peak oil
24 Jun 2008
Oils Ain't Spoils
In the furore over increasing oil prices, there are two words our political and corporate leaders seem determined not to mention: Peak Oil
Having built our prosperity on cheap energy from fossil fuels, particularly oil, it is perhaps understandable that they cannot bring themselves to admit that business-as-usual is over as cheap energy disappears - firstly due to the need to address global warming, and secondly due to the peaking of global oil supply which will probably have even greater impact than global warming in the short term.Peak Oil takes its name from the bell-shaped curve which typifies the production profile of any oilfield. Once an oilfield is discovered, oilwells are drilled and production rises until drilling saturation is reached, whereupon production levels-off at the peak. Production then drops, along the declining segment of the bell-shape, until the reservoir is exhausted. This production profile applies to an individual oilfield, to all oilfields in a region and now to the globe, although it may get distorted, for example, by geopolitics.
At the peak, oil does not run out, as roughly half of the ultimately available oil remains to be produced. However, it is the point, globally, at which further expansion of oil production becomes impossible because production from new oilfields is more than offset by the decline of production from existing oilfields. It may be a sharp peak if, for example, some of the giant fields start to decline rapidly, or it may be an undulating plateau spread over a number of years if, for example, oil demand is destroyed as a result of recession, or developing countries are no longer able to afford high oil prices.
Once demand begins to exceed supply, oil prices rise, as they have been doing over the last few years - the bigger the gap, the higher the price.
The official view, until recently, was that we had abundant oil resources available from both conventional and unconventional sources, which would meet rapidly expanding global demand as China and subsequently India became large consumers. The economists took comfort as the oil price rose, on the grounds that higher prices would stimulate additional production so that supply eventually balanced demand.
However, it is one thing to have oil resources in the ground; it is quite another to convert those resources into oil flows to the market. It now seems that there are unexpected problems in converting resources to oil flows, to the extent that we probably are approaching the peak of global supply. We may have already passed the peak, or it may be some years ahead, but the exact date is less important than accepting the principle and taking action to prepare for it.
The reasons supply is not expanding are: first, we are not discovering new oilfields quickly enough; second, data on existing fields is suspect, particularly in the Middle East, so we may not have as much oil as we thought; third, production from many existing oilfields is declining as part of the natural process often more quickly than admitted officially; fourth, unconventional oil resources, such as deep water and tar sands, are proving more difficult to develop, technically and economically, even with higher oil prices - they also have major environmental problems such as high carbon emissions and high demand for water and energy, to the point where almost as much energy is needed to produce the oil as is ultimately recovered; fifth, oil producing countries are using more oil domestically and are less prepared to export it.
Passing the peak raises the question of who gets the available oil? At the moment it is determined by who can pay the higher prices, but that is not sustainable - it is already causing major societal unrest around the world, let alone in Australia, as witnessed by current protests in Europe. Some form of allocation system will become necessary, as occurred in the first oil shock in the 1970s.
Given the absolute dependence of modern societies on oil and gas, supply shortages will be traumatic. Australia is particularly vulnerable but the issue was completely ignored by the Howard government and even now is barely acknowledged politically.
There are solutions, but they take time to implement, typically at least a decade, and we should have been planning for this years ago. We did not do so and we are now facing the consequences.
Some obvious solutions - for example increased coal consumption, or coal conversion to liquids as Resources Minister Martin Ferguson recently proposed - are carbon emission-intensive and, in the absence of carbon capture and storage, which is still unproven for large scale application, would be extremely detrimental. The two issues are inextricably linked and need to be treated with consistent and holistic policy.
The oil peak will fundamentally alter society as we know it. There is no "silver bullet", rather we have much "silver buckshot" to address the problem. For example, energy efficiency and conservation, renewable energy, shift from private to public transport, urban re-design, pricing/taxation reform, high-speed broadband, alternative but more expensive fuel sources and low-emission technology
Oil prices may well drop temporarily if we do move into recession or if increased oil discoveries do result from the exploration triggered by current higher prices, but the general price trend is probably upwards. It is misleading to pretend otherwise. We should be preparing for that eventuality now, not playing King Canute in futile attempts to turn back the global tide with a 5 cent fuel excise or GST adjustments.
Peak Oil is arguably the biggest issue Australia will have to contend with in the next decade. Strange it did not rate a mention at the 2020 Summit.
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Bob Karmen - where are you now?
If the prime Minister is worried about oil prices now what price if his friend
Prime Minister Olmert bombs Iran’s nuclear facility?
For a diplomat some of his decisions are so one sided they are hard to follow
douglas jones
Are we so uninterested or so disdainful of politicians that we cannot bring ourselves to castigate stupid short term political ploys?
Given as the article says that we have had forewarning, even as long ago as 1956, though Hubbert’s forecast was not accepted until around the early seventies, one might have expected action.
Though the demise of the commission for the future indicated a lazy belief in the market controlling future directions.
We had a prophecy that Australia would become a net importer of fuel sometime in the early two thousands.
We had the Rocky Mountain Institute developing the Hypercar from the late eighties and early nineties, now designed with carbon fibre body and called something else. Toyota took this on board the American companies ignored the idea. Our surrogates did likewise.
In America the energy efficiency gains post 1974 in part by legislation for better performing cars, SUV ‘s excepted, was lost once the oil supply, due political, manipulation increased.
Australia did little the Howard Government believing in the market did nothing. SUV’s and gas guzzling vehicles increased as did urban sprawl
Now because a political opportunity to garner some undeserved support for a sulking opposition, is on offer, they cry about petrol prices and about the possible effect of carbon tax.
Such has nothing to do with the issue facing us.
Yet Nelson gains support and because Rudd indicated he would do something to ease the cost of petrol, he lost some support.
Surveys indicate some 63 % believe oil is limited yet few castigate the fake hysteria, fake for addressed the wrong subject of highly paid idiots seeking political advantage.
What would the coalition do take the excise off increase petrol from coal or turn their attention to another piece of scuttlebutt the restaurant affair?
Is Australia always to be at the mercy of politicians who place gaining power over any other issue, or do we lambast such behaviour?
I remember the "energy crisis" in the late seventies.
We got rid of petrol guzzling V8’s and station wagons.
We exchanged for smaller Jap cars and motorcycles, only to find that Fraser Hawke and Keating removed the protection on local manufacturers and the big tanks were back on the road, menacing, again, although diesel suddenly was’nt as cheap any more.
Now we have a resources boom, and an oil crisis again, and ( the cost of oil has doubled in the past 12 months, and continues to rise.
What were petro dollars again?
Who the hell is Bob Karmen?
What an unholy juxtaposition, Kevin Rudd and Ehud Olmert!?
Now what would be wrong if Iran were neutralized and a new order of that evil cartel OPEC were established?
Exxon Valdiez got fined the equivalent of 12 minutes of its annual revenue, and supposedly this will recompense the fishing villages and wildlife destroyed along the Canadian coastline.
"And the people bowed and preyed to the neon god they made…and it flashed out its warn-ing in the words that it was form-ing…and the
sign said the words of the profits"… are drowned out by the spin docs and their cronies, and noone hears the two words "Peak oil" at their peril.
Apologies to Simon and Garfunkel.
I’m right here, Ben old buddy! Its nice to be in demand.
Ian Dunlop’s article only vindicates my earlier comments.
I suggested that speculators were driving the price up because coal liquefaction capacity had not been deployed en masse. The part of Ian’s article that isn’t subject to imaginative flights of counter-factual fancy confirms this.
Readers must bare in mind that in thermodynamically constrained world all talk of carbon emissions is a mere indulgence. Energy consumption has a direct correlation to political freedom (or liberalism, if you will) and therefore stability. All the eco-fascist chanting about inaction on the environment - about ‘fiddling whilst Rome burns’ - is really masking the most insipid Greek mentality. Almost ironic. Almost…
As for the specualtion about ‘how the world will or should change as a result of peak oil’ i have only this to say: crystal ball gazing is not a new or particularly novel practice.
There is one very important point (dare I say, truth) made in this article that people should dwell on though (instead of immediately repressing as a taboo to be avoided at all costs):
"Given the absolute dependence of modern societies on oil and gas, supply shortages will be traumatic."
I wonder for whom the bell of trauma is tolled? Surely not for those that can afford carbon rights.
douglas jones
If one does one’s homework one would fimd that yes the futures market is helping to lift prices. Why becasuse the market sees oil prices going up. Why because it is believed and Hubberts forecast seems to be born out, wells decline, new exploration yields more and more dry holes.
I must say crystal ball gazing for an intellectual piece of work is derogatroy at best. But then we live in an age in which wishfull thinking is more common, usually masked as truth.
What the hell is meant by thermodynamically constrained world? Talk of carbon emission is – Well the best scientific minds have put together data allowing the formulation of models which indicate the actions of humans is and has increased the amounty of carbon-e in the atmosphere. It might be wrong, science is after all based on falsification as the test of theory. So far even the funders of the unqualified or those seeking money or fame have withdrawn their support. Maybe finding that it does little good so they will try a new tack to ensure their profits.
But at this time science says we have a limited time in which to respond. We iether accept or refute. Can you?
It will be interesting. Lovins has shown the energy effciencuy is commercially attractive to householder and business and that much can be done to add to this effect at little cost.
Yes the history is that carbon taxes credits have been handled badly particularly in Europe giving windfall profit to those dishonest enough to accept them.Such dishonesty is good business as the sole aim is profit which like repentence absolves all.
Yes when oil runs out unless the world has found other means we are in trouble. Suggestions have been made and new technology tested but the market place and the public have not accepted them. Prefering to sit and wait for the solution without cost (in the present as we have done before) from apparently despised science. In the past problems have in part been solved or at least the effect delayed by scientific activity. Now?
In part the solution lies in our hands via energy effciency which was tried in America and elswhere after 1974. Yes it worked enough? no.But a start,. If time is not on our side then the sooner we the people wanting their freedom, G W Bush style I take it,had better start doing something other than listening to cheap jack policians. Yes it is going to hurt but if we have the freedom you say dependent on our indulgent way of living then presumably we cam ensure the apin is spread evenly. Probaly not the developing world will of course be made to bear the burden whilke we superior people arrange it so.
Yes the unworthy are going to profit as some have from the subprime mortagage crisis, being prosecuted in America nothing happens here.After all the Biard committee found few Australian Banks newl made or established were involved. The picture eleswhere is different.
So I guess head in the sand and no rocking the boat.
Thanks Douglas,
The question is not WHETHER to accept or refute of the reality of anthropogenic global warming. The questions is on what terms we accept the AGW thesis.
Is it a problem that is adequately conceived of through the concept of carbon emissions ? I dare say no. The globe has been emitting and sequestering carbon for quite some time. Emissions trading is a silver bullet; a silver bullet for the elites; a silver bullet dressed up as buckshot.
AGW is more adequately perceived a problem of energy production. But what is the nature of energy production? Which, if any, physical laws govern its material expression (and therefore should be taken into account when "redesigning society")? What influence does energy production have on culture (and therefore how exactly will those who must suffer from change, in fact end up suffering)?
These are the tough questions that the "peak-oil causes carbon trading" mob just don’t seem to want to talk about.
Yes, heads are definitely in the sand and nobody wants to rock the boat.