We are being lulled to sleep by temporarily low oil prices caused by the global financial crisis. In fact, low prices may lead to an increased level of consumption and accelerated exhaustion of oil reserves.
“Peak oil,” the point at which global oil production peaks and then rapidly declines, is still not sufficiently on the minds of the American public and policymakers. We don’t know exactly when peak oil will arrive, but it is very likely to occur within ten to twenty years. Some say that it may even be here now – the US Army Corps of Engineers, for example, wrote in a 2005 report: “We are at or near a peak in global oil production.” Peak oil should be at the forefront of everyone’s mind – here’s why:
As soon as the global economy recovers, we can expect oil and other fossil fuel prices to shoot right back to where they were last summer, and probably far higher. The International Energy Agency (IEA), formed in the 1970s to act as an energy watchdog for western nations, stated in its 2008 World Energy Outlook:
Current global trends in energy supply and consumption are patently unsustainable …The future of human prosperity depends on how successfully we tackle the two central energy challenges facing us today: securing the supply of reliable and affordable energy; and effecting a rapid transformation to a low-carbon, efficient and environmentally benign system of energy supply.
This is a call to action of the most urgent kind and we dare not ignore it.
U.S. oil production peaked in 1970 and has declined ever since, apart from a small and short uptick in the late 1970s, and oil imports have increased steadily. We now produce half of what we produced at our peak and import about 60 percent of our oil.
What is the global situation? The United Kingdom struck oil in the North Sea in the 1970s and became a major world producer. But oil production peaked without warning in 1999 and the UK suddenly transformed from an oil exporter into an oil importer just seven years after its oil production peaked. UK North Sea oil production is now down almost 50 percent from its peak.
The same pattern occurred in Indonesia, formerly a member of OPEC. Norway, Russia, and the majority of other oil producers are also past their peak. This is why the IEA regards the situation as so dire: existing oil fields are declining very quickly and new oil fields are not coming online quickly enough to replace them. The IEA concludes that we need three or four additional Saudi Arabias to meet projected demand by 2015!
Cambridge Energy Research Associates, a respected oil forecasting firm that has been very skeptical of the peak oil discussion, also recently forecast that eight million barrels per day of oil projects have been canceled or delayed since the global recession hit, exacerbating the mid-term situation further.
Oil production is not the only issue, however. Natural gas production will follow a similar production decline, probably just a few years behind the oil production decline. Natural gas currently constitutes about one quarter of the world’s energy consumption, so this cannot be forgotten in the discussion.
As we’ve seen with food exports such as rice, when fears grow over the domestic availability of key resources (like food, oil or gas), nations will change export policies overnight: last year, Thailand, the world’s second largest exporter of rice temporarily outlawed rice exports. The same thing could very well happen in oil- and gas-exporting nations: as soon as the global economy recovers and the supply shortage becomes clear, major exporters can simply forbid exports, keeping their precious oil and gas for their own use.
Similarly, some countries’ oil and gas exports are already declining quickly. Mexico, while struggling with a major drug war, saw its oil exports plummet over 20 percent in 2008 due to the decline by 33 percent in just one year of its major field, Cantarell. Mexico is the third largest supplier of oil to the U.S. Mexico’s oil revenue has fallen off a cliff as its oil exports and oil prices more generally have plummeted. A full 40 percent of Mexico’s government funding is oil revenue. Clearly, Mexico is facing a formidable future and may not survive as a functioning nation, a conclusion also reached by the U.S. military’s Joint Forces Command in a 2008 report.
The time is now to invest heavily in alternatives to oil and gas, such as energy efficiency, conservation, renewable energy and more efficient transportation. Our own dream is a sustainable energy future powered predominately by solar and wind energy, backed up with energy storage and baseload geothermal, biomass and hydro power. Much is happening in these areas already – and this is hopeful: the Obama Administration has budgeted billions of dollars for these efforts and has made energy reform one of its three top priorities. Individuals and communities around the world are also springing into action through various initiatives.
But much more needs to be done. As the IEA concludes: “What is needed is nothing short of an energy revolution.”
Walter Kohn (left) is Research Professor of Physics and Chemistry at UC Santa Barbara and a Nobel Laureate in Chemistry (1998).
Tam Hunt is Energy a private consultant and a Lecturer in renewable energy law and policy at the Bren School of Environmental Science & Management at UC Santa Barbara.