Peak OIL

Hi all,
I thought Forumites may be interested in a brief summary of some research I have been doing on Peak Oil. As we all know fuel costs continue to be a considerable cost of our hobby. But what of the future? Read on if interested…….
When oil is discovered , it is at peak production until it reaches about 50% of its total output. After this, the remaining half becomes more difficult and expensive to extract as the ratio of water to oil expands. Ultimately the well is abandoned. Peak Oil refers to the scenario that at some point the world’s oil production will reach a peak in the rate at which it can be pumped out of the ground. Experts generally agree that this will occur sometime between 2010 and 2015 (see graph below).




In 2006 the US Government engaged consultants to prepare a report for the US Dept of Energy re the impact of peak oil on the US economy. I quote one sentence “The world has never faced a problem like this. Without massive mitigation more than a decade before the fact, the problem will be pervasive and will not be temporary. Previous energy transitions were gradual and evolutionary. Oil peaking will be abrupt and revolutionary”. Last year the Queensland Government also had a report prepared to determine a strategy to minimise the impact of peak oil on the Queensland economy.
Of course there are sceptics including some of the big oil producers. They believe alternatives will be found. Mining oil sands and shale oil require huge volumes of water and costs of production are a lot higher and are unlikely to provide the volumes required. Bio fuels will increase but the world has a finite area of arable land. Already in the US about 30% of all maize produced is used for ethanol to make bio fuel for cars. Sugar prices are being pushed up with 200 million tonnes of sugar cane going into ethanol in US. While farm output worldwide continues to grow, world food production has declined since 2000 forcing prices up.
The world economy is addicted to oil. Current world production/consumption is approx 31 trillion barrels of oil per year (this equates to 200,000 litres per second of every hour of every day). Its possible new oil fields may be discovered (eg off coast of South America) but even so demand is currently outstripping supply and known supply. Giant emerging economies of India and China are adding their demand to world oil supplies at an increasing rate.

What does all this mean – peak oil does not mean the world is running out of fossil fuels in the near future. These will be around for another 100 years or more. What peak oil does mean is that once production can no longer match demand – prices can only go one way and quickly. Skyrocketing oil prices will cause volatility in world economies and significant structural changes must occur in order to deal with this scenario. We are living in perhaps one of the most “exciting” periods in modern economic times – after almost 100 years of increasing oil production to match world economic growth if peak oil occurs (as the experts predict (2010 – 2015) for the first time oil production will start its longterm decline. Food for thought. Perhaps our $1.50 litre will seem incredibly cheap in years to come.
Hope this is of interest. I find this issue fascinating to research.
Cheers,
Glen