Gas prices soar as oil production nears peak

The recent oil price surge underscores the economic importance of oil and the reality that oil supplies are starting to dwindle. This is an issue that no longer can be ignored.

During the past 15 years, world oil consumption rose an average of 948,000 barrels a day. It rose more this year, and the International Energy Agency forecasts higher consumption next year.

But whether supply can meet exploding demand is problematic.

We are consuming oil faster than we are replacing it. Worldwide oil discovery peaked in 1965. Beginning in 1984, consumption has exceeded discovery every year.

Since 1999, the discovery of large oil and gas fields has collapsed: 16 in 2000, eight in 2001, three in 2002 and none last year.

More and more countries have peaked in their oil supply as consumption has surged. Of the 48 major oil-producing countries listed by British Petroleum, which provide 98 percent of the world’s oil, 17 were past their peaks in 2003, and 31 were past their peak as of 2002. [ Ed’s note: that should read ’17 were past their peaks in 1993‘ (source) -AF ]

World oil supply depends heavily on a few giant oil fields. The 14 largest supply more than 20 percent of the world’s oil. The trouble is, these giants have been producing for decades, and they’re getting tired. The average age of the 14 largest is almost 46 years.

Given all this, a world oil production peak cannot be far off. The only question is when it will happen. The Association for the Study of Peak Oil and Gas predicts that regular oil will peak in 2005 and that extraction of oil of all kinds will peak in 2006.

Others say it could be just a year or two after then.

Reaching a peak doesn’t mean that oil is about to run out. It means that oil supply will no longer be able to meet demand, and that the shortfall will keep getting worse – unless people drastically cut consumption.

That won’t be easy. Our dependence on oil is enormous. Oil is America’s largest energy source, supplying almost 40 percent of our energy consumption in 2002. (All fossil fuels furnished 85.8 percent.) Nuclear power supplied 8.4 percent.

Some people put their hopes in renewable energy, but don’t get your hopes up. Renewables supplied just 6.1 percent, with wind and solar energy contributing a pitiful 0.17 percent.

Oil peak and decline will mean far higher oil and gasoline prices, with obviously devastating economic consequences. Even worse is the possibility of genuine energy famine.

Americans face nothing less than the greatest economic upheaval in history. If the pessimistic forecasts are right – and the evidence points that way – oil production will peak in the next four years.

In other words, whoever is elected president in November will have to deal with this problem. But unfortunately the candidates so far have focused little attention on the problem.

John Attarian is a free-lance writer in Ann Arbor.