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Peak oil « Previous | |Next »
June 16, 2009

Peak oil happens where supply can no longer met demand. The implication of this theory is that the era of cheap and plentiful oil is drawing to a close. If peak oil is one of those of these fuzzy events that you only know clearly when you see it through a rear view mirror, then the emergence of China and India, and their big demand for energy, means that, global oil demand will eventually outpace supply, driving up prices again.

peak_oil.jpg

Oil prices are now going to be structurally higher than they have been, given the geological limits. No doubt about it. The issue is not one of "running out" so much---there is still a lot of oil left-- as it is more of not having enough to keep our industrial economy running. The problem is that we are running out of cheap oil. There will be a gap between supply and demand, since there will be less to go around just as more and more countries want more and more.

The Energy Watch Group's 2008 Oil Report says that:

To increase the supply of oil will become more and more difficult, the growth rate will slow down and costs will increase until the point is reached where the industry is not anymore able to bring into production a sufficient number of new fields quick enough. At that point, production will stagnate temporarily and then eventually start to decline.

Peak oil is now, even though institutions close to the energy industry are engaging in a campaign trying to “debunk” the “peak oil theory”.

In the short term the rate of decline after peak is estimated to be about 2% per year. That doesn’t sound that drastic since we can make up the shortfall by taking measures to increase energy efficiency and avoid waste. We have created a society that depends very largely on a particular kind of energy. We are dependent on oil because of its versatility, liquidity -which makes it easy to move around- and also because we can make so many things out of it, including plastics and asphalt for our roads.

If the widespread use of fossil fuels has been one of the most important stimuli of economic growth and prosperity since the industrial revolution, then peak oil or a global decline in oil production means big changes in how we currently do things. Industrial civilization was based on the consumption of energy resources that have finite limits in quantity--oil, natural gas and coal.

Hence the need to reduce energy use, have a long term strategy of shifting to renewable energy resources and realize that we wont be powering the fleets of international air transport on wind power and we wont be repairing roads with solar power.

| Posted by Gary Sauer-Thompson at 2:16 PM | | Comments (9)
Comments

Comments

Peak oil is not so much when supply can't meet demand as when they can't supply any more regardless of demand. It's a logistical concept, not an economic one.

Basic economics dictates that price will always ensure equilibrium between supply and demand. However it also assumes that if people are willing to pay a higher price, supply will increase. If increasing supply is simply not possible, the price will just go up indefinitely until people find substitute goods and demand subsides again.

There can be lots of social disorder during the transition period. The traditional response has been for the state to step in and impose price controls and rationing. Hard to see how that can happen with a global commodity like oil, which is why nobody knows how it will all play out and the speculators can drive prices up to stratospheric levels.

Ken,
you are right re

Peak oil is not so much when supply can't meet demand as when they can't supply any more regardless of demand.

It is about natural limits. Wikipedia defines “peak oil theory” as: the point in time when the maximum rate of global petroleum production is reached, after which the rate of production enters its terminal decline. If global consumption is not mitigated before the peak, an energy crisis may develop because the availability of conventional oil will drop and prices will rise, perhaps dramatically.

The standard view is that high oil prices should continue to provide a positive incentive for entrepreneurs and innovators to come up with alternative solutions.What are these alternative solutions?


Oil wasn't the most important thing since the industrial revolution, it caused the industrial revolution, without it, there wouldn't have been one. When oil declines, so does everything else, population, food, metals, plastics, everything oil gave us and caused to grow, will shrink in step with declining availability. What people don't realise is that all those renewable energy dreams require massive amounts of oil, gas, coal to manufacture, just like everything else in our world. We can't produce enough energy to run our societies and have energy left to produce more renewables.....eg you will never see a solar power station built using solar power, or the panels manufactured using solar power. Bottom line is.....we are toast.

Stu,
you are right--the entire process of industrialization was based on using fossil fuels--coal then oil--to mechanize production and transport. The US became a preeminent power because of the abundance of its natural resources and technological capacity to exploit them. Our whole way of life in Australia is based on cheap fossil fuel--coal and oil and they suburban lifestyles depend on that.The growth of the past becomes the decline of the future.

Many argue that there will be a seamless transition to a new form of energy--hydrogen, solar power---but that appears to be wishful thinking----it is more likely there will be resources wars to gain control of the existing geological supplies. Maybe our priorities will shift to self-sufficiency and sustainability?

I understand that the International Energy Agency continues to deny that a fundamental change of our energy supply is likely to happen in the near or medium term future.

Peter,
remember the public debate around high oil prices a year or so ago? The high price rises were attributed to all sorts of causes: speculation, political tensions in oil producing regions, greed of oil companies, strikes, hurricanes, rising demand in China and India, etc.

What was rarely mentioned was the global supply of oil reaching a limit. That is still not considered as being a possible cause. The oil industry assumed unabated growth of oil production in the foreseeable future.

I'm setting up a solar system with a wind turbine as well....off grid. I am fully aware of the limits of solar and wind, eg....no hope of running my whole house off it unless I also adopt energy efficient appliances.....but even that is not enough.....I must do away with wastful use.....endless hours of tv...etc etc. Yes you can live of it as far as energy for you appliances.....but lets face it....my house will still be full of things made directly, or indirectly....from oil.....including the food. We will have no choice but to swith to renewables.......but lets not kid ourselves....it means going back to an energy use per capita that would resemble the 1930s.....population would have to go back to those figures too. Sorry folks....but that is as good as it gets...hey......it's better then the stone age.....the bottom line is....heaps of people are going to have to die.....and the ones left are going to have to learn to like a much simpler more primative life. The rule will be something like....if you can do it without fuel or electricity...then it is done without fuel or elctricity.....luxury use of fuel or elctricity will be so restricted.......a fridge....energy efficient lights.......maybe a tv....back to a couple of channels..and they wont run 24 hours either......street lighting may be reduced......and might even be turned off after certain hour at night....air conditioning will be all but non existent....hair dryers....and the host of other non essential personal appliances will be considered a sinful waste of power....households might only be provided a certian amount of kwh per day...enough for essentials plus a small amount for additional use....then.....once you use it....it cuts off. I can imagine this and a whole lot of other measures to force people....by law.....to recycle, conserve etc. Personally I know that I am no more happy with my mobile phone...internet....electric this and electric that....then I was when I was young and all those things didn't exist....I believe we can still have a good life.......but I think those that think not will stuff it up for the rest of us.....refusing to accept reality.

Stu,
people on Radio National Breakfast who have been able to access the renewable energy subsidy for remote locations say that it is better than the old--and now expensive--- diesel power generation. They have been able to power their houses 24 hrs a day and so keep the fridges running etc.

In their judgement it was a bad thing that the subsidy was cut.They could not have made the transition to renewable energy without it.

Stu
you write:

I am fully aware of the limits of solar and wind, eg....no hope of running my whole house off it unless I also adopt energy efficient appliances.....but even that is not enough.....I must do away with wastful use.....endless hours of tv...etc etc. Yes you can live of it as far as energy for you appliances.We will have no choice but to switch to renewables.......but lets not kid ourselves....it means going back to an energy use per capita that would resemble the 1930s.....population would have to go back to those figures too. Sorry folks....but that is as good as it gets...hey......it's better then the stone age

Why can't you put in more solar panels to increase the power generated for your whole house as well as putting in energy efficient appliances?