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The formation of fossil fuels is a process that takes millions of years.
In fact the majority of the world's fossil fuel deposits originated in
the Carboniferous Period, 360 to 300 million years ago, a period
characterized by low sea-levels and an abundance of dense swamps and
History shows us that the extraction of finite resources broadly follows a bell-curve pattern. In the 1950s the American geophysicist M. King Hubbert proposed that oil production in a given geographical region, in his case the United States, would follow a bell-curve. First it would rise slowly and then more steeply as more drilling rigs were brought online. Production rates would then, he predicted, hit a short plateau. Finally, at around the point where half of the total extractable oil was gone--the easiest oil--production rates would enter a steep decline. Extracting the remaining oil, which is found in more challenging geologies or climates, would be expensive, and every day it would be more and more difficult to keep production as high as it was the day before. The peak that Hubbert proposed factored in both the known oil reserves as well as the undiscovered resources where it allows for new discoveries.
As the graph illustrates, Hubbert, wrote in 1956 that production of oil
in the continental United States would reach a peak either in the late
1960s or in the early 1970s, depending on how fast production increased.
American oil production then peaked in 1970. His model turned out to be
surprisingly accurate. Studies show that when applied at the
sub-national, national and continental levels, his theory has proven to
be the most accurate in the majority of cases.
Why is the idea of a peak so important? It comes back to the importance
of energy to an industrial society. In a very real way energy =
economic activity. If the availability of energy were to decline, then
the price of energy would rise. Higher energy prices act as a tax on
everybody in the society and stunts economic growth. Therefore if
the production of fossil fuels were to peak and then decline rapidly,
the price of those fossil fuels would surge, potentially throwing the
world into a global recession. As energy analyst Chris Skrebowski
argues, a peak doesn't even need to occur in production; demand only
needs to grow faster than supply. As he puts it, peak occurs when "the cost of
incremental supply exceeds the price economies can pay without
So is a peak in fossil fuels looming? Not with coal and natural gas: there remain vast supplies of natural gas and coal in the ground, as we have shown here and here. These reserves should last until mid-century by which point we should have many advanced alternatives (most likely Generation IV nuclear power) for producing electricity. Oil, which owns the transportation market, is another matter.
Inconveniently for our civilization, oil is also the most difficult of the fossil fuels to replace because, unlike coal and natural gas, we cannot simply phase out oil by building solar panels or nuclear power plants. There is a key bottleneck: We need technologies that can power cars, planes and trains, not just provide utility scale electricity.
If our civilization was prudent and far-seeing, even the risk of peak oil would start investors and inventors casting around for oil alternatives. Unfortunately, all the alternatives that could compete with oil--electric cars, hydrogen fuel cells and biofuels--have serious drawbacks, keeping them from successfully breaking oil's stranglehold on our economy. The oil economy rumbles on, and our dependence on oil continues to deepen every day.
Finding the Peak
The first question when determining how much oil is left is to
determine how much of the world's oil has been discovered and how much
more can be found. As any of the oilmen who have spent the last century scouring the globe for
black gold will tell you, almost all of it has been
As an ExxonMobil spokesman said in 2005, "All the easy oil and gas
in the world has pretty much been found. Now comes the harder work in
finding and producing oil from more challenging environments and work
As for the existing oil fields where most of the world's cheap oil is
produced, they are declining. A number of the
world's largest oil fields are already in decline. Ghawar, in Saudi
Arabia, is the largest oil field in the world. Though the Saudi
government keeps its oil reserves a closely guarded secret, some
analysts believe that this field's production has recently started to
decline at a rate of 5% to 8% a year.
Most Western governments, including Canada, base their energy policies,
on the oil production projections of the IEA. So it came as a surprise
when they announced in 2008 that the world's oil fields would likely see
a production decline of 6.7% every year.
All of this will have to be made up for, year on year, by new
unconventional discoveries. These unconventional resources are
discoveries such as: deep water reservoirs off the coast of Brazil, the
oil sands of Venezuela and Alberta or extraction from old
mostly-dry fields using new technologies. New demand from the developing world,
China in particular, leads the IEA to project that oil consumption will
rise to 99 million barrels per day by 2030, an approximately 15%
Much to their credit the oil companies have been remarkably successful
at finding oil in these difficult to access areas. Drilling rigs are
exploring some of the most inhospitable places on Earth, such as the
Arctic and Southern Oceans, or discovering oil off the coast of Brazil
underneath two kilometres of water and five kilometres of Earth. The
Alberta oil sands are now producing 1.31 million barrels of oil every
Nevertheless even with all these unconventional sources of oil coming
online, they will not be able to make up the shortfall for long: the IEA
predicts oil production will enter a plateau by 2020, and then begin to
fall soon after.
So what is going to happen? The inescapable conclusion is that the difficult process of replacing oil must begin immediately, and the enormous growth in oil demand must be stopped and reversed very quickly. If a smooth transition to a post-oil economy is to be made in the next several decades, it will require trillions of dollars of investment in new technologies: new propulsion systems for planes, cars and ships will have to be made and deployed on a global scale. Alternatives to oil in the host of industrial processes for which it is used will need to be found. This transition goes hand in hand with the effort to combat global warming and is, perhaps, just as urgent.
If the transition does not occur economic disruption is probable.
Predictions about what this might entail range from repeated long and
deep recessions to widespread famine and war. The United States National
Energy Technology Laboratory, a section of the Department of Energy,
believes that peak oil "presents the U.S. and the world with an
unprecedented risk management problem. As peaking is approached, liquid
fuel prices and price volatility will increase dramatically, and,
without timely mitigation, the economic, social, and political costs
will be unprecedented. Viable mitigation options exist on both the
supply and demand sides, but to have substantial impact, they must be
initiated more than a decade in advance of peaking."
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