Peak OIL

Submitted: Tuesday, Feb 12, 2008 at 20:28
ThreadID: 54513 Views:1508 Replies:2 FollowUps:2
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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

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Reply By: Martyn (WA) - Tuesday, Feb 12, 2008 at 20:52

Tuesday, Feb 12, 2008 at 20:52
Geepeem,
With all these things you have to take it with a grain of salt I think. One of the largest if not the largest oil refinery in the world in India will soon be coming on stream, this will help something I'm sure, yes the price will more than likely go up, I can't imagine it ever coming down, in 1976 they as in whoever also said we (the world) were going to run out of oil in 20 years time, it's 2008 and we still seem to be going OK. Well at least now you've broken this news to us I can rest easy that I know why fuel prices are going up, and if they rise quicker, this must be the reason......... I'm not going to rush out and buy a scooter just yet.
Keep the shiny side up

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Follow Up By: robak (QLD) - Wednesday, Feb 13, 2008 at 11:15

Wednesday, Feb 13, 2008 at 11:15
Martyn,

An oil refinery does not extract oil, just like a sugar refinery does not grow sugar.

Both of these refuneries still have to buy the raw product.

R.
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Reply By: robak (QLD) - Wednesday, Feb 13, 2008 at 11:12

Wednesday, Feb 13, 2008 at 11:12
I'd only call this "exciting" if you want to live in a mad max world. The control for oil supplies is already destabilising the wolrd and many scenes in war torn countries very well resemble "mad max.

Having said that, you have to remember that for decades the oil companies have been buying out and shelving patents for alternative technologies. When the extraction of oil becomes too expensive these companies simply have to take a few things off the shelf and put them into production. I wouldn'tbe selling my shares in oil just yet.

R.
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Follow Up By: Geepeem - Wednesday, Feb 13, 2008 at 14:28

Wednesday, Feb 13, 2008 at 14:28
Hi Robak,

Yes I agree Mad Max is a good analogy - and one that others have already used in regard peak oil.
Exciting was probably not a good choice of word - certainly not exciting as in a positive way. What I was trying to express was more exciting in a volutile way - higher oil prices will no doubt cause extreme volutility in the western economies as did the oil shocks in the 1970's..
I agree alternative powered vehicles are possible but they are perhaps a long way from being available production wise. Also transport is only one aspect of our dependance on fossil fuels - the petrochemical industry is huge - plastics, medicines, cosmetics, chemicals, fertilizers, etc etc all have their origins in oil. The cost of all these can only increase as oil goes up.
I guess we wait and see what unfolds in the years ahead.
Thanks for your comment,
Cheers,
Glen


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