PEAK OIL
The Looming Energy Crisis
J. R. WOOD
GEOLOGY DEPT.
MICHIGAN TECHNOLOGICAL UNIVERSITY
ANNUAL PRODUCTION OF CRUDE OIL
ACTUAL & PROJECTED
SOURCE: ASPO, 2004
U.S. energy consumption, 2001
US CRUDE CONSUMPTION
USA-OIL
20
18
16
ANNUAL CRUDE OIL
CONSUMPTION
IN THE US & SOURCES
Mb/d
14
Net import
12
10
NGL
8
6
Alaska
Rest-USA
4
2
Texas
0
35 40 45 50 55 60 65 70 75 80 85 90 95
0
DEPENDENCE
OF NATIONAL
GDP ON OIL
CONSUMPTION:
67 COUNTRIES
GDP (PPP)
GDP AND OIL CONSUMPTION
WORLD ENERGY CONSUMPTION
EXXON-MOBIL
THE DEBATE OVER RESERVES:
PESSIMISTS AND OPTIMISTS
During the 1990’s, the debate over oil
reserves generated controversy between
the "pessimists" and the "optimists".
OIL IS POLITICAL
“Oil is so important that publishing reserve
data has become a political act. Most of the
dispute between the so-called pessimists
(mainly retired geologists) and the optimists
(mainly economists) is due to their using
different sources of information and different
definitions. The pessimists use technical
(confidential) data, whereas the optimists use
the political (published) data. “
Jean Laherrère "Future of oil supplies” Seminar Center of
Energy Conversion Zurich May 7 2003
PESSIMISTS
• the world is finite and so are its recoverable oil resources
• all of the oil-bearing regions worth exploring have already
been explored
• the big fields have already been discovered
• claim that official figures for proven reserves have been
overestimated
• world oil production is currently at its optimum (peak) and
will decrease steadily
•Geologists and physicists tend to hold this position.
OPTIMISTS
• hold a “dynamic” concept of reserves
• believe that volumes of exploitable oil
and gas are closely correlated to
technological advances, technical costs
and price
• tend to be economists
THE “FLAT EARTHER’S” PRODUCTION CURVE
“… often assumed by
economists that oil
production can simply be
increased to keep pace
with consumption until
the wells finally and
suddenly run dry.”
http://wolf.readinglitho.co.uk/index.html
Summary: Optimists and Pessimists
Will the hydrocarbon era finish soon? Oct. 2000
H. Rempel, Federal Institute for Geosciences and Natural Resources, Stilleweg 2, 30655 Hannover
140
40
120
35
100
80
Peak
Discovery
1964
30
25
20
60
15
High Prices
Curb Demand
40
10
20
0
1930
5
1950
1970
1990
2010
2030
Production, Gb/a
Discoveries, Gb/a
World - Regular Oil
0
2050
Ultimate :
1850 Gb
To-date 2003: 920 Gb
DISCOVERIES
WORLD OIL DISCOVERIES
Oil discoveries
worldwide peaked
at 90 Gb in 1964
(except for an
exceptional, solitary
peak year in 1948 of
147 Gb. It clearly
shows the fall in
discovery. Even the
successes such as
North Sea oil in the
mid-1970s do not
halt the trend,.
“You have to find it before you can produce it “
 Production mirrors discovery after a time lag
Source: ASPO
3 YEAR AVERAGE
Production mirrors discovery …
Drilling more
does not help
After a time
lag of ~35
years for the
US Lower
48.
Real Discovery Trend
60
Past Discovery
50
Future Discovery
Production
Gb
40
Past discovery
by ExxonMobil
30
20
10
0
1930
1950
1970
1990
2010
2030
2050
Production mirrors discovery …
… for the world?
Drilling more
does not help
The Growing Gap
between Discovery and Consumption
12
Drilling more
does not help
Gb/year
40
10
8
20
6
4
0
2
-20
1960
0
1970
1980
1990
2000
Wildcats (x1000)
60
BUT “OFFICIAL” PROJECTIONS CONFUSE …
SOURCE: EIA & USGS
Regular Oil

How Much has been Found?
1700 Gb (rounded)

When was it found?
Peak discovery was in 1964
ESTIMATTES OF ULTIMATE RECOVERY
“The attached graph shows
76 estimates of ultimate
recover estimates published
by major oil companies and
serious scientific
institutions. There is a
consensus, ... from which
only a few eccentric high
estimates depart (that) ... the
average works out at 1930
Gb, of which 920 Gb, or
almost half (48%), have
been consumed.”

How Much has been Found? 1700 Gb (rounded)

When was it found? Peak discovery was in 1964
Where is it?
Regular Oil
ME.Other
East
Produced
W. Europe
Reserves
Yet-to-Find
Africa
L. America
N. America
Eurasia
ME Gulf
-250
-150
-50
50
150
250
350
450
RESERVE ESTIMATES

RESERVES ARE:
ORIGINAL OIL IN
PLACE –
PRODUCTION

“RESERVE GROWTH”
IS REAL BUT
SOMETIMES HARD TO
VERIFY

RELIABLE DATA ARE
HARD TO COME BY

PRIME DIFFERENCE
BETWEEN
“OPTIMISTS” AND
“PESSIMISTS”
“Political” Reserves

Companies officially under-report where they
can. Stock Exchanges encourage underreporting

Countries variously
– Under-report based on company returns
– Over-report, for example, for OPEC quota
– Simply fail to update - 68 countries in 2003
Final Size
700
3rd Revision
800
2nd Revision
900
1st Revision
First Report
Proposal to
Management
Exploration
SIZE
“Reserve Growth”
1000
Large field
Small fields
600
500
400
300
200
100
0
STANDARD SOURCES OF DATA
STNADARD SOURCES
•OIL & GAS JOUIRNAL
•WORLD OIL
•BP STATISICAL REVIEW
•API (DOE)
•OPEC
“Reserves published as “proved” by Oil & Gas
Journal (OGJ), World Oil, BP Statistical
Review, American Petroleum Institute and
OPEC, can be called “political” (or financial).”
Jean Laherrère "Future of oil supplies” Seminar Center of Energy Conversion Zurich May 7 2003
OGJ and World Oil simply report what
governments and companies send them
BP uses OGJ & WO data but does not filter,
QC or apply institutional knowledge
API and OPEC are meant to be political
World Discovery
Cumulative Discovery, Gb
The Popular Image
2500
2000
1500
1000
500
0
1930
1950
1970
1990
2010
Based on non-backdated revisions
2030
Reality and Illusion
2500
Cumulative Discovery, Gb
Flat-earth illusion
2000
1500
Inflection due to
falling Discovery
Reality
1000
OPEC “quota war”
500
0
1930
1950
1970
1990
2010
2030
Final Size
700
3rd Revision
800
2nd Revision
900
1st Revision
First Report
Proposal to
Management
Exploration
SIZE
Evolution of Reporting
1000
Large field
Small fields
600
500
400
300
200
100
0
Spurious OPEC Reserve Revisions
OPEC PRODUCTION
QUOTAS DEPEND ON
STATED RESERVES
THE TEMPTATION TO
EXAGGERATE PROVED
IRRESISTABLE
Year
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
Abu
Dhabi
28.0
29.0
30.6
30.5
30.4
30.5
30.0
31.0
92.2
92.2
92.2
92.2
92.2
92.2
92.2
92.2
92.2
92.2
92.2
92.2
92.2
92.2
92.2
Dubai
Iran
Iraq
1.4
1.4
1.3
1.4
1.4
1.4
1.4
1.4
4.0
4.0
4.0
4.0
4.0
4.0
4.3
4.3
4.0
4.0
4.0
4.0
4.0
4.0
4.0
58.0
57.5
57.0
55.3
51.0
48.5
47.9
48.8
92.9
92.9
92.9
92.9
92.9
92.9
89.3
88.2
93.0
93.0
89.7
89.7
89.7
89.7
89.7
31.0
30.0
29.7
41.0
43.0
44.5
44.1
47.1
100
100
100
100
100
100
100
100
112.0
112.5
112.5
112.5
112.5
112.5
112.5
Kuwait Neutral
Zone
65
6.1
66
6.0
65
5.9
64
5.7
64
5.6
90
5.4
90
5.4
92
5.3
92
5.2
92
5.2
92
5.0
95
5.0
94
5.0
94
5.0
94
5.0
94
5.0
94
5.0
94
5.0
94
5.0
94
5.0
94
5.0
94
5.0
94
5.0
Saudi
Arabia
163
165
165
162
166
169
169
167
167
170
258
258
258
259
259
259
259
259
259
261
261
261
261
Venezuela
18
18
20
22
25
26
26
25
56
58
59
59
63
63
65
65
65
72
73
73
77
78
78
In billions of bbls.
Misleading Reporting
by BP Statistical Review
1200
Genuine revisions not back dated !
1000
Gb
800
600
400
200
0
1970
1975
1980
Middle East
1985
1990
Rest of World
1995
WORLD OIL RESERVES - BP STATISTICS
The BP statistics for the world's proved
reserves of oil are unrealistic, showing
the unsupported OPEC leap in the 1980s
and a steady increase despite years when
consumption was greater than discovery.
Source: BP
THE CRUDE OIL CRISIS
So, what does it mean …
• if WORLD CRUDE PRODUCTION IS
PRESENTLY PEAKING,
• if MOST OF THE WORLD’S OIL HAS BEEN
DISCOVERED,
• and if WORLD DEMAND CONTINUES TO
GROW?
if WORLD CRUDE PRODUCTION IS PRESENTLY PEAKING
End of cheap oil
Exxon stock anyone?
Really a stretch, Dr. Wood
Population crash?
Just the perception that oil is peaking will be
a problem
• Financial markets can be counted on to
react badly
• Governments too; some may even
consider going to war
• General population will bear the brunt,
esp. in poorer, undeveloped countries
if most of the World’s oil has been discovered
The OPEC/Middle East Crossoverv
One consequence:
•OPEC is expected
to produce more
than 50% of the
world's oil around
2010,
•How will Western
economies cope?
Oil production comparing OPEC with the Rest of the World.
Source: ASPO
•and if WORLD DEMAND CONTINUES TO GROW?
2003
TOTAL ENERGY CONSUMPTION
100
Qatar
UAE
Singapore
10
Iceland
Canada
KuwaitNorway
USA
O/P (TOE/C/YR)
Belgium
Australia
Netherlands
Finland
Sweden Saudi Arabia
Russia
New Zealand
France
Korea
(South)
Austria Taiwan UK Germany
Switzerland
Japan
Denmark
Slovakia
Ireland
Spain
Kazakhstan
Italy
Greece
Turkmenistan
Ukraine
Lithuania
PortugalVenezuela
Bulgaria
South Africa
Poland
Hungary
Belarus Malaysia
Iran
Romania
Uzbekistan
Chile
Azerbaijan
AVE
Argentina
Mexico
Thailand
Brazil
Algeria Turkey
1
China
Egypt
Ecuador
Colombia
Indonesia
Peru
Philippines
Pakistan
India
Bangladesh
0.1
0.1
1
10
100
POPULATION (millions)
1000
10000
Population Trends – Less & More
Developed countries may squeak
by IF energy alternatives can be
found and put on line quickly
enough.
If these population projections are
at all correct, then less developed
countries have no chance.
Developed countries will not let
their economies crumble under
the oil threat. As long as
significant quantities of oil remain,
the developed countries will fight
to maintain share.
Less developed countries will
suffer in comparison as they will
be shut out of oil markets,
probably even if they own the
supplies.
Source: UN Population Trend Data
THE ANTHROPOLOGIST’S PERSPECTIVE?
The Olduvai Theory of Industrial Civilization
EXAGGERATED?
PERHAPS, BUT THE OIL
AGE WILL BE
REMEMBERED AS A TIME
WHEN MANKIND WENT
THROUGH 100’S OF
MILLIONS OF YEARS OF
HYDROCARBON
RESOURCES IN LESS
THAN 200 YEARS.
The Olduvai Theory: Sliding Towards
a Post-Industrial Stone Age. Richard C
Duncan, Ph.D. Institute on Energy and
Man, June 27, 1996
THE CRITICAL IMPORTANCE OF GIANT FIELDS
Saudi Arabia has over 300
recognized reservoirs but 90%
of its oil comes from the five
super giant fields discovered
between 1940 and 1965. Since
the 1970s there haven't been
new discoveries of giant fields.
IAGS, 2004, “New study raises doubts about Saudi oil
reserves “
AAPG EXPLORER, JAN., 2005
GIANT OIL FIELDS*
*
>500 MILLION BBLS
WORLD GIANT OIL FIELDS
Fit Results
250
• HISTOGRAM
CONTAINS 876 FIELDS
WORLDWIDE
Fit 1: Normal
Number of data
points used = 876
Average X = 1966.26
Standard Deviation =
21.5462
200
150
N
• RATE OF DISCOVERY
CLEARLY IN DECLINE
100
• DISCOVERY PEAKED
IN 1966
50
0
1860
1880
1900
1920
1940
1960
1980
2000
2020
2040
2060
Saudi Arabia's Ghawar Field
Discovered in 1948, Ghawar
is the world's biggest oil
field, 174 miles in length and
16 miles across and
encompasses 1.3 million
acres.Current estimates, for
cumulative oil production are
55 billion barrels. Average
production for the last 10
years is five million barrels
per day. Ghawar accounts for
more than one-half of all oil
production in Saudi Arabia
ANNUAL PRODUCTION OF CRUDE OIL
SOURCE: ASPO, 2004
WORLD OIL & THE HUBBERT
CURVE
The yellow line in the graph is the Hubbert curve
and shows how oil production would have
expanded and then contracted if it had been
governed solely by physical constraints.
40
120
35
100
30
25
80
20
60
15
40
10
20
5
0
1930
1950
1970
1990
World - Regular Oil
Ultimate :1850 Gb
To-date 2003 : 920 Gb
2010
2030
0
2050
Production, Gb/a
Discoveries, Gb/a
Peak Discovery 1964
140
The red line shows the amount of oil actually
produced up to 2003 and what is likely to be
produced in the future.
The actual curve followed the theoretical curve
very closely until the early 1970s when five OPEC
producers gained control of more than 30% of the
world market. This pushed up prices, limiting
demand.
High oil prices can be expected to cause world oil
demand to stay on a plateau until around 2010.
After that, output will fall whatever the price
because fields will be becoming exhausted.
All Oil & Gas
50
Production, Gboe/a
Non-con Gas
40
30
Gas
NGLs
Polar Oil
Deep Water
Heavy
20
Regular
10
0
1930
1950
1970
1990
2010
2030
2050
ENERGY CONVERSIONS
1 BARREL OF OIL
= 6.1 GJ
= 5.8 X 10 6 BTU
= 1,700 kilo-watt-hr (kWh)
= 42 gallons (U. S)
7.2 BARRELS OF OIL = 1 ton of oil (= 42-45 GJ)
“Reserve Growth” misleads
“Reserve Growth” misleads.
 It is widely attributed to technology,
market forces or good management,
but is simply a reporting
phenomenon.
 Proved Reserves grow by definition
 Proved & Probable Reserves do not
 Revisions have to be backdated to
obtain a valid discovery trend.

Data Sources

Two trade journals Oil & Gas Journal and
World Oil compile data given to them by
governments but do not assess validity

BP reproduces the Oil & Gas Journal
– But does not reveal its own knowledge

Industry databases give the best available
data but is too expensive for most analysts
to access
Conclusion

Most of the confusion and
controversy derives from the
unreliable reporting of production and
reserves.
 It is not primarily a technical problem,
but a political one.
 There are vested interests with good
reasons to conceal and confuse
Cumulative Discovery, Gb
Hyperbolic Creaming Curve
50
40
30
20
10
0
0
500
1000
1500
2000
2500
Cumulative Wildcats
Hyperbolic Model
Actual
3000
3500
Size Distribution
Size Mb
10000
100
1
1
10
100
Rank
Actual
Parabolic
1000
Yet-to-Find in New Areas

All the larger provinces with Regular oil
have already been found.

The largest found in 50 years was the
North Sea with about 70 Gb. It is
inconceivable that anything near as large
has been missed.

There may be small new areas. But the
discovery trend of a country based on its
major productive provinces will not be
much affected any small new ones.
WAS IT ALL ABOUT OIL AFTER ALL?
• Shell along with Chevron, BP and seven other oil giants, have won contracts
to buy Iraq's new oil production of Basra Light crude. The contracts cover
production from the Mina Al-Bakr port in southern Iraq from August to
December of this year.
• The sales contrast sharply with contracts signed by the previous regime of
Saddam Hussein with Russia and France. "Unfortunately, not a single
Russian company managed to clinch a contract, as we went for the best
price," says acting oil minister Thamer Ghadhban.
EXCERPTS FROM: “To the Victors Go the Spoils of War”
CORPWATCH, 2004
WAS IT ALL ABOUT OIL AFTER ALL?
• “Executive order number 13303 states "any attachment,
judgment, decree, lien, execution, garnishment, or other
judicial process is prohibited, and shall be deemed null
and void", with respect to "all Iraqi petroleum and
petroleum products, and interests therein.”
• "Effectively Bush has unilaterally declared Iraqi oil to be
the unassailable province of US oil corporations." Jim
Vallette, Sustainable Energy & Economy Network of the Institute for Policy
Studies, Washington DC.
FROM: “To the Victors Go the Spoils of War”
CORPWATCH, 2004
CRTITQUE OF OFFICIAL RESERVE ESTIMATES
“According to BP, reserves increased dramatically in the 1980s and
1990s, from 670 billions barrels at the end of 1960 to 1147 billion
barrels at the end of 2003. But most of the increase occurred in OPEC
countries, mainly in the Middle East, in the second half of the 1980s.
Saudi Arabia and Kuwait revised their reserves upward by 50%, while
Venezuelan reserves were boosted 57% by the inclusion of heavy oil in
1988. The United Arab Emirates and Iraq also recorded large upward
revisions in that period. Total OPEC reserves jumped from 538 billion
barrels in 1985 to 766 billion barrels in 1990. As a result, world oil
reserves increased by more that 30%. This hike in OPEC countries’
estimates of their reserves was driven by negotiations at that time over
production quotas, and had little to do with the actual discovery of new
reserves. In fact, very little exploration activity was carried out in those
countries at that time. Total reserves have hardly changed since the end
of the 1980s.”
The Outlook, 2004
NEXT BIG THING: PEAK OIL
“The peak-oil debate is getting more polarized and more rancorous—and,
especially noteworthy, more politicized. So here's an immodest prediction:
The peak-oil debate will be the Next Big Thing. The story with legs. The
overarching theme that will resonate throughout the oil and gas industry for
decades to come. It will be propelled forward in the public consciousness not
only by serious debate within the industry itself but also on the political
hustings and by antioil forces who can't seem to pry Americans out of their
sport utility vehicles even as war rages in the Middle East and Chicken Little
lies sacrificed on the Kyoto altar.
Iraq and Saudi Arabia will figure largely in that debate. So will Russia and
the Caspian. And Orinoco oil and Athabasca tar sands. And reserves
accounting and transparency. And alternate energy viability. “
Bob Williams: Oil and Gas Journal, 2004
NEXT BIG THING: PEAK OIL
CRITIQUE OF USGS RESERVE ESTIMATES
“The USGS commenced its study of world oil following the
shocks of the 1970s, and for many years issued sound evaluations
at successive meetings of the World Petroleum Congress. But a
departure came with the study of 2000, under the project’s new
director, claiming a Mean estimate of the total discovery to 2025
of 3.3 trillion barrels. The following Figure illustrates the record
of some 65 past estimates by major oil companies, serious
institutions and the USGS itself, which average 1.93 trillion
barrels, indicating that the latest USGS estimate is far from the
consensus.”
Examples of Depletion
Evidence for peak and decline as
demonstrated by examples of countries
at different stages of depletion
30
10000
25
8000
20
6000
15
4000
10
5
2000
0
0
1930
1950 1970
1990 2010 2030
2050
Production kb/d
Discovery Gb
US-48
0.45
0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
1930
180
160
140
120
100
80
60
40
20
0
1950
1970
1990
2010
2030
2050
Production kb/d
Discovery Gb
Germany
5
3000
4
2500
2000
3
1500
2
1000
1
500
0
0
1930
1950
1970
1990
2010
2030
2050
Production kb/d
Discovery Gb
United Kingdom
6
3500
5
3000
2500
4
2000
3
1500
2
1000
1
500
0
0
1930
1950
1970
1990
2010
2030
2050
Production kb/d
Discovery Gb
Norway
12
1400
10
1200
1000
8
800
6
600
4
400
2
200
0
0
1930
1950
1970
1990
2010
2030
2050
Production kb/d
Discovery Gb
Algeria
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
1930
1000
800
600
400
200
0
1950
1970
1990
2010
2030
2050
Production kb/d
Discovery Gb
Egypt
16
14
12
10
8
6
4
2
0
1930
4000
3500
3000
2500
2000
1500
1000
500
0
1950
1970
1990
2010
2030
2050
Production kb/d
Discovery Gb
Libya
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
1930
2500
2000
1500
1000
500
0
1950
1970
1990
2010
2030
2050
Production kb/d
Discovery Gb
Nigeria
6
1800
1600
1400
1200
1000
800
600
400
200
0
Discovery Gb
5
4
3
2
1
0
1930
1950
1970
1990
2010
2030
2050
Production kb/d
Indonesia
2.5
1200
2
1000
800
1.5
600
1
400
0.5
200
0
1930
0
1950
1970
1990
2010
2030
2050
Production kb/d
Discovery Gb
Oman
45
40
35
30
25
20
15
10
5
0
1930
3500
3000
2500
2000
1500
1000
500
0
1950
1970
1990
2010
2030
2050
Production kb/d
Discovery Gb
Venezuela
Mexico
3500
3000
20
2500
15
2000
10
1500
1000
5
500
0
1930
0
1950
1970
1990
2010
2030
2050
Production kb/d
Discovery Gb
25
30
7000
25
6000
5000
20
4000
15
3000
10
2000
5
1000
0
0
1930
1950
1970
1990
2010
2030
2050
Production kb/d
Discovery Gb
Iran
140
12000
120
10000
100
80
60
40
20
0
8000
6000
4000
2000
0
1930 1950 1970 1990 2010 2030 2050
Production kb/d
Discovery Gb
Saudi Arabia
35
14000
30
12000
25
10000
20
8000
15
6000
10
4000
5
2000
0
0
1930
1950 1970
1990 2010 2030
2050
Production kb/d
Discovery Gb
Russia
160
140
120
100
80
60
40
20
0
70000
60000
50000
40000
30000
20000
10000
0
1930 1950 1970 1990 2010 2030 2050
Production kb/d
Discovery Gb
World
Canada
Production kb/d
3000
2000
1000
0
1930195019701990201020302050
Regular Oil
Tarsand etc
IRAQ
ASPO
Main Point

The data used in preparing the slides
comes from many sources, but shows
a general pattern of growth, peak and
decline of discovery followed by
production
World Population
“It has been estimated that,
without hydrocarbons to
provide energy, fertilizers and
pesticides, agriculture could not
support a population greater
than two billion.
This reduction would take us back
to pre-20th century levels but
the disruption to society and its
infrastructure would probably
mean a reversion to preindustrial revolution.” Paul Thompson
Reading, England August 2004
Prices and Production over a complete Hubbert Cycle: the
Case of the American Whale Fisheries in 19th Century
Bardi : Sept. 2004, ASPO - The Association for the Study of Peak
Oil and Gas, and The Dipartimento di Chimica - U. Firenze, Italy
Saudi Arabia's Ghawar Field
Discovered in 1948, Ghawar
is the world's biggest oil
field, 174 miles in length and
16 miles across and
encompasses 1.3 million
acres. Current estimates, for
cumulative oil production are
55 (??) billion barrels.
Average production for the
last 10 years is five million
barrels per day. Ghawar
accounts for more than onehalf of all oil production in
Saudi Arabia. (AAPG EXPLORER
JAN. 2005)
Hubbert’s Model: constraints
Hubbert’s modelling technique has been variously
applauded and criticised, but the constraints to its
application have not been widely appreciated. It works well
only:
•where applied to a natural domain, unaffected by
political or significant economic interference;
•to areas having a large number of fields; and to areas
of unfettered activity.
Hubbert himself worked primarily on the US-48, which
had the necessary characteristics to be well modelled by a
single cycle.
“
from THE HUBBERT CURVE : ITS STRENGTHS AND WEAKNESSES” by J.H. Laherrère, Oil
and Gas Journal ms, Feb 18 2000 (http://www.dieoff.com/page191.htm)
PEAK OIL: SOME CONSEQUENCES
The world is not about to run out of oil, but production is about to
peak. The sky does not fall in at peak, but the perception of the
future changes. It is likely to lead to
•severe political and economic tensions, including economic
recession,
•a stock-market crash,
•and, financial instability from the huge flows to the
Middle East.
There are obvious dangers of misguided military intervention as the
United States, Europe and the East vie for access to Middle East oil.
The inequality between rich and poor nations will be more severe.
Agriculture is at risk because it is now heavily dependent on
synthetic nutrients and irrigation, both directly and indirectly
dependent on petroleum. The global market may wither from high
transport costs.
from the Feasta conferencemoney, energy and growth’ March 2000. the imminent peak of
global oil productionCOLIN CAMPBELL
FLAT EARTH PRODUCTION CURVE
Other experts, notably
economists, assume that oil
production follows this type
of curve. As demand
increases, the oil fields
simply increase production,
the two lines rising and
falling together. Those who
admit that oil is finite (and
not all do) expect that the
end will come suddenly as
the oil fields simply run out.
This is often known
disparagingly as 'flat-earth
economics'
http://wolf.readinglitho.co.uk/index.html
FUEL ENERGY DENSITY
SOURCE: INTERNET ENCYCLOPEDIA
US-48
COLIN CAMPBELL
Oil Production Curve (actual and adjusted)
The symmetrical Hubbert
curve is often skewed as
shown. For an individual
area, it often turns out to
be cheaper to buy oil
elsewhere rather than
extract the difficult
remaining oil after the
peak, thus reducing the
downslope angle.
In the case of world
production, there will be
nowhere else to go and it
will be declining
prosperity after the peak
that will reduce demand.
Oil Production (USA lower-48) 1930-2002
Because the USA has been
producing longer than anyone
else, largely unaffected by
external matters, it shows the
Hubbert Curve better than
anywhere else.
Production has been declining
since the 1970s and, despite the
efforts of the richest, most
technologically advanced society
in the world, has not been
stopped. Source: ASPO
Oil Discovery minus Consumption (world)
The really important
statistic is the difference
between discoveries and
consumption. Until 1980
(with the exception of
1972), discoveries
exceeded production
worldwide. Since then, the
trend has been negative
and we consume more oil
than we produce. As
discoveries continue to fall
and consumption rises, it
can only get worse.
Source: ASPO
Proved World Oil Reserves - J. Laherrère
Compared to BP's chart
of the world's oil
reserves, Jean
Laherrère's version,
produced from
creaming curves, seems
much more realistic. As
consumption outgrew
discovery in the early
1980s, reserves fell as
one would expect.
Source: Jean Laherrère
OIL PRODUCTION: ASSUMING R/P (FLAT
EARTH) MODEL
Many people (including
some 'experts') assume
that oil produced from
a field follows the R/P
ratio model: there is a
fairly constant flow
until near complete
depletion when it
suddenly drops.
Actually, a single well is
not unlike this and
natural gas flow is
somewhat similar.
But it is nothing like
most actual oil fields or
oil provinces.
SINGLE WELL PRODUCTION CURVE
This chart
shows how an
individual oil
well acts
differently from
the Hubbert
Curve, with a
long, fairly
stable plateau
rather than a
peak.
HUBBERT 4-WELL CURVE
four individual oil
wells when totaled
begin to create the
Hubbert Curve
Hubbert Curve (8 wells)
eight individual oil
wells when totaled
begin to resemble the
Hubbert Curve. Given
enough wells, a smooth
curve will result.
PEAK PRODUCTION AND RESERVE GROWTH
The growth of reserves
has little impact on
peak production, as
illustrated by the
example of the
Prudhoe Bay field in
Alaska. The growth in
reported reserves
normally coincides
with the onset of
decline, prolonging the
field’s life by extending
the tail end of
production.
Aleklett, Uppsala
Hydrocarbon Depletion Study
Group, Uppsala University,
Sweden
Prudhoe Bay
Cumulative Discovery against Production (World)
Discovery and
production curves for
the World compared.
Discovery peaked in
1964 when the
discovery curve
changed from a concave
(growing) to convex
(declining) slope.
At this time, the
production curve is at a
similar position. The
production curve will
mirror the discovery
curve with a time lag of
about 36 years.
FUTURE VIEWS
“My view of the near future then is
pessimistic, a view that the oil crisis will hit
us hard with wars, famines and the
environment drastically devastating the
population. Assuming that we can avoid a
nuclear war, I believe that the world would
eventually settle down. It has been estimated
that, without hydrocarbons to provide
energy, fertilizers and pesticides, agriculture
could not support a population greater than
two billion. This reduction would take us
back to pre-20th century levels but the
disruption to society and its infrastructure
would probably mean a reversion to preindustrial revolution.”
Paul Thompson Reading, England
August 2004
Coal fields of the United States.
Oil shale in Green River Formation
WILL TECHNOLOGY SAVE US?
“New “technology”, which in fact is not new being
as much as thirty years old for horizontal wells and
3D seismic, is being used already in most producing
fields. It allows cheaper and faster production but
does not add to the reserves themselves in
conventional fields.”
Jean Laherrère "Future of oil supplies” Seminar Center of
Energy Conversion Zurich May 7 2003
Transport Efficiency
This chart shows the
relative efficiencies of
different forms of
transport taking into
account the number of
passengers carried and the
energy needed to move
each kilometer). If we are
to deal with the energy
crisis to come, we will
have to alter our way of
life to use more energyefficient forms of
transport. Source: "Energy: A
Guidebook" by Janet Ramage 1997
The point at which the supply begins to diminish is
much more important economically than when the
wells run completely dry. M Lawton and Tacildayus Andrews
www.almc.army.mil/alog/ issues/JulAug99/MS406.htm
The “production peak” is therefore the
main event in the future history of oil
extraction, a point which will mark the
epochal change from cheap oil to
expensive oil. Ugo Bardi to appear in Energy PolicyDipartimento di
Chimica — Università di Firenze, Polo Scientifico di Sesto Fiorentino, 50019 Sesto
Fiorentino (FI), Italy
EUGENE ISLAND AN “ODD RESERVOIR”
Odd Reservoir Off Louisiana Prods Experts to Seek a Deeper Meaning
By CHRISTOPHER COOPER
Staff Reporter of THE WALL STREET JOURNAL
HOUSTON -- Something mysterious is going on at Eugene Island 330.
Production at the oil field, deep in the Gulf of Mexico off the coast of Louisiana,
was supposed to have declined years ago. And for a while, it behaved like any
normal field: Following its 1973 discovery, Eugene Island 330's output peaked at
about 15,000 barrels a day. By 1989, production had slowed to about 4,000 barrels a
day.
Then suddenly -- some say almost inexplicably -- Eugene Island's fortunes reversed.
The field, operated by PennzEnergy Co., is now producing 13,000 barrels a day, and
probable reserves have rocketed to more than 400 million barrels from 60 million.
Stranger still, scientists studying the field say the crude coming out of the pipe is of
a geological age quite different from the oil that gushed 10 years ago.
Peak oil is a turning point for Mankind. The economic
prosperity of the 20th Century was driven by cheap, oilbased energy. Everyone had the equivalent of several unpaid
and unfed slaves to do his work for him, but now these
slaves are getting old and won't work much longer. We have
an urgent need to find how to live without them. - C.J.Campbell Peak Oil: an Outlook on Crude Oil Depletion Revised
February 2002
DATA SOURCES - GAS & OIL
There are two main sources of public data: the Oil & Gas
Journal and World Oil, which are trade journals that compile
information given to them by governments and others. They
are not in a position to assess the validity of the information
supplied to them. Another widely used source is the BP
Statistical Review of World Energy. BP is in a position to
evaluate the data, but prefers to reproduce the Oil and Gas
Journal numbers, understandably not wanting to involve itself
with sensitive issues that might affect its relationship with the
host governments of the countries where it works. Lastly is the
industry database, which is relatively reliable, but too
expensive for most analysts to access. All these sources provide
different numbers.
IMPACT OF TECHNOLOGY
“Great advances in seismic technology make it possible
to see the smallest and most subtle trap. In general, this
better knowledge has reduced the perceived potential,
because it shows a dearth of large prospects. In other
words, we can find a needle in a haystack, but it is still
a needle. We did not need the resolution to find the
giant fields of the past holding most of the world's oil.
It means we have a much better knowledge of the
endowment in Nature than we used to have.” (C.J.Campbell
Peak Oil: an Outlook on Crude Oil Depletion - - Revised February 2002)
USGS GAS& OIL ESTIMATES
The US Geological Survey has failed to
live up to its scientific reputation. It has
assessed the Undiscovered Potential of
each basin with a range of subjective
probabilities. It has a Low Case for the
most sure and a High Case for the least
sure. The High Case itself has little
meaning, being little more than a wild
guess. The Low Case is consistent with
the discovery trend, but The Mean
value, which is the one publicized is
meaningless because it is influenced by
the High Case. This has been confirmed
by experience in the real world because
the Mean estimate is already 100 Gb
short, five years into the study period.
Its notion of "reserve growth" is also
flawed. It is depicted as a technological
dynamic when it is simply an artifact of
reporting practice, not to be
extrapolated into the future.
(C.J.Campbell Peak Oil: an Outlook
on Crude Oil Depletion - - Feb 2002)
Over the past few years I have often been amazed by the degree to
which the American public remains willingly uninformed, and
despite my skepticism, I sometimes wonder about the validity of
this statement:
"The CIA owns everyone of any significance in the major media.“
--former CIA Director William Colby
Revisited - The Real Reasons for the Upcoming War With Iraq:
A Macroeconomic and Geostrategic Analysis of the Unspoken Truth
by William Clark
wrc92@aol.com
Original Essay January 2003
-Revised March 2003
-Post-war Commentary January 2004
CONSEQUENCES - AN “EXPANDING
EARTH”
In May 2004, Simmons explained that in order for demand to be
appropriately controlled, the price of oil would have to reach
$182 per barrel. With oil prices at $182 per barrel, gas prices
would likely rise to $7.00 per gallon.
OIL COMPANY ENLIGHTENMENT

Nobody knows or can know how
much oil exists under the earth's
surface or how much it will be
possible to produce in the future
BP STATISTICAL REVIEW 2004
Proved oil reserves at the end of 2003 are estimated to have been 1147.7
billion barrels. That represented an increase of around 12% over the end1993 figure of 1023.6 billion barrels, despite estimated cumulative
production of almost 264 billion barrels during the intervening ten years, ie
reserves replacement amounted to almost 400 billion barrels between end1993 and end-2003.
BP STATISTICAL REVIEW 2004
THE CRUDE OIL CRISIS
MAIN POINTS (CONT.)
•CRISIS IS POLITICAL AND TECHNICAL
• GOVERNMENT VERSION DIFFERS
CONSIDERABLY FROM PROFESSIONAL
OPINION
• WORLD POPULATION GROWTH IS PART OF
PROBLEM
ELECTRICITY
CONSUMPTION
ELECTRICITY AND OIL
CONSUMPTION
OIL CONSUMPTION
GLOBAL ENERGY CONSUMPTION
EACH MAN WOMAN AND CHILD IN U.S.
USES ABOUT 8 TONS OF ENERGY (boe) / YR
This is about 2,352 gallons of gas/oil /yr
Enough to drive around the world twice.
The average citizen of Bangladesh uses less than
1/100 that amount in a (good) year.
WORLD OIL CONSUMPTION
The growth in the
world's oil
consumption
doubles in about
thirty years.
Valleys and plateaus
tend to be caused by
recessions as in the
1970s and 1980s.
The change in the
previous year was a
2.1% rise.
Source: BP
WORLD CRUDE OIL: DISCOVERIES & PRODUCTION
NOTES:
WORLD CRUDE OIL
160
1. Discoveries precede
production. Difference
is reserves.
140
120
2. Trend is for
discoveries to taper
off.
80
3. Exponential
increase in pre-1970’s
production.
60
40
DISCOVERED
20
PRODUCED
2050
2040
2030
2020
2010
2000
1990
1980
1970
1960
1950
1940
0
1930
Gb/a
100
4. Area under both
curves will be same at
depletion. Lights out.
PRODUCTION
“The official forecast from the IEA/USDOE of 120
Mb/d in 2020 or 2030 seems too optimistic in front of
the currently indicated poor economic performance,
and seems almost impossible in term of supply.”
Jean Laherrère "Future of oil supplies” Seminar Center of
Energy Conversion Zurich May 7 2003
CREAMING CURVE
This is an example
of a creaming
curve where the
actual values
(yellow) are
compared to a
hyperbolic curve
(red). Where the
curve becomes
horizontal will
show the total oil
in the field.
Source: ASPO
Shell
Cumulative Discovery Gb (gross)
Hyperbolic Discovery Trend
80
1998
60
40
20
1950
0
0
1000
2000
3000
4000
5000
6000
Cu m. wildcats (Sh ell op erated )
Actu al
Hyp erb olic p ro jection
CRITIQUE OF INTERNATIONAL ENERGY AGENCY
“We may conclude that the International Energy
Agency (IEA) has delivered a forecast designed to
fulfill the Agency’s political agenda, but between
the lines it clearly sets out enough evidence to
show that it is indeed no more than a political
statement, far removed from what is attainable in
the real world. The critically important message
that emerges is that peak oil will come in the near
future, and that a peak in 2030 is nothing more
than a political posture. “
Kjell Aleklett, professor in Physics
Uppsala Hydrocarbon Depletion Study Group
Uppsala University, Sweden
OPEC
OPEC (The Organization of Petroleum Exporting
Countries), is an international organization of eleven
countries that rely heavily on oil revenues as their main
source of income. OPEC was formed in 1960, and its
current members are Algeria, Indonesia, Iran, Iraq,
Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United
Arab Emirates and Venezuela.
Its stated objective is to ”co-ordinate and unify petroleum
policies among Member Countries, in order to secure fair
and stable prices for petroleum producers; an efficient,
economic and regular supply of petroleum to consuming
nations; and a fair return on capital to those investing in
the industry.”
INTERNATIONAL ENERGY ORGANIZATION
OECD
AUSTRALIA
AUSTRIA
BELGIUM
CANADA
CZECH REPUBLIC:
DENMARK
FINLAND
FRANCE
GERMANY
GREECE
HUNGARY
ICELAND
IRELAND:
ITALY:
JAPAN:
KOREA:
LUXEMBOURG:
MEXICO
NETHERLANDS
NEW ZEALAND
NORWAY
POLAND:
PORTUGAL
SLOVAK
REPUBLICSPAIN
SWEDEN
SWITZERLAND
TURKEY
UNITED KINGDOM
UNITED STATES
“The IEA was established in November 1974 in response
to this oil crisis as an autonomous inter-governmental
entity within the Organization for Economic
Cooperation and Development (OECD) to study
energy supply and security, and advise the member
nations accordingly. In general, OPEC is accepted as a
political organization with its statements being coloured
accordingly. What many do not realize is that the IEA is
also a political organization and that its reports are
highly coloured by the perceived best interest of its
members. “
Kjell Aleklett, professor in Physics
Uppsala Hydrocarbon Depletion Study Group
Uppsala University, Sweden
COMMENTS FROM ABROAD
“The US energy crisis is just beginning, and is very dangerous. It
may easily lead to a global disruption of the energy supply
system.”
ASPO NEWSLETTER #2, FEB. 2001
“ . . . the commercial value of oil and gas discovered by the 10 largest
energy groups over the last three years is well below the sums spent to
find them. In 2003, the top 10 oil groups spent about $8 billion hunting
for oil, but only found about $4 billion worth of the stuff. Development
spending on existing oil and gas properties has jumped from about $35
billion in 1998 to a record $50 billion in 2003. During the same time
frame, exploration spending has fallen from $11 billion to $8 billion.
ASPO NEWSLETTER #48, DEC. 2004
COMMENTS FROM ABROAD
“The US energy crisis is just beginning, and is very dangerous. It
may easily lead to a global disruption of the energy supply
system.”
ASPO NEWSLETTER #2, FEB. 2001
Even the U.S. government agrees that the amount of oil that can
be pulled from the planet is finite. But it estimates that global oil
production will likely peak in 2037, rather than in 2008. "All or
nearly all of the largest oil fields have already been discovered
and are being produced. Production is indeed clearly past its
peak in some of the most prolific basins," the federal Energy
Information Administration (EIA) said in a recent report on
peak oil.
ASPO NEWSLETTER #48, DEC. 2004
CONVERSION FACTORS AND ENERGY EQUIVALENTS
Basic Energy Units
1 joule (J) = 0.2388 cal
1 calorie (cal) = 4.1868 J
(1 British thermal unit [Btu] = 1.055 kJ =
0.252 kcal)
1 tonne of oil equivalent (toe) = 42 GJ (net
calorific value) = 10 034 Mcal
1 tonne of coal equivalent (tce) = 29.3 GJ
(net calorific value) = 7 000 Mcal
Volumetric Equivalents
1 barrel = 42 US gallons = approx. 159
litres
1 cubic metre = 35.315 cubic feet = 6.2898
barrels
Electricity
1 kWh of electricity output = 3.6 MJ =
approx. 860 kcal
Representative Average Conversion Factors
1 tonne of crude oil = approx. 7.3 barrels
1 tonne of natural gas liquids = 45 GJ (net
calorific value)
1 000 standard cubic metres of natural gas =
36 GJ (net calorific value)
1 tonne of uranium
(light-water reactors, open cycle) = 10 000
– 16 000 toe
1 tonne of peat = 0.2275 toe
1 tonne of fuelwood = 0.3215 toe
1 kWh (primary energy equivalent) = 9.36
MJ = approx. 2 236 Mcal
The long-term price of oil in 2003 dollars through 2003
is shown in the attached graph. ... the volatility imposed
by the difficult swing role of OPEC is over, and prices
are set to rise to reflect the underlying supply
constraints. The remarkable stability before the foreign
companies were expropriated in the main producing
countries stands out, and a future rise into the $40-60
range does not look altogether out-of place, still being
below the 1980 spike. - James Dow, ASPO Economics
Correspondent, Sept. 2004
OIL PRICE