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Wednesday, November 24, 2004

OT: Peak Oil

We are running out of oil, that is to say, we are running out of cheap oil, but the difference is more or less academic. The petroleum geologists, using a forecasting method pioneered by Shell geologist King Hubbert, now say we will soon hit a production peak from which we will never return. When will we hit it? It could be happening now, but the consensus seems to be between 2004-2010. The big difference-makers are the unexpected and enormous growth in usage in China and India.

A Google search on "peak oil" yields a number of resources on this topic, some more optimistic than others, but the pessimistic ones are frightening in the extreme, to the point I would call them millennialist and write them off -- except that so much petroleum energy goes into food production, it's not entirely possible to do so. After all, one of the great causes of the Depression was mechanization of farms, which resulted in enormous gains in crop production -- driving prices down and farmers off their land. Take away oil from farming, and suddenly productivity goes down.

The present administration listens to an energy secretary from Michigan, and hears what it wants to hear about oil. If you believe the more conspiratorially-minded, we launched upon the Iraq war fully well knowing that country had some of the biggest undeveloped oil reserves in the world.

For balance -- that is, to provide the anti-peak point of view -- I provide this article by Leonardo Maugeri from Italy's Eni oil company. His argument is fairly typical; this is a dialogue split along the fault lines of discipline, that is, the geologists versus economists, and may briefly be summarized in this way:

Economists: Oil is a price-driven commodity, whose presence or absence is determined by that price.

Geologists: Okay, show me the reserves.

$50/bbl oil is here now. We've probably seen the last of $30/bbl oil. $5/gallon gasoline is coming, and soon.

This is not pleasant stuff. It's very easy to see how this could turn into a full-scale depression, and much, much worse. The need to conserve is becoming increasingly obvious, as is the need to invest in research in renewables, and by this I mean any and all of them, up to and including fusion. Likewise, we need to start reinvigorating nuclear power by building breeder reactors and finding cleaner ways to burn coal. And we need to do all of this now before rising fossil fuel prices make it uneconomic to effect the changes we need.

A big shoutout to Dodgerkid, aka Rick Todd, for pointing this out to me. He has also blogged on this subject on Autoguy .

I am all for more nuclear power, too...the problem is that the people that want to conserve gasoline are the same people that don't want nuclear power, and for the most part they have controlled all environmental discussions. My feeling is that we have a good 50-100 years or more with petroleum products as our main energy source (newer technologies will allow us to find more and newer sources to keep that going for a long time). By that point we should have reasonable new technologies (hydrogen fuel cells, small fusion reactors, useful solar power, something we can't think of right now).
Energy fuels growth. It's that simple. We don't have energy, we don't grow. And the reverse could easily be true.

One of the things that fueled the French Revolution were the disastrous harvests of the 1780s. With energy in short supply, it wouldn't be too hard to see what happens next. And remember, we've invited the Chinese and Indians to the big petroleum party. It's one thing to reduce American demand; it's another to tell the Chinese and Indians what to do.
I agree. I believe that capitalism will help us here, though. As petroleum gets more expensive and/or scarce, more money will be put into alternatives because the alternatives will be needed more. Forcing people to spend the money doesn't help, there actually needs to be a near-crisis (running out of fuel or exorbitant prices). The adaptability of the free market is important in achieving long term stability here.
It's all well and good to say that we need to do something, but any politician who takes on the issue is likely committing political suicide. Nothing is going to get done until Americans start feeling it in the wallet. That’s not going to happen anytime soon, because OPEC knows what it’s doing.
Sadly development of alternative fuels seems like the type of thing where government could get things to a point where private enterprise could do it better (cf. internet).
Richard -- read some of these things. It's not in OPEC's hands anymore. There is no surplus capacity being withheld. They've effectively set quotas so high that any country can pump as much as they like, and still the markets aren't satiated. We might get some rollback next year, but that's if $5/gallon gas becomes a reality and Americans freak.

Did I mention that I'm really, really beginning to hate SUVs?
It costs time and money to find reserves. Petroleum companies plan 15 years ahead and that is why there is always 15 years' supply of oil.
Oil supplies worldwide are being depleted. There isn't a 15-year supply in the US because we don't have large reserves anymore; we hit our production peak in 1970.

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