Peak Oil Overview - June 2007
Posted by Gail the Actuary on June 26, 2007 - 10:53am
I wrote this article to put together answers to questions someone new to peak oil might have and to directly counter some common misunderstandings. One topic I talk about is CERA estimates. While there is a little overlap with Oil Quiz-Test Your Knowledge, most of it is different. Pass along a link or a PDF (available below) to your friends.
The message that "peak oil" may be a problem is now reaching respected publications like Business Week. But how can a person learn more? Information about peak oil is often fragmented, and the quality of the sources is questionable. The purpose of this article is to document some of what is known about peak oil, so that readers have a better framework for understanding our current situation. Many links are provided, so that readers can dig deeper if they like.
1. What is peak oil?
"Peak oil" is the term used to describe the situation when the amount of oil that can be extracted from the earth in a given year begins to decline, because geological limitations are reached. Extracting oil becomes more and more difficult, so that costs escalate and the amount of oil produced begins to decline. The term peak oil is generally relates to worldwide production, but a similar phenomenon exists for individual countries and other smaller areas.
2. Why would oil production begin to decline? Can't we extract oil as fast as we want to, until it finally runs out, many years from now?
What happens isn't quite as simple as "running out". Instead of running out, oil gets progressively more difficult to extract. When a well is first drilled, the oil is often under pressure, so comes out quickly with virtually no effort. Later, pressure drops, and it becomes necessary to inject one of several gasses to repressurize the wells. Finally, when even this ceases to keep production up, the remaining oil is pumped out at a slow rate.
Another reason for production tapering off is that oil companies tend to develop the fields which are expected to have the highest return first, and save the smaller fields and fields with more challenging production profiles (such as deep sea oil, very viscous oil, and oil combined with toxic chemicals) until later.
3. Do we have any historical reason to expect that oil production will begin to decline at some point?
When we look at oil production in any given area, the production tends to rise until approximately 50% of the oil that will eventually be extracted is gone, and then begins to decline. For example,
Figure 1 shows oil production of the United States.
A similar pattern holds for North Sea oil production (Figure 2).
We have now reached the point where oil production is declining, apparently for geological reasons, in the majority of oil-producing countries. It logical to expect that world oil production will eventually begin to decline.
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