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Peak oil: the world’s dirty secret bubbles up from the ground
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If the rampaging crude oil price is any guide (crude futures rose again to US$109.09 per barrel last night), the world’s dirty little secret might finally be starting to come true. The looming spectre of peak oil is fast becoming a reality, courtesy of the perfect storm of declining discovery and a booming China. Even the most bullish of oil commentators will concede that peak oil (which is the point in time where the world begins to consume more oil that it is able to produce) is inevitable – the only real debate is when that will happen. One of the most well-known ‘peak oil’ proponents is energy sector investment banker, Matthew Simmons. Simmons claimed recently that major oil firms are “actually in liquidation” with the vast reserves claimed largely consisting of expensive, unconventional sources such as Canadian oil sands. It should be noted that while many discredit the notion of peak oil being a reality, Simmons is no crackpot - he served as George W Bush’s energy adviser.
The US encountered peak oil in 1972. Today, the US produces less than two-thirds the daily volume it produced at its peak. According to the 2006 documentary, Crude Impact, world oil usage is currently around 82 million barrels per day. However, production capacity is only marginally higher, at around 84 million barrels per day. The problem is many fields are past their production peaks – meaning that oil production is actually declining as consumption increases (especially in countries like China and India). Of the top thirty oil producing countries, fifteen have reached peak oil (including Iran, Kuwait and Russia). Peak oil advocate, Richard Heinberg, author of Powerdown: Options and Actions for a Post-Carbon World, claimed that global oil production capacity needs to increase by 30 million barrels per day by 2010 just to offset depletion – that is before demand increases are even taken into account. The other problem with peak oil is, like with a recession, we won’t know that it has occurred until after it has happened. By that stage, US$100 a barrel oil will seem like a fairytale. While high oil prices will reap havoc in the global economy and will inevitably change the way most of West lives, peak oil also raises one of mankind’s most important opportunities. That is, the opportunity to devote real resources to creating renewable energy forms which are commercial in their own right, without the need for generous government subsidies. At this stage, the alternative energy source which is in the best position to be commercialised on a large scale appears to be solar power. While much maligned for its cost, solar power is slowly becoming a genuine alternative to fossil fuels. According to Fortune, Solar power currently costs around 30 cents per kilowatt hour, more than triple the cost of fossil fuel energy. However, technological improvements mean that by 2020, the cost of solar power will be significantly less than grid-supplied electricity. The sharemarket certainly believes in the solar story. As Fortune noted, “the market value of the world’s publicly traded solar companies stood at about $1 billion in 2004. Now, after a slew of IPOs, they are worth about $71 billion.” What effect will peak oil have on us? While no-one can know for sure, Reserve Bank board member and former Woolworths CEO, Roger Corbett has a few ideas. Corbett claimed last week that energy prices may go up by a factor of ten. Unless a viable alternative to oil is made commercial soon, probably time to rethink buying that Hummer. |
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7 Comments
I would have thought that serving as “George W Bush’s energy adviser” was the actual definition of crackpot…
I’m surprised that the fairly intelligent and subversive Crikey.com.au has taken this long to finally seriously engage with Peak Oil. More please.
http://act-peakoil.org
Related to Peak Oil and the need to migrate our transport to Electriv Vehicles (EV’s), is the need to buy 100% clean electric energy from our electricity suppliers to re-charge the batteries.
However grid elctricity is also going to become much more expensive as we clean up the coal burning emissions.
Fotunately decentralized Concentrated Solar Systems (see: http://peswiki.com/index.php/Directory:Concentrated_Solar_Power ) should start to become available in the same 2-3 year EV timeframe for installation at homes and businesses. Their cost is expected to be amortised at around the same cost as as today’s grid prices and will allow us to become 100% Carbon Neutral for home, business and transport.
We just need our govt to provide a few tax incentives and fair feed-in tariffs as Hilary Clinton suggested yesterday that the US govt needed to legislate.
To watch the experts discuss Peak Oil, its definition and consequences, just copy & paste the links below in your browser and choose ‘open’ (to listen/watch) or ‘save’ to your hard drive.
Video: Extra Interviews from ‘A Crude Awakening’ documentary:
Colin Campbell – Consultant to Exxon, Mobil, Shell, Total, etc
http://plug-inaustralia.org/shared_files/Peak_Oil_Colin%20Canmpbell.avi
David Goodstein - Author on Peak Oil and Vice Provost & Prof of Physics at California Inst of Technology
http://plug-inaustralia.org/shared_files/Peak_Oil_David_Goodstein.avi
Mathew Simmons – Energy Investment Banker & advisor to Bush
http://plug-inaustralia.org/shared_files/Peak_Oil_Mathew_Simmons.avi
There’s more on the website…../Chris
My understanding of the definition of peak oil is when we hit the half-way point of reserves, not of production nor when consumption outstrips production. When I first started reading about this four years ago, credible commentators argued we had already reached that point. We can continue to increase consumption and production for many years, but if we’re foolish enough to do so, the fall will be all the harder. We’ve used 50% or so of oil in the last 50 years at increasing rates, rates that show no abatement - the last 50% will be increasingly difficult to extract and at the end we may have very little to show for it. Nuclear power is fool’s gold (and immoral) and renewable energy far more limited than fossil fues. Let’s face it kids, we better start changing our ways very quickly or things will be very unpleasant. We could use these next decades sensibly and co-operatively to create a sustainable world or we can keep partying hard and wake up with a terrible hangover.
Good summary of the Peak Oil situation. If you didn’t have to be so cautious, you could probably have added that people like Mathew Simmons, Colin Campbell and other experts in recent documentaries such as ‘A Crude Awakening’ are now starting to sugggest that global Peak Oil production is probably starting to peak around now.
Also worth pointing out that Peak Oil is converging with Climate Change to intensify the crisis and the urgency of the need to stop burning oil in our transport asap, which currently accounts for around 30% of emissions.
Bearing in mind that it will take around 3-4 years minimum for govt and the auto industry to gear up for conversion to the Electric Vehicles (EV’s) currently being developed by virtually all of the global auto manufacturers, we need to start preparing now.
Consumers also need to start planning financially to migrate from internal combustion engines (ICE’s) starting around 2010/2011,
Peak Oil is *not* when demand exceeds supply, but when global oil production reaches its peak point. There is a substantial difference between the two.
http://en.wikipedia.org/wiki/Peak_oil