Reference: Peak Oil Primer

Why is Peak Oil Significant?

Because we have probably already passed the point of no return, and can no longer drill our way to energy security. Daryan Energy Blog lays out the facts, point by point:

We have passed a threshold where we could essentially drill our way out of oil shortages (graphs here). In the early days of the oil age we went after the “low hanging fruit” first. The big mega fields like West Texas, or Ghawar Field (Saudi Arabia) were found and drilled pretty early on (obviously being the biggest target simple probability says they were always more likely to be found first). What’s left is mostly concentrated in smaller fields, and indeed most of the oil that remains is in the form of those “unconventional” reserves discussed earlier.

The problem thus becomes an issue of sustaining output at its current levels, which becomes increasingly difficult over time, nevermind actually increasing output (which we need to do to maintain economic growth). In essence it’s the law of dismissing returns in action. These smaller fields don’t have the high EROEI ratios (energy invested v’s energy returned), and the economies of scale that the big oil fields once gave us.  Similarly the EROEI’s for unconventional sources tends to be much worse than those for conventional sources.

What About the Keystone Pipeline? The tar sands are a classic example. Even the most optimistic projections suggest a EROEI of between 6 and 9compared with figures of conventional oil wells in the range of 200-20. Note that an EROEI of anything less than 5-3 can potentially mean a net loss of energy, once you account for cycle efficiency when the fuel is ultimately consumed…

Thus in order to utilize the Tar sands (and other unconventional oil and gas supplies) substantial amount of energy will have to be devoted purely to oil extraction. And of course if the critics are right (anything less than an EROEI’s of 4) they will become a net energy sink rather than a resource.

Tar Sands use would at least double the relative CO2 emissions from each barrel of oil (not a good idea if we’re to fight climate change). However, the real problem with the Tar sands is that the maximum production rate that the main Alabasca region will be capable of sustaining (according to its supporters mind, the environmentalists give much lower figures) is a mere 5.1m bbl/day by 2030 – roughly 6% of current global production (5% of projected 2030 demand)….so where do we get the remaining 93-95% of the world’s oil from?

The short answer is, we don’t! once the large conventional oil fields peak, the world will enter into a permanent state of oil production decline. Global oil output will inevitably begin a process of slow gradual decline sometime soon.

Can’t We Just Diversify our Sources from the Middle East?

Almost every major oil producer outside of the Persian gulf has now peaked. If current global production just remains steady, by 2030 up to 50-60% of all oil production worldwide will be coming from the Persian Gulf (it now accounts for 32% of world oil production).

Global Oil Distribution by Region [Credit: BBC News & BP]

Most will come from 2 countries that are the only 2 major oil producers in the region who have the reserves large enough to match global demand – Iraq and Saudi Arabi, making us heavily dependent on political developments in this volatile region. And even this is questionable:

The experts agree that the vast bulk of remaining oil reserves are contained within the Middle East. Unfortunately, there are grave doubts by some as to just how much of this oil under the Middle East actually exists and how much of it is in a form than can be produced in an economically viable manner. As one commentator on the topic concluded “the books on oil have been as cooked as the ones at Enron”

What Are the Consequences of Having Reached Peak Oil?

In short, the economy can no longer be sustained on fossil fuels:

The economic growth of the world since the end of the 2nd world war has been largely fueled by the cheap availability of oil and petroleum derived products (short video here). Our entire civilisation is built around the use of oil, and there’s a strong probability we will not be able to sustain our current economy without it.

Why not Wait and See if Peak Oil Happens?

The problem with waiting until it’s too late is that to keep the economy afloat will require preparation many years in advance:

The Hirsch report (downloaded from the DOE website here) makes clear that it would take a comprehensive energy transition program to be implemented 20 years before peak oil hits to mitigate any disruption. Waiting till it’s in the past? the report states could lead to a 20 year or more liquid fuels deficit, with some pretty dramatic consequences for society.

The problem is that all the solutions to peak oil are long term. As mentioned earlier, we can’t simply flatten entire cities overnight and rebuild them the next day, the costs would be enormous! Even the most obvious option, switching over to natural gas, isn’t a simple solution. The Hirsch report pointed out that the value of the US inventory of oil based equipment is in the order of tens of trillions of dollars (that covers refineries, several million petrol stations, a hundred million or so cars, building heating systems, various chemical plants, ships, planes, etc). We simply can’t junk all of that overnight, wave a magic wand and produce another entire set of systems….which, in the case of natural gas, would themselves need replacing once natural gas sources peak and enter into decline.

Similarly vast arrays of solar panels or wind turbines, or a series of synthetic fuel plants or a major nuclear building program…are the sort of projects it takes decades to organize,plan, and implement.

Shouldn’t We Just Expand Drilling?

The impact of ANWR Drilling on the US oil picture, based on DOE figures []

Some question whether we should expand drilling in places like the Arctic National Wildlife Refuge (ANWR). The question of  whether there are any viable deposits of oil there is a blind assumption. And, if there is, the maximum speculated output is 0.7 million bbl/day – only about 0.9% of current global production. And since there could be much less than this, if any…

Say we actually get an output just over half this figure 0.4m bbl/day. It will be a good few decades before such oil can be brought on stream, by which stage demand will have risen to at least 90m bbl/day (according to the IEA)…so that would be just under 0.44% of global demand…or about 2% of US oil demand (where does the other 98% come from?). In short ANWR would be a drop in the ocean in the grand scheme of things, if of course there’s any oil there in the first place!

The only people seriously promoting ANWR drilling (I seem to remember even John McCain was against it) are a small number of oil companies and politicians who stand to gain financially from it, as well as a large number of “sheep” who watch too much Fox News and drink far too much tea.

Are Renewables The Answer?

Yes and no. Yes, because it’s clear that we’ll have to ramp up our investment in and implementation of renewable sources of energy. No, because renewables alone may not be enough to sustain the kind of economic growth we’ve become accustomed to.

World Energy output with renewables highlighted, note the heavy dependence on biomass and hydropower [Credit: REN 2011]

What would it take to bring renewables to a critical level?

In order to take up the slack set by Peak oil alone (nevermind peak gas or coal) then we would need to raise [current implementation of] 566 Billion kWh/yr by at least double or more. If we exclude large hydro (nearly all used up, limited room for expansion) and biofuels (arguably double counting of oil), bringing our figure above down to just 260 Billion kWh/yr, then we need to expand annual renewables production by almost 5-6 fold just to keep pace with peak oil depletion.

And if we want to cope with future potential declines in gas and later on coal (or we wish to decrease our use of these to combat climate change) the above figure rises yet further…about 12 times our current output of renewables per annum will be required post-peak fossil fuel energy, just to keep pace with decline rates. And again, this is just the cost of standing still, trying to expand the global economy or rapidly replace our existing fossil fuel based energy infrastructure (necessary in order to combat climate change) would add further to this figure (12 fold+???).

Could our renewable output be raised by such an unprecedented level? My suspicion is no, we can raise output to a considerably higher level than it is now but not nearly enough to cope with the above noted levels of demand.

Not a pretty picture? Maybe we should just bury our heads in the sand (pun intended), watch Fox News and buy into myths and conspiracy theories to boost our sense of security? Not so fast…

What Can Be Done?

What’s needed is a 3-part strategy that combines:

  • The development of renewable energy technology 
  • The use of energy efficiency measures
  • Simplifying our lifestyles

Renewables: Experts estimate that we can ultimately get 3,000 times more energy from renewables than we currently use. The real question is how to roll out usage to keep pace with oil and gas depletion.

Energy Efficiency: Most experts say that energy efficiency policies can cut global energy use by 2-3% per year, eventually bringing energy consumption to half our current levels.

Lifestyle: There will be roadblocks, and the two main impediments to a viable energy strategy are  cost and lifestyle.  Someone is going to have to pay for the investment before the price of oil and energy get high enough for it to becomes economic to make the changeover.  And even assuming that we can work together to make this happen, we’ll have to adjust our lifestyles to deal with decreased energy reserves:

While we’ve made our homes more energy efficient with low-e bulbs and lagging the loft, we’ve also started buying lots of energy hungry gadgets like plasma TV’s and computers. Consequently the energy consumption of the typically household has soared over the last 30 years, even though it should be falling (due to improving energy efficiency. 

The Coming Years Will Be Our Ultimate Challenge

In other words, while the decline of the fortunes of the middle class today is largely a function of a class war waged by capital against labor, while we search for new employment and advancement opportunities, we’re all going to have to lower our expectations nonetheless.

This coming change is going to test the mettle of the human race to the fullest. Will we become embroiled in conflict and descend into a dystopian wasteland, or will we begin to rationalize our use of resources, learn to distribute our wealth and opportunity more equitably and come together in the common enterprise of rebuilding the global economy?

One way or the other, massive change is inevitable.