It is argued that the projected increase in the price of oil will stimulate exploration and exploitation of presently uneconomic or prohibited oil production areas, such as in the Arctic or Antarctica. This is certainly true. However this will not greatly change the picture of rapidly rising oil prices as the exploitation of these alternative areas will be very expensive, and this cost will be passed on to consumers.

It is also interesting that all peak oil debates have, as their base assumption, the idea that we will actually use all the accessible crude oil on the planet, and take no account of any possible reduction in use that would occur if we try to reduce global warming, nor the development of new technologies and renewable energy sources.

Some maintain that those who believe demand for oil will keep going up as available supplies drop fail to understand how supply and demand, price elasticity, substitute goods, and other basic market mechanisms work. According to this argument if and when oil becomes too expensive for economic functions which depend on it, the market will seek substitute goods, which will progressively reduce the demand for oil as this process continues to the point that oil actually running out will not be a concern. Those who believe substitute goods are too expensive, or do not exist, fail to understand other basic market mechanisms such as economies of scale, human ingenuity and, perhaps, hubris.

See also

Footnotes

  1. Note that crude oil is not really "produced", but is harvested from finite stocks.
  2. New Scientist on Peak Oil
  3. US DOE on Peak Oil
  4. http://www.inteldaily.com/?c=154&a=3585
  5. http://www.commodityonline.com/news/topstory/newsdetails.php?id=3702
  6. See, for example, The Long Emergency by James Howard Kunstler, in which he asserts that every form of renewable energy is either "vaporware" or impossible to meet current energy consumption needs, not even in combination. He believes only oil, coal, and nuclear are viable, and as oil depletes civilization will collapse with mass starvation, riots, fire raining down from the sky, 8 by 10 glossy photographs with circles and arrows on the back of each one, etc. And no cars. Probably no internet, either.
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