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The Hubbert peak theory, also known as peak oil, is an influential theory concerning the long-term rate of conventional oil and other fossil fuels production and depletion. It predicts that future world oil production will soon reach a peak and then rapidly decline. Some observers such as Kenneth S. Deffeyes, Matthew Simmons, and James Howard Kunstler believe that because of the high dependence of most modern industrial transport systems on inexpensive oil, the impending post-peak production decline and possible resulting severe price increases will herald negative implications for the future global economic outlook.
Note, because of world population growth, oil production per capita peaked in 1979 (with a plateau 1973-1979).[1]
According to the Hirsch report prepared for the U.S. Department of Energy, a global decline in oil production would have serious social and economic implications without due preparation. Initially, an unmitigated peak in oil production would manifest itself as rapidly escalating prices and a worldwide energy crisis. While past oil shortages stemmed from a temporary insufficiency of supply, crossing Hubbert's Peak means that the production of oil continues to decline, so demand must be reduced to meet supply. If alternatives or conservation (orderly demand destruction) are not forthcoming, then disorderly demand destruction will occur, with the possible effect that the many products and services produced with oil become scarcer, leading to lower living standards.
Because most oil is consumed in transportation, approximately 66.6% in the United States[10] and 55% worldwide,[11] much of the discussion regarding mitigation of the effects of oil depletion center around the development of transportation that uses less oil.
There are many forms of transportation that do not require oil or require much less than the standard automobile. Today, these include the application of public transport, biofuels, high mpg hybrid vehicles, bicycles, diesel vehicles,[12] battery electric vehicles, and plug-in hybrid electric vehicles. Hydrogen vehicles[13] such as General Motors Sequel are also being developed. Because America uses 1 out of every 4 barrels of global oil consumed[14][15] and uses 66.6% for transportation, it uses roughly 17% of global oil consumption for transportation and is potentially the largest market for any new type of vehicle. However less than 30% of personal auto expenditures in 2003 were on gasoline and oil as compared with over 40% in 1980[16] and personal use is just one component of overall transportation.
More comprehensive mitigations include better land use planning through smart growth to reduce transportation inducements, increased capacity and use of mass transit, vanpooling and carpooling, bus rapid transit, telecommuting, and human-powered transport from current levels.[17] Rationing is also a form of mitigation.[18] In order to deal with potential problems from peak oil, Colin Campbell has proposed the Rimini protocol.
Of the currently available alternatives to oil, the most viable ones are:
Regarding nuclear power, the output of current nuclear generation is electricity. Newer, generation IV reactors which can produce electricity as well as hydrogen directly would need to be built in order to supply hydrogen for vehicles or other chemical applications.
It should be noted that hydrogen is not an energy source, but an energy storage medium, since it cannot be mined or extracted.
One near-term alternative source of liquid fuel is the Athabasca Tar Sands in Alberta, Canada. Production from this source is around 1 mbbl/day as of 2006, and is expected to build up to 3.2 mbbl/day by 2015. New technology has drastically reduced the cost of extracting oil from this source. The current extraction process, however, requires large inputs of natural gas and fresh water.[19] The figure for recoverable reserves from this source was around 180 billion barrels as of mid-2006 (cf. the Saudi Arabian reserve of about 260 billion barrels of conventional oil). A similar field, the Orinoco tar sands in Venezuela, is also being exploited. These two are the largest known fields of tar (i.e., bitumen) sands.
Even in 2005, before further dramatic techological improvements in the ease of extraction, the potential of oil shale in the US is discussed by a RAND study:[20] Synthetic fuel, created via coal liquefaction, requires no engine modifications for use in standard automobiles. As a byproduct of oil embargoes during Apartheid in South Africa, Sasol, using the Fischer-Tropsch process, developed relatively low-cost coal-based fuel. Currently, about 30% of South Africa's transport-fuel (mostly diesel) is produced from coal.[21] With crude-oil prices above US$40 per barrel, this process is now cost-effective.
Matthew Simmons, Chairman of Simmons & Company International, said on October 26, 2006 that global oil production may have peaked in December 2005, though he cautions that further monitoring of production is required to determine if a peak has actually occurred.[22]
In State of the World 2005, Worldwatch Institute observes that oil production is in decline in 33 of the 48 largest oil producing countries.[23] Other countries have also passed their individual oil production peaks.
World oil production growth trends, in the short term, have been flat over the last 18 months. Global production averaged 85.24 mbbl/d in 2006, up 0.76 mbbl/d (0.9%), from 84.48 mbbl/d in 2005.[24] Production in Q4 2006 was 85.38 mbbl/d, up 1.09 mbbl/d (1.3%), from the same period a year earlier. Average yearly gains in world oil production from 1987 to 2005 were 1.2 mbbl/d (1.7%), with yearly gains since 1997 ranging from -1.4 mbbl/d, (-1.9%; 1998-1999) to 3.3 mbbl/d (4.1%; 2003-2004).[25]
Of the three largest oil fields in the world, two have peaked.
Mexico announced that its giant Cantarell Field entered depletion in March, 2006,[26] as did the huge Burgan field in Kuwait in November, 2005.[27] Due to past overproduction, Cantarell is now declining rapidly, at a rate of 13% per year.[28] In April, 2006, a Saudi Aramco spokesman admitted that its mature fields are now declining at a rate of 8% per year, and its composite decline rate of producing fields is about 2%,[29] thus implying that Ghawar, the largest oil field in the world, may have peaked.[30]
Many commentators have pointed to the Jack 2 deep water test well in the Gulf of Mexico, announced September 5, 2006, as evidence that there is no imminent peak in global oil production. The Jack 2 field may have the potential to provide nearly 2 years of U.S. consumption at present levels. Peak oil theory, however, does not suggest that there will be no major oil finds in the future, but rather that new discoveries and new production will not be able to offset depletion in other parts of the world.
Increasing investment in harder to reach oil is a sign of oil companies' belief in the end of easy oil:[31] The "harder work" mentioned has, however, already displayed the potential to unlocking crude oil measured in the trillions of barrels. Chuck Masters of the USGS says:
This "harder work" has failed, however, to either significantly increase the actual production of oil globally, or to significantly reduce the price of oil. This paradox—between theories of how to extract untold trillions of barrels of oil with stagnant actual oil production—highlights the core of peak oil theory: peak oil does not mean that we will run out of oil, or even that we will cease to make major oil discoveries, but rather that we will be unable to maintain current levels of oil production.
In 2004, 30 billion barrels of oil were consumed worldwide, while eight billion barrels of new oil reserves were discovered in new accumlations, a number which excludes reserve growth in existing fields. In August 2005, the International Energy Agency reported global demand at 84.9 million barrels per day, resulting in an annual demand of over 31 billion barrels. This means consumption is now within 2 Mbbl/d of production. At any one time there are about 54 days of stock in the OECD system plus 37 days in emergency stockpiles. In June 2005, OPEC admitted that they would 'struggle' to pump enough oil to meet pricing pressures for the fourth quarter of that year. The summer and winter of 2005 brought oil prices to a new high (not adjusted for inflation). On the other hand, some analysts attribute much of this new high to disruptions caused by the war in Iraq.[32]
An oil price chart can be seen here.
Part of the current debate revolves around energy policy, and whether to shift funding to increasing energy conservation, fuel efficiency, or other energy sources like solar, wind, and nuclear power. For example, in the USA Rep. Tom Udall at congressional peak oil hearings:[33]
For the United States investments like FreedomCAR, Hydrogen Fuel Initiative[34] and a DOE loan guarantee program[35] are driven by Hubbert peak theory applied to US peak production as well as global peak predictions. In China[36] and Japan[37] lack of native oil resources may also overshadow the world peak. In Europe initiatives such as Renewable Transport Fuel Obligation are marketed more in terms of the environment.
The Congressional Budget Office provides debate of government research versus incentives:[38]
A warning of the level of incentive required for market driven research and development is stated by Rogner:[39]
The problems of privately funded research and development, especially that funded by venture capital, are not unique to peak oil mitigation.[40]
The severity of the problem for energy is echoed in the International Energy Agency's latest report, "WEO 2006 identifies under-investment in new energy supply as a real risk".
In the US, transportation by car is guided more by the government than by an invisible hand. Roads and the interstate highway system were built by local, state and federal governments and paid for by income taxes, property taxes, fuel taxes, and tolls. The Strategic Petroleum Reserve is designed to offset market imbalances. Municipal parking is frequently subsidized.[41] Emission standards regulate pollution by cars. US fuel economy standards exist but are not high enough to have effect. There is also a gas guzzler tax of limited scope. The United States offers tax credits for certain vehicles and these frequently are hybrids or compressed natural gas cars, see Energy Policy Act of 2005.
Many alternatives to oil require the price of oil to remain above some level in order to be profitable. So investors in these alternatives must gamble with the limited data on oil reserves available. This imperfect information can lead to a market failure caused by a move by nature; for instance see Hotelling's rule for non-renewable resources. Even with perfect information the price of oil correlates with spare capacity and spare capacity does not warn of a peak:[42]
This problem might be solved by the government establishing a price floor for oil.[43] A tax shift raising gas taxes is the same idea.[44] Opponents of a price floor for oil argue that the markets would distrust the government's ability to keep the policy when oil prices are low.[45]
Because of world population growth, oil production per capita peaked in the 1970s.[46][47]This peaking wasn't noticed due to global socioeconomic inequality.
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