“We can't solve problems by
using the same kind of thinking we
used when we created them.”
Maj. Gen. (Retd) S. C. N. Jatar
Oil has been the focal point of contention since its discovery on
The goals set out by the US to eliminate
Iraq's weapons of mass destruction, and to liberate the Iraqi people were again the red herrings that the US was
dragging in front of the world to justify its attack on Iraq. When the US sank its teeth into Iraq on
March 19, 2003 with heavy bombardment and missile attacks on Baghdad itself, could anyone have
been oblivious to the vast reservoirs of oil that lie in Iraq, oil that the US
needs badly today and in the future? It
was thus that the
A study of the reserves to
production ratios – the number of years that reserves of oil will last at
current production rates – gives us a good overview. The R/P ratio is about 8 to 10 years for the
Global oil demand
has grown by more than 14 million barrels a day (BOPD) in ten years. Non-OPEC/non-FSU oil supply grew by 3.2
million BOPD. Non-middle east OPEC oil
supply grew by 0.6 million BOPD. Thus,
Hubbert observed the obvious, namely that oil production from a field rises, then falls, as time goes by. He fitted a logistic curve to this rise and fall, but only as a mathematical convenience. He never said that the logistic curve had some fundamental power. There does not seem to be any physical reason why either a field or the entire world has to enter decline on producing exactly 50% of its oil. It could be earlier or later! The production curve can in theory be any shape whose area is equal to the extractable oil (itself a variable within limits, depending on how much effort and resource one is prepared to invest). Hence, Peak Oil is not going to happen just because the world has precisely reached the production of the median barrel. 
In his book, The Hydrogen Economy,
“The Times of London on
Oil, the day when oil production reaches its maximum and begins a steady
decline until it is gone in 40-50 years, is fast approaching. Its approach correlates with the increasing
tensions in the world. If a world war
comes, it may well be fought with nuclear weapons in the
Problem Day is the day when demand permanently exceeds
production. It would generally happen
before Peak, when demand and supply are both still rising, but when demand is
rising the faster. The consequence will
be a sharp and permanent rise in prices to suppress that demand (as is the case at present).
Mega-projects adding New Capacity
According to Petroleum Review (April 2006), the mega projects database
shows that both
Research Associates Inc. (CERA) sees potential for exceptional growth in
non-OPEC oil production in 2006 and 2007 – a cumulative two year-increase of
approximately 2.5 to 3 million BOPD.
This would put downward pressure on price, but non-OPEC output is only
one variable in the oil price equation.
The downward force of strong non-OPEC supply gains will be influenced by
the degree of stability in the
Why the world is not about to run out of oil
In 1894, Le Petit Journal of Paris organised the world's first endurance
race for “vehicles without horses”. The
race was on the 78-mile (125km) route from
Now comes what appears to be the most powerful threat to oil's supremacy
in a century: growing fears that the black gold is running dry. For years, a small group of geologists has
been claiming that the world has started to grow short of oil, that
alternatives cannot possibly replace it and that an imminent peak in production
will lead to economic disaster. …Every
few weeks, it seems, “Out of Gas”, “The Empty Tank” and “The Coming Economic
Collapse: How You Can Thrive When Oil Costs $200 a Barrel”, are joined by yet
more gloomy titles. Oil companies, which
once dismissed the depletion argument out of hand, are now part of the
debate. Chevron's splashy advertisements
strike an ominous tone: “It took us 125
years to use the first trillion barrels of oil. We'll use the next trillion in
But is the world really starting to run out of oil? And would hitting a global peak of production necessarily spell economic ruin? … Despite today's obsession with the idea of “peak oil”, what really matters to the world economy is not when conventional oil production peaks, but whether we have enough affordable and convenient fuel from any source to power our current fleet of cars, buses and aeroplanes. The race is on to manufacture “greener fossil fuels” for blending into petrol and diesel, thus extending the useful life of the world's remaining oil reserves. It may even result in a breakthrough that replaces oil altogether.
To see how that might happen, consider the first question: is the world
really running out of oil?
Oil production capacity might actually grow sharply over the next few years (see chart 1). Cambridge Energy Research Associates (CERA), an energy consultancy, has scrutinised all of the oil projects now under way around the world. Though noting rising costs, the firm concludes that the world's oil-production capacity could increase by as much as 15m barrels per day (bpd) between 2005 and 2010 – equivalent to almost 18% of today's output and the biggest surge in history. Since most of these projects are already budgeted and in development, there is no geological reason why this wave of supply will not become available (though politics or civil strife can always disrupt output).
However, this thesis is not borne out by the study by Petroleum Review (April 2006) referred to above.
It is true that the big firms are struggling to replace reserves. But that does not mean the world is running
out of oil, just that they do not have access to the vast deposits of cheap and
easy oil that are left in Russia and members of the OPEC. And as the great
fields of the
The baleful thesis arises from concerns both that a cliff lies beyond any peak in production and that alternatives to oil will not be available. If the world oil supply peaked one day and then fell away sharply, prices would indeed rocket, shortages and panic buying would wreak havoc and a global recession would ensue. But there are good reasons to think that a global peak, whenever it comes, need not lead to a collapse in output. However, the decline would be steep as seen in Chart 2 below. Additionally, the prices are indeed rocketing.
Alternative fuels will not become common overnight, as one veteran oilman
acknowledges, “Given the capital-intensity of manufacturing alternatives, it's
now a race between hydrocarbon depletion and making fuel.” …As
a. Bio-diesel - $80 (excludes impact of tax credit)
b. US Corn based Ethanol - $60 (excludes impact of tax credit)
c. Shale Oil - $50
d. Tar sands, Brazilian cane-based Ethanol, Gas-to-Liquids & Coal-to-Liquids (GTL is economic at $40 if gas feedstock price is $2.50 or less per million BTU, CTL is economic at $40 if feedstock price is $15 per tonne or less)
e. Conventional Oil - $20
Energy Returned On Energy Invested (EROEI)
Efforts are afoot to use renewable energy sources as additives to
oil. The most common in
According to current data, the returns on extracting oil from tar sands
works out to roughly three barrels of oil for every two consumed, representing
an EROEI of about 1.5. That is without
taking into account the massive environmental costs involved in terms of water
pollution, the degradation of land and so on.
Non-Renewable Energy Sources
EROEI if renewable is mixed
The reader would have discerned by now that there are a group of optimists (CERA, The Economist, etc); the moderates (oil Companies, IEA and so on), and the pessimists (Peak Oil protagonists, Simmons, Bakhtiari, Deffeyes, etc). It is for the reader to judge the merits and demerits of each argument and arrive at his or her own conclusions.
The Hirsch Report
This Hirsch report was prepared in February 2005, as an account of work sponsored by an agency of the United States Government although the US government has stated specifically, “The views and opinions of authors expressed herein do not necessarily state or reflect those of the United States Government or any agency thereof.” The report deals with impacts, mitigation and risk management of ‘peaking of world oil production’. Below are a brief summary and the conclusions of the Hirsch Report along with the three mitigation scenarios drawn by the Hirsch Committee.
Projections of future world oil production will be the sum total of 1) output from the entire global producing oil reservoirs, which will be in various stages of development, and 2) all the yet-to-be discovered reservoirs in their various states of development. This is an extremely complex summation problem, because of the variability and possible biases in publicly available data. In practice, estimators use various approximations to predict future world oil-production. The remarkable complexity of the problem can easily lead to incorrect conclusions, either positive or negative. Various individuals and groups have used available information and geological estimates to develop projections for when world oil production might peak. A sampling of recent projections is in the Table below:
Background & Reference
Iranian Oil Executive
Petroleum journal Editor
Oil co geologist (ret)
Oil co geologist (ret)
World Energy Council
Oil co geologist (ret)
EIA nominal case
2025 or later
Major oil company
No visible peak
Table: Projections of the Peaking of World Oil Production
As we see above, world Oil Peaking is going to happen. World production of conventional oil will reach a maximum and decline thereafter. That maximum is the peak. A number of competent forecasters project peaking within a decade; others contend it will occur later. Prediction of the peaking is extremely difficult because of geological complexities, measurement problems, pricing variations, demand elasticity, and political influences. Peaking will happen, but the timing is uncertain.
Oil Peaking could cost the world economy dearly. Over the past century, abundant, low-cost oil has shaped the development of the economy and lifestyle. Oil scarcity and several-fold oil price increases due to world oil production peaking could have dramatic impacts. The decade after the onset of world oil peaking may resemble the period after the 1973-74 oil embargo, and the economic loss could be measured on a trillion-dollar scale. Aggressive, appropriately timed fuel efficiency and substitute fuel production could provide substantial mitigation.
The report states that the peaking of world oil production presents the
However, world-scale contributions from these options will require 10-20 years of accelerated effort. Dealing with world oil production peaking will be extremely complex, involve literally trillions of dollars and require many years of intense effort. To explore these complexities, the Hirsch committee analysed three alternative mitigation scenarios:
• Scenario I assumed that action is not initiated until peaking occurs.
• Scenario II assumed that action is initiated 10 years before peaking.
• Scenario III assumed action is initiated 20 years before peaking.
The Hirsch Report concluded inescapably that more than a decade would be required for the collective contributions to produce results that significantly affect world supply and demand for liquid fuels.
Important observations and conclusions from this study are as follows:
a. When world oil peaking will occur is not known with certainty. A fundamental problem in predicting oil peaking is the poor quality of and possible political biases in world oil reserves data. Some experts believe peaking may occur soon. This study indicates that “soon” is within 20 years (that is, 2025).
b. The problems associated with world oil production peaking will not be temporary, and past “energy crisis” experience will provide relatively little guidance. The challenge of oil peaking deserves immediate, serious attention.
c. Oil peaking will create a severe liquid fuels problem for the transportation sector, not an “energy crisis” in the usual sense that term has been used.
Peaking will result in dramatically higher oil
prices, which will cause protracted economic hardship in the
e. In the developed nations, the problems will be especially serious. In the developing nations, peaking problems have the potential to be much worse.
f. Mitigation will require a minimum of a decade of intense, expensive effort, because the scale of liquid fuels mitigation is inherently extremely large.
g. While greater end-use efficiency is essential, increased efficiency alone will be neither sufficient nor timely enough to solve the problem. Production of large amounts of substitute liquid fuels will be required, which is feasible with existing technology.
h. Intervention by governments will be required, because the economic and social implications of oil peaking would otherwise be chaotic. The experiences of the 1970s and 1980s offer important guides as to government actions that are desirable and those that are undesirable, but the process will not be easy.
Prudent risk management requires the planning and implementation of mitigation well before peaking. Early mitigation will almost certainly be less expensive than delayed mitigation. A unique aspect of the world oil peaking problem is that its timing is uncertain, because of inadequate and potentially biased reserves data from elsewhere around the world. In addition, the volatile nature of oil prices may obscure the onset of peaking. Since the potential economic impact of peaking is immense and the uncertainties relating to all facets of the problem are large, detailed quantitative studies to address the uncertainties and to explore mitigation strategies are a critical need.
The purpose of the analysis by the Hirsch Committee was to identify the critical issues surrounding the occurrence and mitigation of world oil production peaking. The analysis clearly demonstrates that the key to mitigation of world oil production peaking will be the construction a large number of substitute fuel production facilities, coupled to significant increases in transportation fuel efficiency.
In summary, problem of the peaking of world conventional oil production faced by modern industrial society is unique. The challenges and uncertainties need a much better understanding. Technologies exist to mitigate the problem. Timely, aggressive risk management is essential.
This paper discusses conflicting views on the peaking
of world oil production. The reader
should weigh the divergent views to arrive at a rational interpretation. Three major conclusions come to the fore:
firstly, there is a lot of loose talk of substitute fuels, especially ethanol
from Jatropha plant. In
 “Ecclesiastes 3:1-15”: Time for Everything: There is an appointed time for everything. And there is a time for every event under heaven
 US National Security Strategy Report September 2002
 Newsweek, April 2002
 The Organisation for Economic Cooperation and Development Current membership: Australia, New Zealand, Japan, United States, Canada, United Kingdom, France, Germany, Italy, Spain, Portugal, Belgium, Luxembourg, Netherlands, Denmark, Norway, Sweden, Switzerland, Eire, Austria and Greece.
 Ruppert Michael C., “The Paradigm is the Enemy”, Speech for the Local Solutions to the
Energy Dilemma Conference, April 27-29,
 Editor, Petroleum Review since June 1997, formerly
editor of Petroleum Economist, oil market analyst in
 Megaprojects, “Prices holding steady, despite massive planned capacity additions”, Petroleum Review, April 2006
 All the
evidence shows that depletion tends to speed up rather than slow down – the
 It is virtually impossible to predict demand growth due to a wide variety of fluctuating factors. However, other figures widely quoted are 1.75-2mn b/d or about 2-2.5% growth
 Extracts from “The Oil Industry, Steady as she goes”,
The Economist print edition,
 Ravindran, Pratap, “Oil: On the skids”,
 Energy and the U.S. Economy: A Biophysics Perspective by C. J. Cleveland, R. Costanza, C.A.S. Hall, R. Kaufmann, and Science Vol. 225, No. 4665, August 31, 1984 pp. 890-897.
 Ethanol Production using Corn, Switch grass, and Wood: Bio-diesel Production using Soybeans and Sunflower, by D. Pimentel and T. W. Patzek, Natural Resources Research, Vol. 14:1, May 2005, pp. 65-76.
 “Peaking of World Oil Production: Impacts, Mitigation,
& Risk Management”,