GLOBAL ENERGY CRUNCH
Oil peak predicted
Some analysts predict irreversible slide for world's reserves
Published: Tuesday, May 24, 2005 at 3:00 a.m.
Last Modified: Monday, May 23, 2005 at 9:00 p.m.
Could the petroleum joy ride -- cheap, abundant oil that has sent the global economy whizzing along with the pedal to the metal and the AC blasting for decades -- be coming to an end? Some observers of the oil industry think so. They predict that this year, maybe next -- almost certainly by the end of the decade -- the world's oil production, having grown exuberantly for more than a century, will peak and begin to decline.
And then it really will be all downhill. The price of oil will increase drastically. Major oil-consuming countries will experience crippling inflation, unemployment and economic instability.
Princeton University geologist Kenneth Deffeyes predicts "a permanent state of oil shortage."
According to these experts, it will take a decade or more before conservation measures and new technologies can bridge the gap between supply and demand, and even then the situation will be touch and go.
None of this will affect vacation plans this summer -- Americans can expect another season of beach weekends and road trips to Graceland relatively unimpeded by the cost of getting there. Though gas prices are up, they are expected to remain below $2.50 a gallon. Accounting for inflation, that's pretty comparable to what motorists paid for most of the 20th century; it feels expensive only because gasoline was unusually cheap between 1986 and 2003.
And there are many who doubt the doomsday scenario will ever come true. Most oil industry analysts think production will continue growing for at least another 30 years. By then, substitute energy sources will be available to ease the transition into a post-petroleum age.
"This is just silly," said Michael Lynch, president of Strategic Energy and Economic Research in Winchester, Mass. "It's not like industrial civilization is going to come crashing down."
Where people stand on "peak oil," as parties to the debate call it, depends on which forces they consider dominant in controlling the oil markets. People who consider economic forces most important believe that prices are high right now mostly because of increased demand from China and other rapidly growing economies. But eventually, high prices should encourage consumers to use less and producers to pump more.
But Deffeyes and many other geologists counter that when it comes to oil, Mother Nature trumps Adam Smith. The way they see it, Saudi Arabia, Russia, Norway and other major producers are already pumping as fast as they can. The only way to increase production capacity is to discover more oil. Yet with a few exceptions, there just isn't much left out there to be discovered.
There will be warning signs before global oil production peaks, the bearers of bad news contend. Prices will rise dramatically and become increasingly volatile. With little or no excess production capacity, minor supply disruptions -- political instability in Venezuela, hurricanes in the Gulf of Mexico or labor unrest in Nigeria, for example -- will send the oil markets into a tizzy. So will periodic admissions by oil companies and petroleum-rich nations that they have been overestimating their reserves.
Oil producers will grow flush with cash. And because the price of oil ultimately affects the cost of just about everything else in the economy, inflation will rear its ugly head.
"The world has never seen anything like this before, and so we just really don't know," said Robert Hirsch, an energy analyst at Santa Monica-based Science Applications International Corp., a consulting company.
Still, he added, "there's a number of really competent professionals that are very pessimistic."
The pessimism stems from a legendary episode in the history of petroleum geology. In 1956, a geologist named King Hubbert predicted that U.S. oil production would peak in 1970.
His superiors at Shell Oil were aghast. They even tried to persuade Hubbert not to speak publicly about his work. His peers, accustomed to decades of making impressive oil discoveries, were skeptical.
But Hubbert was right. U.S. oil production did peak in 1970, and it has declined steadily ever since. Even impressive discoveries such as Alaska's Prudhoe Bay, with 13 billion barrels in recoverable reserves, haven't been able to reverse that trend.
When Hubbert extended the production curve into the future it looked like it would peak about 1970. Every year after that, America would pump less oil than it had the year before.
At first, critics objected to Hubbert's analysis, arguing technological improvements in exploration and recovery would increase the amount of available oil.
They did, but not enough to extend production beyond the limits Hubbert had projected. Even if you throw in the unexpected discovery of oil in Alaska, America's petroleum production history has proceeded almost exactly as Hubbert predicted it would.
Critics claim that Hubbert simply got lucky.
Peak's likelihood disputed
But many experts see no reason global oil production has to peak at all. It could plateau and then gradually fall as the economy converts to other forms of energy.
"Even in 30 to 40 years, there's still going to be huge amounts of oil in the Middle East," said Daniel Sperling, director of the Institute of Transportation Studies at UC Davis.
A few years ago, geologists began applying Hubbert's methods to the entire world's oil production. Their analyses indicated that global oil production would peak some time during the first decade of the 21st century.
The exact date doesn't really matter, said Hirsch, because he believes it's already too late. In an analysis he did for the U.S. Department of Energy in February, Hirsch concluded it will take more than a decade for the U.S. economy to adapt to declining oil production.
"You've got to do really big things in order to dent the problem. And if you're on the backside of the supply curve you're chasing the train after it's already left the station," he said.
Changes take time
For example, the median lifetime of an American automobile is 17 years. That means even if the government immediately mandated a drastic increase in fuel efficiency standards, the conservation benefits wouldn't fully take effect for almost two decades.
And though conservation would certainly be necessary in a crisis, it wouldn't be enough. Fully mitigating the sting of decreasing oil supplies would require developing alternate sources of energy -- and not the kind that politicians and environmentalists wax rhapsodic about when they promise pollution-free hydrogen cars and too-cheap-to-meter solar power.
If oil supplies really do decline in the next few decades, Hirsch said America's energy survival will hinge on the past century's technology, not the next one's. His report concludes that compensating for a long-term oil shortfall would require building a massive infrastructure to convert coal, natural gas and other fossil fuels into combustible liquids.
Proponents of coal liquefaction, which creates synthetic oil by heating coal in the presence of hydrogen gas, refer to the process as "clean coal" technology. It is clean, but only to the extent that the synthetic oil it produces burns cleaner than raw coal.
Synthetic oil still produces carbon dioxide, the main greenhouse warming gas, during both production and combustion. And the coal that goes into the liquefaction process still has to be mined, which means tailing piles, acid runoff and other toxic ills.
Energy analysts say coal liquefaction can produce synthetic oil at a cost of $32 a barrel, well below the $50 range where oil has been trading for the past year or so. But before they invest billions of dollars in coal liquefaction, investors want to be sure that oil prices will remain high.
Investors are similarly wary about tar sands and heavy oil deposits in Canada and Venezuela. Though they are too gooey to be pumped from the ground like conventional oil, engineers have developed ways of liquefying the deposits with injections of hot water and other means.
Unfortunately, it costs energy to recover energy from tar sands.
Most Canadian operations use natural gas to heat water for oil recovery; and like oil, natural gas has gotten dramatically more expensive in the past few years.
"The reality is, this thing is extremely complicated," Hirsch said. "My honest view is that anybody who tells you that they have a clear picture probably doesn't understand the problem."
This story appeared in print on page 1
All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.
Comments are currently unavailable on this article