In the comments thread to my previous post, Luis Enrique suggests he’s optimistic about the ability of market mechanisms to mitigate the worst effects of peak oil. He does preface this, however, by acknowledging that it isn’t a subject he’s studied extensively and accepts that this optimism may well be misplaced.
So for the benefit of Luis and anyone else who may have missed my previous witterings on the subject, I’d like to recap my own position on the peak oil problem, why I believe it is the most pressing problem we face as a society, why free market mechanisms can only exacerbate the problem, and what I believe we should do about it.
Now, before I get excitable environmentalists accusing me of hyperbole for describing peak oil as “the most pressing problem we face”, and insisting that Climate Change makes peak oil pale into insignificance, let me point out that I don’t claim peak oil is somehow a more important problem only that it is more immediate. Furthermore, a failure to deal effectively with peak oil will dramatically accelerate Climate Change. Indeed, we cannot begin to effectively address the Climate Change issue without first sorting out what we plan to do about oil production peaking.
As an aside, I’d also like to point out that I’m a little troubled by the current tendency of environmentalists to describe Climate Change as ‘the most important issue facing the world’. Don’t get me wrong, I do understand where they’re coming from with that, but I believe they’re failing to see the wood for the trees… focussing on a single facet of something far larger. The issue we need to be concerned with — above all — is sustainability. Our impact on the climate may well be one of the largest obstacles to our achieving sustainability, but any “solution” to Climate Change that is itself unsustainable should be automatically discounted. This is why I have such a problem with the likes of George Monbiot and Mark Lynas (two environmental writers for whom I have a great deal of respect) suggesting that nuclear power be part of our plan to deal with Climate Change. The kind of massive increase in industrial activity that would inevitably accompany any significant expansion of nuclear power will only serve to take us further from sustainability. But that’s a discussion that deserves a post of its own, so for now I’ll get back to the specifics of peak oil.
A brief history of Peak Oil
The idea of a peak in global oil production was first seriously mooted by M. King Hubbert in the 1950s. There had been others before him who’d predicted oil running out, but they may as well have been reading tea-leaves for all the evidence they had to back up their claims. Hubbert on the other hand was a quite brilliant man; a petroleum geologist working for Shell Oil who carried out a highly detailed systems analysis of the oil industry. He collated and correlated vast amounts of data regarding oil discovery and production, then presented the findings to his extremely sceptical colleagues. They dared not openly dismiss such an acknowledged expert in the field, but it’s safe to say that his analysis was largely ignored.
This all changed with Hubbert’s vindication in the late 1970s as it became clear that his claims were borne out by the facts. Back in the 50s he had generated a graph — which has since become known as ‘the Hubbert Curve’* — which he claimed illustrated the life-cycle of oil production in a given region. His curve indicated that oil production in the 48 states of the continental United States would rise until 1970 whereupon it would peak and drop off at a rate of roughly 3% per annum.
As it happens, he was one year out.
Oil production in ‘the lower 48’ peaked in 1971 and despite the massive incentives created by the oil embargo of the early-to-mid 1970s, it declined steadily at roughly the rate he predicted and has been declining ever since.
By definition a peak in oil production can’t be identified until several years after it happens. So it wasn’t until the late 70s that Hubbert’s work was revisited in a serious way. Once it became established that his model had been near perfect in predicting oil production on the continental United States, a number of people in the industry began to work at applying that model to global production.
This, however, took a great deal of time. As I’ve recently discussed, getting hold of accurate data for oil fields isn’t always easy. Many nations — Norway and the UK for instance — have fairly transparent oil field accounting allowing both production and discovery to be accurately assessed. Unfortunately, although their production levels are easily identified, the nations controlling the majority of the global supply (the OPEC nations and Russia) tend to be extremely secretive about their discoveries. And the Hubbert analysis requires both sets of data.
Ultimately it took about 10 years for the first global analysis based on Hubbert’s methodology to be published. It appeared in a 1991 book by Dr. Colin Campbell called The Golden Century of Oil. Dr. Campbell, like Hubbert before him, was a well-respected petroleum geologist who had worked for many of the major players in the industry. He’s still a well-respected petroleum geologist but is now the Chairman of ASPO (the Association for the Study of Peak Oil and gas).
Campbell soon realised, however, that his analysis was far too optimistic — predicting, as it did, a global peak in production sometime in the middle of this century. The reason for, what he later realised was a significant inaccuracy, was his reliance upon the “official” data. As you may recall, BP have recently insisted that peak oil will not manifest for another 40 years or so which tallies with Campbell’s original hypothesis. However, as you may also recall, BP’s data is seriously flawed and significantly over-estimates the oil reserves in the major producing countries. Soon after the publication of his book, Campbell was contacted by an American geologist called Harry Wassall.
Wassall had spent his life in the oil industry and had set up a company in Switzerland called Petroconsultants. A significant portion of the resources of this company was sunk into developing the world’s first accurate database of oil discoveries and reserves. This was done by bypassing the official pronouncements of oil companies and nations and going straight to the source. As Campbell points out, what they did amounted — more or less — to “industrial espionage“. They sent engineers out to every major oil field and asked the people working on-site for accurate data. After double and triple verifying their information, they were able to build up a comprehensive, field-by-field, database of oil reserves.
Having read his book, Wassall got in touch with Campbell and suggested he re-run the analysis using the Petroconsultants database. Enlisting the help of fellow geologist Jean Laherrere, Campbell carried out the — rather laborious — analysis a second time and arrived at a somewhat troubling conclusion… global oil production was due to peak several decades before his initial estimate.
In fact, a strict application of the Hubbert curve to the Petroconsultants data set appeared to predict a global peak sometime around the year 2000. However, what Hubbert’s methodology does not — and cannot — take into account are any political and economic restrictions to production. The oil embargo of the mid-1970s dramatically reduced oil production for political reasons. This in turn plunged the world into a recession which saw demand drop for economic reasons. Thanks to this interruption of expected production rises, the peak was pushed back by several years. Once this was factored into the data, Campbell and Laherrere — using the tool-set provided by Hubbert — concluded that global oil production would peak sometime around 2010. They suggested a 5-8 year margin of error because although the Petroconsultants data set was far more accurate than the official figures, they couldn’t guarantee it was quite as accurate as the U.S. data that Hubbert had access to. Campbell published their findings in a 1997 book (The Coming Oil Crisis). In March 1998 their results were summarised in Scientific American. The article was called The End of Cheap Oil and can be read here (PDF file).
Mr. Bliss joins the party
Which is how and when I became aware of Peak Oil. As it happens, I’d begun to think about the issue about a year earlier when a chance remark had set my mind reeling. I was in a small boat on a particularly wide stretch of the Amazon River, near the city of Manaus. We were caught unawares by the mother of all electrical storms and spent half an hour in abject terror as wind, rain and river tried to swamp us. Miraculously we survived, and several bottles of beer were consumed in quick succession to steady the nerves. I was therefore in a rather ‘heightened’ frame of mind when one of my companions said of the storm “someone should learn to harness all that energy for when the oil runs out”.
Although I’d thought about the concepts of resource depletion and sustainability prior to that, it was really that moment when they became a mild obsession of mine. For a year I mulled over the question of what happens “when the oil runs out”. I was working in the engineering industry at the time and my job took me to numerous places where they pumped oil. The more I discovered, the more horrified I became. Then I received a copy of Campbell’s article from a guy called Jay Hanson who had — it appeared — become even more obsessed with the issue than I had. A few years earlier I’d published an article he’d written (on Corporate practices) in a zine I ran. He invited me to join a fledgling email-list he was involved in, called ‘energyresources‘ (set up to discuss Campbell’s book and Scientific American article, along with their implications) which is still going strong today.
As is my interest in the subject.
* Kenneth Deffeyes’ excellent book, Hubbert’s Peak: The Impending World Oil Shortage is the perfect place to start for those who want more information on the specifics of M. King Hubbert’s work.