Daniel Duma 3Rd Essay Final Draft Peak
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Daniel Duma 3rd Essay Final Draft Peak oil: the end of the world as we know it? That the whole world’s economic and social models completely depend on the consumption of fossil fuels is perhaps a well-known fact. Amongst these, petroleum has been called “the lifeblood of modern civilization” (Hirsch:2009). Beyond its use as a raw material for the manufacture of such products as plastics and medicines, it provides 99% of the energy used in transportation: cars, trucks, ships and planes all move on oil (IPTOES:2009, p.5). As modern economy can be argued to be heavily dependent on cheap transportation of goods and people, cheap oil is essential for its continued working. However, fossil fuels are by nature finite resources and there are those who say that a shortage of petroleum is imminent, a crisis the size of which the world has never seen. Many of these proponents of what is known as “peak oil theory” go as far as saying this would be the end of the world as we know it. The aim of this essay is to examine the validity of these claims and explore their implications should these predictions turn out to be correct. Before delving into a discussion of this issue, it seems essential to first present a crucial piece of background. It is necessary to note that all “peak oil” theories are based on the Hubbert peak theory, which posits that mineral resources are not extracted at a constant rate, but rather follow a production curve. This theory is based on several assumptions: firstly, that the resources which are easiest to extract and thus more profitable are extracted first; secondly, that the likelihood of finding new deposits of a resource depends on the total amount of the resource available; and thirdly, that resources are exploited with maximum efficiency. Given these postulates, the production curve predicted by Hubbert's theory is a symmetrical bell-shaped graph, according to which production will grow exponentially until reaching a peak, and then it will dramatically drop in symmetry with the increase. In simple terms, this means that after reaching its peak, the production of oil will inevitably and irreversibly plunge. So, the questions are now how valid this theory is and whether it can be applied to the world production of oil. Those who believe so point out that it has been used to successfully predict yearly oil production of specific countries and areas in a plethora of cases. Most memorably, it is very often pointed out that Marion King Hubbert successfully predicted in a 1956 paper that 1 conventional oil production would peak in the USA in 1970. (“Hubbert peak theory”, 2009) (Figure 1) The Hubbert model has also been applied to past figures and proved to be the model “providing the best fit to the data”, by testing it “using data from 139 oil producing regions” (Brandt:2007) (Figure 2). Figure 1. US oil production Figure 2. Norway oil production The economic and social implications of this seemingly innocent graph are huge: it has been suggested that a shortage of oil and the associated surge in prices would trigger a world economic crisis. Moreover, it has been pointed out that modern agriculture is heavily dependent on fossil fuels (pesticides and fertilizers are made from fossil fuels, and machinery runs on oil) (Peak Oil, 2009), and that with a shortage of petroleum supply food production would be hard-hit, leading to high food prices and eventually famine. Others, however, question the validity of this theory in a world-wide scenario, by pointing out that it only applies to conventional oil resources, i.e. to the easy-to-extract, free-flowing kind, or in other words, “cheap oil”. Unconventional oil resources, which are more difficult to extract and need heavier processing to be of any use (and are thus more expensive), are forecast to continue growing and developing as oil prices go up. For instance, such is the case of the Alberta tar sands in Canada, where production is expected to continue growing until 2030 (Söderbergh:2007). From this it follows that firstly the graph need not adjust to such a curve and secondly that if it does, the post- peak decline need not be symmetrical (i.e. a sharp descent). In other words, reaching the peak in production would not necessarily trigger an energy crisis. 2 It seems to me that the previous success of the Hubbert model in predicting oil production does make it a valid guiding principle for predicting future trends in production. Even taking into account unconventional sources, it seems to me that the basic assumptions are still valid. Furthermore, those unconventional sources pose other problems, and they cannot really be equated to conventional ones in terms of monetary cost and net energy, as I will discuss presently. So in my view the crucial question is not if but rather when the world oil production will peak. The figures on the timing of the peak of conventional oil range widely. The most pessimistic analyses suggest that it has in fact already happened, some say as early as 2005 (EWG:2007). Others, like the Cambridge Energy Research Associates (CERA) propose that we have at least a decade till peaking (Hirsch:2005), and UK oil giant Shell estimates it no sooner than 2025. By then, however, world demand is forecast to have grown by 50% (Hirsch:2005). These discrepancies appear to be caused by a great uncertainty about the reliability of all figures on oil reserves. I believe this stems from the complexities of international political and economic maneuvering and the interests of all parties involved. It has been suggested that governments of exporting countries and oil companies – 80% of world reserves are controlled by state-owned companies, such as Saudi Aramco (IPTOES:2009, p.3)– might be interested in overstating the immediacy of peak oil in order to drive up prices and so increase their benefits, while on the other hand governments of importing countries might want to understate the urgency of the issue in order to avoid a panic that would inflate oil prices and affect the economy. It has frequently been suggested, for instance, that “at least 300 billion barrels out of the 1.2 trillion barrels of supposed global proved reserves may be overstated” by members of the Organization of Petroleum Exporting Countries, because their quotas of production are fixed based on the size of their reserves. (IPTOES:2009, p.4) Many reports can be found suggesting the peak is rather imminent. A February 2004 report from US oil company ExxonMobil, one of the 4 biggest oil companies, dramatically shows a growing gap between world production and world demand starting 2005. (ExxonMobil:2004). While one could downplay this on the basis that an increase in oil prices would be in their interest, I see proof that the oil situation is reaching a tipping point in the very recent scandal on the International Energy Agency’s 2009 World Energy Outlook report. The Guardian reported that “a whistleblower at the International Energy Agency” claimed that “[the IEA] has been deliberately underplaying a looming 3.