Peak Oil News: The price of peak fuel

Thursday, June 05, 2008

The price of peak fuel

ABC Science

Our need for fossil fuels is insatiable, but coal, oil, gas and uranium reserves are finite and some may even be in decline. How long will our energy resources last?

By Stephen Pincock

It's among the great ironies of modern life. In order to fuel our twenty-first century global society, we rely profoundly on fossil fuels that are millions of years old.

Most scientists believe that the oil, coal and gas we use to generate electricity, run our cars and transport food began their existence as ancient plants and algae. Buried under heavy layers of sediment, they transformed chemically under immense heat and pressure into rich sources of fuel.

These forms of energy have revolutionised human society over the past century and more, but they are irreplaceable resources, and reserves are inevitably dwindling. Many scientists and other experts warn that we are approaching the time when production of these fuels will reach its peak, and start to decline.

The concept of peak oil — and by extension, peak coal, gas and other fuels — was born in 1956, when American geophysicist M. King Hubbert calculated that the rate of production of fossil fuels would peak in the United States in about 1970 and then start declining. At first his calculations were dismissed, but ultimately he was proven correct.

"The peak that matters is a peak in production," says Dr Mark Diesendorf, a senior lecturer at the Institute of Environmental Studies at the University of New South Wales. "And the peak wouldn't matter so much if the demand for these fuels wasn't increasing so much. But demand keeps going up and up and up. In that scenario only one thing can give, and that's price."

As fossil fuels become increasingly rare, the cost of extracting them from the earth will inevitably grow, he says. And the impacts on the global economy could be dramatic. These fuels are used for more than just running the family car; they are vital to powering homes and offices, transporting foods and much more.

In the most dramatic scenario, declining availability of fossil fuels could trigger violent upheaval, as a group of German experts called the Energy Watch Group warned in October last year.

"The world is at the beginning of a structural change of its economic system," they said. "This change will be triggered by a sharp decline of fossil fuel supplies and will influence almost all aspects of daily life. Anticipated supply shortages could easily lead to disturbing scenes of mass unrest."


Crude oil, otherwise known as petroleum, is a vital energy source. Made up of a mix of different molecules, it is the starting point for production of the petrol we buy to power our cars, diesel, bunker fuel used in ships, kerosene and liquefied petroleum gas, among many other things.

"Everyone knows that our transport system is highly dependent on petroleum products," says Dr Hugh Saddler, managing director of the company Energy Strategies. "The mining industry in Western Australia is also dependent on petroleum products. There's an enormous amount of diesel fuel used there."

Given the world's reliance on oil for transport, heating and to a lesser extent electricity generation, not to mention the manufacturing of plastics and other products, there's intense interest in trying to figure out how much oil is left. But calculating this figure is no easy task, partly because many countries keep their data secret.

According to estimates published by the US Energy Information Administration in early 2007, the world has around 1,200 billion barrels of oil in "proved reserves", which are estimated quantities of oil that can be recovered based on geologic and engineering data.

On the other hand, Energy Watch Group said in October last year that a more accurate estimate, based on the amount of oil that is being produced, would be 854 billion barrels. According to their analysis, world production of oil passed its peak in 2006, and is now already in steep decline.

The International Energy Agency (IEA), on the other hand, disagrees. In a 2005 report, the agency's executive director, Claude Mandil, argued that "There is no shortage of oil and gas in the ground, but quenching the world's thirst for them will call for major investment in modern technologies."

Still, the IEA estimated that unless the world implemented new energy policies, oil demand would grow by more than 50 per cent between 2002 and 2030.

Searching for the reality among these different estimates is a futile exercise, says Saddler. "I've had the view for a long time that when you're talking about energy policy that it gets a bit fruitless arguing about peak oil. It gets a bit speculative."

His view is that we simply need to begin finding ways to use less oil and search for alternatives. "It's the precautionary principle we should apply, just as we do with greenhouse-gas emissions."

This seems like particularly sensible advice given the impact that rising oil prices are already having at the pumps and elsewhere. Oil prices have doubled in a year to around $130 a barrel as increased consumption has hit, hurting industry and contributing to food price rises that have resulted in protests and riots in places like Haiti, Egypt and Somalia.

"The reality is that the supply of oil has got to the point where the reserves of easily obtained oil are definitely starting to dwindle," says Dr Graeme Pearman, former chief of CSIRO Atmospheric Research and now honorary senior research fellow at Monash University.

"How hard and how fast the prices rise depends on a lot of factors, including the politics of how the oil suppliers respond to the situation."


Coal generates 40 per cent of the world's electricity. It is also the largest worldwide source of carbon dioxide emissions. (Source: iStockphoto)

If oil is largely used for transport, most of the coal mined around the world is used in power stations, where it is burned to turn water into steam and turn turbines that generate electricity.

According to the World Coal Institute, which represents industry, coal provides a quarter of global primary energy needs and generates 40 per cent of the world's electricity. It is also the largest worldwide source of carbon dioxide emissions, contributing more greenhouse gas than oil and gas to generate the same amount of electricity.

There is little disagreement that coal is currently an abundant resource, with the US Energy Information Agency estimating that there are world coal reserves of 997 billion short tons. At current production levels, the World Coal Institute says, proven coal reserves are estimated to last 147 years.

The coal story is very different to the situation with oil, notes Pearman. "There are reserves of coal that are still obtainable at relatively low cost."

There are concerns, however. Some organisations predict that global coal production could peak as early as 2020, and the massive growth in China and elsewhere looks likely to keep demand for coal growing.

Plus, the rate at which we use up coal reserves could escalate if it is converted into liquid and gas fuels, a scenario that could become more attractive if the cost of oil continues to spiral.

"In that case, the coal will go very quickly," says Diesendorf. "Probably within the century."

Ultimately, the major concern about coal is the amount of greenhouse gas it emits when being used to generate energy. In the short term, the search for ways to capture and store the carbon dioxide (CO2) from coal could create a temporary peak in its use, suggests Pearman.

As US scientist James Hansen wrote in an open letter to Prime Minister Kevin Rudd this year: "Coal caused fully half of the fossil fuel increase of CO2 in the air today, and on the long run coal has the potential to be an even greater source of CO2. Due to the dominant role of coal, solution to global warming must include phase-out of coal except for uses where the CO2 is captured and sequestered."


Natural gas is actually a mixture of different gasses, sometimes found in isolation and sometimes along with oil and coal. It is used to generate electricity, as an automobile fuel and for heating and cooking at home.

According to the US government, current global reserves are estimated at 178 trillion cubic metres. Australia is home to a sizeable amount of that resource — two trillion cubic metres according to the government's Australian Bureau of Agricultural and Resource Economics, most of it located off the West and North West coasts.

But gas is easy to extract, and is used up quickly, a process that Saddler suspects will soon become even more important as oil prices keep rising. "The world's going to gas because it can be readily substituted for petrol in non-transport uses and it is lower in greenhouse gas emissions," he says.

The inevitable result will be rising prices for gas, he says, and Mark Diesendorf agrees. "The demand for gas is going to go up dramatically. We'd probably be optimistic to think there's going to be much gas left in Australia by 2050."


Fossil fuels such as oil and coal are not the only finite fuel resource. Uranium, used to power the nuclear power stations some hope will offer a power source with fewer greenhouse emissions, could also reach a peak as soon as 2040.

Over the past 50 years, the average grade of the uranium extracted from mines around the world has gradually declined, says Dr Gavin Mudd from Melbourne's Monash University, and he argues it's a trend that is likely to continue.

That means mining companies will have to use more energy, and more water, to extract the ore and process it ready for use in a power station.

Advocates for the technology say nuclear power plants could help mitigate greenhouse gas emissions, and therefore could be an important weapon in the fight against climate change. But Mudd says there has been a lack of real facts and figures around how much uranium there is, and how easy it will be to extract.

A spokesperson for the Australian Uranium Association questions Mudd's figures.

"The assumption appears to be that we are currently mining all the known resources of uranium, beginning with the most easily recoverable ore and working through to the ore that is more difficult," he says.

Time to act

Exactly how and when each of these fuels is likely to reach their production peaks is still a matter of intense disagreement among scientists, politicians and representatives of the fossil fuel industry.

One thing seems certain, however. Eventually they will.

"All of these things have their limits," says Pearman. "There are constraints in the real physical world."

The big question is how quickly we will be able to change our economies and societies and begin weaning ourselves from our reliance on these limited resources.

"We seem to be very slow to respond to these things," Pearman says. "I'm optimistic we can do it, but there are things that could happen overnight that could change our view."


At 5:33 PM, June 05, 2008, Blogger Robert said...

a side note: McCain doesn't have a chance! and let's hope Obama can get govt involved in the changes that will have to come as we continue to use up our natural resources fast. thank you for some new statistics. last i read about uranium peak, it was 2080. now it's 2040. figures continue to move. when i read about oil supplies back in the 70s, the thought was there would not be a problem till 2100. population scientists at one time thought we would peak between 12-15 billion. now it's 9 billion. in 5 years as we enter oil decline the figure will probably go to 8 billion. ------- we have to start becoming serious about local food production and the coming decrease in property tax which will lessen the protective ability of local govt as in police. things will happen fast and most of us just go on day to day only worried about how much it's going to cost to fill up the car. we need smart people to come forward and i really hope Obama will prove to be one of them.

At 2:50 PM, June 06, 2008, Anonymous Anonymous said...

I read over what lots of people are writing and the hushed whispers of concern in cafes. I work in the oil and gas industry and I can tell you without a pause that the crisis (energy) is generated..Right now as I type there are wells shut in all over our country. huge oil reserves have been discovered in the gulf of Mexico. Its estimated that the one pocket off of walker ridge (for Chevron) holds enough oil to fuel our nation for 50 years. Fossil fuels are not spent. what we do have is the swaying of fear in the masses.. and amid the frightened sheep we have the wolves preying on the weak.. Grocery stores marking up all products because the media has conditioned them to pay more..more at the pump more at the markets.. dress up a nerd and put him on tv..tell the world he is a leading expert on global warming.. preaching a " the end is near rethoric" everyone buy a new car ..get fit and go green.. everywhere you go there are wolves pandering a
new go green gadget or solution.

why buy a new car? Why not refab the ones we already have??? its just chips and fuel injection systems.. we can increase fuel economy by 35 to 40%. Make Light bulbs that never burn out. Shhhhh don't suggest these things might piss off big buisness

Answer..more money in leasing and financing. Forget that the carbon debt has already been paid on that old Toyota your driving.. Add a flex fuel injection system to a mid 90's Tercel and go from 35 miles to 50 miles per gallon.. but it doesn't have an mp3 dock.. scratch that.. and your new flex fuel car will have to operate for over a 100,000 miles to catch up to the carbon debt of the tercel. Yeah out so called leaders and experts have everything worked out..

Fact..the damage to our environment is done..either by us or a random volcano.. a large eruption emits more CO2 than 20 years of our modern society.. so lets whittle a big plug for Mt Kilauea on the big island . Most of the REAL scientist have already stated that our earths climate is always in flux ice ages come and go heating and cooling ..mountains rise oceans fall..etc. And once the earth is unbalanced it will naturally correct itself.. i.e floods,storms droughts.. and maybe the best thing for us to do is quit worrying and get down to figuring out how we need to adapt to the new weather conditions, before its to late

So unfortunately once the "GO GREEN" fad has faded we will not have even addressed the real issues at hand and no politician is going to go near them not when the media is telling us dooms day is looming on us. While the same rich scum bags who Speculated on mortgages till it sank our dollar and economy have a new un-regulated toy to play with in gas and oil futures

At 9:48 AM, June 07, 2008, Anonymous said...

"The peak that matters is a peak in production," says Dr Mark Diesendorf, a senior lecturer at the Institute of Environmental Studies at the University of New South Wales. "And the peak wouldn't matter so much if the demand for these fuels wasn't increasing so much. But demand keeps going up and up and up. In that scenario only one thing can give, and that's price."

This remark is at the very heart of the problem and developped at the URL given above.

At 3:48 PM, June 07, 2008, Anonymous Anonymous said...

well now that the scenerios are set looks like with the help of the nightly news. we may be entering into a new era of global warfare as countries begin to worry about sustanability of their economies and contries. Hench hording and covering up how much oil or fuel is beign produced.. ect ect.. Now its a new cold war or global oil stand off.. allies will be made contries will group together for protection as one invades anouther for its oil reserves as they come under pressure from their populace to do somthing!!! Riots food shortages ..the earth is slowly sliding into a climate change and mankind will slip back into the dark the lights go out

At 5:08 PM, June 12, 2008, Blogger SBVOR said...

If you care to, click the link and spread the word.


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