Peak oil is real and will stunt any economic recovery

Peak oil is real and will stunt any economic recovery thumbnail

During the last century, society squandered 500 million years of captured sunlight on drag races, traffic jams, private jets and overheated office buildings – warns campaign group

Oil company cheerleaders proclaiming huge supplies of oil are dead wrong. Peak oil is as real as rain, and it is here now. Not 2050. Not 2020. Now. Oil production has been flat since 2005. This is not by choice. The producers cannot increase production because new fields cannot keep pace with declining production from old fields. The plateau is the top of the global depletion curve. Furthermore, this end of energy growth only accounts for volume. Energy quality and net-energy are falling like stones as environmental devastation increases. Every producing oil field on earth is in decline, unless it is brand new, and peak discoveries are well behind us. Meanwhile, the aggregate decline rate appears to be about 5 per cent per year. To maintain world production, we would need to bring a new Saudi Arabia – equivalent to three billion barrels annually – into full production every three years. There exists on earth not one single promising field that remotely approaches those requirements.

oil production
(The oil plateau: The calm before the decline. Reference: The Oil Drum.)

When you read or hear about “10 billion barrels” of oil discovered somewhere, here is how to think about that – a third of that is probably not recoverable or entirely illusory. The recoverable portion will require a billion barrels of oil equivalent energy to produce; in the tar sands it would take three billion barrels. What is left, about five or six billion barrels, equates to about a two-month supply for humanity. Two months. We will not “run out of oil” because, simply, we will never get it all. What petroleum geologists point out is that all oil fields have a production curve, a peak and a decline. Therefore, the earth’s total supply has a peak and decline.

But that is not all, the volume decline includes a decline in quality and net energy. As oil fields reach old age, energy returned on energy invested plummets and production costs soar for a lower quality product. Over the last century, oil producers have high-graded earth’s energy storehouse, and the best net-energy reserves disappeared 70 years ago. Oil in its heyday – the 1930 and 1940s – produced 100:1 net-energy, a hundred barrels out for one barrel of energy invested. Today, oil fields range from 20:1 to 10:1. The United States average is 11:1. We are now digging into the 3:1 net-energy tar sands. Energy expert Howard Odum warned of the net energy curve in the 1970s and geologist Marion King Hubbert graphed the oil decline in the 1950s.

oil discovery and production
(Peak discoveries occurred 50 years ago. Reference: Exxon Mobile, from The Oil Drum.)

Charles Hall, at the State University of New York, has calculated that it is not possible to run our complex civilisation on a net-energy below about 6:1 – because society needs that reserve energy to run its transportation, agriculture, health systems and so forth. The tar sands 3:1 net energy is simply pathetic. A salmon does better chasing herring. An Amish farmer gets 10:1 net energy with hand tools. I suspect most of the industry cheerleaders talking about “giant discoveries” and “energy gluts” know this. Still, they spin every new oil discovery as an arrival in the Promised Land, pump stock plays and promote their industry. In our world, that is legal. But it is not really honest. In April 2011, chief economist of the International Energy Agency Fatih Birol revealed what the industry knows: “We think that the crude oil production has already peaked, in 2006.”

And since the population is growing, peak oil per capita occurred in 1979. We have now reached the absolute peak. Without increasing energy sources, we cannot increase economic activity. We can print money and harvest the earth’s assets and make it look like growth – for a while – but the piper will be paid. Nature shall not be mocked. In 2008, when the economy appeared to be roaring and traders pitched mortgage-backed securities on unsuspecting clients, energy production had ceased growing. As a result, the oil price almost tripled from $50 per barrel to $147. This equated to a $3 trillion increase to the world’s annual energy bill, which sucked discretionary income from every other market and helped crash the global economy.

When the economy collapsed, oil prices fell. But as economies recover even slightly, the price will rise again since supply is restrained. Blaming the US President Barack Obama for rising energy prices is another con job. Blame nature. She just cannot make more of the stuff fast enough. During the last century, society burned the best half of recoverable hydrocarbons that represented 500 million years of captured sunlight; a one-time storehouse of high quality, concentrated energy. We squandered it on drag races, traffic jams, private jets and overheated office buildings. We burned this valuable asset and called it “income.” If you did that in your home, you would go bankrupt. Peak oil is real. The consequences – at best – will be a slowly scaled-down industrial civilisation. If we continue to ignore these facts, the consequences will be far worse. Nature just is not sentimental.

PublicServiceEurope

3/15/2012

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