The Party’s (Almost) Over


To the long list of wearying apocalyptic scenarios facing the future of humankind must, unfortunately, be appended yet another. One which, nonetheless, at least has the merit of focusing attention by virtue of its sheer immediacy.

According, then, to many of the world’s most prestigious (independent) oil geologists and institutions, not only is the era of cheap oil now almost certainly at an end, but by the end of this decade – and likely before – the price of a barrel of oil will rise well past $100, and will continue to climb quickly and inexorably thereafter. One need not be a rocket scientist to begin to grasp the staggering implications of this for industrial civilization.

But before we do that, best to start at the beginning….

The Problem

In 1956, the geologist M. King Hubbert predicted that the U.S.’s oil production would peak in 1970, and thereafter begin an accelerating decline. Despite being derided at the time by many industry analysts, his predictions proved entirely accurate. This, for the very good reason that he had correctly figured out that oil extraction follows a statistical model known as a bell curve.

Oil production starts off slow, picks up more and more, reaches a peak – when half the oil has been pumped out – and then begins to fall as it had risen, that is, faster and faster. In the latter stages, all sorts of strategies are used to maintain pressure at the well-head, including pumping the reservoir with water and gas. Still, it’s a case finally of diminishing returns. Less and less oil at greater and greater cost.

But, you might ask, what difference does it make if a particular oil field runs dry? Aren’t new ones being discovered?


Aye, there’s the rub. In fact, many of the world’s largest oil fields are now decades old and are depleting rapidly. Thus, in the mid-eighties the North Sea used to produce 500,000 barrels per day. Today it produces 50,000. Prudhoe Bay in Alaska once gushed out over 1.5 million barrels per day, but in 1989 it peaked and now gives only 350,000. The huge Russian Samotlor field used to account for 3.5 million barrels per day. Now its ledger tallies a mere 350,000.

Even the largest oil field in the world, the giant Ghawar of Saudia Arabia, is showing distinct signs of having peaked. The Saudis must now inject some seven million barrels of water per day into the reservoir just to maintain well-head pressure.

As for new discoveries, there have been no new large discoveries in over two decades. The 14 largest oil fields average over forty years old. Indeed, Dr. Colin Campbell, former chief geologist for Shell Oil, has stated that the discovery of major new oil reserves “peaked in the 1960s” and that, “We now find one barrel for every four we consume.”

According to the best estimates, by such as the Petro- consultants of Geneva, the French Petroleum Institute and the Colorado School of Mines, global “peak oil” will likely be upon us sometime before 2010. Such estimates, of course, fly in the face of those by the U.S. Geological Survey and the International Energy Agency, both of which acknowledge “peak oil,” but which project its onset to somewhere between 2015 and 2040. Most of the independent experts, however, argue that these latter figures are mistaken on at least three counts.

The first is that oil reserve figures have been inflated for years for purely speculative and ideological reasons, essentially to maintain investor confidence. A stark illustration is provided by the scandal of Shell Oil, which was recently forced to revise its reserve estimates downwards by over twenty per cent.

The second involves reliance on so-called “non-conventional” oil supplies, including tar sands and oil shales. Unfortunately, these require massive amounts of energy to extract. And not just energy. For every barrel of oil from tar sands, 400 to 1,000 cubic feet of gas are required. For every barrel of oil from shale, one to four barrels of water are needed. Moreover, the tailings and detritus left behind are literally mountainous, an environmental nightmare just waiting to explode.

They also take time to bring on line. It is expected, for instance, that Canada will, by 2030, be producing no more than four million barrels of oil per day from its Athabascan oil sands. This would amount to little more than three per cent of the (now widely agreed upon) estimated global need of 120 million barrels per day (mb/d) by 2025 to 2030. (Present usage is about 84 mb/d).

Finally, the term “peak oil” refers not just to the problem of declining rates of discovery and extraction, but also to the compounding problem of increasing rates of consumption. China, for instance, has recently surpassed Japan as the world’s second-largest importer of oil, imports which are rising by nine per cent a year. India’s thirst is also exploding.

In short, the gap between demand and supply is already beginning to yawn. Once the downhill side of the bell curve sets in, this gap is likely to spread into a chasm. And the consequences of that are little short of catastrophic.

Goodbye Growth, Goodbye Globalization

For the past century, the world’s industrial societies have enjoyed between two and seven per cent annual economic growth. This growth has been almost entirely fuelled by a bonanza of cheap, easily extractable, high grade oil. Virtually every aspect of our modern industrial economy relies on it, including global transport of goods, commercial air travel, gasoline for cars, the lubrication of industrial machinery, the generation of electricity and the production of plastics, fertilizers and pesticides. The consequences of, say, $150 per barrel of oil will profoundly affect everything from our suburban, commuting way of life right through to our industrial and international modes of agricultural production and distribution.

And that’s just to begin with. World economic growth will likely become a quaint curiosity consigned to the history books. Permanent recession, if not outright depression, could well become the norm. Unemployment will undoubtedly skyrocket, as will world political instability. Driving a car? Taking a plane? These will gradually, incrementally, become elitist activities reserved for the few. Agriculture will need to become regionalized and localized, just as our whole modern way of life will need be re-engineered to accommodate our changed energy circumstances.

Given all this, one might be hard pressed to comprehend how officialdom and the major media have failed both to recognize and/or respond adequately to the problem.

The narrow answer to this conundrum is that official reports have, for years, simply concentrated on global oil reserves (which are still quite extensive), rather than on the projected future gap between production and consumption. Thus, the world will continue to “enjoy” significant reserves far into the future. Oil will not, all of a sudden, simply run out. But the gap between supply and demand will grow quickly. Price volatility will follow suit.

The broad answer is, of course, that certain government bodies have already responded to the problem.

Resource Wars of the 21st Century

That the U.S. invasion of Iraq was mostly about oil will come as no earth-shattering revelation to many. What is perhaps less well appreciated is how completely the list of nations comprising Bush & Co.’s “axis of evil” extend along an arc that maps virtually one-to-one both to the world’s major reserves of oil, and to the strategic chokepoints and sea lanes vital to its transport and distribution.

U.S. threats against Iran, for example, not only target one of the world’s largest reserves of oil and the critical Strait of Hormuz, linking the Persian Gulf to the Arabian Sea, but also China itself, which has signed major oil deals with Iran. China’s energy supplies and supply lines are further threatened by the U.S.’s sudden humanitarian interest in the Darfur region of the Sudan, where China also has major oil concessions; and by U.S. actions against Venezuela, with whom China has recently negotiated a major bilateral energy deal; and by Washington’s recent naval and troop deployments to the Strait of Malacca, which controls access to the South China Sea.

(As an aside, one wonders, naturally, what all this might mean for Canada in light of the recent “energy partnership” Prime Minister Martin concluded (in January) with China regarding access to the Athabaskan oil sands. In a future world of shortage, the U.S. may not be content simply with the guaranteed siphoning of our energy through “free trade” deals.]

Analogous considerations apply to a host of other countries from Yemen and Somalia (straddling the vital oil-transit strait to the Red Sea) to Algeria (90 per cent of whose oil goes Europe) to a string of countries girding the belly of Russia.

With respect to the latter, a very interesting contest is shaping up in the Caspian Sea basin. The American-backed Baku-Ceyhan pipeline (bringing oil westward and bypassing Russian pipelines) has recently been completed and the Kazakhstan-China oil pipeline is expected to come on line near the end of the decade. Meanwhile, though China and India have squared off in Angola, Indonesia and the Sudan, they have also engaged in intensive negotiations with respect to their energy security needs in Central Asia. There is talk of extending the Iran-Pakistan-India gas pipeline to eastern China.

The recent spate of “velvet” revolutions in Central Asia are clearly tied in with the American attempt to control this vital, energy-rich region. Overall, Russia, China and India are, in a very real sense, strategic allies who share common cause both in frustrating Washington’s attempt to isolate Iran, and in securing sources and transit routes from the oil-rich Middle East and Central Asia to oil-deficient East Asia.

In summary, the struggle, the war if you like, for the globe’s limited energy resources has, in other words, already begun.

Sleepwalking into the Future

Are alternative fuels and alternative technologies the answers to the coming crisis?

The short reply is, possibly yes, probably no. Gas, for instance, is being touted as a clean alternative fuel. Unfortunately, gas is not only running out fast, but its depletion curve has the peculiar property that, when it does run out, it stops suddenly, with little warning. Moreover, to tap, say, Russia’s great reserves of methane, it has first to be liquefied, at great cost, for transportation.

But then what about the renewables? Well, bio-fuel requires fertilizers – which require oil. In any case, land is needed, it’s hardly necessary to add, to grow food. Hydrogen is clean, but it takes a lot of energy to produce it. A hydrogen economy is, really, no more than a fantasy. Wind and solar power are unlikely to ever significantly substitute for fossil fuels, at least given our present energy-intensive lifestyles. Nuclear is also being touted once again, but its capital and decommissioning costs are exorbitant and its nuclear waste problematic. Moreover, uranium is also a limited resource.

This leaves only a multi-faceted approach in which our remaining reserves of oil and gas are used to transition to a combination wind, solar and coal energy economy, while we simultaneously embark on mass-scale efficiencies, conservation and downscaling of our energy usage. It will be a different world. This in the best of scenarios, where immediate action is taken to transition to the post-oil era, a period many experts have said would take a minimum twenty-year effort.

But given how little open recognition there is of the problem, let alone any concerted worldwide policy to implement change, it seems rather more likely that, intoxicated for an entire century with the heady brew of cheap energy, the party will continue to rage on. That is, until the fridge runs dry, the tempers wear thin and the furniture is tipped, unceremoniously, on end.

This article appeared in the September/October 2005 issue of Canadian Dimension (The Battle for Canadian Universities).



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