Peak Oil

I've been casually reading a little bit about the issue of 'peak oil'. It seems like this topic doesn't get much attention--or as much as it, perhaps, deserves. The general concept is pretty simple: The easy sources of oil have mostly been found and the rate of their discovery is declining. When a new oil field is discovered and developed, the rate of oil production increases from zero to a certain point where oil cannot be extracted any faster. And then the rate of production begins to fall. You haven't run out of oil, but you can't produce it as quickly any more.

Here's a little analogy that helps me to think about this. Imagine a towel soaked with water. As you begin to wring it out, the water flows increasingly fast until it pours out at a maximum rate, then begins to decline. You rest a moment, and then try again. A lot of water comes out, but not as quickly as before, and each subsequent attempt yields less and less. Your rate of water production from the towel has peaked, and although you can continue producing water, the rate of production is diminishing.

This basic scenario applies on a global scale. When you aggregate all global oil fields together and consider that the rate of discovery of easy sources is declining, you are set up for the worldwide rate of production to peak, and then decline. This is a problem if demand for oil continues to increase, as it is expected to as the world population increases by billions and India and China become more prosperous, because supply will not be able to keep up with demand.

The main tricky part is uncertainty of timing because there usually isn't much warning that an oil field's peak is coming, so you don't know that you've hit the peak until after you've already passed it, and the same applies on a global scale. Although it remains uncertain, a lot of forecasters see the world hitting peak oil within the next 20-30 years. The rate of oil production in the continental U.S. peaked in the 1970s, and in the U.K. it peaked in 1999. A news article in the March 25 issue of Science opens with this:

Five years ago, many oil experts saw trouble looming. In 10 years or so, they said, oil producers outside the Organization of the Petroleum Exporting Countries (OPEC) would likely be unable to pump oil any faster and OPEC would gain an even stronger hand among the world's oil producers. Five years on, it appears those experts may have been unduly optimistic—non-OPEC oil production may have been peaking as they spoke. Despite a near tripling of world oil prices, non-OPEC production, which accounts for 60% of world output, hasn't increased significantly since 2004. And many of those same experts, as well as some major oil companies, don't see it increasing again—ever.

Those major oil companies include Shell and ExxonMobil. In fact a graphic from the article (shown below) comes from an ExxonMobil energy outlook report.



Now for a little perspective. How much of the world's produced oil does the U.S. use? Answer: about 22%, with a little over half of that coming from imports, as shown in this graph [source]:



At this point you might think (aside from, "Hey, that looks like Pac-Man!"), "Well, we better pull out all the stops and drill everywhere we can in the U.S." Aside from the negative side-effects such an approach might have, there is one little problem which is illustrated with this graph:



As you can see, U.S. oil reserves are diddly-squat compared to the rest of the world--about 1.4% [source]. Here is another way to look at it [source]. (Click for large):




This, then, is what it means to say that we cannot drill our way out of the problem of oil dependence.

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Further Reading:

For more, see the Hirsch Report, published in 2005 at the request of the Department of Energy. The summary version [PDF] is quite readable.

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