Catalyst: Real Oil Crisis
In Brief: What would happen if the world were to start running out of oil? Conventional wisdom says we’ve got 30 years, but there’s a growing fear amongst petroleum experts it’s happening much sooner than we thought – that we are hitting the beginning of the end of oil now. So how soon will the oil run out, and can we stop our economy collapsing when it does? How prepared are we for the real oil crisis?
Narration: What would happen if the world started running out of oil?
Jeremy Leggett: It’s going to be very difficult to get gasoline for transport. Food is not going to be getting through in enough quantities to the shops,
Narration: Conventional wisdom says that’s at least 30 years away.
So why does a growing group of petroleum experts believe it’s coming within three?
Eric Streitberg: Ah. I think it’s happening now frankly.
Peter Newman: It gives me nightmares when I think about what we’re headed for.
Narration: Are they just scaremongerers or have the rest of us been asleep at the wheel. Are we about to hit the real oil crisis?
Jeremy Leggett: Really when the crisis dawns I think people are going to be looking back in anger. How have we allowed ourselves to get into this mess?
Narration: In just a century, we’ve allowed our lives to become entirely dependent on cheap oil.
Jonica Newby, Reporter: And it’s not just that 90% of our transportation is fuelled by oil. This shopping centre is literally full of petroleum products.
Look: the fabric in these clothes – petroleum based. These plastics, petroleum based. It takes on average 6 barrels of oil just to bring one cow to market.
Narration: Yet who of us stops to think oil is a finite resource - the lifeblood of our modern world is steadily pouring away.
Jeremy Leggett: We just take it so much for granted that cars drive around, the pumps are always full. I talk to people in financial institutions who are investing on the assumption that oil supplies are going to grow and grow into the 2030’s. I hardly ever meet anyone who knows about this problem outside a relatively elite group of whistleblowers inside and around the oil industry.
Narration: Dr Jeremy Leggett is part of an international splinter group of petroleum geologists convinced a tipping point on oil is imminent.
This former oil industry insider, now alternative energy advocate, has written a new book outlining the case.
It makes startling reading.
The most oil ever discovered was way back in 1965.
Narration: This graph traces world oil discoveries.
Since 1965, the amount of oil discovered each year has inexorably plunged - despite all our advances in technology.
Jeremy Leggett: The last time we discovered a whole new province was the North Sea in the early 1970’s and really you know these days the average size of an oil field that gets discovered is about 50 million barrels. It’s nothing, it’s a drop in the ocean. We’re using 84 million barrels a day.
The last year we discovered more oil than we consumed was 1981. We use 2 barrels of oil for every barrel discovered.
Jeremy Leggett: I’ve been talking to people who I know because of my past in these big oil companies and they tell me there are no more big oil fields left to find.
Narration: So if we’ve found nearly all the world’s oil, how long before it runs out?
Surprisingly, that’s not so important. The real question is when will we reach half way – it’s known as 'peak oil'.
Jonica Newby, Reporter: So what exactly is peak oil, and why is it so serious? That’s what I’m heading to the west Australian oil fields to find out.
Narration: My guide is a geologist from deep within the oil industry. Eric Streitberg is managing director of Australian oil company, ARK energy.
He’s just decided to go public with his fears.
Eric Streitberg: The reason I feel strongly about this is that people don’t understand the underlying causes of why petrol prices are going up and what the effect that could have on our lives.
Narration: Eric is about to show me what happens when an oil field reaches peak oil.
Eric Streitberg: The oil field was discovered in 2001 and its now on full production doing about 6000 barrels of oil a day which is about 10% of Western Australia’s consumption.
Jonica Newby, Reporter: Wow: 10%.
Narration: When oil is first pumped, it’s under pressure and comes out easily – production rises.
But over time, oil pressure drops. Water is pumped in to maintain pressure. At the half way point, it reaches peak oil, and then-
Eric Streitberg: We’re holding on to peak production at the moment but we’ll be going into the inexorable decline of all oil fields very shortly.
Jonica Newby, Reporter: Really, and there’s nothing you can do?
Eric Streitberg: No you can slow the decline but you can’t stop it.
Narration: To ram home the point, Eric takes me to an oil field which passed peak oil in 1992.
Eric Streitberg: Jonica this is what we are getting out of this old oil well. It’s 99% water and 1% oil.
Narration: All oil fields follow the same pattern of rise, peak, then fall – even if they encompass an entire nation.
The US hit peak oil in 1971. The UK with its North Sea oil peaked in 1999. Australia peaked in 2000.
So when will planet earth reach peak oil?
That depends on what’s really happening here. The place that provides a quarter of the world's oil - the Middle East.
Jeremy Leggett: These governments have not let anyone in to verify how much oil they have for getting on for a quarter of a century and in the 1980’s there were some really suspicious treatment of oil reserves data. Most of the Gulf countries increased their national proved reserves supposedly by in some cases up to double, and then ever since the quoted figures have not gone down very much at all. I don’t believe that for a minute.
Narration: The dissident geologists went back to original surveys to estimate total Middle East oil. They added world known reserves, and projections of all future oil to be discovered.
That’s how they calculated the world will reach peak oil in the next 3 years – if we’re not there already.
Jeremy Leggett: 2008 maybe 2009, certainly no later than 2010. That’s the point at which we will no longer be living in a world with growing supplies of generally cheap oil but instead living in a world of rapidly shrinking supplies of ever vastly more expensive oil and that point of realisation is going to come as a real shock.
Then we will see world record oil prices. Who knows how high they can go.
Narration: So what does the mainstream think?
The world's largest petroleum company is ExxonMobil – Esso. It employs 20,000 scientists to generate their own exhaustive data sets.
In their Melbourne 3D seismography room, I meet head of exploration, geologist Dr Doug Schwebel.
Doug Schwebel: OK this is a 3 dimensional image of the geology offshore Bass Strait in Victoria.
Narration: Doug acknowledges oil will run down eventually, he just vigorously disputes when.
Doug Schwebel: Well people have been predicting for over a hundred years that we’re going to run out of oil. It hasn’t happened. We don’t think it’s going to happen in the near term.
Narration: Exxon calculates twice as much oil left in the world as the so called 'early peakers' - placing peak oil decades away.
Doug Schwebel: I mean we’re talking at least out to 2030 with what we know today. And then potentially another 20 – 30 years beyond that with technologies that we can envisage might exist. You know if we can improve technology by only 10% then we can recover an additional 600 – 800 billion barrels of oil.
Narration: If this majority view is correct, we have plenty of time for a smooth, market driven transition to alternatives via hybrid cars.
Cruising in the balm of this reassuring future, it's tempting to dismiss the 'early peak' camp entirely, as a small bunch of vested interest doomsdayers.
But it’s not that easy.
Petroleum giant Chevron is now running these startling advertisements.
And here in Australia, some surprising people have come out in the early peak camp.
Earlier this year, Eric Streitberg asked an extraordinary question at the Australian Petroleum Production and Exploration Association conference.
Eric Streitberg: I asked them to put up their hands if they thought that we had reached peak oil. Fifty percent of the people in the audience put up their hand saying that they believe we’re at peak oil and these are practicing petroleum industry professionals.
Narration: So what if they’re right?
This is what the early peak camp are terrified of – an apocalyptic gulf between dwindling supply and rising demand from the voracious east.
Jeremy Leggett: It’s panic that causes collapses in markets. People start selling their shares. That’s what happened in October 1929 and it just snowballs.
Eric Streitberg: Rationing - people having to queue for three days to get a tank full of petrol, people not being able to afford to heat their houses.
Peter Newman: Getting to 2 to 3 to 4 dollars a litre you really are grinding to a halt.
Narration: But couldn’t we just switch to alternatives – like solar cars or hydrogen?
Professor Peter Newman should know. He’s been trying to prepare his home town of Perth with a post-petroleum transport system - which includes Australia’s first hydrogen buses.
Peter Newman: This is a transition that can’t be done overnight. Hydrogen technology is being developed but it’s a 20 year program.
Jonica Newby, Reporter: Twenty years?
Peter Newman: Yeah, the next 20 years are an absolute critical point where I don’t know that we can make it. I just feel we haven’t started soon enough.
Narration: The trouble is, if peak oil is imminent, other mooted oil substitutes, like biofuels, tar sands, shale oil, could only yield a fraction of the world's needs.
And no one can think of an alternative fuel for aeroplanes.
Jeremy Leggett: So I’ve looked at it all and I don’t see a way of closing the gap quickly enough. That’s the honest and depressing answer. It’s all about renaissance. It’s all about how quickly we can repair the problems and get an alternative infrastructure after the crisis breaks.
Narration: Whether we reach the end of cheap oil in 3 years or 30, it will be a defining moment for human society.
Even if there’s only a one in ten chance the early peakers are right, with the lifeblood of our economy at stake, shouldn’t we listen, just in case.
Eric Streitberg: If people like myself are taking the view that they need to speak out, I think it’s time to start taking it seriously.
Peter Newman: We have lots of preparedness for terrorist attacks; but where’s the plan for peak oil? We don’t have one.
Jeremy Leggett: I think the interesting thing about the problem is that we’ll find out. We’ll find out who’s right really soon, within a few years it will happen and play out on our watch.