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Peak Fossil Fuels
An oil refinery at Anacortes, Washington.
An oil refinery at Anacortes, Washington.

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 rainforests. This means that once humanity is done burning the fossil fuels that are already in the ground, we will have to wait hundreds of millions of years for more to form. Coal, oil and gas, are non-renewable, finite resources, and every day there are simply less of them left at humanity's disposal. But figuring out how long a fossil fuel-based civilization can survive is not as simple as calculating how much fossil fuels are left in the ground. For example, China is believed to have around 114.5 billion tons of coal left within its borders. If we were to take their current production rate of 3.4 billion tons a year, we can say that China will be able to keep consuming coal at this exact rate for 38 years until the last of the coal is dug out of the ground and China's age of coal immediately stops. This simple analysis ignores a phenomenon known as Hubbert's Peak.

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.

A graph used by M. King Hubbert to illustrate his theory of a peak in oil production.
A graph used by M. King Hubbert to illustrate his theory of a peak in oil production. His prediction of global peak oil has been delayed by oil from unconventional sources and difficult to reach places, like deep offshore, and a slowing in global oil consumption in the 1970s and 1980s following the oil crises.

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. Studies also show that this model is applicable not just to oil, but to coal, natural gas, metals, uranium--essentially every finite resource.

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 destroying growth." Determining the exact moment a peak will hit, a hobby of many armchair analysts, is not so important as the impact of rising prices, be it gradual or sudden, has on our society's economic growth.

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

A graph showing oil production up to the present day and the huge range of varying predictions about future oil production.
A graph showing oil production up to 2006 and the huge range of varying predictions about future oil production.

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 found. If you were to measure year on year the rate at which new supplies of oil were discovered, the peak occurred in 1965. Since then the rate at which new fields have been discovered has dropped by about two thirds. And of the new fields discovered the general trend is for them to be smaller and more difficult to access or have heavier, more difficult to extract oil. Unsurprisingly, finding this oil is now much more expensive than it once was--three times more expensive per barrel than it was only ten years ago. This goes some way to explaining why the current price of oil is hovering around $100/barrel, up from the range of between $15 and $30 per barrel where it remained from 1986 to 2003.

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 areas."

A depleted oil field in Azerbaijan.
A depleted oil field in Azerbaijan.

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. At Cantarell, Mexico's largest oil field, production is declining at a rate of 13% 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% increase. The only way to preserve the economy, according to the IEA, is to rely on unconventional oils. Yet the IEA acknowledges these same unconventional oils may push our cllimate beyond the point of no return. How to make sense of this? Nevertheless the exact policy prescription they recommend to governments, including Canada's, is to forge ahead with exploiting these unconventional oils.

Mining at the Alberta oil sands.
Mining at the Alberta oil sands.

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 day.

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. Some commentators, including the US Joint Forces Command, a planning body in the Pentagon, believe we are already on the plateau, and that production will never rise much higher than its current output of the 89 million barrels of oil currently produced and consumed every day.

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."


A Brief History of Energy Use

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References

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