Climbing Hubbert's Peak: the Looming World Oil Crisis

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Climbing Hubbert’s Peak: The Looming World Oil Crisis

When the American Peak Oil Theory Petroleum Institute Hubbert argued met for a conference Declines in global oil production that petroleum pro- in March 1956, duction would fol- most of the partici- are inevitable low a standard sta- pants probably ex- tistical “bell-shaped pected to hear up- curve.” He noted beat news. After all, that the quantity of back in the 1950s, oil available for production in any given region the U.S. petroleum industry was humming and must necessarily be finite, and therefore subject vibrant. The petroleum companies were produc- to depletion at some point. ing more U.S.-generated crude oil than ever be- Whenever a new oil field is discovered, the fore—in excess of 7 million barrels per day.1 The petroleum yield from that location tends to in- sky was the limit. Or so it appeared. crease rapidly for a period of years, as drilling in- Then M. King Hubbert delivered his paper. frastructure is put in place and extraction activi- ties are ramped up. Hubbert’s Prediction Once half of the oil field’s reserves are Dr. Hubbert, then age 52, was a geologist with pumped out, however, the oil source reaches its Shell Oil Company. Officials at his company had peak rate of production. Then decline sets in, received advance word about Hubbert’s speech, with the rate of production decrease ultimately and they were worried. They pleaded with him to approximating a “mirror image” of the produc- downplay some of the paper’s more controversial tion increase rate seen in the oil field’s early years. claims.2 The actual date when oil production reaches But Hubbert refused and went ahead with his its peak depends on the number of barrels ex- presentation, entitled “Nuclear Energy and the tracted from the oil field. So plugging different Fossil Fuels.”3 His theme was grim, and it disturbed figures into the variables of Hubbert’s equations many of his distinguished guests: He boldly predicted that U.S. oil production would peak some- where around 1970, and then begin declining. Charles H. Eccleston

© 2008 Wiley Periodicals, Inc. Published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/tqem.20173 Environmental Quality Management / DOI 10.1002/tqem / Spring 2008 / 25 03TQEM_17_3_eccleston.qxd 3/7/08 12:19 PM Page 26

can yield a range of “peak date” estimates. The dicted that a peak in world oil production would end result is the same, however: Oil production occur around 2000.5 crests and then rapidly declines. The graph in Exhibit 1 shows a forecast that Hubbert made in the late 1960s, based on esti- The Trajectory of U.S. Oil Production mated world oil supplies of approximately 2,100 In the years after Hubbert’s speech, U.S. oil billion barrels. Assuming the production rates production continued its steady upward progres- shown in this graph, the world would deplete sion. 1970 came and went. Many commentators about 80 percent of its available oil in a period of dismissed Hubbert. under 65 years. But trends are not always immediately appar- ent. It can take a few years of data before they be- Developments in World Oil Production come clear. Within a few years after Hubbert made his And soon enough, the statistics were indis- prediction about global peak oil, political events putable: Hubbert had been dead on. U.S. oil pro- arose that affected his estimates. In particular, the duction had in fact peaked in 1970—exactly the 1973 oil embargo imposed by the Organization of year he had predicted based on his “high oil in- the Petroleum Exporting Countries (OPEC) re- ventory” estimate.4 sulted in an “energy crisis” that changed the dy- namics of Hubbert’s equation. By reducing oil Repeating the Peak? consumption and encouraging greater energy ef- But Hubbert’s prediction went much further. ficiency, the embargo and its aftermath probably He argued that his theory applied not only to the delayed the worldwide Hubbert’s Peak.6 U.S. petroleum industry, but to global oil production as well. Heading into the Future Throughout the 1960s and 1970s, Hubbert But a global peak in oil production is still in- continued to refine his theory. He eventually pre- evitable, assuming Hubbert’s theory is correct.

Exhibit 1. Projected Worldwide Oil Production

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Every oil field has its own unique Hubbert pump only the quantity of oil specified in their curve. Once its peak is reached, decline is un- individual quotas, and these quotas are based avoidable. on the estimated reserves that each OPEC mem- To see what this means in practice, look at oil ber declares. So the higher a country’s reserve production in Pennsylvania, where the U.S. pe- estimate climbs, the more oil it is allowed to troleum industry began in the mid-nineteenth pump—and the more revenue it can earn from century. There are approximately 20,000 produc- petroleum sales. ing oil wells in the state. These wells each yield an This of course creates a strong incentive for average of only around 1/4 barrel per day. All the OPEC states to overstate their reserves in order to oil wells in Pennsylvania produce less than half as gain larger production quotas. After all, the big- much as a single high-producing well in Saudi ger the production quota, the more income the Arabia.7 country can generate. Thousands of oil fields around the world are Kuwait was the first OPEC nation to sud- quickly heading toward the same fate as those in denly increase its reserve estimate, which soared Pennsylvania. And even where production is not by over 40 percent in yet clearly in decline, petroleum may not be as a single year (1984 to plentiful as it appears. 1985). Within a few Assumptions about the amount of oil years, several other available to be pumped are based Reserve Estimates: How Trustworthy nations (including oil largely on estimates of oil reserves Are They? giant Saudi Arabia) re- announced by petroleum producers. Assumptions about the amount of oil avail- sponded by dramati- But many observers suspect that able to be pumped are based largely on estimates cally increasing their producer estimates are inflated. of oil reserves announced by petroleum produc- officially stated re- ers. But many observers suspect that producer es- serves. These develop- timates are inflated.8 ments strongly suggest that the estimated re- These observers note that between 1980 and serves of many major oil-producing nations 1990, the “proven reserves” of many of the have been greatly exaggerated. largest oil-producing nations suddenly and Moreover, many OPEC members’ reserve es- mysteriously showed a dramatic increase. For timates are not declining appreciably from one example, Abu Dhabi’s declared reserves nearly year to the next. This means that OPEC mem- tripled in one year, from approximately 31 bil- bers are in effect claiming to discover “new” lion barrels in 1987 to 92 billion barrels in fields—year after year—that almost exactly 1988. That same year, Venezuela’s declared re- match (and replace) the quantities of oil they serves more than doubled, from 25 billion to are pumping out.9 over 56 billion barrels. If OPEC producers are in fact overstating What could account for such sharp and mas- their reserves, then the amount of oil yet to be sive increases in reserves? The answer may have extracted may actually be much smaller than of- little to do with the actual amount of oil in the ficial projections estimate. This means that the ground—but a lot to do with OPEC politics. world oil “day of reckoning” may be much closer Since 1985, OPEC has tied member coun- than previously thought. In fact, some peak oil tries’ production quotas to their oil reserves. critics believe that oil production by many OPEC Under this policy, members are allowed to members is already in the process of peaking.

Climbing Hubbert’s Peak: The Looming World Oil Crisis Environmental Quality Management / DOI 10.1002/tqem / Spring 2008 / 27 03TQEM_17_3_eccleston.qxd 3/7/08 12:19 PM Page 28

Growing Oil Consumption and Lower Exports shortage. Higher prices cannot make oil appear if by Producers it does not exist. Moreover, feverish oil drilling in The problem is made worse by growing rates areas of mediocre potential and other “last- of oil consumption in many countries around minute” efforts are unlikely to provide a the world—including petroleum-producing na- “lifeboat” once worldwide peak oil arrives. tions themselves. A recent article in the New York Times noted, “The economies of many big oil- DOE’s Peak Oil Analysis exporting countries are growing so fast that their A study of the peak oil question commis- need for energy within their borders is crimping sioned by the U.S. Department of Energy (DOE) how much they can sell abroad, adding new paints a sobering picture of the problem—and strains to the global oil market.”10 The article the level of effort needed to address it. The study went on to add: resulted in a report entitled “Peaking of World Oil Production: Impacts, Mitigation, and Risk Experts say the sharp growth, if it contin- Management.”12 ues, means several of the world’s most im- The report’s executive summary opened with portant suppliers may need to start import- an ominous sentence: “The peaking of world oil ing oil within a decade to power all the new production presents the U.S. and the world with cars, houses and businesses they are buying an unprecedented risk management problem.”13 and creating with Among the key conclusions outlined in the re- their oil wealth. port were the following: A study of the peak oil question commissioned by the U.S. Department of Energy (DOE) paints a Indonesia has al- • World oil production will peak, although ex- sobering picture of the problem— ready made this perts differ on exactly when the peak will and the level of effort needed to flip. By some pro- arrive. address it. jections, the same • Peak oil will have a severe impact on the U.S. thing could hap- economy. pen within five • Peak oil is a “unique challenge,” something years to Mexico, the world has never before faced. The au- the No. 2 source of foreign oil for the thors note, “Previous energy transitions United States, and soon after that to Iran, (wood to coal and coal to oil) were gradual 11 the world’s fourth-largest exporter. and evolutionary; oil peaking will be abrupt and revolutionary.” A “Solution” to Peak Oil? • The main problems created by peak oil will be Many who dismiss peak oil predictions—par- concentrated in the transportation sector, ticularly economists—argue that improved tech- which relies primarily on petroleum-derived nologies and higher oil prices will solve any oil liquid fuels for which there are no readily supply problems that may arise. available substitutes. But many petroleum geologists tend to view • The mitigation efforts needed to avert severe the situation differently. They point out that tra- impacts from worldwide peak oil could take ditional economic incentives may not work when decades. These efforts will involve replacing the underlying problem is a natural resource “vast numbers of liquid fuel consuming vehi-

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cles” and building “a substantial number of implementation. All we need are the requisite substitute fuel production facilities.” The au- funds and the determination to act. thors state, “There will be no quick fixes. Even The longer we wait, the worse the impact of crash programs will require more than a peak oil will be. We can only imagine how many decade to yield substantial relief.” people will soon be asking, “Why didn’t anyone • Demand for oil can be reduced through do something about this crisis years ago?” higher oil prices and tighter efficiency re- quirements. But such reductions will not be Notes sufficient to meet the peak oil challenge. 1. U.S. Crude Oil Field Production (Thousand Barrels per Day), Large quantities of substitute fuels will also 1859–2006. United States Energy Information Administra- have to be produced. tion. Available online at http://tonto.eia.doe.gov/dnav/pet/ hist/mcrfpus2a.htm • Peak oil “presents a classic risk management 2. A tribute to M. King Hubbert. (2006, February 28). Available problem” that necessitates careful planning online at http://www.mkinghubbert.com/speech/prediction? and well-timed mitigation efforts. PHPSESSID=421e8d6f06a74e7afbb37b79f52908ad • Government intervention will be needed. 3. Available online at http://www.energybulletin.net/ • Mitigation efforts are crucial to averting 13630.html major economic difficulties. The authors 4. See note 1. note, “Without mitigation, the peaking of 5. Grove, N. (1974, June). Oil, the dwindling treasure. National world oil production will almost certainly Geographic, 145(6), 792–825. This article quoted Dr. Hubbert as stating, “The end of the oil age is in sight.” cause major economic upheaval. However, 6. Campbell, C. J. (2003). The essence of oil and gas depletion. given enough lead-time, the problems are Essex, UK: Multi-Science Publishing Company. This book in- solvable with existing technologies.”14 cludes estimates of how much oil production can be obtained from conventional sources, as well as from “unconventional” sources such as heavy oil, tar sands, natural gas liquids, and oil shale. The authors note that the “obvious conclu- 7. de Winter, F. Reading material on the bleak future we can sion” from their overall analysis “is that with ad- expect in petroleum and natural gas as sources of energy. equate, timely mitigation, the costs of peaking Available online at http://www.energycrisis.co.uk/Dewinter/. can be minimized. If mitigation were to be too lit- 8. Simkins, C. (2005, September 28). Open letter to Daniel Yer- gin on optimism and addressing Peak Oil seriously. Energy tle, too late, world supply/demand balance will Bulletin. Available online at http://www.energybulletin.net/ be achieved through massive demand destruction 9335.html. (shortages), which would translate to significant 9. Oil reserves. (updated 2008, January 11). Wikipedia. Avail- economic hardship.”15 able online at http://en.wikipedia.org/wiki/Oil_reserves. 10. Krauss, C. (2007, December 9). Oil-rich nations use more energy, cutting exports. New York Times. Available online at Concluding Thoughts http://www.nytimes.com/2007/12/09/business/worldbusiness/ 09oil.html?_r=2&hp&oref=slogin&oref=slogin. As the DOE study makes clear, it is time to 11. Ibid. seriously and honestly acknowledge the sever- 12. Hirsch, R. L., Bezdek, R., & Wendling, R. (2005, February). ity of the global peak oil emergency. An inter- Peaking of world oil production: Impacts, mitigation, and risk national program is needed to develop global management. Available online at http://www.netl.doe.gov/ publications/others/pdf/Oil_Peaking_NETL.pdf. energy alternatives—something along the lines of the United States’ “crash program” to put a 13. Ibid., at p. 4. man on the moon in the 1960s. Numerous al- 14. Ibid., at pp. 64–66. ternative technologies are already available for 15. Ibid., at p. 59.

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Charles H. Eccleston is a National Environmental Policy Act (NEPA) and environmental policy consultant, and an elected member of the board of directors of the National Association of Environmental Professionals (NAEP). He is listed in Who’s Who in America and Who’s Who in the World as a leading expert on NEPA and environmental policy. Eccleston is the au- thor of three leading textbooks on NEPA and environmental impact assessment published by John Wiley & Sons and CRC/Lewis Press. His book Megacrises: A Survivor’s Guide to the Future addresses terrorism and other emerging global threats. His latest book, NEPA and Environmental Planning, was published by CRC Press in February. He can be contacted at [email protected].

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