Peak Oil is the new “global warming”

2008/07/21 § 3 Comments

While the world is still talking about global warming I have found myself another threat to human kind as a personal pet theory. It is called peak oil. And what it means is simply, that we have reached a point in our consumption and production of oil, from which on demand will be larger than what can possibly be produced.

I know, some of us are against any such theory, simply because they assume some eco-nut-cases behind such claims. Or some suspect another conspiracy theory of either right-wing ideologists or left wing proponents or whoever. Admittedly, there is enough of that stuff out there. But I actually tend to look into all these things. I find it intriguing for the simple reason that, if something is true about it, it is worth being listened to. And if it is untrue it is still interesting to see what crap people come up with when they have too much time at their hands.

And most importantly, from personal experience I know how the tides can turn on a topic. Do you remember the times when most people did not believe in global warming? Have you already forgotten the people that assumed eco-nuts behind the claim that climate is changing?

I remember all to well (and besides, even as recently as 2 years ago the majority of US americans seemed to be oblivious to the topic at best) how I was telling people in early 90s about it. I will never forget how they were in disbelieve simply because they had not heard about global warming. “If something so big was about to happen, we would hear about it”, they argued. Well, that is history and I got bored with the topic. So let me let you in on the newest “hype” of disaster research- peak oil. 😉

Even a child must understand that a limited resource is going to run out eventually. And oil is not like resources such as gold or copper or wood. Metalls we can recycle and wood can be regrown. Oil on the other hand is gone, once you burn it (unless you turn it into products like plastic. However, turning plastic into oil is a energy demanding and costly undertaking). 

While some think oil derives from the center of the planet, or it is constantly produced by bacteria, so that we would have nothing to worry about, this is not just unlikely, it is like saying the moon is filled with cheese. Possible, but extremely unlikely and against all we can scientifically say…

So let’s say it is a limited ressource, then the question is: how limited is it?

That is where the trouble starts, because we know that we have 800 billion barrels left rather certainly. The rest are estimates.

But the cool thing is, we need not know how much is left exactly, because there are other ways of figuring out if we run out of oil. Simply by looking at the numbers of new oil fields that have been discovered. If we do that we find that we have discovered less oil each year since the 80s than we consume.

I do want to avoid getting too theoretical here, but if you want to look into the numbers it turns out that wikipedia is a solid ressource to start with (I know, do not always believe what is written there, but just follow the links provided there and you can get yourself going on a journey into numbers and figures that will in the end paint a picture pretty close to what you find on wiki).

Now what is interesting is, that the numbers are so clear that I at first was in total disbelieve about it. I was wondering why I had not heard about it (as seems to be the natural reaction as described above). But as so often, it turns out, that all the information is out there, and that people actually do talk about it. Just not the mainstream media that you may take your daily news from.

Saying that, it has been the topic in mainstream media, since the oil price seems to have risen somewhat (5 times in less than 2 years). Hence it has been a topic in all these investors shows on the big channels which I try to avoid as much as possible. But the ironic truth is that the markets (whatever you think about capitalism) do not lie. And some of the greatest investors have actually said that the problem of oil prices is a fundamental one and not a product of speculation, as some politicians want us to believe (and as they seem to want to believe).

Take this guy Boone Pickens for example. He has made his money with investment in oil for the last 60 some years. He is convinced that we will not be able to produce more than 85 million barrels a day. That is less than we even need today and it is less than we will need in 10 years.

Why is it that some claim this while oil companies claim there is enough oil?

The first thing we must understand is, that peak oil does not mean that we suddenly have no oil anymore. It does mean that we reach a point after which we cannot produce as much oil as we need. This has to do with the technicalities of oil production. You cannot just drill more holes if you need more oil. Oil can only be pumped out of the ground due to its natural occuring pressure. The more oil is in the ground the higher the pressure. The less oil that is left the lower the pressure gets and fewer oil can be produced.

A simple fact but the crucial one. Now in order to compensate for the lack of pressure you would indeed have to find a completely new oil field that still is filled to the brim. But as I mentioned above the discovery of new oil fields is decreasing rapidly.

Now you probably have some news coming to your mind of some “giant” oil field they found in Mexico, or off the coast of Alaska. Right. If you look closely you will find that they never compare the “greatness” of such new oil fields with other fields or with the current consumption. Shockingly, it turns out that some of these great oil fields hold no more oil than the planet consumes in a year or two. Unbelievable? I know, but still true. Check it for yourself next time you read about a “great” oil discovery. Get the numbers and check against consumption you can find provided e.g. on wiki.

I do not want to go on here for too long and I do not want to bombard you with numbers. So let us cut through the chase: what does all that mean?

While oil production fails to meet demands prices will rise. Simple. How high? No one knows, because it depends on how high our demand is going to be and how the markets evaluate the scarceness.

However, as a result we can expect oil prices of anything above 100$ per barrel up to, gee, let’s say 1000$ in 10 years time? The price is not too important. All you need to know is that we use 10 times the energy we get in our food to produce it. That means that every calorie in food needed at least 10 calories of energy coming from oil. Fertilizers are made from oil, machinery runs on oil, the transport is done using oil, damn, even the plastic wrapper around your food is oil derived. And if you go to the pharmacy the drugs you buy are based on oil. The paint on your walls, the insulation of your house, your TV, Computer etc. all made from oil.

Oil is our life basis and much, much more important than for driving a car to work and back.

So when will oil run out? Also that is anyones guess. With what we know about ressources left in the ground and what we can safely assume to be there it might run out in 35-40 years. If we belive BPs CEO there is double the amount available (hard to believe, especially since that is in contrast to what most geologists would tell you). Let us assume he is right, well then we maybe have 60 years left. 

Why not 80 years then, you may ask? Simply because our consumtion is increasing with approximately 2% year. Every 35 years our consumption DOUBLES as a result. And every 35 years we need more oil than we have ever used in the history of human kind. Sounds crazy? It is however simple mathematics.

So if you hear someone say: “we used 1 billion barrels in the 100 years of the history of human kind using oil and we have 4 billion barrels left”, all that it tells you is not that we have 300 years of oil left, but depending on the growth rate of our consumption maybe only 60 years.

For this see this fantastic talk by Dr Albert A. Bartlett: 

Then again, observe that I said that volume of production will decrease continuously. So who knows, maybe oil will be produced and consumed on some low levels in 100 years from now. But what will oil prices be like if we need 200 barrels per day in 2060 for example while we can only produce 40 million barrels or less?

Remember that we now would need 88 million barrels per day while we produce 85 million barrels. With a lack of merely 3 million barrels prices went from 20$ per barrel to 140$ in less than 2 years. Do you see the problem?

So what do we do? I don’t know. In fact I have no idea. I just find it amazing that no one seems to have a good idea so far. Well, first of all people and politicians would have to take their heads out of the clouds and face the fact that this scenario is true. So go ahead, check for yourself and if you think there is something about it, tell your friends.

Surely one day soon “peak oil” is going to be a term that is at least as well known as the term “global warming” ins now, and you could be one of the first ones to spread the word…

Also check my other posts on the topic:

A great quick video explaining the concept of peak-oil.
Is peak-oil the end of aviation?
Even the oil-industry admits that the peak-oil problem exists.
Why there are no quick solutions such as arctic oil or natural gas reserves, which are not enough to cover demands.

Slowly but surely the European media starts to discover a topic, that has been pressing for years now: Peak-oil
Although for now it is just the dear of rising prices, as the German Spiegel and Sweden’s DN write. Anyhow, finally they dare to use the term “peak-oil”.


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