After several years of partial success in explaining the physics-based phenomenon sometimes known as “Peak Oil”, this author has come to one conclusion: Peak Oil is difficult to explain, and it is difficult for most people to understand.
Now, some folks make the conscious choice to avoid considering a concept like Peak Oil because it might imply future hardship or a change in lifestyle, and they’d rather dwell on “positive” matters. Others would consider the acceptance of Peak Oil to be defeatist – ie, a surrender of man’s great ingenuity and/or his ability control his own destiny. Make no mistake about it, this author has a high regard for the power of positive thinking, for man’s ingenuity and for his ability to help influence his destiny.
For others, the difficulty with Peak Oil might be a subconscious one. Theories such as “cognitive dissonance” and “consensus trance” have been advanced, and these are likely manifestations of what is sometimes referred to as “crowd behavior”.
But for this exercise, let’s set aside these willful and subconscious roadblocks.
So, why do rational, intelligent, objective people have a hard time with this concept?
Well, a good guess might be that we are barraged - on a daily basis - with volumes of commentaries, data and unintelligible statistics:
- “Oil inventories are down this week.”
- “OPEC is increasing production by 500,000 barrels per day.”
- “There are trillions of barrels of tar sands around the world.”
- “They just found a new, 8 billion barrel field in
Without continuous study, it all becomes a fog. And sometimes even WITH continuous study, it is still foggy! As a result, most of us resort to: “Just tell me the answer! And tell me something good!”
The term “Peak Oil” is really a shorthand. It is an abbreviation for “peak production rate” or “maximum worldwide production rate”. Peak Oil is a manifestation of the physics of the depletion of a finite resource. And physics indicates that over the life of a group of all the fields in a country - or in the world - there is a maximum rate that can be achieved, and that rate occurs when roughly half of the RESERVES are depleted.
Currently, the average rate of oil consumption/production is around 85 million barrels per day, and many believe that there is little current "surplus capacity". Some believe that Peak Oil may be 80 – 85 million barrels per day, ie we are “already there”. Others believe that the world may be able to achieve 100 million barrels per day by 2011 or so. And the IEA has forecasts that indicate that it will be possible to produce as much as 120 million barrels per day in 2030!
But what if the world population grows, developing nations develop, and 2.4 billion Chinese and Indians just want to use a little more oil? Well, if the demand is 110 million barrels per day, and the world can only produce 100 million barrels per day, then the price will go up until the demand abates. And if worldwide economic growth is proportional to the rate of growth in energy consumption (as it has been since the beginning of the Industrial Revolution), then if we can’t grow energy consumption, we’ve got a problem with growing the economy!
To make matters worse, after the maximum oil production rate (Peak Oil) is reached, then the rate begins to decline - at least within a few years! (Hirsch's recent work with respect to "plateaus" is not encouraging.) So, post-Peak Oil, the economy not only can't continue to grow, but it must contract – IF economic growth is proportional to growth in energy usage (as it has been in the past).
So far we’ve talked about production RATE. Now let’s cover one other concept: RESERVES. RESERVES are "how much oil that there is left in the ground, which can be gotten out".
Once again, understanding RATE and RESERVES are the keys to understanding Peak Oil:
- RATE (in our context) is the maximum rate of oil production for a group of fields, or for the world.
- RESERVES are how much oil that is in the ground that can be ultimately be produced (for this analysis we won’t even differentiate between oil types, ie tar san