Ascent of Peak Oil
by: John Laumer
“Peak Oil” is a best guess of when cumulative global oil production will begin to move into decline. This global ‘peak’ occurs when volumes lost from all countries where production is declining (losers) exceed the production gains made in all countries where production is still expanding (gainers). In the run up to Peak Oil, prices steeply climb for everything tied to oil; culture transforms radically; and everything you assumed to be constant starts to look shakey. Its not a question of "if", but rather, a matter of when we top Peak Oil and how steeply we go on our way up.
Projecting a year for Peak Oil is controversial and difficult for many reasons, some of which are non-technical. For example, few new gainer oil producing countries have popped into view recently. New gainers tend to be both unstable and unfriendly to their Western nation customers. Geopolitics can unexpectedly turn a gainer in to a loser country. Controversy about picking a year for Peak Oil is fed by concerns about biasing the market value of anything oil dependent, including stock. Its not just a game for geologists. The public has no direct way of judging the credibility of those postulating the numbers.
Because oil reserves are not interconnected, a number for global Peak Oil makes a false analogy, . There's no underground network fluidly linking each country's underground oil 'pools'. Estimates, then, are mathematical sums of a great many smaller estimates. Some of the reserves brought into the Sum Total are small or too technically or socially problematic to warrant high investments as long as there is easier oil to get at elsewhere. Just like at dinner, we consume the worst stuff last. Remember that as you read more about Peak Oil.
Here’s a variant on a more useful analogy, one that’s come by way of Europe: its the “Pub” analogy. This is a immense and crowded Pub with a very long bar, numerous taps, and a great many kegs lined up in the basement. As the night goes on some taps begin to dry up, pushing out foam. Thirsty customers anxiously look for a refill where a keg has not bottomed out, while bar employees scramble to hook up new kegs in the basement. Everyone's happy as long as the barkeeps keep up. Eventually all taps go down, though, and the manager decides to drain the Beer Bottle Reserve.
The customer in this analogy learns nothing about the global production and distribution of beer. Similarly, our personal experience with gasloine pricing and availability provides little insight into where we are with the “Peak Oil” issue. One reason is the years-long lag time between exploration, development, production, refining, distribution, and consumption. (In an ironic parallel, one person’s “weather” gives no insight whatsoever into Climate, as climate is the average of all weather).
The various Peak Oil estimates being trumpeted are easily spun by politicians, misunderstood by investors, and supporting of conspiratorial mindsets. Duck that nonsense. The peak of a curve (any data set really) should be understood for both accuracy and precision of the data. Hold off Googling on "peak oil" for a moment. Build up some spin immunity first.
Measurement Accuracy: -- An accurate measurement is one that is close to the true value of the phenomenon you are observing. How do you make an accurate measurement of oil production in an unstable place like Iraq? Do we trust the accuracy of production estimates made in the OPEC countries? Trust is based on strength of relationships. Who argues that these are improving? Houston...we may have a problem with accuracy.
Precision: -- a precise measurement is one that has very little scatter: repeat measurements give more or less the same value. If you do not know the expected value of a phenomenon but are trying to determine just that (peak oil for example), it is better to have accurate observations with poor precision than very precise, but inaccurate values. Ultimately, what gets sold in the way of oil is what was produced, allowing for some retrospective verification. However, Peak Oil numbers are and will remain imprecise: so deal with it. Expect a scatter in the projections.
Broadcast news doesn't get the substance of Peak Oil and probably never will, as its too hard to issue in a sound byte. But they will of course have plenty of opinions. Go ahead: laugh at the confused Sunday pundits and conflicting govenrment statements. Luckily, there's enough information, reflecting the full range of scatter, for you to make your own analysis. Highlights:
Consider the "little" peaks first.
According to the BP “Petroleum Review of 2004":
“Calculation of the annual average decline rate shows that in the 18 years since the US went into continuous decline (in 1985) it has been losing an average of 1.6%/y, which is probably the reason why people have generally been fairly relaxed about depletion, assuming it progresses slowly”....
"Analysis of this year’s oil production statistics leads to the conclusion that declining production and depletion is now a significant influence and that rapid production increases are sustainable in only a limited number of countries. This, in turn, gives a very great deal of political and financial leverage to those countries that do have expansion potential. …, total North American production peaked in 1997 while Asia-Pacific production peaked in 2000 and OECD production in 1998. Latin American production may have peaked in 2002, although it is too early to be sure".
Global Peak Oil Dates: The pessimistic global Peak Oil dates range from 2007 to 2012. These close-by dates tend to come from individuals, consultants, or independent non-governmental organizations. The IEA (International Energy Agency), a large energy reporting group under the OECD umbrella reports 2030. The US belongs to IEA incidentally. Optimists throw out numbers like 2100+. I suppose these optimistic ones include oil shale and tar sands in their estimates of reserves. (Should we assume that the "optimists" want to replicate the atmosphere of Venus here on Earth?)
Lets think about the 2030 number from IEA. If you live in the United States, for example, what would be some of the obvious ramifications? Here's my short list.
=>By 2030, most SUV drivers on the road today will be in retirement, their vehicles off the road. These trashed SUV’s will be partly reincarnated in more efficient vehicle designs, and the parts that did go in landfills will be getting mined back out to extract the embodied energy value.
=>For all retirees, but especially those who, today, can not afford a big SUV, the social security check is increasingly used to pay for energy.
=>By 2030, a large number of LNG transfer ports will have been established in the Northeast to supplant the oil that now heats a large proportion its residences.
=>By 2030, the cost to transport fresh fruits and vegetables from foreign producers will become so burdensome that there will be a major resurgence in local agricultural production: e.g. truck gardening, community supported agriculture, and commercial greenhouses.
=>Organic gardeners, less reliant on expensive pesticide inputs, will become increasingly competitive at the local and regional level. A return to interest in canning and consumption of winter root crops can also be expected.
=>By 2030, used materials that were energy intensive to produce, like ceramic sinks, aluminum canoes, stainless steel grilles, will become very valuable in recycling markets.
For a circumspect and interesting perspective on what Peak Oil means, albeit a very pessimistic one, click on this: This animated online slide show gets to the heart of trust and precision issues in a way no other source seems to have done. You'll need big pipes but it's really worth your ten minutes.