Sunday, June 22, 2008

Technosanity #3: Peak Oil

You are missing some Flash content that should appear here! Perhaps your browser cannot display it, or maybe it did not initialize correctly.

Today I want to talk about the Peak Oil situation and do an overview of some of the current news related to this.

Let's start with a quick primer on what this is.

Adapted from:

Peak oil is the point in time when the maximum rate of petroleum production is reached. The peak oil occurs at every level, for each oil field, for each country, and for the global production. After the peak oil point is reached, the rate of production enters its terminal decline. If global consumption is not mitigated before the peak, an energy crisis may develop because the availability of conventional oil will drop and prices will rise, perhaps dramatically. M. King Hubbert first used the theory in 1956 to accurately predict that United States oil production would peak between 1965 and 1970. His model, now called Hubbert peak theory, has since been used to predict the peak petroleum production of many other countries, and has also proved useful in other limited-resource production-domains. According to the Hubbert model, the production rate of a limited resource will follow a roughly symmetrical bell-shaped curve based on the limits of exploitability and market pressures.

The same pattern happens for other limited resources. There will be a copper peak, a coal peak, a natural gas peak, a fish peak, etc. In each case there is an increasing demand for a resource, and a fixed maximum capacity to deliver that demand, and once the capacity is reached it damages the resource such that it can no longer produce as it did before.

Oil is the most critical resource for our societies existence and it is with oil that this Peak Resource phenomenon was discovered.

Oil is the key to transportation. Current transportation technologies generally require liquid fuels, and society has chosen that the only way to get liquid fuels is to use fossil oil. The direct result of tight oil supplies will be expensive transportation, and that will contribute to several secondary results to be covered later.

The ever-increasing demand for oil partly occurs as a natural byproduct of rising population. Each person who exists is responsible for consuming resources, so of course the more people there are the more resources which are used. Another cause is a shift from manual technologies like bicycles or horse drawn carts to mechanized technologies like cars and trucks. Some countries, especially India and China, are industrializing and are causing an increased rate of demand. As countries industrialize the amount of resources consumed per person raises as well.

Peak Oil

An interview with the authors of Transport Revolutions: Moving People and Freight Without Oil they suggest the U.S. might become so desperate for oil they would invade Canada to get its oil. Maybe the NAFTA is at least partly due to the need to have ready access to Canadian oil.

"The likely outcome of not dealing with this issue is not an environmental catastrophe. It's an economic and social catastrophe that may leave us unable to deal with the environmental catastrophe," Richard Gilbert said in an interview. The effects brought by oil in our society are so critical and fundamental to how we live, that without cheap oil we face starvation, riots, collapsed economies, more wars, and more.

The gushers are gone - "It's the end of the Beverly Hillbillies oil. The kind of oil that you stick a hole in the ground, and it starts squirting a gusher out under its own power." - All the big discoveries have already been made. There are two peaks in oil supply, the first peak is the peak in the rate of discovery of oil, and the second peak is the peak of oil production. The peak of the discovery rate has to precede the peak of production, and the peak of oil discovery is long past.

There's more in this article but we're focused on understanding peak oil here.

World Energy Outlook
World Energy Outlook 2007 Edition

As Dr. Fatih Birol, Chief Economist of the International Energy Agency, said in testimony to Congress in January 2007: "The world is facing twin energy-related threats: that of not having adequate and secure supplies of energy at affordable prices and that of environmental harm caused by its use. " Not only is the supply threatened, the use of fossil fuels is threatening us all from environmental harm. The burning of fossil fuels releases poisons which directly cause a wide range of diseases. The burning of fossil fuels release greenhouse gasses which are directly causing climate change to be worse. Purchasing fossil fuels results in large capital flows into the Middle East.

"Oil supply is increasingly dominated by a small number of major producers, most of them in the Middle East" which then connects to a variety of global geopolitical manipulations. The oil industry needs to do massive investment in developing oil fields and infrastructure, a total of $4.3 trillion dollars between 2005-2030. However it is uncertain whether the key Middle East countries will actually do so, and it's possible they will deliberately keep investment lower than predicted. Why should they increase production when keeping production low keeps the price high? Or it's possible that a credit crunch might prevent producers from expanding capacity due to a lack of money to pay for the investments.

The U.S. imports more energy than the next 2 highest importers. Most of U.S. imports come from shaky or unfriendly suppliers. Many of the key suppliers are 1-2 months travel time away. There are many scenarios in which "energy" (a.k.a. oil) supplies to the U.S. can be disrupted. One of these unfriendly suppliers could turn downright nasty and cut off oil to the U.S. Or storms could wreck shipping facilities, refinery facilities. Or a war with Iran could block the mouth of the Persian Gulf, preventing shipment of oil from the Middle East.

In other words we have to be smart enough to realize the game is changing. That we can no longer continue life in the style to which we have become accustomed. We have to change our ways.

The Shape of Oil to Come

There are approximately two thoughts to how the peak oil phenomena plays out. The "sharp peak" model says production reaches a peak and rapidly declines. Nobody who has studied this carefully says we will "run out", instead the debate is in how quick is the decline. There are those who think production will, instead, "plateau" for a long time for one reason or another.

Oil megaprojects

On Wikipedia the Oil Megaprojects page tracks the known huge oil projects. It's a useful resource to look at and ponder.

The rise of the new energy world order

The world energy crisis is upon us. Dwindling supply and rising demand leads to a simple economics lesson, rising cost. The old equation was cheap energy lead to untold wealth. The new equation is gonna lead to a totally different world power structure.

Technosanity #3: Peak Oil

External Media