When will oil production peak?

The previous article indicated that our oil-based society is fast approaching a turning point where the production of oil will be less than the demand of our world. At this point, a seller’s market will exist and the price of a barrel of oil may be $300 or higher. This translates to gas at $4.50 a litre. Need a loan to fill your gas tank?

Some visionaries have made predictions on our future:

“We have, or soon will have, exhausted the necessary physical prerequisites so far as this planet is concerned. With coal gone, oil gone, high-grade metallic ores gone, no species however competent can make the long climb from primitive conditions to high-level technology. This is a one-shot affair. If we fail, this planetary system fails so far as intelligence is concerned”.

— Sir Fred Hoyle, “Of Men and Galaxies,” 1964 –

Back in 1956, a geologist named M. King Hubbert predicted that U.S. oil production would peak in 1970 – The actual peak was 1971. His 1969 prediction that world oil would peak in approximately 1995 would seem to be a little early. Similarly, George Orwell’s novel entitled “1984” did not seem to be realistic when 1984 actually arrived. Today it seems a little more possible. What is perhaps more important than absolute accuracy of timing is the clarity of vision that these thinkers have brought to us. How many of us can predict anything in the future?

A number of industry related individuals have shared their predictions of when oil production may start declining. Most predictions for a peak of oil production fall between 2006 to 2025.

Source

Domain

Prediction

Bakhitari, A.M.S. Oil Executive (Iran) 2006-2007
Matthew Simmons Investment Banker (US) 2007-2009
Chris Skrebowski Petroleum Journal Editor After 2011
Deffeyes, K.S. Oil Geologist (Ret. US) Before 2009
Goodstein, D Cal-Tech Before 2010
Campbell, C.J. Oil Geologist (Ret. Ireland) Around 2010
World Energy Council World Non-Gov. Body After 2010
Pang Xionqgi Petroleum Exec (China) 2012
Laherrere, J Oil Geologist (ret. France) 2010 – 2020
EIA nominal case DOE energy info (U.S.) 2016
Thierry Desmarest Total Oil Company (France) 2020
CERA Energy Consultants (US) 2020 or later
Shell oil Major oil company 2025 or later

The world’s largest oil fields were all discovered more than 50 years ago. Given that age, it is possible that a large Saudi field will soon go into decline. The major Canterell field in Mexico will start its decline in 2006. The decline of super giants will be extremely difficult to replace.

Since the 1960’s, annual oil discoveries have generally decreased. Since 1980, annual consumption has exceeded annual new discoveries. The approximately number of oil fields is 4200, with 1% of these containing over 75% of reserves.

If the historical maximum of oil discoveries has already arrived, then it logically follows that the maximum of oil production will follow with an appropriate time delay.

The replacement of declining oil fuel by conservation, fuel switching or production by other sources (coal gasification) is a process that would take ten to fifteen years even if a concentrated effort were to be undertaken. If the pessimists guessing 2010 are right, then we are too late to avert a crisis of large and expensive proportions. If the optimists guessing year 2020 are right then we have 14 years to prepare. Some ask the question: when will the peak oil crisis come? A better question is – do we as a human race on this planet have the intelligence to demand and support the political leadership necessary in the coming years? We are well past the moment where short-term gamesmanship by our political leaders is acceptable.

Given the history of human cooperation in the past, it is not at all reassuring for the survival of the human race on this planet.

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When we can’t afford oil in Canada

Not so long ago the cost of gas was below our radar screens. Over the years our usage of oil has been increasing, with a number of oil analysts preaching in the wilderness that our profligate usage of oil is unsustainable and that a day of reckoning is coming soon. Those analysts are gaining more respect each day and that message will soon be the accepted wisdom. The average Canadian senses that there is a problem in the liquid fuels area but is unclear where this is all going. And to tell the truth, we don’t really want to hear the bad news. Isn’t life grand right now? Don’t worry, be happy!

Those “be happy” readers are advised to skip this column. For others who want a glimpse into the future, please continue reading. There is a great misunderstanding about the nature of the liquid fuel problem, which should be cleared up. Of all the planet’s riches that we are using up at a fantastic rate, oil is one of the most versatile and irreplaceable. It is a powerful source of energy that is mostly used in transportation – cars, ships, and airplanes but also in electric power generation.

There is a limited amount of oil on our planet. It is found in certain geological formations at considerable depth in the ground or under the ocean floor. With present technology, the chances of finding oil when drilling is considerable higher than in the past. For simplicity, we’ll use a round figure of 2000 Gigabarrels of ultimate recoverable reserves. The actual reserves may be more or less depending on whom you believe.

To understand why differing estimates exist, imagine being blindfolded with a straw inserted in a milkshake of unknown size. Based on the flow, you try to estimate how long the milkshake will last. Your friends stick other straws into the milkshake to attempt to find the edges of it, get more flow and a make a better estimate.

We know that the world is presently using roughly 82 million barrels a day or 30 Gigabarrels a year. Simple math (2000 / 30) would indicate 66 years before the oil runs out. Assumptions are that annual usage growth of 1.5 million barrels will cancel out discoveries over the long term. So where is the problem, you might ask?

The problem starts with the economist’s term “elasticity”. With most goods, if the price rises, we reduce our consumption. This reduced consumption, in turn, moderates prices. However, when oil prices rise, we still fill up because we need our cars to go to work, to shop and to heat our homes.

Where can we immediately cut our consumption of oil and gas? Public transit may not be possible. We need our lettuce from California and oranges from South Africa. We can’t re-insulate immediately. We can’t shut down our oil furnace during the winter. Can we change our SUV quickly for a small Honda Civic? We can’t do it. So oil demand is inelastic. We have all been complaining about the price of oil going to $75 a barrel but how many of us have actually cut our oil consumption? Anyone?

The second part of the problem is that oil flow from a well eventually starts declining. Doesn’t that make sense? At present major oil companies are having difficulties maintaining production at current levels and covering for growth of demand in China and India. As production from existing fields declines, it has to be replaced by new discoveries and they are not so common as before. New drilling is taking place in deeper water that is costlier. Unconventional sources like oil sands in Alberta are being tapped but they too are expensive, energy intensive to extract and not too good for the environment.

When oil production peaks and we won’t know until after it happens, a seller’s market will exist and oil prices will go to heights like nothing we have seen before. And that is when we won’t be able to afford oil in Canada. Next, Energy Matters! looks at when oil may peak.