There’s an old saying with regards to falls from great heights that it’s not the fall that kills you, but the sudden stop at the end. Well for roughly the past 65 years we’ve been falling without realizing it and we’re about to reach the sudden stop at the end. What I’m referring to is the era of cheap oil, which is about to come to an abrupt end. Notice I did not say the end of oil, but the end of cheap oil.
Originally there were an estimated two trillion barrels of oil in the ground. Of this we’ve used roughly half. No problem you say we’ve still got at least 50 years before we have to start worrying. Wrong. What we’ve used is the easy to get at and cheap to produce oil. Think Saudi Arabia, Texas and southern Alberta. It costs roughly $10 a barrel or less to refine. Compare this to off shore drilling, the tar sands and the oil shale, which cost roughly $70-$80 a barrel or more to refine.
Peak oil also means peak production. Production is believed to have peaked about 2008 and has now plateaued. Currently we use between 80 and 83 million barrels of oil per day. That is about where production is at. It is expected to start declining as early as next year. (see The Guardian ) And we will never use all the remaining oil because it will be too costly to extract in terms of both money and energy. As one person so aptly put it, the human body is made up of roughly 70% water, but all we need to do is to lose 15% of that and we die.
Here’s a short video on Peak Oil - How Will You Ride The Slide? The comment above comes from the comments to this video.
There are some who say that new extraction technologies allow us to get more oil from existing wells. That is certainly possible as an article in the May, 2013 issue of The Atlantic shows the Kern River field in California was estimated to have just 47 million barrels of recoverable oil left in 1949 after 50 years of extraction. By 1989 945 million barrels were removed and an estimated 647 million barrels remained. By 2009 1.3 billion additional barrels of oil had been extracted and an estimated 600 million barrels remained. The field will inevitably run dry, but the question is when.
Others point to oil shale and claim that could save the day. Well the Bakken field in North Dakota deplete fast and estimates I’ve seen say this field could peak between 2017 and 2020. Unlike conventional or offshore fields shale oil fields do not plateau, but immediately start dropping once they reach their peak of production. So they could at best give us roughly an additional 5 or 6 years before the consequences of peak oil truly set in.
There is also the possibility that methane hydrate (crystalline natural gas) could take us off oil and coal and thus save our economies. However, there are major problems with this. It is found in low concentrations on the continental slopes. Since it is in a form similar to dry ice that means it has to be mined rather than drilled. Then there’s the problem of transporting it to shore. Finally it’s very costly.
The Japanese have been working at this for the past twenty years and estimate that it will take at least another ten years to finally bring this to production. So assuming they are right that would still leave a gap of as much as ten years between when oil production starts to decline and when methane hydrate starts to take over.
Again I refer you to the article in The Atlantic on this issue.
One thing that will definitely delay the consequences of the permanent decline in oil production is a new great depression. As I’ve discussed in previous blogs (see The New Great Depression) we’re facing a debt bubble, which is about to implode and will begin to happen this year. It will trigger a world-wide depression that will, unfortunately, be worse than the 1930s depression. If the depression suppresses oil demand deep enough and long enough it could delay the fall in production by perhaps as much as twenty years.
Let’s say that the depression reduces world demand from the current 83 million barrels a day of oil to 63 million barrels over 15 years. In 15 years time as global economies recover and oil demand starts to rise again we could find that we now have a permanent maximum production of say 70 million barrels of oil a day and declining. If we haven’t begun to take serious steps to wean ourselves off oil we will once again be facing very serious trouble.
What to do about peak oil, how to cope and the post peak world may look like is the subject of my next blog post in about a month’s time.
Copyright 2014 Peter D. A. Warwick