Will Peak Oil Squeeze World’s Energy Spigot?

Published in The Washington Diplomat, January 2011 issue


 

 

Chances are that much of what you taste, wear or touch every day has been, at least in part, made possible by oil. This ubiquitous, viscous natural substance, the result of millions of years of geologic activity, doesn’t just fuel most of our cars — it’s also the key driver of industrialized societies. Some experts have even dubbed oil the basis of modern life. But now, many experts are also asking: What if we had to imagine life without it?

 

The total absence of oil is simply not on the horizon. But a growing body of analysts has begun to warn that a looming scarcity is precisely what human populations will face — and in the not-too-distant future. The phenomenon known as “peak oil” means that global oil production has reached, or soon will reach, its greatest level of production, followed by an irreversible decline. The resulting “oil crash” will have far-reaching global effects, in politics, trade, agriculture, international relations, and even health and culture.

 

No country, regardless of its level of economic development, would be spared; in fact, the developed countries, because of their extreme dependence on oil (the United States, with 4 percent of the world’s population, consumes 25 percent of world oil production) may be among the nations most impacted. Americans in particular, long accustomed to low taxes on their gasoline compared to their European counterparts, would be in for a shock with the demise of oil as a cheap, plentiful fossil fuel. Like the two other fossil fuels, coal and natural gas, oil is not renewable.

 

Peak oil proponents argue that as production from mature oil fields diminishes, less oil will be available worldwide. Geological mapping indicates that remaining oil and natural gas deposits are less amenable to exploration and extraction, contain yields of lesser quality, and require increasing amounts of energy to access. The massive 2010 BP oil spill in the Gulf of Mexico also exposed the dangers and limits of offshore drilling in deep water. At the same time, emerging countries such as China and India gobble up more oil to fuel their superheated economies, driving up the costs of oil on the world market.

 

The implications of such a critical global resource dwindling in the near future were highlighted recently when 300 oil analysts, security specialists, geologists and scientists and experts in other fields convened at the Association for the Study of Peak Oil and Gas (ASPO) conference in Washington.

 

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ASPO International, headquartered in Sweden, was formed five years ago as a nonprofit, nonpartisan organization. With branches in 22 countries, it mission is to encourage “prudent energy management, constructive community transformation, and cooperative initiatives in an era of depleting petroleum resources,” and to provide objective and accurate information using fact-based qualitative analysis. The conference presenters included not only scientists and researchers, but some star-power attractions such as veteran activist Ralph Nader and Bianca Jagger.

 

The implications of peak oil are sobering. Oil as an energy source has reigned supreme for decades, and for good reason. “Nothing really matches oil for power, versatility, transportability,” according to James Howard Kunstler, author of “The Long Emergency: Surviving the Converging Catastrophes of the Twenty-First Century.” “It stores a tremendous amount of energy per weight and volume. It is easy to transport. It stores easily at regular air temperature in unpressurized metal tanks, and it can sit there indefinitely without degrading. You can pump it through a pipe, you can send it all over the world in ships, you can haul it around in trains, car and trucks…. It can be refined by straightforward distillation into many grades of fuel and into innumerable useful products — plastics, paints, pharmaceuticals, fabrics, lubricants.”

 

Former Secretary of Defense James Schlesinger testified before the U.S. Senate as early as 2005 that peak oil was a looming threat. At the ASPO conference, he noted that the peak oil “debate” is over. “We must expect to get along without the leading energy resource we’ve relied on for the last half century,” he said. “The world ignores the possibility of peak oil at its peril.”

 

Earth Running on Empty or Gusher of Hyperbole?

 

So when will the world start running on empty? That’s the million-dollar question. The fact is that no one knows for sure — the Earth’s geology isn’t a predictable open book, and no one can accurately gauge how the discovery of new oil reserves or technological advances, the adoption of alternative sources of energy, government policies or consumer demand will alter the peak oil picture in the future.

 

Precise figures on oil production and reserves are also notoriously difficult to obtain, as some oil-producing countries consider such information secret or may overestimate supplies for political reasons. A 2008 estimate put the world’s oil reserves at 1.3 trillion barrels, with consumption standing at 85 million barrels a day. But some researchers dispute that figure, such as Cambridge Energy Research Associates, which put the number of oil reserves far higher — 3.7 trillion barrels when you take into account conventional and unconventional petroleum supplies.

 

Oil analysts from governments, academia and the private sector have used extensive modeling methods to pinpoint where and when oil discoveries and exploration might diminish. These forecasters have largely settled on a range between 2010 to 2040 when the effects of oil decline would begin to be felt acutely.

 

From there however, studies and predictions vary wildly, and therein lies the problem with the notion of peak oil — not everyone is convinced it exists.

 

In fact, the first whispers that the oil bonanza might be die out actually came in 1949, when American geologist M. King Hubbert claimed that, by using mathematical modeling, he could demonstrate the pending limits of the world oil supply. The so-called “Hubbert curve” was a bell-shaped graphic illustrating the apex of production, followed by a gradual, but steep, slope. Hubbert forecast the peak for American production would occur in 1970, with world oil production peaking in 2000 — predictions that became a lightning rod for controversy and debate to this day.

 

But other studies have confirmed many of Hubbert’s conclusions, notably those researched or commissioned by the U.S. government. The Department of Defense for instance has been actively studying the national security implications of peak oil.

 

Still, not surprisingly, the peak oil scenario has generated considerable resistance in some quarters. Skeptics include scientists who challenge the accuracy of the data and methods. Leading oil companies and industry allies support the idea that there are substantially more oil reserves than described or that future technological advances will assure a steady stream of fossil fuels, which will power the world for decades to come.

 

Some analysts concede the diminution of oil supplies is a possibility, but argue that abundant sources of liquid natural gas will make up for any future shortfalls  — bemoaning the cottage industry of peak oil experts that has cropped up in response to the dire predictions.

 

“Just as it seemed that the world was running on fumes, giant oil fields were discovered off the coasts of Brazil and Africa, and Canadian oil sands projects expanded so fast, they now provide North America with more oil than Saudi Arabia,” wrote Clifford Krauss in the article “There Will Be Fuel,” which appeared in the New York Times.

 

“The same high prices that inspired dire fear in the first place helped to resolve them. High oil and gas prices produced a wave of investment and drilling, and technological innovation has unlocked oceans of new resources.

Oil and gas from ocean bottoms, the Arctic and shale rock fields are quickly replacing tired fields in places like Mexico, Alaska and the North Sea,” he argues. “Energy experts now predict decades of residential and commercial power at reasonable prices. Simply put, the world of energy has once again been turned upside down.”

 

Krauss cited figures from the Paris-based International Energy Agency (IEA) to bolster his case, although the same statistics are used by environmentalists — an example of how research can cut both ways, depending on interpretation.

 

Indeed, the IEA, which provides energy analysis to 28 industrialized nations, offers a mixed picture. According to the agency’s latest annual outlook, the total global energy demand will increase by 36 percent between 2008 and 2035, assuming the broad policy commitments already announced by governments were exercised. All of that net growth comes from emerging powers, almost half from China alone, mainly driven by rising use of transport fuels.

 

Meanwhile, the IEA says production of conventional crude oil most likely already peaked in 2006, at about 70 million barrels a day. The report also suggested that production from current oil fields will drop sharply in coming decades.

 

However, at the same time, the agency projects that after a short dip in production, crude production will reach an “undulating plateau” of roughly 68 million barrels a day between 2020 and 2035. Moreover, a major boost in natural gas and unconventional oil could make up for crude’s shortfall to potentially quench the rising global thirst for energy, although that’s not guaranteed.

 

Overall, the IEA estimates that global oil production will reach 96 million barrels a day in 2035 largely on the back of rising output of natural gas liquids and unconventional oil, as crude oil flattens out. Meanwhile, oil demand is projected to grow to 99 million barrels a day in 2035, up from 84 million barrels a day in 2009, according to the IEA. That in turn would require liquid energy supplies to not just hold steady, but to climb by more than 20 percent. It also means a heavy reliance on unconventional oil sources like Canada’s tar sands.

 

Krauss and others say liquid fuels, nuclear power, renewable forms of energy and oil production from both conventional and unconventional sources will be more than enough to satisfy this growing demand. Others say all good things must come to an end. They point out that most of the mature giant oil fields established in the 1950s and 1960s are clearly in decline already. Even accounting for new discoveries, the lag time between discovery and production can be a decade or more. Meanwhile, the exhaustion of land-based oil operations, as well as community opposition and challenges by environmental groups, has spurred offshore and deep-water drilling. But the Deepwater Horizon oil disaster along the U.S. Gulf Coast underscores the ecological cost-benefit tradeoffs that continued levels of oil consumption demand.

 

To that end, peak oil proponents argue the world simply has a finite supply of economically recoverable oil. That includes unconventional oil resources, which, although abundant, are also incredibly costly — both economically and environmentally.

 

For its part, the IEA admits it doesn’t have a definitive answer. “Will peak oil be a guest or the spectre at the feast?” the report’s authors ask, concluding that, “The size of ultimately recoverable resources of both conventional and unconventional oil is a major source of uncertainty for the long-term outlook for world oil production.”

 

On-the-Ground Realities of Limits Below Ground

 

Putting exact predictions of peak oil aside, the concept of dwindling resources in an increasingly globalized world is a reality everyone on the planet will eventually have to come to grips with — and oil is sure to test the benefits and limits of globalization.

 

“Depletion is not just a geological concept,” said Jeff Rubin, former chief economist at CIBC World Markets. “It’s fundamentally an economic concept. It doesn’t matter how many barrels of oil there may be in the ground; what matters is, how do we adapt and grow in an economy of triple-digit oil prices? In a world of triple-digit oil prices, distance costs money. The global economy where we produce one thing at one end of the world to be sold at another end doesn’t make sense. That is not determined by government or ideological preference or our willingness to reduce our carbon trail. Oil prices will change cost curves and economic geography at the same time.”

 

Two crucial areas will register immediate effects with a decline in oil: feeding people and moving people and goods. As the IEA noted, much of the increase in global oil demand will be driven by the rising use of transport fuels.

 

To that end, ASPO speaker Anthony Perl, director of urban studies at Simon Fraser University and author of “Transport Revolutions: Moving People and Freight Without Oil,” called for a major redesign of our transportation system.

 

“We are at a fork in the road, and if we are to survive this decade’s coming challenge, we’re going to have to fast-track a transportation system that can perform without oil. Electricity is the only energy carrier that can blend enough renewable sources to replace the oil that is used in transportation. We have to find ways to mix energy sources from renewables and incrementally decommission the nonrenewable sources.

 

“I cannot see a way for us to get through the transition smoothly unless we have significant ability to move people and freight without oil,” he continued. “There’s lots of technology that’s innovative and promising, but we have now reached that point where we need to use energy sources for our transportation that are currently ready for prime time. That means they can deliver large-scale mobility for a major share of our needs. So a transport revolution is a change of more than 50 percent in transport activity, that happens in less than 25 years, and that affects more than 10 percent of the society’s population.”

 

Perl explained that transportation uses as much as 58 percent of the world’s energy, according to the IEA, and that liquid fuel sources power 95 percent of global mobility.

 

A transport redesign would kick three modes into high gear: electric motors that replace the internal combustion engine; increased rail and water transport through technical innovations; and collectively managed travel — that, is using transportation management systems to improve mobility capacity and efficiency.

 

“Rail is the proven mature technology that everyone seems to ignore in the near term. So we have a clear template for success,” Perl noted. “Even given the world’s energy challenges with petroleum futures, we will be able to move things between continents and into places that have water access, which really is how trade historically

originated.”

 

The challenge of food production is another story — aggravated by the threat of climate change. World grain production and grain-load per person is declining, due in part to glacial melt and mountain runoff. More recent events, such as the heat wave and drought in Russia that caused a worldwide surge in wheat prices, illustrated the widespread impact of climate-related effects on food security. And some countries facing this insecurity are becoming “agri-colonists,” using their wealth to buy up farmland all over the world, mostly in poorer regions.

 

With the world’s population expected to reach 9 billion by 2050 — and the majority of people living in developing nations — one of mankind’s greatest tasks will be figuring out how to feed all those people.

 

Key to that conundrum is the role of transportation, without which modern-day food networks wouldn’t exist. Sharon Astyk, a farmer and author of “Depletion and Abundance,” described the complex nexus of food, global trade and the climate crisis at the ASPO conference.

 

“During 2008, food producers restricted exports, not because of scarcity, but because of price — a 40 percent rise due to ethanol production. Cars always eat first. Cars have become a new population we have to feed,” she pointed out.

 

“There was a time in the U.S. when 25 percent to 30 percent of the population was involved in agriculture, and in the last century we had the biggest shift from agriculture to the cities and suburbs that we’ve ever had in our history,” Astyk explained. “And a lot of that was fueled by fossil fuels — we replaced the people with energy. We use 10 calories of oil for every calorie of food we eat. If the cost of the energy is going to rise and the available energy is going to constrain our choices, it means that people are going to have to go back to growing food. Most people aren’t going to move to a farm, but most people can start participating the food system, cutting their energy usage, working with what they have, where they are and with the people who are already in their lives.”

 

Creating a New Paradigm

 

Regardless of the exact month or year in which peak oil is reached and decline begins, its possibility displaces time-honored verities on which international policy has been built, especially in the economic realm. Previous oil shocks provide little guidance for the future, as most peak oil experts warn that the situation will not be temporary, but rather a long-term one requiring urgent mitigation measures.

 

“Mitigation is going to be the highest priority, in my opinion,” said Robert L. Hirsch, author of “The Impending World Energy Mess” as well as “Peaking of World Oil Production: Impacts, Mitigation, & Risk Management,” one of the most influential peak oil studies to date.

 

“That doesn’t mean we have to rape the planet but we have to put first things first. And getting economies back to a steady state and hopefully growing will be the first priority. When oil shortage occur and get worse, it’s going to trump all other priorities,” Hirsch said.

 

The mitigation measures he proposes include a worldwide crash program that phases in substitute fuels and technological improvements in facilities and infrastructure. In severe cases, oil and transportation rationing could take place, meaning a larger role for central government.

 

A world with less oil means that many low-tech or traditional practices will be rediscovered and adapted, Hirsch contends, while alternative, cleaner sources of energy come online. Conservation will be key, along with an emphasis on more local production scaled to community needs and economies.

 

Still, diminishing resources need not spell the end of the world — to the contrary, it could mean greater opportunities for international collaboration and creativity. For instance, a new report from the Council on Foreign Relations offers recommendations for a low-carbon alternative energy strategy, using different domestic motivations in the United States, China, India and Brazil to push a comprehensive climate change policy. The authors explain how the United States can combine efforts with the major emerging economies to grow and open markets for low-carbon technologies, allowing the U.S. to take advantage of each country's goal to be both a consumer and producer of clean energy, while safeguarding its own broader economic interests.

 

Creativity, collaboration and conservation can certainly mitigate whatever Mother Nature has in store for mankind in the future. But at some point, sacrifice will also be inevitable as nature imposes constraints on a globalized world. People and governments will have to make hard decisions and alter their behavior — on a personal, local and international level — as they adjust to a new, uncertain future. But here too, there’s room for optimism.

 

“I have great faith in us,” said Hirsch. “We’ve gotten through all kinds of difficult situations in the history of humankind. Human beings are very resilient and I think we’ll get through this and as a result of being hit very hard, we’re going to end up stronger.”