The Upcoming Peak Oil Problem

January 17, 2011


In today’s global financial crisis, people are looking for ways to fix the mistakes that led to the current disastrous situation. Fixing the problem is always second best, however, to making sure the problem never happens in the first place. It is important not only to learn about past global economic catastrophes, but also to anticipate coming ones. Oil will definitely have a major influence on the next global financial collapse. The United States now accounts for about a quarter of world oil consumption (with more than half that total imported from OPEC and other overseas producers). On the other hand, annual oil consumption in China is growing seven times faster than in the United States. America is entering an era of unprecedented growth, as well as a dwindling supply of its bloodline to the industrial world.


Peak oil is the notion that concerns the inevitable moment when world oil production will hit its peak; from that point on, reserves will be on an ever-dwindling downward spiral. Prices will be pushed higher and higher in the face of surging demand, which in turn will have a disastrous impact on oil-addicted economies around the planet. Major oil companies worldwide know very well about peak oil, which is why they are scrambling to secure as much global reserves as they can, and why the number of oil-based company mergers has steadily increased over the past 15 years.

The International Energy Agency (IEA) says that peak oil will arrive “sometime between 2013 and 2037,” with production thereafter expected to decline by about three percent a year. “Most of us who are worried about this issue would say definitely it will happen sometime this decade,” said Dr. Jeremy Leggett, a member of the UK’s Renewables Advisory Board and a former oil geologist.

The geologist who has most expressively laid out the argument for higher oil prices is Dr. Colin J. Campbell. As author of the book “The Coming Oil Crisis”, Campbell holds a doctorate from Oxford University, and spent decades working as an international exploration geologist for major oil companies. After an extensive career in the oil industry, Campbell worked for Petroconsultants, where he was influential in assembling what has become widely recognized as the world’s leading hydrocarbon database. According to Campbell, world oil discovery peaked in the 1960s and has declined steadily since, and, currently, four barrels of oil are produced for every one that is discovered.

 

This is clearly an unsustainable situation, as long-term discovery and production must reflect each other to a certain degree. Campbell also provides significant evidence that the Organization of Petroleum Exporting Countries (OPEC) is grossly overstating its oil reserves, for various political reasons.

Other expert views on peak oil are many and similar: “World will face oil crunch in the next 5 years” (The Financial Times, 2007); “Shell estimates that after 2015, supplies of easy-to-access oil and gas will no longer keep up with demand” (Jeroen van der Veer, CEO of Shell, Jan. 22, 2008); “Underpinning the long-term price of oil is the fact that the world is consuming over 30 billion barrels a year and replacing only a fraction of this with new discoveries” (James W. Buckee, President and CEO of Talisman Energy Inc., March 13, 2007); and “We’re seeing the beginnings of a bidding war for Middle Eastern oil between east and west” (David O’Reilly, CEO of Chevron, Feb. 15, 2008).

While oil is best known for its use in transportation, it is also used in nearly all plastics, along with lubricants, wax, sulfur, tar and asphalt. Because oil has become synonymous with industrialization, unless serious steps are taken to prepare when the production of conventional oil can no longer increase, the world will be faced with the possibility of major economic shocks and political unrest that would surely ensue. This means that new approaches to an economic fuel source must be found immediately. Any plans for offshore drilling, or attempting to scavenge the oil in the tar pits of Canada or the barren arctic of Alaska, will only delay the inevitable. We are running out of time to find substitutes for oil and every day the we delay the necessary adaptations is a day closer to a more volatile and dangerous world.

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