Source: Wikipedia
1. Introduction
2. Has it occurred?
3. Hubbert's theory
4. Peak prediction
5. Energy return on investment
6. Cultural Awareness
7. Implications of a world peak
8. Alternatives to conventional oil
Introduction [top of page]
The Hubbert peak theory, also known as "peak oil", concerns the long-term rate of conventional oil (and other fossil fuel) extraction and depletion. It is named after American geophysicist M. King Hubbert, who created a model of known reserves, and proposed, in 1956, in a paper he presented [1] (http://www.hubbertpeak.com/hubbert/1956/1956.pdf) at a meeting of the American Petroleum Institute, that oil production in the continental United States would peak between 1965 and 1970; and that world production would peak in 2000.
U.S. oil production peaked in 1971 [2] (source:click here) , and has been decreasing since then. Global production did not peak in 2000. Supporters of peak theory suggest Hubbert's model did not account for the 1973 and 1979 OPEC oil shocks, which effectively reduced global demand for oil, thus delaying the peak.
Given that oil is a non-renewable resource, it is inevitable that at some point there will be a similar peak in worldwide oil production. Hubbert's theory is that the same calculations that successfully predicted the peak in oil production in the USA would apply to other circumstances, such as the peak in worldwide oil production. Various estimates for the worldwide peak have been made by Hubbert and others, with some of these dates already having passed. This has led to criticism of the method and predictions made using the method.
Hubbert's peak theory is subject to continued discussion because of the potential effects of lowered oil production, and because of the ongoing debate over aspects of energy policy. Opinions on the effect of passing Hubbert's peak range from faith that the market economy will produce a solution to predictions of doomsday scenarios of a global economy unable to meet its energy needs. (See Implications section, below)
Some oil industry executives, economists, and analysts doubt that Hubbert's peak theory applies on a global scale. However, Chevron has launched the Will You Join Us? (http://www.willyoujoinus.com/) ad campaign, seeking to inform the public to the possibility of oil depletion and encourage discussion. The campaign's website notes findings from the International Energy Agency's (IEA) World Energy Outlook 2004: "Fossil fuels currently supply most of the world’s energy, and are expected to continue to do so for the foreseeable future. While supplies are currently abundant, they won’t last forever. Oil production is in decline in 33 of the 48 largest oil producing countries, ..."
The Hubbert curve, devised by M. King Hubbert, is a model of future oil availability.
2004 U.S. government predictions for oil production other than in OPEC and the former Soviet Union
Has it occurred? [top of page]
An increasing number of theorists believe some peak in world oil production has already occurred. Colin Campbell of the Association for the Study of Peak Oil&Gas(ASPO) has calculated that the global production of conventional oil peaked in the spring of 2004 albeit at a rate of 23-GB/yr, not Hubbert's 13-GB/yr. After Hurricane Katrina, Saudi Arabia admitted that it simply could not increase production to make up for the loss of Gulf of Mexico oil rigs. This was widely believed, albeit speculatively, to be the beginning of a final oil crisis, in which the amount of oil available world-wide will enter a gradual yet terminal decline.
Nor is the crisis restricted to oil. Traditional natural gas supplies are also under the constraints of production peaks, which especially affect specific geographic regions because of the difficulty of transporting the resource over long distances. Natural gas production has already peaked on the North American continent (2003), while gas supplies in the North Sea have also peaked. UK production was at its highest point in 2000 and declining production and increased prices are now a sensitive political issue there. Even if new extraction techniques yield additional sources of natural gas, like coalbed methane, the EROEI (energy returned on energy invested) will be much lower than traditional gas sources, which inevitably leads to higher costs to consumers of natural gas.
Hubbert's theory [top of page]
Hubbert, a geophysicist, created a mathematical model of petroleum extraction which predicted that the total amount of oil extracted over time would follow a logistic curve. This implies that the predicted rate of oil extraction at any given time would be given by the rate of change of the logistic curve, which follows a bell-shaped pattern now known as the Hubbert curve (see figure on the right).
Given past oil production data and barring extraneous factors such as lack of demand, the model predicts the date of maximum oil production output for an oil field, multiple oil fields, or an entire region. This maximum output point is referred to as the peak. The period after the peak is referred to as depletion. The graph of the rate of oil production for an individual oil field over time follows a bell-shaped curve: first, a slow steady increase of production; then, a sharp increase; then, a plateau (the "peak"); and, finally, a steep decline.
When oil reserves are discovered, production is initially small, because all the required infrastructure has not been installed. As wells are drilled and more efficient facilities are installed, oil production increases. At some point, a peak output is reached that can not be exceeded, even with improved technology or additional drilling. After the peak, oil production slowly but increasingly tapers off. After the peak, but before an oil field is empty, another significant point is reached when it takes more energy to recover, transport and process a barrel of oil than the amount of energy contained in that barrel. At that point, Hubbert theorized that it is no longer worthwhile to extract oil for energy, and the field might be abandoned. According to Hubbert's model, U.S. oil reserves would be exhausted before the end of the 21st century.
It should be noted that Hubbert's original formulations applied to a "theoretical, unconstrained province" and that the model must be adjusted if significant artificial impedances (such as political or environmental regulations) are in effect.
Peak prediction [top of page]
Few would disagree with the statement that fossil fuels are finite and that alternative energy sources must be found in the future. Most critics instead argue that the peak will not occur soon and that the form of the peak may be irregular and extended rather than a sharp logistic curve peak. Like any mathematical model, the accuracy of the prediction is limited by the accuracy of the input data. If variables such as consumption are estimated incorrectly, then the formula will yield incorrect results.
In 1971, Hubbert used high and low estimates of global oil reserve data to predict that global oil production would peak between 1995 and 2000. ASPO has calculated that the annual production peak of conventional crude oil was in early 2004. However, it should be noted that other events that occurred after Hubbert's prediction may have delayed the peak, especially the 1973 energy crisis, in which a decreased supply of oil resulted in a shortage, and ultimately less consumption. The 1979 energy crisis and 1990 spike in the price of oil due to the Gulf War have had similar, albeit less dramatic effects on supply. On the demand side, recessions in the early 1980s and '90s have decreased the demand and consumption of oil. All of these effects would theoretically delay peak oil.
The Association for the Study of Peak Oil and Gas (ASPO) was founded by the geologist Colin Campbell. Based on current information about known oil reserves, estimates of future discovery, growing oil demand, and available technology, the ASPO predicts that world oil production will peak around the year 2010. Natural gas is expected to peak anywhere from 2010 to 2020 (Bentley, 2002).
The organization ASPO predicts that oil production will peak around 2010.
In 2004, 30 billion barrels of oil were consumed worldwide, while only eight billion barrels of new oil reserves were discovered. Huge, easily exploitable oil fields are most likely a thing of the past. In August 2005, the International Energy Agency reported annual global demand at 84.9 million barrels per day which means over 31 billion barrels annually. This means consumption is now within 2-mbd of production. At any one time there are about 54 days of stock in the OECD system plus 37 days in emergency stockpiles.
The United States Geological Survey estimates [3] (http://energy.cr.usgs.gov/) that there are enough petroleum reserves to continue current production rates for 50 to 100 years. A year 2000 USGS study of world-wide oil reserves predicted a possible peak in oil production around the year 2037. That is countered by an important Saudi oil industry insider who says the American government's forecast for future oil supply is a "dangerous over-estimate."[4] (http://channel4.com/news/2004/10/week_5/26_oil.html) Campbell argues that the USGS estimates are methodologically flawed. One problem, for example, is that OPEC countries overestimate their reserves to get higher oil quotas and to avoid internal critique. Population and economic growth may lead to increased energy consumption in the future.
Further, the USGS reserve estimate appears to owe more to politics than to research. According to the Energy Information Administration of the United States Department of Energy, international reserve "estimates are based on non-technical considerations that support domestic supply growth to the levels necessary to meet projected demand levels. [emphasis added]" (Annual Energy Outlook 1998 With Projections to 2020[5] (http://tonto.eia.doe.gov/FTPROOT/forecasting/038398.pdf) ). This means--plainly--that the USGS estimates are based on what is needed to operate at projected growth rates, not what actually exists.
Energy return on investment [top of page]
When oil production first began in the mid-nineteenth century, the largest oil fields recovered fifty barrels of oil for every barrel used in the extraction, transportation and refining. This ratio is often referred to as the Energy Return on Investment (EROI or EROEI). This ratio becomes increasingly inefficient over time: currently, between one and five barrels of oil are recovered for each barrel used in the recovery process. The reason for this efficiency decrease is that oil becomes harder to extract as an oil field is depleted.
Certain types of energy are more convenient than others—because of the energy density and relative safety of gasoline at room temperature and atmospheric pressure, it is uniquely suitable for transportation. Oil is also usable as a chemical feedstock, whereas sources such as wind and solar are not. Therefore, it is possible that oil would continue to be extracted and refined even after it consumes net energy to do so.
Cultural Awareness [top of page]
Hubbert's research and awareness of Hubbert peak theory is becoming a more prevalent sociological phenomenon. For example, a peaknik is a person who studies or has an interest in the Hubbert Peak theory of oil depletion and is concerned for the possible long-term effects on society. Peaknik may also refer to people involved in promoting public awareness of Peak Oil. The word Peaknik is a neologism - it is a variation of the term peacenik. The use of "-nik" evokes a counterculture attitude to the status quo.
The term Doomer is sometimes used to describe Peakniks that believe there will be severe implications of peak oil.
Implications of a world peak [top of page]
It is clear that any global decline in oil supply will have serious social and economic implications. Global economic growth is predicated upon cheap energy and oil contributes significantly to the worldwide energy pool. As energy supply declines so too will growth. This fact applies equally to individual organisms as it does to groups and societies. Therefore the timing of peak production is not as important as the consequent rate of decline.
Initially a peak in oil production would manifest itself as structural worldwide oil shortage. This shortage would differ from shortages of the past because the fundamental cause is geological not political. While past shortages stemmed from a temporary insufficiency of supply, crossing Hubbert's Peak means that the production of oil continues to decline, and that demand must be reduced to meet supply. The effects of such a shortage depend on the rate of decline and the development and adoption of alternatives. If alternatives are not forthcoming, then the many products and services produced with oil become scarcer, leading to lower living standards in all countries. Scenarios range from doomsday scenarios to faith in the market economy and new technologies to solve the problem. In order to deal with those problems of peak oil Colin Campbell has proposed the Rimini protocol.
It is unlikely that the actual peak in global oil production will be the direct catalyst of global economic decline. Instead, severe economic turbulence will be precipitated by the realization of bankers that "peak oil" ( and natural gas) is a real phenomenon and either upon us or behind us. Significant indications of economic volatility have manifested themselves in the largest increase in inflation rates in 15 years (Sept. 2005), which were due mostly to higher energy costs. Since natural gas is the single largest feedstock (raw material) used to produce fertilizers, food costs are set to be dramatically higher next year (2006). This situation is exacerbated by exploding transportation costs as well. It should only be a (short) matter of time before this is fully recognized by investors.
The economic implications, however, do not end with higher food costs, or even greater levels of inflation. The situation in the First World is made even more dire by a number of confounding factors, which include:
Large government debt (in the US alone it is nearly $8 trillion)
The impending retirement of the baby-boomer generation and the general ageing of populations
Dependence of the largest employers on cheap, abundant, and immediately available forms of energy (i.e. the car industry, the airline industry, "big-box" stores, etc.--essentially, the backbone of the entire economies of all the richest countries in the world)
Burgeoning personal debt through credit cards and rising housing prices
There are also political implications to "peak oil." In 1976 William Ophuls published "Ecology and the Politics of Scarcity." In this book, he posits that as the primary governmental systems of the Western world evolved during the 1700s thru the 1900s, these systems experienced (and have come to assume) great natural abundance. Our governmental systems further assume (and depend upon) unlimited growth, and virtually unlimited natural resources, including oil and natural gas. The word "scarcity" is not welcome in contemporary political discourse. This fact hinders the ability of government to consider and mitigate the looming social and political problems associated with "peak oil."
Alternatives to conventional oil [top of page]
Alternatives are energy sources other than conventional oil and natural gas which can be used instead in one or more applications, including; as a prime energy source to generate electricity, as a transportation fuel, for space heating, and as an ingredient in plastics, pesticides, and fertilizers. Alternatives include tar sands, oil shale, and coal liquifaction and gasification. These alternative energy options may be increasingly relied upon to meet the world's energy needs, but at the moment none of them offer alternatives that are cheap, clean, and abundant enough to replace anything approaching the vast amount of conventional oil and natural gas consumed daily in the world. Many argue that we do not have realistic alternatives in order to counter negative effects of the Hubbert peak. To gain time to develop nonconventional alternatives as well as renewables or nuclear energy, conservation and improved efficiency are often the first choices of actions to deal with rising prices of oil and natural gas.
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