Peak oil

1. A summary of peak oil
2. The Australian Senate were undecided about the date, but said we should be planning for it now.
3. Senate concludes markets will not prepare in time
4. A real risk of sudden shortages
5. The Senate concluded there is no “silver bullet”
6. If peak oil is imminent, the effect on the world economy is going to be profound
7. We need energy efficient cities not energy efficient cars

1. A summary of peak oil

I always thought the oil crisis would start when the oil ran out. Instead, peak oil describes how oil production will one day reach maximum output (or peak) and then production starts to slowly drop off. Since Ford’s famous assembly line brought motoring to the modern world, the human race has enjoyed ever increasing supplies of cheap oil.  We always find and mine the largest, easiest oilfields first, and it tends to be the good stuff — the light sweet crude. It’s easier to refine and makes more money.

We are now nearing the point where the only new discoveries are in deep ocean waters, and are very hard to get at and expensive to mine. We’re not finding enough, and are burning much more oil than we are finding.  Indeed, there’s a historic gap between demand and discovery. These days we’re burning through oil our grandparents discovered. The last time we routinely found as much oil as we burn was around 1980.

Alternatives like tar sands and shale oil are now being mined, but they cost more, and cause profound local environmental destruction and emit far more CO2 than traditional sweet crude. And they won’t last. As National Geographic reports:

The IEA report projects that “U.S. domestic oil supplies, dominated by fracking, will begin to decline” by 2020.

“As tight oil output in the United States levels off, and non-OPEC supply falls back in the 2020s,” the report says, “the Middle East becomes the major source of supply growth.” Earlier this year the U.S. Energy Information Agency (EIA) also forecast a plateau in U.S. oil production after 2020.

The age of sweet oil is turning sour. We have mined the easy stuff, and from here on in it will gradually get more and more difficult to satisfy demand. Many expert geologists are predicting the peak to be somewhere in the next decade (see graph). 

Exactly when is the peak? I used to be quite scared of peak oil, and used to obsess over the exact timing. But now I don’t really care, other than to hope that it arrives sooner than later. Why? Because climate change is so urgent we should not burn the remaining oil anyway – let alone the gas and coal, which would cook the planet 5 times over! In fact, I long for the day all oil categories peak and begin to decline on a steady basis so that it forces recalcitrant governments into action!

But to highlight the risks of peak oil, I’ll leave you with the conclusions of the Australian Senate special committee into peak oil (Feb 2007).

2. The Australian Senate were undecided about the date, but said we should be planning for it now.

3.137 The committee cannot take sides with any particular suggested date for peak oil. However in the committee’s view the possibility of a peak of conventional oil production before 2030 should be a matter of concern. Exactly when it occurs (which is very uncertain) is not the important point. In view of the enormous changes that will be needed to move to a less oil dependent future, Australia should be planning for it now.

3.138 Most of the official publications mentioned in this report seem to regard the ‘long term’ as extending to 2030, and are silent about the future after that. The committee regards this as inadequate. Longer term planning is needed. Even the prospect of peak oil in the period 2030-2050 – well within the lifespan of today’s children – should be a concern. Hirsch suggests that mitigation measures to reduce oil dependence ‘will require an intense effort over decades…’

This inescapable conclusion is based on the time required to replace vast numbers of liquid fuel consuming vehicles and the time required to build a substantial number of substitute fuel production facilities… Initiating a mitigation crash program 20 years before peaking appears to offer the possibility of avoiding a world liquid fuels shortfall for the forecast period.[114]

3. Senate concludes markets will not prepare in time

Committee comment

4.64 The committee notes concerns that markets will not respond in time to provide a smooth transition to a post peak oil world without government action. Given the uncertainty about much of the information on world oil supplies and the geopolitical instability of some key oil bearing regions, it is possible that there may be a risk that markets will under invest in oil and energy technologies, resulting in economic and social hardship when supply of conventional oil falls below demand.

4.65 The information required to make a clear determination on whether peak oil will occur before the market can provide mitigating action is not available. The following chapters discuss possible mitigation actions. These offer options for a prudent approach to managing the possibility of peak oil and associated issues contributing to oil vulnerability, resulting in substantially higher oil prices and a constraint on liquid fuel availability.

4. A real risk of sudden shortages

Keep in mind that global Peak Oil describes world oil supply declining at a certain rate. But there are scenarios where even though the international market for oil dries up faster than the reserves. There are 2 concerns – the Export Land Model and political crisis.

a. Export Land Model

World oil supply will one day decline by a few percent a year. But how that works out in the geopolitics of buying and selling oil on the international market can be a very different thing. Oil exporting nations can suddenly become an oil importing nations, causing chaos on the world oil market. The Export Land Model describes how oil exporting nations tend to do well economically. This raises their lifestyles and domestic demand for oil increases. If they’ve been drilling for a while, they may be close to their peak. When the nation cannot pump enough oil to meet their own demand, they might quickly switch to becoming an oil importing nation. For example, the wiki says Indonesia went from exporting 152 thousand barrels a day to importing 188 thousand barrels a day in just 5 years! Bit by bit world oil exporters are becoming importers.

b. Political crisis: war, terrorism and embargoes in a stressed world

As climate change and peak oil start to effect the world marketplace, supply gets tight. It has been a while since the 1973 oil Arab oil embargo. We were starting to forget what a political oil crisis was like – and then a variety of natural disasters like droughts and floods hurt various energy systems – and then Russia invaded Ukraine! This led to the 2021-23 energy crisis. This is less about the oil supply drying up and more about a nation turning off the pumps. Supply is getting tight. Small disruptions can have large consequences – as the 2020-2023 energy crisis shows!

5. The Senate concluded there is no “silver bullet”

None of the alternative liquid fuels appeared likely to replace oil in the foreseeable future. Some might replace niche markets for a while, such as LPG or coal-seam gas for heavy machinery and trucking, but there was no one silver bullet. However, this report was over a decade ago. Technology has changed, and I cover the alternatives under the “REFUEL” header menu of this blog. Yet the comment must be made, even if we could replace every car today with clean, abundant, alternative fuels: would we want to? How are we all going to drive anywhere as city populations increase, and is there a better way to live than isolated, bland, boring, car-dependent suburbia anyway?

6. If peak oil is imminent, the effect on the world economy is going to be profound

4.4 A recent report for the US Department of Energy, the Hirsch report, considered the impact of three different scenarios on the world and American economies. One assumed that no mitigating action was initiated until peaking, the second assumed that action is initiated 10 years before peaking and scenario three assumed that action is initiated 20 years before peaking. The severity of the impact of peak oil on the world economies was different for each of the three scenarios.

4.5 The Hirsch report claims that only aggressive supply and demand side mitigation initiatives will allay the potential for peaking to result in dramatically higher oil prices, which will cause protracted economic hardship in the world. ASPO-Australia also claims that the economic and social impacts will be very serious unless we take the necessary precautions very soon. The potential seriousness of the problem is also accepted by some political leaders, the W.A. Minister for Planning and Infrastructure, the Hon. Alannah MacTiernan MLA commenting that:

It is also certain that the cost of preparing too early is nowhere near the cost of not being ready on time.[2]

7. We need energy efficient cities not energy efficient cars

General comment on demand management measures

8.96 When government considers the range of policies needed to reduce oil dependence, and the level of government intervention or support that they deserve, the costs and benefits of demand side measures versus supply side measures should be compared. A litre of oil saved through a fuel efficiency measure, or by turning a car trip into a bicycle trip, is just as real as a litre of oil found by new exploration or produced in a coal to liquids plant.

8.97 It should be remembered that measures to reduce demand for oil-fuelled transport also have other benefits – reducing greenhouse gas emissions; promoting the environmental and social benefits of less car-dependent cities – which the alternative fuels do not have, or have to a lesser degree. In the cost/benefit comparison these extra benefits should count to the credit of the demand management measures.

And earlier…

Comment

8.48 Studies suggest that overall the potential fuel saved from promoting walking, cycling and public transport, with realistic assumptions about how much behavioural change could be achieved, is relatively small compared with the saving from improving the fuel efficiency of vehicles.[50] However more walking, cycling and public transport use is still a worthwhile goal for a number of reasons – for example to reduce congestion and pollution; to promote healthy lifestyles; and to reduce the disabilities suffered by people without cars (since more public transport use would make better services more viable). This applies regardless of predictions about the oil future. If there is a long term rise in the price of oil, it will be all the more necessary.

8.49 It is often said that it is too hard to get Australians out of their cars.[51] Others argue that the real problem is that people have no choice:

There is no real relationship between wealth and car use. People use cars because they have to. Car dependence has become a dominant phenomenon. There is a lot of nonsense about how you will never get people out of their cars. You will not get them out of their cars unless you give them a better option, and then they will.[52]

8.50 The committee agrees that, whatever the reasons for people’s travel behaviour, changing it is a challenging goal. However this does not mean it should not be attempted. It a clearly a long term project. Change may be slow, but the important thing is to set the trend to reduce car-dependence into the long term.