Peak Oil News: Worldwide Peak Oil May Already Be Here - Now What?

Tuesday, February 05, 2008

Worldwide Peak Oil May Already Be Here - Now What?


By Ronald G. Nelson

Houston recently hosted the 2007 US.-World oil Conference of the Association for the Study of Peak Oil & Gas - USA (ASPO) at the Hilton Americas hotel. The event included four days of presentations and field trips by several hundred participants. Yet, despite the compelling significance of this issue - that the world's supply of petroleum is due to "peak" at some point during this decade, at which point total world production will officially be declining toward depletion - there was amazingly little press coverage or US. public interest. ASPO boasts more than 20 chapters in the world, many of which are in Europe. Most members are retired and active professionals of the oil industry and academia. They are united in their efforts to educate the public and governments about the urgent need to begin steps to alleviate a massive potential crisis that is already apparent in the rapid price increases for crude oil and natural gas, two leading indicators measuring our advanced industrial economy.

We have had plenty of warnings about the consequences of an early peak in global oil production, but no one in Washington is listening. A premature topping plateau in global oil production would wipe out most, if not all, economic and policy plans on offer by politicians and "think tanks" in our nation's capital. Such plans assume continued growth in supplies of generally affordable oil, but a surprised world could instead soon be facing rapidly dwindling supplies of increasingly unaffordable oil.

The U.S. is the world's largest consumer of oil (25% of total world consumption) and could also find its sources of petroleum imports drying up. In the face of supply shortages, it is likely that the oil-exporting countries would begin to restrict the volumes previously available for export, to ensure that their own economies and people will be spared immediate shortages. Shrinking exports will adversely impact the global economy. The aftermath of peak oil will have major ripple effects for everyone on the planet, and these will only grow in intensity.

What Is Peak oil?

Dr. M. King Hubbert laid the foundation of the study of peak oil in 1956, publishing a paper predicting the U.S. would reach peak oil production by 1970. He based his forecast on the history of oil exploration success in the U.S. up to 1956. Though ridiculed for years, his analysis, conclusions and prediction proved to be spot on: we reached peak oil in 1970. Not even our subsequent development of the giant Prudhoe Bay reserve in Alaska could bring U.S. production back to the levels achieved before 1970.

Today, many scientists utilize Hubbert's basic principles of analysis to measure the rate at which oil, natural gas and other natural resources are produced over time. Usually, a rapid period of exponential growth is followed by an inflection point, after which growth tapers off, reaching a peak or plateau.

After the plateau-rate period, production begins to decline. The "peak" is reached after approximately 50% of its resource base, or ultimate reserve, is produced.

In analyzing global oil production, the methodology consists of backdating all oil reserves to their original year of discovery, and then constructing the production curve to project the same volumes of oil that are likely to be produced ultimately. In this way, scientists can make informed assumptions about peak oil production.

Based on the views expressed and documented at the ASPO conference, it is quite possible that we have already reached peak oil. It is difficult to be sure because oil production statistics include lease condensate, natural gas liquids, oil from tar sands, and reduction of oil in storage. The oil production rate in the world has been virtually level for the past two years.

Global Oil Fever

There was a consensus at the conference that there could now be deliberate retention of oil supplies by OPEC and other exporting countries before the advent of peak oil. Additionally, if new projects are delayed, the entire world could feel the supply pinch well before the peak oil point around 2011.

Developing countries, such as those across Africa and Asia, are already being priced out of the market for oil-based energy. Recent riots in Myanmar were touched offby high prices for energy. Iran has instituted rationing of gasoline (petrol) because of insufficient refining capacity. The Nigerian government is struggling to pacify its citizens, who are striking for a larger share of the oil revenue from exports to the U.S.

Mexico, one of our chief suppliers of imported oil, has been experiencing declining oil production since 2004. Venezuela, another of our oil suppliers, has reached declining oil production and is also beginning to export oil to China, a huge market hungry for oil to fuel its fast-paced growth. Bolivia, Colombia and Ecuador are becoming stridently nationalistic with regard to their internal oil supplies.

All of these situations reflect symptoms of world oil fever and are causing tightening oil supplies, rising demand and progressively higher oil prices. Meanwhile, our financial and governmental energy experts tell us that high prices are only a temporary problem due to oil speculators driving up the price, and that $98 per barrel is roughly equivalent in inflation-adjusted dollars in the oil crunch of 1980, during the Iranian revolution.

These same experts also tell us that our gross national product is affected by oil usage by less than half as much as it was a generation ago. Few, if any, of these experts are trained in geology. Instead, they base their analyses on extrapolation of past years' growth to ever-increasing prosperity in a world with abundant transportation energy. They point to immense reserves of tar sands, oil shale and coal that can be exploited in the future, if necessary. What is not mentioned is the multi-year time frame and colossal investment required to develop these resources. The worldwide appetite for petroleum is now nearly 1,000 barrels of oil per second.

Conservation Is Critical

When oil imports do begin to decline, government-controlled gasoline rationing and price controls could be a fact of our daily lives to ensure fairness in energy distribution. We will all be under the gun to conserve energy, including smarter commutes, telecommuting and transportation not reliant on petroleum. Price alone, as a mechanism to reduce demand, is not the answer. High energy prices unfairly penalize the people at a lower economic scale, and result in waste by the wealthiest segment of the population.

If the concept of conservation seems foreign to the American way of life, look back to the rationing and price control of gasoline, tires, food and other consumer products during the war years of 1942- 1946.

If sacrifice is not shared equitably, it can lead to a breakdown in civil government and society. Most countries have undergone drastic shortages of necessary food, fuel and/or material products for extended periods in their history, usually as a result of wars. It is not too early for our officials and leaders to begin to plan for fuel supply rationing among the nations of the world. Invading oil-rich countries by the strongest nation(s) is anathema as a solution to our fuel supply needs. P&GJ

Author: Ronald G. Nelson, NRG Consulting, The Woodlands, TX. A frequent contributor to P&GJ, Ronald G. Nelson is a retired petroleum engineer whose career took him to North Africa in the 1960s, Europe and the North Sea in the 1970s, Houston in the 1980s and to DeGolyer & McNaughton in Dallas, TX, during the 1990s. At D&M, he provided consulting services and detailed reservoir analyses, traveling to Russia, London, Dubai, Kazakhstan, Congo, Egypt, Singapore and many other countries to gather data and report to clients. He holds a master of science degree in geology and a bachelor of science degree in engineering from the University of Minnesota. He can be reached at rgnelson 1936@earthlink. net.


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