The End Is Nigh (Now With Charts!)

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Posted by Clark Williams-Derry

10/31/2008 07:05 AM

Geologists predict that oil production will decline within a decade.

As I'm sure you've noticed by now, gas prices have fallen back from the phenomenal highs of last summer. The immediate cause has been the economic crisis. When credit markets seized up, some companies that wanted to buy oil simply couldn't get the cash. And perhaps more importantly, the economic slowdown has decreased projections for oil demand. Markets that seemed tight are now looser than they've been in a while.

But those changes are just on the demand side. On the supply side, though, little has changed. If anything, the outlook for oil supplies is somewhat more pessimistic than it was a few years back. Take a look, for example, at this recent survey of petroleum geologists (pdf link), that was conducted at a recent professional convention and reported in the journal of the Society of Exploration Geophysicists. Three out of five petroleum geologists surveyed believed that global oil production would "peak" within 10 years. See below:

For those out there who aren't familiar with the concept, an oil supply "peak" is the point at which global petroleum production gradually declines, never to return to its previous highs. US oil production peaked in 1972, ushering in decades of growing reliance on foreign sources of petroleum -- along with all the international and economic entanglements that's entailed. Many predict that a worldwide peak in oil production will cause even more turmoil than the US peak has.

Perhaps surprisingly, then, more than one in ten petroleum geologists surveyed believe that the peak has already occurred, but has been masked by delays and ambiguities in the international production data. On the flip side, only fifteen percent of respondents believe that global peak is more than two decades off.

This is really quite remarkable. Just a few years ago, the conventional wisdom -- at least, the wisdom that we were hearing from major oil producers, top energy consultants, and international energy agencies -- held that the peak was many decades in the future. Apparently, professional petroleum geologists now feel free to speak their minds -- and are saying that a production peak isn't far off at all.

The geologists may be wrong, of course. But trying to outguess the considered opinion of well-informed scientists is a sucker's game. So no matter what oil prices do in the short term, we'd be wise to prepare ourselves for tightening oil supplies, and higher oil prices, in the not-too-distant future.

[Hat tip to Wayne Suyenaga -- thanks, Wayne!]

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Comments

Posted by Clifford J. Wirth, Ph.D. 10/31/2008 08:42 AM

According to most independent scientific studies, global oil production will now decline from 74 million barrels per day to 60 million barrels per day by 2015. During the same time demand will increase 14%.

This is equivalent to a 33% drop in 7 years. No one can reverse this trend, nor can we conserve our way out of this catastrophe. Because the demand for oil is so high, it will always exceed production levels; thus oil depletion will continue steadily until all recoverable oil is extracted.

Alternatives will not even begin to fill the gap. And most alternatives yield electric power, but we need liquid fuels for tractors/combines, heavy trucks, trains, ships, and mining equipment.

We are facing the collapse of the highways that depend on diesel trucks for maintenance of bridges, cleaning culverts to avoid road washouts, snow plowing, roadbed and surface repair. When the highways fail, so will the power grid, as highways carry the parts, transformers, steel for pylons, and high tension cables, all from far away. With the highways out, there will be no food coming in from "outside," and without the power grid virtually nothing works, including home heating, pumping of gasoline and diesel, airports, communications, and automated systems.

This is documented in a free 48 page report that can be downloaded, website posted, distributed, and emailed: http://www.peakoilassociates.com/POAnalysis.html

I used to live in NH-USA, but moved to a sustainable place. Anyone interested in relocating to a nice, pretty, sustainable area with a good climate and good soil? Email: clifford dot wirth at yahoo dot com or give me a phone call which operates here as my old USA-NH number 603-668-4207. http://survivingpeakoil.blogspot.com/

Posted by Matt the Engineer 10/31/2008 10:23 AM

That chart is sobering. I have heard expert opinions from 25+ years until the peak all the way to several years ago, but didn't realize how soon most geologists agree it will hit us. 61% say it's within a decade. Ouch.

I wonder what Texas will do with it's new 18 lane freeway.

Posted by David Hicks 10/31/2008 12:36 PM

The 'oil peak' or Hubbell's Folly, as it was known 30 years ago, is increasingly more undeniable - we're only arguing about the exact time now. The Industrial Revolution, at least the last 150 years of it, is an artifact of cheap oil. It cannot and will not continue as currently constituted. [1] We need to put online ASAP a wide range of substantial sustainable energy options. [2] We need to implement thousands of energy efficiency techniques. [3] We need to stop building huge energy-intensive structures, like cities. [4] We need to demonize power, speed, and unrelenting change.

Posted by Matt the Engineer 10/31/2008 01:02 PM

//[3] We need to stop building huge energy-intensive structures, like cities.//

I think you're missing something here. We should care about energy-intensity per person, which tends drastically downward when you look at cities. Transportation energy is very small. Heating energy goes way down with shared walls. Heating, cooling, lighting, and embodied energy (energy required to make "stuff") goes way down with reduces living space. I know the image in your head is probably the subsistence farm, but our population is far too high for that to be an efficient lifestyle.

Posted by Bill Ph.D. 10/31/2008 07:31 PM

Once agin I am amazed that feew people understand or acknowledge the close link of energy use/oil depletion, as well as most socioecnomic problems, with population growth!

Posted by Anne Marie Jehle 11/01/2008 12:12 PM

Blow Sunshine so that the Circle stays Unbroken, NOW!

Ain't that America? It's our boisterous, bountiful homeland. Full of amazing, good people who's eyes are on the prize, the lottery the ladder. Our nation of settlers has settled prematurely. We're snugly living to celebrate another day with the ones they love. But today my buddies are all caught up in a deathly game of battleship, king of the castle, monopoly, I spy, strip poker and capture-the-flag the immigrant or the panties!

Yes, I said the immigrant. Amazing grace, turn that ship around. It's time to dust off the welcome mat, sow first- reap second, be forever grateful for the chance to do good work here on American Indian soil. We need to shape up and be a damned good neighbor as if your life depended on it. Matter of fact, it does!

Vote and vote well and vote early, vote now. And vote with your heart open and your eyes on your national legacy, its treasures it's people. May our country's youth, all races and blessed global environment matter and flourish and last. We're hanging out here at the brink of eternity, so shake a leg, buster.

Mine is an American story. My great-grandfather Valentine Decot was a first generation American. In his twenties he knocked on doors till a doctor agreed to apprentice him. He worked, married and when his youngest of three baby girls was one, his wife died, He married the maid and had six more children. So I had five great-grandmothers and they all happened to be white. Luck of the Irish, you might say.

Today, Val Decot's spritely, now 96-yr-old jockish daughter Bunny Annable won't let a senior in her sight rest but for playing more penochle. He lives on in my father Bill Jehle thrill seeking geek who rides every wind, works like a banshee and yodels when he skis. My dad always thought he was German. My father has another grandfather.

Urban Jehle immigrated from Hamburg, Germany in the late 1800s. Urban was orphaned in the passage. He did not know his name. He was adopted by a loving German family who took his name off unclaimed luggage. Urban had a fruit and vegetable store in a building designed by a female architect. Together with fellow merchants, Urban started an insurance company, Merchant's Mutual. money flowed on until the market crashed. Urban went crazy and filandered, got syphillis went insane and died in an insane asylum. My father was eight years old when Urban died. He had never met his grandfather, he had only heard of him spoken about in hushed tones.

What a quirky society we keep. If it's challenging it must be hushed, suppressed, drugged or distracted.

Darn that 180, I want speech back. No more shutting up and playing nice. I want truth back now. Thinking is a public act.

I want to talk about abortion and immigration and global peace. I'm 100% Catholic and I have had an abortion. Jesus knows me, he knows why and he forgives me. I love my neighbors where ever they are from and I bless them and keep happy, close memories snug in my heart if they move far from me. I've been a merry globe-trotter: birding in Nepal (Hi Namka!), snorkeling in Galapagos (hi bright-eyed, in-my-face baby seal!), skiing the Alps (with snorts of Schnapps and delightfully goosed by the poma lift) and climbing pyramids of Chitzen Itza (time slowed to time immemorial).
My glorious travels (and Walt Whitman) taught me that the whole wonderful world exists in every cell that lives. Please leave untouched places whole. We don’t know and won’t know what we're missing when it's gone.

I'm mostly Irish. My beloved, warm and quirky mother Patsy Healy sings Tura Lura and can talk from home to the Blarney Stone and back. Her father, Edwin Ellsworth Healy earned his way as a first generation American, selling Fuller Brush, drinking with the boys, selling bigger tools till he half-owned the company selling big ol' tool and dye machinery. That about drunk him out of business. He loved gazing at birds flying over the Niagara River from his home on the Ontario side of the Peace Bridge. He died when I was four and he lives on in all of our hearts, minds and souls.

Pappa Healy left me college tuition in the form of a trust. Thank you, Pappa. I will never let you down.

Pappa also left me an antiquated sense of bravado, bullying, distrust and life-snuffing greed. I'm sure those skills helped Pappa climb to the top of the heap when he thought he hadta. Today is a different day. I want the world righted, that starts in my beloved homeland, because that's America.

I went to mass in O'Hare airport on October 5. Over the donuts that followed, I asked the Catholic priest if he was pro choice. He said, "Yes". I asked him was he voting for Obama, He said, "Yes." I asked him would he please say these things from the pulpit and he declined. Again my self-gagging faith is silently crushing my heart and my chances.

I have a deep loss I want you to know about. When my dearest pal and merry troubadour Teresa Rose Scott Divine was dieing of melanoma I was angry and deeply sad. At her wake Armstrong's What a Wonderful World wafted thru. My dear hippeclad T Rose, singing Bobbie Magee and Circle Be Unbroken and passing the jug to all people everywhere as we rode trains and scrounged our way through Europe via Innsbruck, Austria (thank you Universities of Innsbruck & Austria) in 1981-2.

My 4 year old daughter Abby is calling me now. She likes too introduce a show from her puppet theater, "Babies and gentlemen...!" she says. Well,, the world still beholds women as babes, so I giggle and fret.

Abby has friends from many cultures. She is so lucky and alive. May they all become a merry band of color blind, good neighbors playing musical chairs and hosting tea parties from sea to shining sea.

Abby wants to get going to family day at Seattle's Asian Art Museum and then to Seattle Center for El Dia De Los Meurtos. I tell her that we can go and play now. That sharing, having good manners, telling our stories, singing our songs, taking only what we need, being glad for all we have and going easy on our sandbox is everything... that's what it's all about.

When my dear ol' Dad retired I told him he had a new job. "Take care of your self, Dad. You have a new job. If you work out and take good care, then when you wake up in the morning, you'll still have a job!"

It's like this with our planet. Happiness isn't having what we want... it's wanting what we have. We've got it so good and there are simple savings all around.

We just gotta play nice in the sandbox. And I'd like a word with your friends. Surely you have years and fears greater than my own. My generation would like to get back to basics and focus on what's needed and what's lasting. We just gotta. The world is on fire. There's more to do than s'more and s'more alone. The world needs a united, healthy, open and welcoming middle class for the toddling merry band of wanderers.

So, please pass the earth... I have open loving arms, a receiving blanket, mamma's milk and all the rest of my days to smile, coo, delight and enjoy her.

thanks, Mom!
Anne Marie

I thank my lucky stars for my friends and inspirations Vic Charlo, Mayre Washington, Jerry Hunnicut, Keiko Sato and immortal beloved radiant rambling girl T. Rose Scott Divine
Please vote for Christine Gregoire in Washington State

Posted by Barry 11/01/2008 08:11 PM

One of the main dangers people don't understand about peak oil is that it isn't really about how much oil is left in the ground...it is about how fast we can get it out relative to demand.

I've had oil geologists explain this to me as how big the "straw" is we are sucking with...and not so much how much oil is the glass. There will be lots of oil left in the ground forever because it is too expensive to get out.

The threat for society can be seen in current oil extraction costs. To get a barrel out of the supergiant fields costs about $1. To get it out of all the tiny new pocket fields costs between $60-$70 a barrel. Ditto for extracting it from tar sands.

So the cost per barrel for NEW SOURCES of oil is very high and going upwards. Instead of a few big straws in big pools we have thousands of smaller straws in tiny pools.

To keep supply growing requires ever larger and larger amounts of money spent on exploration and new extraction techniques. And it takes years before any dollars spent yield much oil flow.

In other words, and this is the crucial point, money spent exploring and developmenting new sources needs to be ever increasing...BUT IT ISN'T. Why? For the same reason car companies didn't shift from SUVs in time. For the same reason investment banks didn't ditch derivative risk in time. The drive for short-term profits makes it almost impossible for oil companies to invest massive dollars in future exploration.

The IEA has finally started to see this danger. An internal report was just leaked this week saying a 9% PER YEAR decline in global oil production was possible soon unless major new investments are made globally to develop new sources now.

Will big enough investments happen? Well the major US oil companies just released quarterly reports and all showed:

1) huge profit increases
2) falling production
3) flat or declining investments in capital

For example, Exxon reported the largest quarterly profit of any company in history: $15b in one quarter. That is up 58%. Their production however was down 8%. Their investments in capital were flat at $6.8b. What did they do with all the extra profit: returned $10b+ to shareholders via stock buyback and dividends. They are choosing short term stock price over long term oil supply. Sound familiar?

Shell's profits rose 22%. But its production dropped 7% (including its oil sands). Their response to record profits and declining production? They are shelving plans to expand oil sands, cutting capital spending and returning $3b+ to shareholders.

Ditto for Chevron. Profits up 50%, but production fell for 8th straight quarter...this time by 5.7%. Increased dollars to shareholders, not capital.

So who cares how much oil is left...what matters is can we keep supply up to demand. It doesn't look good based on current investment rates. THAT is what is freaking people out who pay attention to this.

If we can't increase supply in time, we have only one other hope: dramatically decrease demand. If demand passes up supply the price with go hyper-critical and switch from cost of production of marginal new barrel to "cost of access". That is the caviar syndrome and we saw an example of that last summer.

Fortunately we also need to cut demand to solve climate crisis as well. So let's get on it. Time for "change" indeed.

I like the suggestions made by many who follow this issue: put a "floor" price on oil that is high and ramps ever upwards. If market forces cause oil to drop below the "floor" then add a carbon tax to keep the price there. If the price goes above the "floor", remove the carbon tax.

Unless we regulate demand of oil we are going to be slammed over and over by ever more brutal price spikes and economic chaos.

Posted by Barry 11/02/2008 01:43 PM

Another little known driver of the peak oil threat is the declining NET ENERGY per barrel of oil.

Big, shallow oil fields on land take very little energy per barrel extracted. But those are all gone. Remaining untapped sources are very deep, or offshore, or mixed with other stuff. These take much more energy to extract per barrel.

The newest "conventional" oil sources have a net energy gain of ~40% compared to older oil sources. The "unconventional" sources are far worse. Tar sands and coal-to-liquid are return less than 10% while oil shale, biodiesels and ethanol are near or below 0%. In other words, some of our newest sources are net energy losers.

This trend clearly shows that there is a physical energy limit to the extraction of new sources of oil. It also shows a little appreciated fact that we are getting less and less energy per barrel each year. To maintain the same energy usage we need even more barrels than before. The treadmill is speeding up and we have to produce more and more each year just to stay in the same place.

The peak oil threat is complicated in that it combines physical oil deposits, rates of investments, net energy levels and the ratio of demand to possible supply at any moment. But that makes it all the more dangerous to society.

A couple other indicators:

* world discoveries of new oil sources peaked in 1965 at about 60b barrels of new oil. The decline has been relentless and now discovery rate is about 10% of that peak.

* production of oil has exceeded new discoveries since 1984. We now extract FOUR TIMES more than we find each year.

* peak oil PER CAPITA happened many years ago in every analysts scenario

We must cut demand for oil ASAP. North Americans use over a quarter of the world's total...and twice as much as Europeans with same standard of living. The only people who can semi-gracefully ramp down oil demand in time are the wealthiest 10% of humanity: i.e. most of us.

We have a narrow window to keep things from getting really ugly for all of us.

Posted by Wayne 11/02/2008 07:27 PM

Clark, thanks for putting this up and good job in summarizing. I have a brief comment on one of your statements and on Dr. Wirth's contribution.

A comment on "conventional wisdom from major oil producers, top energy consultants, and international energy agencies held that the peak was many decades in the future." Its no coincidence these groups are the ones with the largest PR departments with the easiest access to large corporate media. Its been amusing to see these groups continually retreat in their predictions as they confront reality.

On the other hand, individuals (geologists, geophysicists, engineers and financiers) involved in the day-to-day exploration were the ones who have been advancing the peak oil argument by methodically using their background to document country by country, oil basin by oil basin, the reserves, productivity and future prospects for crude oil. They have built a convincing case over the years and their predictions have been more accurate that those of the more well known groups. This is apparent in the results of this informal survey.

As I have also followed the peak oil controversy I noticed that as awareness slowly increased, the community expanded to include several subgroups, each one emphasizing their interests. One of the first to join the parade were those like Dr. Wirth. If the oil majors and top consultants are at the Pollyanna end on controversy, the other end is occupied by the survivalist, the end-of-civilization-as-we-know-it individuals and groups.

Not to minimize the oncoming problems but the consequences of peak oil don't have to be as bleak as predicted by Dr. Wirth. Much of what he writes is certainly plausible and he is correct in emphasizing the importance of liquid fuel. But he overstates his case by extrapolating perceived trends too far into the future. For instance, "demand increases by 14%" . Well, if supply is constrained and prices rise, then much of this increased demand disappears. We are already seeing this process unfold and the "33% gap" between supply and demand becomes more manageable.

I think he is also too quick to write off conservation. Conservation can have a negative connotation if it just implies sacrifice. But it also can mean to search for better ways of living using less energy by imaginatively "living within our means" as Alan Durning is encouraging us to do. It won't be easy and there will be individual and societal dislocations that will be painful but global peak oil is in our near future and I agree with you that we'd be wise to prepare ourselves for it.

Posted by Wayne 11/17/2008 09:37 AM

Clark's post mentioned the conventional wisdom that global peak oil is decades away as conveyed by major producers, consultants and international energy agencies. Included in the latter group is the appropriately named International Energy Agency (IEA). Its recently released annual report represents a further scaling down of its formerly rosy outlook.

First a bit about the IEA. It is not surprising that it is highly influential in the policy making of the major economic powers because it was set up and funded by them after the 1970's oil shocks for just that purpose. Perhaps because of its intertwined political relationships with established governments, the IEA's reports through the 1990's into this decade emphasized the abundance oil supply by estimating oil production out to 2030 at 130+ million barrels of oil (MBO), implying that the world economy, or at least the IEA member nations, could chug along without worrying about where its cheap energy would come from. The IEA estimates are more examples of extrapolating a trend (in this case 1980-1990's oil production) far into the future without considering potentially contradicting factors (like whether or not the earth could actually supply that amount).

But that was then. In recent years, the IEA has moderated its tone as it confronted growing undeniable evidence supporting peak oil. Last week the IEA issued its 2008 annual report. The tone is set in the opening paragraph of its executive summary.

" The world’s energy system is at a crossroads. Current global trends in energy supply and consumption are patently unsustainable — environmentally, economically, socially. But that can — and must — be altered; there’s still time to change the road we’re on. It is not an exaggeration to claim that the future of human prosperity depends on how successfully we tackle the two central energy challenges facing us today: securing the supply of reliable and affordable energy; and effecting a rapid transformation to a low-carbon, efficient and environmentally benign system of energy supply."

It seems that the IEA has abandoned not only its upbeat forecasts, it has also firmly brought global warming concerns into its agenda.

For future oil production, the IEA now anticipates 2030 production of 104 MBO, a decrease from last year's 116. This is still arguably high for some peak oil analysts but not as indefensible as its earlier estimates. The IEA also anticipates rising production costs and continued price volatility.

So, Clark, it seems that the mainstream in slowly changing course as it encounters geologic and other obstacles. You and Alan are right in guiding us to anticipate a return to higher energy prices after the current financial and economic crises have passed. It will also be interesting to see if and how the IEA's new outlook is incorporated into the policies of its members.