Peak Oil: a Non-event?

December 5, 2005

I have been hinting for some time now that the peak of world oil production, in itself, could be a non-event. While ‘Peak Oil’ has become the common term whereby we refer to the entire phenomenon of energy depletion, it is not so much the peak of production that we should be concerned with as the decline of production following the peak.

The oil peak could be defined as the time of maximized production. We have never produced more oil than at this moment in history. The peak tends to be the period of super-abundance and greatest prosperity. Such was the case when the US peaked in 1970. At that time, the critics of peak oil theory were bragging that we had never produced so much oil in the US. What they did not know was that we would never again produce that much oil. This only became apparent after the peak, once US oil production entered an irreversible decline.

Right now, there is a lot of bickering about when world oil production will peak. Will it be this year (as gathering evidence seems to suggest), two years hence, the end of the decade, twenty years from now, thirty years from now? Personally, I think we have been flirting with the peak since the beginning of the millennium. 2005 might very well come to be known as the year of peak oil. Or it may be 2007. I think the odds are that the peak will come before the end of the decade. In fact, I expect that production will begin declining before 2010.

Peaks can be sharp or they can be drawn out. We could reach peak and begin the decline in a matter of months. Or we could reach peak in 2005 and hover there until 2007 or 2008, before we begin to decline. We could even have a series of mini-peaks over the next several years, each one linked to the next by a period of declining and then recovering production. It is quite likely that right now we are witnessing a tango between peak oil and the economy.

The tango is choreographed between demand and production. When there is spare production then demand will take the lead. The economy will prosper and demand will increase until it exceeds production. At that point, production will take the lead back from demand. The economy will falter as prices rise. Eventually demand will drop below production, allowing breathing space between the two. Prices will relax, and the economy will begin to recover, fueling demand to rise once again above production. Ostensibly, this tango could go on so long as there is enough floor space for the dancers.

In the real world, speculation could cut in on this dance at any point. Once investors perceive that the days of economic growth are over, there will likely be a market crash. We have already seen nervous investors and profiteering speculators drive up energy prices at any hint that there might be a problem with production. A wise strategy for the most powerful players, if they believe that a crash is eminent, would be to cash in their chips at a point of their own choosing before the crash, and then step aside and wait for the crash to reduce prices to the point where they can buy up what is left for pennies on the dollar.

While many think this is the probable scenario, it is all speculation. The truth is, humankind has never faced a situation like this in its entire history. Nobody really knows what is going to happen. It makes sense that an irreversible decline in energy production will spark a crisis in an economy based on the necessity of constant growth. It seems probable that our entire civilization will collapse, given that complex systems must change gradually and tend to react to sudden change with systemic collapse. And given the fact that we have done virtually nothing to prepare for this change, even now that it is breathing down our necks.

But the key here is not so much the peak as the end of the peak; that point when production begins to decline irreversibly. The most important question we should be asking right now is not when oil will peak but what will be the rate of decline once the peak has ended?

A gradual 2% decline could quite possibly be accommodated. Such a rate of decline, if it began by 2010, would mean that we would be producing as much oil in 2020 as we produced in 1990. There would be problems—the population has grown considerably between 1990 and now—but these problems would not be insurmountable. This decline rate is slow enough that we might be able to adjust naturally, transitioning smoothly into a more sustainable socio-economic system. This is, of course, barring panicked reactions. A global economic collapse due to market hysteria would make matters much worse than they need be. Likewise, energy wars would make the situation much worse for everyone, and possibly even lead to a nuclear exchange. But, barring such suicidal responses, a 2% decline rate might allow a relatively gentle transition.

There are some very strong arguments, however, that the decline rate will exceed 2%. It could be as high as 7 or 8%, and it is not impossible that it might be as high as 10 or 15%. Those who argue for these higher rates point to individual depletion rates of various fields that seem to average around 7%. A major cause of the higher depletion rates is new technology that makes production more efficient. These new technologies have the end result of drawing down the field quicker, leading to a higher depletion rate. It is unlikely that a depletion rate of 7% could be accommodated. This rate is simply too quick for transitions to occur naturally within a complex system. The system would lose its underpinning. Short of a global effort to direct all of our attention and energy to making a quick transition, the system would collapse.

Yet this is not the worst scenario. Unsound production practices have damaged many of the world’s major oil fields, as it has Ghawar—the largest oil field in the world. Should damaged fields such as Ghawar collapse, we could see oil production plummet by a whole order of magnitude within little more than a decade. The result of such a drop would be nothing less than the collapse of civilization, widespread suffering and starvation.

So this is the question that we desperately need to answer: what will be the rate of decline? To date, this question has been the subject of speculation and debate, but no one has been able to give a definite answer. This question can only be answered conclusively in one of two ways. Either we can make an honest and open assessment of all the world’s oil fields, their health and their rate of production. Or we can wait for time to show us the answer.

We need this answer in order to know what steps must be taken now. But too many of the players are refusing to reveal their hands. Too many are looking out for their own short term interest, too many are afraid of being culpable, and far too many are still in denial that there is any problem at all. As a result, we continue paddling blindly down the river, without knowing whether there is a rapids ahead or a waterfall.

Yet we can say that it is likely that there is white water ahead, and it would only be prudent to prepare for it. It is time to prepare. It is time to network with others around us, organize within our communities, time to take our homes off the grid and learn to produce at least a portion of our own food. The peak of oil production is not the event we need to be concerned about, it is what comes after. While we can still breath and hope, there is time to prepare; let’s not waste it.


Tags: Fossil Fuels, Oil