Why The World Will Never Be the Same
By Tom Whipple
If you have never heard of M. King Hubbert or his peak, read on because it is going to change the rest of your life.
Fifty years ago, Hubbert, a geophysicist working for Shell Oil, gave a talk to an American Petroleum Institute meeting in San Antonio, where he reported on a new technique that he had developed to measure petroleum reserves. This technique allowed him to calculate how long petroleum would continue to be produced in the United States. His calculations showed that circa 1970 would be the peak year for US production and that after that oil production would decline -- despite the discovery and exploitation of new fields -- until all the oil was gone.
This revelation was met with controversy. A lot of people, especially in the oil industry, did not want to hear news like this and pointed out that there had been false prophets before, each predicting that the oil would be gone in ten years.
From the vantage point of 50 years later, we can say that Hubbert got it right. Oil production in the US did indeed peak in 1970, and despite the discovery of new fields, tax breaks, new production technology, and tearing up the tundra, production has been going down ever since. Thus, the year in which petroleum production tops out in a field, a country, or the world, has come to be known as Hubbert's peak or just "peak oil".
Hubbert's peak is the point in time when half the oil in a field, a country or the world has been pumped out of the ground. The key point is that the first half of the oil is easy to produce, but after the peak is reached it becomes harder and harder, and more expensive, to extract the oil so output starts to decline.
In the mid-1990s, and indeed earlier, a number of geologists turned their attention to world petroleum production and by applying Hubbert's methods calculated that peak worldwide production would occur just about now, 2004-2007. The big difference from Hubbert's 1956 calculation time, of course, is that the world peak is the ultimate one. All the oil pools with which the earth has ever been endowed are starting to run out. When the worldwide peak is reached there is no place else to obtain oil. The oil age will run its course over the next 20 to 40 years with increasing prices punctuated with shortages and some of the worst social and economic upheaval we have seen in a long time.
If this notion is new to you, let this sink in for a minute. A rapidly increasing number of knowledgeable scientists, without any political or economic axes to grind, are saying that serious worldwide economic disruptions caused by declining oil production are now months rather than decades away. Indeed, the first tremors may have already begun.
The immediate problem is increasing demand. We all know that China and India are industrializing rapidly and therefore increasing their imports. U.S. demand for oil continues to increase with economic growth. If, as some knowledgeable people suspect, OPEC is no longer able to pump additional oil in meaningful quantities, we are, for the first time, entering uncharted territory where there simply is not enough oil available to meet demand. Throw in a terrorist attack on a vital installation or an unstable government in an oil producing state, and the world, particularly the United States, has a big, big problem.
"Just a minute" you say. If the end of our oil-based civilization (or at least the end of cheap gas) is really coming, why aren't we hearing more about it? Where is the Government? The President? Congress? The Press? Or, at very least, the Energy Information Administration (EIA) down at DOE.
The answer to this is simple. Should the President get on television some evening and announce that his administration has regrettably concluded that world oil production can no longer increase, the stock market, his standing in the polls and his effectiveness as a leader would collapse.
The President would be obliged to point out that we should no longer expect OPEC to cover shortages that develop as worldwide demand for petroleum continues to increase. And, if he wants to be impeached, he might go on to say that gasoline will certainly reach several dollars per gallon shortly and that the cost of nearly everything we buy as well as our taxes will be going up markedly to cover the increase in the cost of energy.
No government official will ever make this speech, for very few of us are ready to hear it.
DOE released its energy projections for the next 20 years in February and one is hard pressed to find even a hint of Hubbert's peak. In fact it is hard to recognize that DOE and the "peak-oil-is-here folks" are talking about the same planet. DOE says that "Projected U.S. crude oil production will increase from 5.7 million barrels per day in 2003 to a peak of 6.2 million in 2009." Then, "beginning in 2010 U.S. crude production begins to decline, falling to 4.7 million barrels per day in 2025."
As for imports into the U.S., EIA's "reference case" has them going up from 11 million barrels per day in 2003 to 19 million in 2025. Prices, which were about $28 per barrel in 2003, creep all the way up $30 in 2025 according to EIA projections. No alarm bells here. The administration acknowledges that worldwide oil production will peak some day but has set this unhappy date circa 2016, or perhaps 2036, long after we have transitioned to the "hydrogen economy."
Is anybody else out there worried that Hubbert's peak is imminent besides the usual suspects -- university professors, environmentalists, retired geologists, and lunatic fringers? Yes, a few others are starting to express concern. On March 14th, Congressman Roscoe Bartlett (R-Md.), in a speech on the House floor largely unattended and unreported, lucidly laid out the case for an imminent peak oil. Later Bartlett added to his earlier remarks and voted against the administration's energy bill.
A couple of weeks ago, former CIA Director James Woolsey, testifying before a House Subcommittee on Energy and Resources on behalf of the National Commission on Energy Policy, noted the potential for problems ahead and called for more alternative fuel vehicles including plug-in hybrids. Again there was no note of urgency, as the bi-partisan commission seems to believe 2010 is a good year to phase in more fuel-efficient cars.
Recently a bi-partisan coalition of environmentalists and conservative national security folks called "Set America Free" have likewise foreseen trouble ahead and have been putting forth proposals for more gas-saving hybrids. The environmentalists have been there for years, it is the conservatives that are starting to understand that it is America , which consumes some 25% of the world's oil, that will be country in the most trouble when oil prices climb.
In recent days, the rise in gas prices has elicited a spate of what-the-price-is-now newspaper stories and TV segments. So far the mainline media has largely stuck with "pretty soon I can't afford it" stories, although a few have mused about the impact of high gas prices on the President's popularity and the economy. For now the administration's position, as expressed by EIA Administrator Guy Caruso, is that the cost of gasoline has only gone up by $180 per car per year so what are you worried about?
If any of you doubt that peak oil and all it implies will be here shortly, just Google "peak oil" and start reading. In the meantime, keep and eye on that big sign in front your gas station. It will never lie about the price over at the pump and one day soon will become the incontrovertible voice that the world has reached the summit of Hubbert's peak.