More Evidence We’ve Entered the End of Oil

More Evidence We’ve Entered the End of Oil
By Chuck Squatriglia November 19, 2007 | 7:30 pm | Categories: Alt Fuel

There is growing concern within the petroleum industry that we are approaching a limit to the amount of oil that can be pumped each day, and it might arrive before alternative fuels can be adopted on a large enough scale to avert severe energy shortages, the Wall Street Journal reports.

The story offers what the Journal calls "a significant twist" on the theory of peak oil while underscoring the urgent call to move beyond oil that the International Energy Agency made earlier this month in its annual World Energy Outlook. Taken together, they make a convincing argument that we’ve entered the end of oil and must move quickly, boldly and decisively to supplant oil as our primary source of energy.

No one, least of all the oil industry executives quoted by the Journal or the analysts who wrote the World Energy Outlook, is saying the wells will run dry in our lifetime, or even our children’s lifetimes. There’s still a lot of oil left to be pumped. But there is a growing belief that several factors are converging to create a practical limit to how much we can pull from the earth each day.

In other words, after seeing worldwide production rise an average of 2.3 percent annually since 1965, we may be approaching a plateau beyond which production will not climb. According to the Journal, that ceiling could be 100 million barrels a day, and said we could hit it as early as 2012.

That isn’t nearly enough, and it is entirely too soon. Find out why after the jump…

As we noted in "The End of Oil Is Upon Us. We Must Move on - Quickly", the World Energy Outlook says worldwide demand for energy will climb 55 percent by 2030, with the burgeoning economies of China and India driving almost half the increase. The IEA said that "alarming" growth will within a generation threaten energy security, accelerate global climate change and possibly bring worldwide shortages and conflict if we do not adopt sustainable energy in a big way, and soon.

"All countries must take vigorous, immediate and collective action to curb runaway energy demand," Nobuo Tanaka, head of the IEA, said. "The next ten years will be crucial for all countries… We need to act now to bring about a radical shift in investment in favor of cleaner, more efficient and more secure energy technologies."

That said, fossil fuels will remain the leading source of energy, providing 84
percent of our needs, and oil will continue to dominate the picture as daily demand rises from 85 million barrels today to 116
million in 2030, according to the report. The IEA - an energy watchdog group representing 26 nations, including the United States - says we’ve got enough oil to meet demand even if we don’t do anything to change course. That may be so, but as the Journal notes, producing it is another story entirely.

In the past three weeks, the Journal reports, Christophe de Margerie (chief executive of the French oil company Total SA, the world’s fourth-largest petroleum company), James Mulva (chief executive of ConocoPhillips, the third-largest energy company in the U.S.) and Shokri Mohamed Ghanem (chairman of the Libya National Energy Corp.) all have said publicly that they don’t see worldwide production topping 100 million barrels a day, and we could hit that ceiling as early as 2012.

(UPDATE: You can add Lee R. Raymond, a career oilman, former chief executive of ExxonMobil Corp. and current head of the National Petroleum Council to the list of industry insiders who say it will be a whole lot harder to keep extracting oil. He expressed his concerns during a conference at the Massachusetts Institute of Technology earlier this month.)

Of course, that’s by no means a consensus within the industry, and the Journal quotes two high-ranking oil industry executives who say, essentially, there’s nothing to worry about. And, the Journal points out, "the industry has long been beset by doom and gloom scenarios, which so far haven’t panned out." But most of those scenarios have revolved around the idea that worldwide production would peak, then begin a long, slow and irreversible decline. That theory, called peak oil, was first put forth by geophysicist M. King. Hubbert in 1956, and remains a subject of no small debate that we won’t delve into here.

The question, according to the Journal, isn’t one what’s available, but what can be pumped and how quickly. It quotes Deputy Energy Secretary Clay Sell, who says:

We know that the world is not running out of energy resources, but nonetheless, above-ground risks like resource nationalism, limited access and infrastructure constraints may make it feel like peak oil just the same, by limiting production to something far less than what is required.

The Journal lists several factors that are converging to create the plateau, not the least of which is the widespread belief that the world’s giant oilfields have already been discovered and are being tapped out, and most of the promising fields yet to be developed are inhospitable for reasons of geography, geology or political instability.

Moreover, a labor pool that is shrinking even as it is aging, construction bottlenecks and skyrocketing equipment costs are making it harder, and more expensive, to develop new oil fields and move the oil once it’s pumped. And, the Journal notes, the industry simply isn’t spending enough to meet future need. You have to wonder - how can it? According to the IEA, $22 trillion dollars of investment must be made in the supply infrastructure alone just to meet projected demand.

Most of the world’s biggest oil fields are aging, and their production is falling. There is widespread speculation that the Ghawar oil field in Saudi Arabia, the world’s largest, is petering out, which is significant because it likely has produced more than half the oil that has flowed out of the kingdom. At the rate oil fields are being depleted, simply maintaining our current production of 85 million barrels a day will require producing at least another 4 million daily barrels every year. That, according to the Journal, is roughly five times the daily production in all of Alaska, and doesn’t account for any increase in demand at all. So it might already be too late, Matthew Simmons, a peak oil proponent who wrote "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy" and chairman of energy investment banking at Simmons & Co. International, told the Journal:

Peak oil is likely already a crisis that we don’t know about. At the furthest out, it will be a crisis in 2008 to 2012. Global warming, if real, will not be a problem for 50 to 100 years.

So what’s the answer?

Well, oil companies are increasingly looking beyond petroleum. The Journal says Total is taking a hard look at going into nuclear energy and ConocoPhillips may begin using coal to produce natural gas. There’s been a lot of talk about Canada’s oil sands helping out, with proponents saying they could hold as much as 180 billion barrels of oil. But despite years of effort and tens of billions of dollars of investment, we’re only getting 1.1 million barrels of crude a day - and few expect to pull more than 3 million a day by 2015, the Journal notes. Nuclear’s a tough sell in many quarters, but it will undoubtedly grow more attractive as oil prices climb. But using coal, oil sands and other fossil fuels does nothing to address the problem of global climate change.

Of course, as crude oil prices continue climbing - the IEA, in the World Energy Outlook, says we could see it hit $159 a barrel by 2030 - it will make alternative sources of energy more appealing and more viable and more cost-effective. We pointed this out in "Why $5 Gas Is Good For America" and outlined in "How Hydrogen Can Save America" and "Cellulosic Ethanol: How One Molecule Could Cure Our Addiction to Oil" how those fuels might move us beyond petroleum.

The Jounal notes that oil production may reach its plateau before these alternatives can be adopted on a scale sufficient to head off "energy shortages, high prices and bare-knuckled competition for fuel." The time has come to act. The IEA says we’ve got 10 years to figure it out and begin moving, once and for all, beyond oil.

Will it be enough?