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Peak Oil: What’s Ahead?
Gail the Actuary, The Oil Drum
Quite a few analysts are saying that peak oil is here now. Suppose they are right — what kind of changes can we expect to see in the years ahead?
In this section, we will look at projections of oil supply, and discuss what of the consequences of this declining supply might be. While it is possible that peak oil is not for a few years, this analysis will assume the peak year is 2006, with decline starting in 2007. If this assumption turns out to be a little early, the worst that will happen is that we will be a little ahead in our planning.
1. How much of a decline in world oil production can be expected in the next few years? …
2. How likely is it that future production will follow a pattern similar to Figure 1?…
3. It seems like it is really the amount of oil per person that makes a difference. What kind of change in oil production is expected on a per capita basis? …
4. Does a decrease in per capita oil production really make much difference? I have heard oil represents only a tiny fraction of world revenue. …
5. If world oil production decreases as shown in Figures 1 and 3, what impact will this have on the amount of oil the US consumes? …
6. Is the decline in availability of oil the only problem the world is likely to face in the years ahead? [Gail cites climate change, metal shortages, North American natural gas, world food supply] …
7. What are the immediate impacts of an oil shortage expected to be?
…Some areas that are likely to first feel the impacts of oil shortages are
• Commercial airline flights – Cost of fuel and higher debt costs will be a problem
• Food imported by air – Demand will decline because of much-higher cost
• SUV manufacturers – Demand for large cars will decline precipitously
• Third world countries – These countries are already being priced out of the oil market
8. What is the impact of oil shortages on the financial markets likely to be? …
• End of the growth paradigm. …
• Declining credit availability.
• Declining stock prices. …
• Deflation and/or Inflation. …
• Reduced interest in insurance and other financial products. …
• Declining globalization …
9. What types of jobs are likely to see growth in the years ahead?
10. What are some of the challenges in the years ahead expected to be?
• How do we adapt the transportation system to the new lower supply? …
• How do we plan for a declining economy? …
• How do we protect the food supply? …
• How can we avoid future shortages that are likely to have wide-ranging effects?
• Resources are unevenly divided. People will want to move to areas with greater resources. How do we deal with the conflict that may ensue? Do we forbid immigration all together? How do we keep countries from fighting over limited resources?
This is a draft of Chapter 3 of my booklet. Chapter 1 can be found here; Chapter 2 can be found here.
(31 July 2007)
Energy Bulletin plans to publish the chapters from Gail’s book, once they have gone through the feedback-review cycle on The Oil Drum. -BA
What would you pay for a barrel of oil these days? $100? $200?
Dyer, Gwynne, The Barrie Examiner (Ontario, Canada)
Nine of the last 10 serious downturns in the world economy followed a spike in the price of oil, and we are heading for another spike, with oil back up near the peak of $78.40 US a gallon that it reached almost exactly a year ago. A record number of options contracts are now being sold that entitle customers to buy oil in the future at $100 a barrel. That tells you where the inside players think the price of oil is heading.
The spike at $78.40 in July 2006 didn’t cause a recession, so why should this one? Indeed, why would even $100 a barrel cause a global economic crisis, given that one hundred U.S. dollars today is only worth about the same in most other currencies as $78.40 was a year ago?
Oil sales are almost all denominated in U.S. dollars, which are worth almost a third less in euros, pounds or yen than they were two years ago, so the countries of the Organization of Petroleum Exporting Countries (OPEC), are not rolling in sudden wealth. The oil exporters spend most of their income in other currencies, so from their point of view the recent surge in the oil price only restores the purchasing power that they lost over the past two years due to the U.
S. dollar’s slide.
More importantly, most of the big importers of oil in the industrialized world are not really paying much more for oil than they were two years ago. The rising dollar price has been largely cancelled out by the fall in the value of the dollar, so it’s not really busting their budgets.
…The truly significant change in the situation is the stagnation of supply, not the rise in demand. New oil-fields are much smaller than discoveries in the previous generation (the last really big oil domain to be developed was the North Sea in the 1970s), and they tend to be in much more remote places.
The number of new deep-sea drilling rigs now under construction is almost equal to the total number that currently exist in the world (seventy). When you have to look for new oil at depths of over 1,500 metres under the sea, or coax it out of the tar-sands of northern Alberta by equally expensive techniques, the era of plentiful cheap oil is definitely over.
Gwynne Dyer is a London-based independent journalist published in 45 countries.
(31 July 2007)
Also posted by New Vision Online of Uganda.
Sir David King’s View on Peak Oil
Chris Vernon, The Oil Drum: Europe
Professor Sir David King, Chief Scientific Advisor to the UK Government since 2000 and former head of Cambridge University chemistry department has submitted a paper to the recently formed All Party Parliamentary Group on Peak Oil (www.appgopo.org.uk).
I find this paper very disappointing, especially coming from someone of King’s calibre and position. It shows no original thought, preferring to cite the IEA, the USGS and historically static reserves-to-production ratios. It also shows no appreciation for flow rates or declining production from fields already in production, explains lack of new discoveries by low levels of exploration in the Middle East and attempts to square the development of unconventional oil sources with “radical reductions” in greenhouse gas emissions. King ends by saying hydrogen and fuel cell technologies have the potential to replace oil for transport. I’m left feeling King has presented a politician’s view rather than a that of a scientist.
It is unclear how King’s view as expressed in this paper relates to a conversation he had with David Strahan (author of The Last Oil Shock, link) in 2005 where King is reported to have said peak oil “in ten years or less”.
His full submission is reproduced below the fold [at the original article at TOD].
(31 July 2007)
The Round-Up: July 30th 2007 – special on the financial crisis
Stoneleigh , The Oil Drum: Canada
News from a peak oil perspective. This edition covers the financial and credit crises.
(30 July 2007)
