thenextwave

Oil? It’s already peaked, say researchers

Posted in blindspot, economics, emerging issues, energy, oil, reports by thenextwavefutures on 22 October, 2007

If this is true, it’s alarming. The German energy consultancy Energy Watch Group [EWG] says in its latest six-monthly oil report (report and executive summary can be opened in pdf from here) that global oil production peaked in 2006 – and has since declined quite sharply.

EWG’s conclusions are based on production data rather than information on reserves, which they note “are difficult to assess and to verify and in the past frequently have turned out to be unreliable.” Production data, in contrast, is easier to observe and more reliable. The study looks at each region in turn, and concludes that all producer regions except Africa will be in decline by 2020, and all – Africa included – are declining by 2030.

‘Peak oil’ is defined as the maximum rate of extraction of oil, and the likely year has been the subject of a fierce dispute between the oil industry (which generally believes that the year of global peak oil is at least 20 years away) and industry dissidents, who thought it might be as early as 2010.

As a result of its analysis of production, EWG projects world oil production falling dramatically, from 81m barrels a day, by more than a quarter to 58 Mbd in 2020, and down to less than half current production levels at 39 Mbd by 2030. A gap of this scale needs radical demand reduction measures to meet it:

By 2020, and even more by 2030, global oil supply will be dramatically lower. This will create a supply gap which can hardly be closed by growing contributions from other fossil, nuclear or alternative energy sources in this time frame.

The report provides a breakdown of production trends by region, which can be viewed here:

Energy Watch Group Oct 07 oil projections

It’s worth noting that this isn’t the only recent publication to conclude that peak oil was now or imminent. The reporter David Strahan comes to a similar conclusion in his book The Last Oil Shock, published earlier this year, in which he piles up the evidence that reserves have been overstated by producer countries, and that there is more behind-closed-doors scepticism within the industry about the prospects for production than the ‘official future’ would have us believe. (Some of these arguments are rehearsed in an article on his blog, and in a Prospect article). Strahan’s website, by the way, has a funky little ‘oil depletion map’ app on it.

The scenario all of this leads to for an advanced energy-dependent society which doesn’t take dramatic action to reduce demand is “overshoot and collapse”. But this future is generally regarded with disbelief when it emerges as part of a scenario set. In the set of (transport-oriented) intelligent infrastructure 2055 scenarios for the UK government’s foresight programme, which I was involved in developing, the ‘Tribal Trading’ scenario was universally regarded as unlikely by stakeholders.

From a futures perspective, this suggests a massive blindspot, which is underlined by the (quoted) blinkered response of the Department of Business, Energy, and Regulation to the EWG report:

Over the next few years global oil production and refining capacity is expected to increase faster than demand. The world’s oil resources are sufficient to sustain economic growth for the foreseeable future. The challenge will be to bring these resources to market in a way that ensures sustainable, timely, reliable and affordable supplies of energy.

I guess that’s what you get if you believe your own White Papers – which I blogged about previously, arguing that “it’s hard to avoid the impression that they’ve started from the IEA [International Energy Agency] projection and moved directly to a set of traditional assumptions about energy security and supply”. And this probably explains why Gordon Brown didn’t create a separate Department of Energy when he restructured Whitehall’s ‘machinery of government’ in the summer. But while it would be nice to believe that there was some contingency planning being done, or even a little ‘What if…?’ option testing, the department’s overall behaviour on energy policy makes this seem unlikely.

Yet even if you toe the official line that ‘peak oil’ is twenty years away, it’s still possible to believe – as former Shell chairman Lord Oxburgh said recently – that pressure of demand will force oil prices as high as $150 a barrel.

As EWG concludes:

The world is at the beginning of a structural change of its economic system. This change will be triggered by declining fossil fuel supplies and will influence almost all aspects of our daily life.

2 Responses

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  1. thenextwavefutures said, on 26 October, 2007 at 11:29 pm

    TED.com has a post that Chevron’s CTO, Don Paul, reckons that the year of peak oil will be in 2012.

    “Thus, peak oil–the theory that we’re about to get into declining numbers on conventional oil–is probably real. However, Paul said, “I don’t think it has to be the catastrophe that other people have predicted, because there are other ways to make fuel.”

    I guess he just isn’t thinking too hard about the Energy Return of Investment on those other ways.

  2. […] ‘peak coal’ Just as we’ve got used to the idea that the moment of ‘peak oil‘ might be upon us (at the moment 2005 is the year of highest oil production) new figures […]


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