Peak Oil - Not If but When Message Board

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Gold/Mining/Energy : Peak Oil - Not If but When

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From: veritas501	2/3/2011 10:42:09 PM
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In an earlier post I highlighted the deceptive nature of oil depletion. Because things don't seem too bad currently (although Egypt is a notable exception), people are lulled into complacency. However, as I showed using an example where oil production declines 50% per year (obviously an absurdly high number but useful for illustration purposes), the early years after a peak in production result in most of the oil being produced. As I stated earlier: To use a simplified example, suppose there is a country that reaches its peak in oil production at the beginning of Year 1 and declines until the end of Year 5 when it ceases to produce oil. If the country produces Y barrels of oil in Year 1, then its production profile will look something like this: Year 1: Y barrels produced Year 2: 1/2 Y barrels produced Year 3: 1/4 Y barrels produced Year 4: 1/8 Y barrels produced Year 5: 1/16 Y barrels produced - production terminates. We can see from this simple example that most of the oil is produced in the first 2 years (Y + 1/2 Y = 1.5 Y) with the remaining 3 years producing only 7/16 Y (1/4 Y + 1/8 Y + 1/16 Y). Consequently, oil prices over time will accelerate in appreciation.

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