IS THE GRAPH RIGHT?
It is very unlikely that things can be better than the graph indicates. Why?
- The great majority of authorities believe there is little more than one trillion barrels of conventional oil left. You can make a simple calculation from that: At the present rate of 30 billion barrels per year, 82 million barrels per day, it will all be gone in 33 years, and consumption has been rapidly increasing, not decreasing, so if anything it will all be gone sooner...
- A closer look at the graph reveals that it was drawn on the assumption that the world's existing conventional fields contain only 750,000 barrels at this time, enough to keep us going only 25 years.
- The graph assumes a decline rate of 4% per year. As long as the estimates of remaining reserves are right, that can't be far off. In fact, 4% is a relatively low decline rate compared to what has been observed in oil fields generally. Hold on, it's going to be a fast ride down!
- The major oil companies, which presumably know better than we do how much oil is in their possession, "conspicuously fail to invest in new refining capacity, which would surely be needed if production were set to rise." (See Campbell, http://www.greatchange.org/ov-campbell,outlook.html.) The excess of refining capacity over demand remained close to 10 million bpd during the nineties, but dropped to almost nothing in the last decade as a result of failure to build new capacity (see http://www.imf.org/external/pubs/ft/weo/2006/01/chp1pdf/fig1_21.pdf. The United States Joint Forces Command has also reported the failure of the oil industry to invest in the refining capacity necessary to permit expanded production, and that "Even were a concerted effort begun today to repair that shortage, it would be ten years before production could catch up with expected demand." (See Joint Operating Environment 2010," page 26).
- The most frequently discussed significant source of unexploited petroleum is the tar sands of Alberta, Canada. Because a high percentage of the energy value of the tar sands has to be expended in their extraction, the reported quantity of reserves is misleading, and two independent researchers have estimated respectively that production from the tar sands by 2020 may be expected of 3.3 million bpd and 4 million bpd. Consequently, the likelihood of the tar sands making a significant contribution to the world's petroleum demand in the foreseeable future is low. (See Phil Hart and Chris Skrebowski, Peak oil: A detailed and transparent analysis).
- The shortfall, labeled "unidentified projects," that needs to be filled in 20 years is an unprecedented 60 million barrels per day, equivalent to 3/4 of today's total production. We have never in history done anything comparable to that. Although there are large deposits of "unconventional" oil such as the Canadian tar sands, most are making only slow progress at development and consume as much or more energy in their production as they can generate. The independent Oxford Institute of Energy Studies has estimated a possible development of 6.5 mbpd of such projects, when we'll need more than that every two years just to keep our place. So the likelihood of anything at all making a significant dent in the shortfall is small. Indeed, the "unidentified projects" can be perceived as just a "euphemism for rank shortage" (Campbell). The United States Joint Forces Command has come to the similar conclusion: that of all potential future energy sources, "None of these provide much reason for optimism." Petroleum industry investment banker Matt Simmons calls them "faith-based." (See page 4 of http://www.simmonsco-intl.com/files/Northern%20Trust%20Bank.pdf.
- The "Hubbert Peak" theory of oil field depreciation, which predicted the peak and subsequent demise of the US oil industry 15 years in advance and within 2 years of its occurrence (see http://www.hubbertpeak.com/hubbert/1956/1956.pdf, says that with normal production methods, a country reaches peak production in its oil fields when they are 50% depleted, with the production curve being bell-shaped. The peak can be postponed with innovative extraction techniques, but this only causes subsequent more rapid decline of the deposits and total extraction if anything decreasing. The world reached the midpoint of its reserves in the last decade, so the 2005 "peak" implied by the above graph is very close to what would be expected.
- Astonishingly, Dr. Hubbert in the same 1956 paper predicted, based upon records of only 90 billion barrels of oil having been recovered worldwide, that the peak of world petroleum production would be approximately the year 2000; this apparently quite accurate prediction by Hubbert has largely been forgotten. One is tempted to ask why, if one man could predict the timing of the peak 44 years before it occurred, the United States Department of Energy is incapable of recognizing it after it occurred.
- There's a common feeling that just because we don't know where the oil is, doesn't mean the Mother Lode isn't right around the corner. But if you've looked everywhere, the chances are a lot slimmer. The lag time between discovery and bringing to full production of a field is 30-40 years, which means that even the virtually impossible discovery of another Saudi Arabia would barely change the graph above, of production between now and 2030. But no such discoveries are left to be made. The rate of discovery of new conventional oil has been steadily dropping now for FORTY years despite ever-more searching with ever-more-sophisticated technology. There have been two pivotal events: the peak of discovery around 1968, and the day in 1981 when discovery of new oil deposits no longer kept up with production. There is nothing complicated about this. As Campbell says, the warning sign there for anyone to see:
"simply recognised two undeniable facts:
- You have to find oil before you can produce it
- Production has to mirror discovery after a time lag
"Discovery reached a peak in the 1960s — despite all the technology we hear so much about, and a worldwide search for the best prospects. It should surprise no one that the corresponding peak of production is now upon us." Indeed, Campbell's second point means that the inevitable peaking of oil production in the early 21st century, should have been clear for all to see since the peaking of discovery in the late sixties.
Campbell does not stand alone. As the US Joint Forces Command observes, "The discovery rate for new oil and gas fields over the last two decades (with the possible exception of Brazil) provides little reason for optimism that future efforts will find major new fields." - Saudi Arabia's largest field, the Ghawar, is now in decline and it appears that the country has nothing to offset that decline. That has led many to conclude that "Peak Oil is a Done Deal." (Dave Cohen, ASPO/USA Energy Bulletin, July 16, 2008)
