Oil Depletion in the United States and the World

The development of modern industrial societies was possible because of cheap and abundant energy in the form of fossil fuels. Today oil accounts for 40% of the primary energy production; natural gas contributes 23%, and coal’s contribution is also 23%. The rest is made up by nuclear energy at 8% and hydropower at 6%. The other renewables constitute the remaining 0.5%, a number obtained by proper rounding of values for the major sources of energy. This tally makes plain how difficult it will be for a society to move quickly to renewable energy sources. Biomass is generally not taken into account in these calculations, for it is used primarily at a local level in developing countries and thus it is difficult to count.

Use of fossil fuels has made possible the expansion of human population from 1 billion in 1820 to 6.6 billion today. During the course of history societies have built an extensive infrastructure, which needs constant maintenance for its proper functioning. This adds to the energy needs of the daily activities of industry, commerce, and private life. When fossil fuels begin to deplete at a rapid rate, it is difficult to see how societies will manage, for dependence on fossil fuels has landed us in a trap. Historically it has taken from 40 to 50 years for a new energy source to increase from 1% to 10% of market share. To reach 50% has taken almost a century. We must now face this predicament and think about how to cope. By understanding these difficulties the Central Ohio Relocalization Effort firmly believes that we in Central Ohio need to begin to move toward local reliance. Local reliance movements have sprung up through the history of our country for various reasons; the present one is forced upon us by scarcity of resources.

Oil production in the United States is in its terminal decline. We passed the discovery peak for oil already in 1930. The production peak followed 40 years later, in 1970. The production is now so far down that U.S. imports about 60% of its oil and if the finished petroleum products are counted imports rise to 63%.

Oil and other petroleum liquids are produced in the world today at the rate of 85 million barrels a day, or one billion barrels every 12 days. By backdating the extensions of old fields to the date of initial discovery and adding these to the new discovery, the world’s peak in oil discovery can be reckoned to have taken place in 1964. As a consequence of the lack of recent discoveries oil production has exceeded discovery since 1983. Today only one barrel is discovered for every three used in the world.

Natural gas production in the U.S. reached its peak in 1973, and went over a secondary, but lower peak, in 2001. This was also the date for North American peak production of natural gas. Production, both in the U.S. and Canada, is now in terminal decline. United States imports about 17% if its natural gas; 14% from Canada (which is one half of Canada’s production) and 3% as liquefied natural gas, mainly from Trinidad.

A recent study by the Energy Watch Group in Germany projects the world coal production to peak by year 2025. This is an astounding claim, as we are used to hearing that coal will last more than 200 years. The study is based on recent reassessment of world’s coal resources by the BGR, the national bureau of geological resources in Germany. A similar study for the European Commission also warns that coal is not available at near the quantities that most people think. A related issue is whether the world can afford to burn all its coal resources, for the danger of causing a catastrophic climate change.

Concern for the looming energy crisis prompted the Oxford educated geologist Colin J. Campbell to form the Association for the Study of Peak Oil, ASPO, in December 2000. This organization has convened five international meetings. It has also spawned national organizations in many countries. The ASPO-USA is holding its third yearly conference this fall in Houston.

A number of former and present ministers have attended the ASPO meetings and members of ASPO have been influential in convincing the government of Sweden to acknowledge that world’s dependence on oil is becoming precarious. The U.S. House of Representative has formed a Peak Oil Caucus and this month the U.K. All Party Parliamentary Group was formed to study this issue. A report commissioned by the Department of Energy warns what depletion of world’s oil will mean great difficulties to the United States. A member of ASPO has testified in the Australian Senate. He observed how all the base metal prices have soared and urged the Australian government to instruct local government to act to insure good public transportation for the period in which automobile travel will become prohibitive. A chart which shows how base-metal prices have soared over the last three years affirms this.

The prediction that world’s peak oil production will take place before the end of this decade is based on six criteria. First is a mathematical model developed by M. K. Hubbert, who predicted the U.S. peak 14 years before it happened. Second criterion examines when and how much oil has been discovered in the world. Third, since about half of world’s oil comes from some 120 best producing fields, the age and size of these fields is tallied and their expected topping in oil production is assessed. Fourth criterion compares the independently arrived estimates for world’s ultimate recoverable reserves and compares these with the model predictions. Fifth way is to examine which countries are already past their peak production, how many are near their peaks, and which countries still can increase production. Finally, at the peak, decline rates can be compared to start of new field development, from which the time for peak production can be estimated. All these point to world peak oil production to take place during the next three years.

The mathematical model developed by Hubbert is based on the logistic equation. Hubbert showed how to estimate the parameters in the model and applied it with success to U.S. oil production. The model also provides an estimate how much oil is yet-to-find. For the U.S. the present reserves are 22 billion barrels and there is still about 24 billion barrels to find.

Independent estimates of the world’s original oil endowment that were carried out over the last 50 years give an average value of 2050 billion barrels of oil for this ultimately recoverable reserves. Applying Hubbert’s method of estimating this gives 2209 billion barrels. This shows a reasonable agreement between the model and the independent estimates. World oil production peak is predicted to take place midyear 2008 and for all petroleum liquids by 2011. Cumulative discovery and cumulative production track each other with a 38 year lag.

World’s largest fields are in decline. The second best producing field in the world, the Cantarell field of Mexico, peaked in production at 2.1 million barrels a day in the year 2004 and Mexico’s national oil company Pemex projects its production to drop to 1.33 million barrels a day by the end of 2007.

Saudi Arabia’s oil production is also decreasing despite tripling the number of drilling rigs operating in the country. A recent report from Kuwait is equally discouraging, as the Burgan field, its largest, is now in decline and indications are that the stated reserves are overblown by twice the actual.

In summary, world’s oil production will pass its peak before the end of this decade. Already in 1972 a United Nations study, compiled in the book “Only One Earth”, by Barbara Ward and Rene Dubois concluded that world will pass its peak oil production around the year 2000. The mathematical model establishes this date to be within three years, and discovery trend affirms this. Analysis shows that nearly half of world’s oil production comes from old and ageing fields. It also shows that 12 of the 26 of world’s best oil producing countries are in decline today. Of the remaining 14, which can still increase production, 9 are members of OPEC. New project starts are tabulated yearly by Chris Skrebowski, the editor of Petroleum Review of London. His conclusion is that depletion overtakes production by 2011.

In the United States 65% of oil consumption is for transportation. The main consumers are cars, light, and heavy trucks. Other users include construction and farm equipment, airline, water, and rail transport. Movement of oil and gas over pipelines contributes a small fraction.

As Americans built up the suburbs after WWII, they became totally dependent on cars. The future American city will have a different form than it is today. It will have to be served by a multimodal transportation system, a system which we are only now beginning to construct.

Natural Gas Depletion in the United States and North America

Natural gas is depleting rapidly in the U.S. The influential National Petroleum Council issued a report in March 2000 stating that supply was adequate and able to provide for growing demand which by 2010 would be 27 to 30 trillion cubic feet and that prices would remain under $3 per thousand cubic feet. In April, just one month after the report was issued, prices rose above $3 and by December they were $10. National Petroleum Council commissioned a new study in November 2002, at which time it was clear that North American natural gas was in decline.

World’s natural gas reserves lie mainly in Russian Siberia, Iran and Qatar. Natural gas is shipped mostly by pipeline. In order to gain access to the large reserves in Asia and Middle East liquefaction facilities need to be built. But as natural gas is in decline in many parts of the world, as soon as these are built, stiff competition for liquefied natural gas will come from Europe and the Far East.

World’s natural gas discovery took a large jump in 1970, when the North Field off the coast of Qatar was found. This was the peak discovery year and today production exceeds discovery. For North America discovery dropped fast during the interval from 1975 to 1985. Should the production drop equally fast during the next few years, only a fraction could be made up by liquefied gas. As time evolves natural gas users in North America will become painfully aware of the coming scarcity.

The depletion rates for natural gas in the U.S. are larger than for oil. Fields put into production in 1990 were down 17% after the first year, those put into production today deplete more than 30% during their first year of operation.

Natural gas consumption in the U.S. divides in the various sectors of the economy in the following way. Industrial use is 33%, electricity production accounts for 31%, residential demand is 22%, and the commercial sector uses 14%. The total consumption is 20 trillion cubic feet a year. Owing to the high prices of natural gas over the last ten years, industrial demand has dropped 22% during this period. The chemical industry has been particularly vulnerable and of the 80 new chemical plants being planned in the world today, none will be built in the U.S.

Community Responses to the Looming Energy Scarcity

It will be difficult for humanity to admit that severe energy shortages will begin to take place shortly. Our thinking has co-evolved with the gadgets that are now our disposal. But technological progress is based on ready availability of inexpensive energy, and with energy scarcity technological advances are likely to also slow. Psychologically it will be difficult for us to accept that past progress does not guarantee future progress and even if we begin to accept that world’s fossil fuel depletion will put severe stresses on modern life, many of us think that this will only happen after our lives are over. The institutional and societal arrangements we have built are impediments for coping with the predicament we now face. For example, rather than promote a sensible transportation system based on rail and bicycles, most advocate hybrids and plug-in-hybrids in an attempt to keep the “car culture” going. Our living arrangements have put us into a terrible bind, for they have made us entirely dependent on cars.

Our fundamental difficulties come from the still growing population in the world.
Demographers believe that it will reach near 10 billion before it stabilizes. Were this to happen, all of us would need to use much less energy. To prepare for the future, our society needs to embrace the “precautionary principle” and pursue “no-regret” policies, both of which would serve us well in uncertain times. For Ohio such policies include a multimodal transportation system based on the Ohio Hub plan for intrastate passenger rail; an intercity rail system to tie smaller localities to Columbus; a light rail or a street car system for the city and bus system for those routes that cannot be served by rail.

If we are successful in developing a multimodal transportation system, a “transit oriented development” will follow naturally. This means that housing will be denser and thus more energy efficient. Transportation costs will decrease and farmland will be preserved for local food production.