Views of the News – March 2009

PEAK OIL: WHEN WILL WE REACH IT? HOW HAVE WE CALCULATED IT? WHY IS THE MEASURE IMPORTANT

Peak oil is when maximum production of oil extracted. It is indicated by decreasing amounts of petroleum discovered, explored and extracted annually.

Oil exploration in the west started in 1850. By 1910, most oil fields were identified, but not fully explored. By 1918, there was a major change in ownership of the oil fields, cue to WW1 and the Russian revolution. The major oil finds in and around China and India is a recent phenomenon due to industrial expansion of these regions, since the 1960s.

Peak oil is the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production starts to decline. Peak oil is often confused with oil depletion, which is a period of falling reserves and supply.

This measure is important because of the cross over of energy growth of increasing energy consumption per person and the decreasing energy supply available from oil. This results in increasing prices for oil and oil related products and the obsolescence of energy producing equipment, which uses oil as a feedstock.

This cost increase drives the development and use of alternative sources of energy and technologies. As we reach the point of equal cost, renewable and sustainable energy will become readily accepted and no longer be a political issue.

Conservative estimates put peak oil between 2020 and 2030. There are several uncertainties in the calculation of reserves and efficiency/cost of extraction. This is the cause of much speculation as to the actual date of peak oil. The Developed World has reached maximum energy consumption per person and is embarking on energy efficiency. The emerging economies of India, China, Brazil and Africa are continuing to increase their power consumption per individual. Their demand is increasing the overall global consumption of oil and increasing the price, as a result.