Peak Oil

December 22nd, 2005 by Potato

I’ve heard a bit about Peak Oil lately, and figured I would talk a bit about it.

First off, let’s put this discussion in context. A while ago, people were worried that we would run out of oil, and there would be a disastrous effect on the world (especially the economy), perhaps plunging us into a dark age. The fear had immediacy: in the 80’s, we were afraid we might run out of oil as soon as 2010. As technology developed, we found more reserves, and better ways of extracting the oil from difficult-to-work reserves (cf. Alberta Oil Sands).

Then the concern flipped around: one of our biggest fears was that we wouldn’t run out of oil. While it may sound paradoxical, you have to consider that the use of oil as a primary source of energy creates a lot of pollution: greenhouse gasses and waste heat from the burning of the fossil fuels, and toxic deposits from the extraction and refinement. If we weren’t going to run out of oil, then consumption would not slow, and alternative technologies would not develop.

Recently, another idea has been getting wider attention, that of “Peak Oil”. The concept here is that we extract the easiest to access sources of oil first, ramping up production with demand over the last century or so, and then eventually we reach a point where we have depleted the easy reserves, and have to resort to harder sources (such as the oil sands). For a number of reasons, the amount of oil extracted reaches a peak, and then begins to decline.

All the while, demand is constant and/or increasing.

So while we may still be 100 years or more away from extracting the last barrel of oil we’ll ever find in the planet, we’re actually getting very close to the peak of production. Soon production will slow down, and we’ll be unable to meet the current demand (or for some fossil fuels, such as natural gas, we’re at that point already). The interesting thing economically is how little production needs to slow down to lead to massive increases in price. Since oil is so necessary for many endeavors, businesses may be willing to pay much more money to keep their supply constant. For example, if energy costs are 5% of a company’s total finances, they’d easily be willing to pay double if it meant they would stay in business. And clearly, the SUV drivers of the world don’t care how expensive oil is — if the price were to double, it would be you who ended up having to conserve out of necessity, not them.

After all, since I started driving the price has already just about doubled (from a low of 45 cents/L when I would put $2 of gas in my car at the 7-11 at Sheppard and Willowdale and go out “cruising” for an hour, to $1.43/L during a road trip to the cottage when a hurricane struck New Orleans; gas today is 90 cents/L). Yet driving habits haven’t really changed much in the last few years (if anything, school kids have gotten lazier/parents have gotten more paranoid, and people are driving for short trips more often than before).

Exactly how soon is soon varies: it’s hard to predict exactly when it will happen, and there are various confounding factors. Pretty much anything that shuts down oil production (wars, hurricanes, recessions) slows the coming of the peak, both because you leave the oil in the ground, pushing back its eventual extraction, and because during those slow-downs fields that are still developing get to catch up in terms of their infrastructure development. Estimates place the peak as soon as 2010, or as far away as 2050. To me, both of those dates look pretty close though, as I’ve got a reasonable chance of living to see both of them.

I think I had more to say on that, but it’s getting pretty late. Anyway, something to think about.

4 Responses to “Peak Oil”

  1. netbug Says:

    Late? It’s like noon when this was posted. :P

    I’m sure that something till come along to save the day and I’m not to fussed about it. I’m curious, but not concerned. As greedy as corporations are, they wouldn’t do anything to jeopardize their market share, so alternatives will arise.

  2. Potato Says:

    I wrote it last night but forgot to hit post until today.

  3. rez Says:

    I can no longer stand idly by.
    Use it.

  4. Potato Says:

    Thanks for the tip — I usually just type away and rely on manual error checking (my old method involved writing in word for spell checks and then cut/pasting and reformatting in HTML).

    That said, there was only one spelling mistake in this whole article (or at least, only one that picked up) :) Corrected now.