Peak Oil (1)

When you spend as much time as I do hanging around groups concerned with urban sustainability, you tend to get bombarded with the “Peak Oil” message. In fact, much of the effort of the Sustainable Transport Coalition of WA (STC) in the past 3 years has revolved around this concept.

Now, despite the endless talks and presentation and papers that I have read, I have still been very uncomfortable about the whole concept. I keep feeling that there are too many ‘leaps of logic’ taking place which results in me not being willing to accept the arguments put forward.

In order to try to sort this out I am going to put together a collection of posts that will, if all goes well, both summarise and clarify the arguments and lead to some sort of conclusion.

In this first post I will simply state the tenets of the Peak Oil arguments as I understand them to be. In the next post I plan to try to untangle the various statements regarding “supply” and “demand” and put them on a more accurate economic footing. Finally, I will review the arguments and try to reach a conclusion on points I agree or disagree with, and the areas where I feel that more information is needed.

...

Like many major theories that are developed in the public arena, discussions of Peak Oil are frequently either bogged down in minutiae, or jump into the middle of arguments without stating basic assumptions. Nevertheless, distilling the information that I have seen, I reach the conclusion that the Peak Oil arguments are based on 5 key points (assumptions and/or conclusions):

1. Geological Constraints
It is a geological fact that there is a fixed amount of oil in the ground, as the bio-physical processes required to generate oil take eons. No matter how much we wish, we cannot generate more than exists in nature.

2. Rising Demand
The overall demand for oil is rising rapidly in the world, not the least through the rapid industrialisation in China, rising wealth in countries such as India and the growth in the use of larger vehicles in the US (and Australia).

3. Reserves and Production
Central to the whole debate is the question of “reserves”. Wikipedia defines “oil reserves” as “portions of oil in place that are recoverable under economic constraints” and goes onto add “[o]il in the ground is not a reserve unless it is economically recoverable” (http://en.wikipedia.org/wiki/Oil_reserves).

It follows therefore that there is a point beyond which extraction of oil becomes economically and technologically unfeasible from any particular site.

The Peak Oil argument takes this one step further and concludes that overall there is a fixed quantity of oil available for extraction (1) and, given ever increasing demand for oil (2) at some point the total world production of oil will “peak.

A good deal of the argument regarding Peak Oil revolves around the question of how accurate are the various predictions of reserves (proven or otherwise) and exactly when this peak will occur.

This is illustrated in the following diagram (source: ASPO Australia website) which is typical of the charts produced by Peak Oil proponents.



4. Rapid drop in production following peak

Associated with the “peaking” argument is the conclusion that after the peak, the amount of oil being produced will drop rapidly, causing major rise in the price of oil

5. Vulnerability

Finally, there is the conclusion from (1) to (4) which is that our current society is so tightly bound to crude oil (for which there is no realistic substitute) that the rapid decrease in production following the peak will generate shortages, inflation and major social dislocation.

The whole argument can be summarised in this quote by Iranian oil researcher Samsam Bakhtiari (frequently quoted by the STC)

"Seen from a Middle Eastern perspective, the present global oil situation can be summarised within five major and inescapable trends:

• The world's super giant and giant oil fields are dying off;
• There are no more major frontier regions left to explore besides the earth's poles;
• Production of non-conventional crude oil has been initiated at great costs --- in Venezuela's Orinoco belt, Canada's Athabasca tar sands and ultra-deep waters;
• Even OPEC's oil production has its limits;
• No major primary energy rival can possibly take over from oil and gas in the medium term.

Adding up these five trends, one can envision a global oil crunch at the horizon --- most probably within the present decade....." "...It would take a number of miracles to thwart such a rational scenario. Now, a single miracle is always a possibility, but a series of simultaneous miracles is not --- for there are limits even to God Almighty's mercifulness".

(Samsam Bakhtiari, 2002)

http://www.aspo-australia.org.au/content/view/18/41/


Next time: Can demand exceed supply, and other economic arguements