Roughly speaking, if these predictions are correct—and numerous studies seem to corroborate them—between 2011 and 2016, we are going to lose the equivalent of 18 million barrels per day. Now, some recently discovered deposits give us, at the moment, a bonus of 7.6 million barrels per day. But that still leaves a gap of 10.4 million barrels per day. And this is only the case if the economy remains stationary—zero growth. If, on the other hand, we can expect 3 percent growth, that makes 13 million barrels per day that we shall lose. If growth is 4 percent, that makes 14 million barrels; if 5 percent, 15 million. And if we boost the economy in the Chinese fashion, reaching 10 percent growth, we shall be losing 20 million barrels a day.
Before going further, we must see if these data and predictions are correct. This is all the more relevant since the concept of lowered production is not new: it is something called peak oil.
Peak oil is the highest point of the production curve of an oil well or oil field. It is the moment when production flattens out before beginning to decline due to the exhaustion of the usable oil deposits.
The life cycle of an oil deposit is quite variable. It always extends for several decades from the time of the first discovery. The tapping of a new deposit generally occurs between a few years and a few decades after the discovery of the oil. The oil production from a deposit generally extends over several decades as well: the first North Sea wells began production in 1970, and the last drop of oil will probably be extracted by 2050.
As you can see from the graph below, the volume of oil produced over time can be represented by a bell-shaped curve. Between the beginning and the end, production passes through a maximum, which corresponds roughly to the moment when half the oil has been extracted. The declining phase is much longer than the time passed between the start of production and its peak.
When production starts, the oil spontaneously shoots out of the well from natural pressure. In the second phase, the oil must be forced out by the introduction of air or gas, which requires an increasing expenditure of energy. Finally, even more costly techniques must be used, such as injecting steam to increase the fluidity of the oil. Production stops when the energy needed to extract a gallon is greater than the energy contained in the gallon of oil itself (also accounting for other costs such as maintenance, transportation, and labor). During the declining phase, production decreases at a pace that depends on the geology of the deposit and the methods of extraction employed: the average is 4 percent per annum, or 25 years to exhaust a reserve after it peaks.
The expression “peak oil” as we will employ it refers to the peak of global production. The methods for estimating this peak are derived from the work of the geologist Martin King Hubbard, who in the 1950s successfully predicted the peak of American oil production. The following graph shows the evolution of all accumulated deposits:
To know whether total oil production in the last few years corresponds to a curve like the one we have just described, we must compile all the data on all the oil deposits of these past few decades. This is what the Association for the Study of Peak Oil (ASPO) has done. The results are in the graph below, which show world oil production by region and in millions of barrels per day:
Between 2008 and 2010, global oil production began to wane, mostly due to the industrial consequences of the financial crisis (lowered demand, relatively lower transportation costs, etc.). Data since then has revealed that production worldwide has returned to its steady secular increase of the past quarter century. The United States has experienced a sharp rise in production in the years since the crisis, and a reversal of a downward trend of some two decades. This was the result of the development of new technologies, such as horizontal drilling and hydraulic fracturing, as well as the exploitation of North Dakota’s Bakken formation. We will have to wait for official production data in subsequent years to know if these phenomena amount to the last gasp of the oil era, or whether the peak in production is still many years away. Determining this is a little like looking in the rear-view mirror to foresee how much traffic we can expect up ahead. It is not possible to know in advance if we have reached the peak. We can only measure the lowering of production by looking at last year’s figures.
Another index of whether we are close to peak oil is the condition of existing deposits. Here, the figures are very difficult to determine, since each country declares only its official deposits. Do these figures correspond to reality? In fact, it is well known that the more significant the announced deposits, the more the country is considered strategically important, with all the commercial advantages (and corruption) that entails. It is also well known that OPEC, the Organization of Petroleum Exporting Countries, bases the production rights assigned to each member on these deposits, encouraging these states to declare as much of their respective deposits as possible in order to boost production and thus revenue. Numerous CIA reports show that OPEC has been warning American authorities of this danger since 1980.
It remains for us to see if the discovery of new oil deposits will compensate for lost production. After all, if these new deposits are huge, it could set peak production back a long way. However, according to the ASPO, the discovery of new deposits, measured in billions of barrels, has been sinking since 1964, as the graph below shows.
This means that new deposits are getting gradually smaller, which makes sense, since we have been exploring every corner of the world for a century now. Geologists know very well where deposits are likely to be found. We began by tapping the easiest and least costly deposits.
In fact, oil is divided into a very small number of enormous deposits and a large number of small ones. This gap is illustrated by the fact that 60 percent of the world’s oil comes from only 1 percent of active deposits. When a very large deposit starts to become exhausted, perhaps hundreds of little deposits must be tapped to make up for the loss in production. This decrease in the economies of scale will have repercussions on costs. The oil industry has invested heavily in new technologies, including better exploration and production techniques, but these have not succeeded in uncovering major new deposits.
Since 1980, we have been consuming four barrels of oil for every new one we have discovered. Annual oil consumption surpassed the world’s annual gross product in 2002. Put simply, we are facing a radical divergence between supply and demand.
Are there other oil sources available?
There is also the question of abiotic and unconventional oil. The abiotic theory is based on the notion of a chemical, non-biological (thus a-biotic) origin of oil in the deepest strata of the Earth. This theory holds that oil is formed from deep carbon deposits dating back perhaps to the very formation of the Earth. Supporters of this hypothesis suggest that great quantities of oil may still remain to be discovered, migrating upward from the Earth’s mantle via carbon-carrying fluids. However, this theory has never generated real interest among geologists and is generally considered scientifically invalid. Besides, the theory does not involve commercially significant or accessible quantities. The question is not quite closed, but until proven otherwise, abiotic oil will not solve our problem.
Oil can also be produced or extracted using techniques other than the usual method of oil wells; these often involve additional costs or technologies because of the greater difficulty or risk. Such unconventional production includes the tapping of oil shale, bituminous sands, heavy oil, deep offshore drilling, and drilling in polar conditions.
As for oil shale, bituminous sand, and heavy oil, the idea is that as the price of oil rises, it will become economical to tap these difficult or remote deposits. In terms of oil shale, whereas the last few years showed some increase in production, the exploitation is extremely capital-intensive, and available reserves seem to be much lower than originally publicized, not to mention the potentially dangerous and expensive ecological impact of techniques such as hydraulic fracking. In the case of deep offshore oil (i.e., drilling in very deep water), research projects have had to be revised
downward due to costs and the technical and ecological problems involved, as the Deepwater Horizon fiasco of 2010 demonstrated. The cost of foraging under polar conditions—a hostile environment for man, to say the least—is equally prohibitive.
Before reserves are totally exhausted, the rising price of oil may weigh drastically upon operations. Before oil, carbon, or bituminous sand can be extracted, energy is necessary to get the trucks rolling, the drills working, the pipelines laid, etc. All that requires more oil. In other words, it could happen that extraction no longer makes economic sense, whatever the market price. If it costs a barrel of oil to extract a barrel, it will no longer be done—even if the price of a barrel climbs to a million dollars! Neoliberal economists never seem to understand this.
It is clear that, whatever the available reserves of oil, they represent a finite quantity, and one day they shall all be consumed.
If oil specialists and economists are debating peak oil, the general public has practically never heard of it. The oil crises of 1973 and 1979 were perceived as temporary difficulties, which were overcome by discoveries in Alaska and the North Sea. The illogical conclusion drawn is that all future problems can be overcome in the same way. Besides, since the end of the 1960s, there have been so many prophets crying wolf—without any wolf showing up under our noses—that the public has stopped becoming alarmed. At elementary school in the 1970s, I remember a teacher who told us that oil would soon disappear. How could such a thing be taken seriously when oil and gas have been so cheap since 1980? Even among informed people, it is thought that peak oil is no more than another false alarm, like the Y2K bug which was supposed to bring about the end of the world. The September 11th attacks were also said to have “changed everything.” Well, we are still here; everything’s going fairly well; we still drive big cars, take low-cost flights, and we’re all just hoping not to lose our jobs during the next wave of outsourcing.
It is quite understandable that, for many Europeans and Americans who have never known life without petroleum, it is simply impossible to imagine a different way of life. I have to think of the stories my grandmother told me about country life in northern Italy in the 1920s and ‘30s to imagine existence without oil. Several families lived together on great farms where you worked as an agricultural laborer, and each infrequent trip to the nearest town was an adventure that left an impression in your memory.
The oil lobby, or simply the industries with an interest in the status quo, go into denial, give out misinformation, or conceal facts such as the following:
Oil consumption is rising steeply, especially because of the arrival of new industrial powers such as China, India, and Brazil. At the rate of 24 billion barrels of oil consumed in 2004, the one trillion barrels of known oil reserves will only last 37 years. (And there is good reason to believe that world reserves are actually not one trillion at all, but only two or three hundred billion barrels.)
The U.S. has only 3 percent of world reserves, but consumes 25 percent of production. It imports 70 percent of what it consumes. Shale gas and oil seem to be a bubble that will only last a few years—not the long-term economic bonanza as portrayed by many in the media.
The barrels-of-oil-equivalent energy required to pump a barrel of oil has gone from 1 for 28 in 1916 to 1 for 3 in 2004 and continues to worsen. This is the most worrisome fact, because it means that soon it will no longer be economical to extract oil.
In summary, the optimists think that with first-rate technologies, new deposits will be discovered, and the cost of extracting from them will go down; the pessimists think that we are headed for irreversible decline. The latter put forward the following arguments:
Oil in existing deposits is decreasing by 6.7 percent per annum.
The discovery of new deposits reached its maximum in the 1960s, and for the last few years, few discoveries have been made, even in deep water.
Even though more oil can be extracted from the deposits in Saudi Arabia, Iraq, and Iran, the point of maximum extraction has been passed in most of the deposits currently being tapped.
It is quite possible that oil-producing countries have exaggerated the size of their reserves for political and financial reasons.
Although enormous quantities of oil exist in the form of bituminous sand, the cost and, above all, the energy necessary for extracting them will soon be prohibitive—not to mention the environmental costs.
Is this the end of oil?
No. Oil will continue to exist; perhaps there’s more left than all that has been consumed up to now. However, that which remains is getting ever more difficult to extract, and thus ever more expensive.
It’s the end of cheap oil.
The rising prices will lead us to concentrate our use of oil on the most valuable applications, such as transportation and chemistry. The aeronautics industry will be hit first, full force, along with every other activity which depends on a long logistical chain. There will be no more fish caught off the coast of Chile or Iceland, cleaned in Morocco, and consumed in Japan. No more South African raisins in the springtime, Kenyan green beans, California dates. The effects on personal transportation will be considerable, enough to put in question the whole urbanization model of the Western world. Many off-shored factories will be repatriated. Distribution chains dependent on road transportation will be entirely rethought.
Nothing will be as it was.
*
Max spends another afternoon baking in his car as he waits in the gas line.
He doesn’t understand why gas is so expensive. And not only expensive, but rationed. He’s limited to 20 gallons per week, but at $20 a gallon, he can’t afford that much anyway . . . There are no taxis or chauffeurs, no special exemptions for gasoline. And he has had his fill of lining up for two hours every week! Fortunately, a friend of his, Dylan, with whom he makes evening supermarket runs, and who has tuned up cars with him, has a good plan: at night they break into the gas tanks of cars in the road and siphon gas into a jerry can. The taste is disgusting, but it works. Every night they get 20 or 30 liters.
The End of All Resources
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albert einstein
scientist
/1953/
<
nicholas georgescu-roegen
economist
//1906-1994//
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zebdaa
_essence ordinaire
/1998/
There are two kinds of resources: renewable and nonrenewable. Resources are considered renewable when their stock is practically infinite (the sun, the wind, the tides, etc.), or if they renew themselves over time (assuming, of course, that they are not exploited beyond their capacity to renew themselves). Nonrenewable resources are those whose stocks are not renewed, at least on a human timescale—it takes millions of years to create coal or oil, for examples—or those whose quantities are finite (minerals, etc.).
In the previous chapter, we found that human civilization consumes all resources with an unprecedented rapacity that is constantly growing, which is what is leading us toward peak oil. Even as world commerce declined 30 percent in the aftermath of the 2008 crisis, oil consumption only went down 1.5 percent. Even though this was one of the biggest economic slowdowns ever recorded, it shows that demand for oil is the example par excellence of an inelastic demand. It is easy to eat somewhat less, go less often to restaurants or to the movies, postpone the purchase of a house or new clothes, but it is quite difficult to reduce the number of miles between our home and workplace, between school and the supermarket, etc. With our current way of life, it is impossible to do without cheap oil. And in the current state of knowledge, no possible comb
ination of renewable resources is capable of preserving that way of life for us. None of these forms of energy could sustain even a small fraction of the systems that provide for our present needs. Moreover, petroleum has a great number of uses that cannot be supplied by electricity, which is difficult to store anyway. Ninety-five percent of energy used in transportation comes from petroleum. It’s hard to imagine a billion vehicles (cars, trucks, freighters, planes) working on electricity.
In 2009, 30.8 billion barrels of oil were produced. Converted into energy, this corresponds to over 6,800 nuclear power stations (for comparison, about 440 of these are operating today), or seven million giant wind turbines, or 30,000 square kilometers of solar panels. And this is just for the year 2009! Imagine how it will be in the future, with the prospect of exponential population growth. Needless to say, realizing that number of nuclear power stations (not very fashionable since Chernobyl and Fukushima, either), wind turbines, solar panels is likely to take time and cost a lot . . . And there is no indication that enough uranium or rare-earth metals even exist to make them in any case.
On the table below, we see the growth in demand for energy expressed in its petroleum equivalent (in millions of barrels per day) between 2004 and 2030. The rate of growth remains very high everywhere in the world.
2004
2030
Rate of Growth
North America
55
69
25%
Latin America
13
24
85%
Europe
39
46
18%
Africa
12
19
58%
Survive- The Economic Collapse Page 4
