Peak Oil

Dr. Marion King Hubbert was a genius. An American geophysicist who was born in 1903 and passed away in 1989, he’d be unknown today if it weren’t for the fact that he not only introduced the theory of “Peak Oil”, but developed it with incredible thoroughness and clarity. He correctly pointed out the unpleasant fact that fossil fuels are a limited resource for which supply cannot be arbitrarily increased to meet demand. Most importantly, his methodology for estimating when supplies of oil, gas, and coal would run out musters a lot of credibility given that he correctly predicted when U.S. production of oil would hit its peak, never to recover. The consequences of Hubbert’s “Peak Oil” theory are of great importance for the energy future of the world.

Dr. Hubbert’s seminal paper “Nuclear Energy and the Fossil Fuels” was presented in 1956 at a meeting of the American Petroleum Institute. It is worth reading in its entirety, and from time to time it can be found on the Internet although at present a prime source is inaccessible.[1] Typed up double-spaced using an old-fashioned typewriter and peppered with a few plots, the document takes 57 pages. In a nutshell, the key points of the argument go something like this:

(1) Fossil carbon (coal) and fossil hydrocarbons (oil and natural gas) came from plants, and the supplies that exist had been accumulating for 500 million years before they began to be exploited by modern humans. Whatever the supply may be, it is finite. Additional accumulations during the time of exploitation will be negligible, because that exploitation is happening on a timescale more than a million times shorter.

(2) Fossil fuel exploration and discovery follows a particular pattern. Some aspects of this can be understood by analogy to Christopher Columbus’ and other explorers’ discovery of New World lands: North and South America each had a much higher probability of early discovery than any particular small Caribbean island. It is similar with fossil fuel deposits. The largest resources have a high likelihood of being among the first to be discovered and exploited. As the number of discoveries accumulates, the likelihood of additonal finds decreases and their exploitation cost rises. And yes, Hubbert was aware of tar sands and shale hydrocarbon deposits.

(3) Two points on the resource exploitation curve are fixed in advance: Before the first discovery, the quantity of known resource is zero. After a resource has been thoroughly exploited, the amount remaining that can be effectively exploited is also zero. In between, initially there is ramp-up in both known reserves and production, with annual new discoveries outpacing annual production so that known reserves are increasing even while the rate of production is increasing too. Next inflection points are reached at which the rate of discovery and the rate of increase in production begin to slow. Then a maximum in the rate of production is reached. There may be a bit of a plateau around that peak, but there is likely to be just one dominant peak. By this time, production outpaces new discoveries. Production then declines, and eventually dwindles to zero despite the fact that exploration continues and some new discoveries are made during the decline.

The theoretical production curve is bell shaped with one peak, hence the name “Peak Oil Theory”. Dr. Hubbert understood very well that actual production curves for a resource are not perfectly smooth theoretical figures, in fact, he gives a number of examples of this imperfection. Since the 1956 paper, various authors have worked at refining the theoretical model. Nonetheless, the basic pattern always holds, and it was possible for Dr. Hubbert to take historical data about the reserves and production of fossil fuels and fit them to the theoretical model in order to determine at what stage in the exploitation curve each resource is in. The trickiest part of the process is predicting future demand, since sometimes, for some resources, the demand falls below the maximum possible production, and this delays the peak.

According to Hubbert’s 1956 predictions, US production of petroleum would peak in 1970 and global production would peak in 2000. US production of natural gas was also expected to peak around 1970. Global production of coal was predicted to peak circa 2150 if demand for coal were not affected by the situation with the other fossil fuel resources. It should be pointed out that any errors in estimation would not have invalidated the theory in general, but would call for an adjustment. So how accurate was Dr. Hubbert? His prediction re. petroleum production in the USA was very accurate, while the prediction concerning global production was out by about a decade. The peak in global petroleum production may have happened in 2008 or 2009 instead of 2000, but we won’t know for sure until the global production decline begins in earnest. In any case, respectable people believe the peak has happened already.[2]

Economists are fond of the law of “supply and demand”. This idea has been around in some form at least since the publication of Adam Smith’s classic magnum opus, “Wealth of Nations”[3] The basic notion is that prices adjust to account for changes in supply and demand. Increasing demand or decreasing supply puts pressure on prices to increase. Increasing prices tend to encourage more market entrants and therefore increase supply. When it comes to natural resources such as oil and gas, price increases do encourage more efficient exploitation and use, but they cannot truly increase supply. What our rich but abused Earth has to offer is all there is or will be. Optimists pin their hopes on future discoveries and better recovery technologies, but the best that can be accomplished is to slightly delay the inevitable: Oil and gas prices will skyrocket but supply will dwindle to zero anyway.

We end up with a dire collection of givens:
- global demand for petroleum and natural gas will not only hold steady but will actually increase thanks to developing countries like China and India, even if demand in the West can be curbed;
- global production of petroleum and gas is already at or near its peak and has either started declining or soon will;
- the world needs this fossil hydrocarbon energy for heating, and transportation, and many other requirements;
- combustion still provides 90% of all global energy, and most of that is from fossil fuels. Burning non-fossil carbon is not a good option either. Replacing fossil with nonfossil hydrocarbons would rapidly deplete the world’s stock of plant matter while also robbing soils of nutrients;
- although outside the scope of the energy problem, it is worth noting that petroleum is also a crucial input into fertilizer production. Without fertilizer, crop yields per hectare can be expected to fall, which will have terrible consequences for those countries that are already barely able to feed themselves.

Dr. Hubbert’s paper accomplished more than point out the impending crisis. He also identified the energy sources that the world would fall back on (for lack of any other realistic alternative) during the decades of the fossil hydrocarbons’ decline: coal combustion and nuclear energy. The world’s reliance on coal will be inevitable and fateful: The dwindling of hydrocarbon supplies might at least have had the benefit of slowing or stopping the steady increase in the amount of carbon in circulation. Thanks to coal, that change in human behaviour won’t happen for over a century. In the meantime, increases in atmospheric CO2 and the resulting global warming are likely to continue uninterrupted whether scientists and environmentalists in the West like it or not. Remember, the advanced West’s circa 700 million people represent only one-tenth of the world’s population. No wonder even some environmentalists are beginning to embrace nuclear power.

Is there an alternative energy technology that can displace combustion and nuclear, and is ready to be phased in starting immediately, to fill the role of 90% of the world’s energy supply? This serious matter needs to be explored further. In order to understand the world’s energy options after the decline of fossil hydrocarbons, we must examine critically all the non-fossil fuel sources including the alternative ones such as wind, solar, and geothermal, and all plausible energy intermediaries, chiefly electricity and hydrogen. From such an examination, we can assess what combination of technologies looks promising, and equally importantly, which technologies are likely dead ends. In order to implement a long-term solution and avert catastrophe plenty of research and manufacturing are required, but that will take decades.

If the world had taken Dr. Hubbert’s work more seriously in 1956, maybe our alternative energy development and deployment would have been advanced enough by now to take over from carbon combustion. Sadly, it isn’t. At least today Hubbert has a legion of fans, the Association for the Study of Peak Oil and Gas [4]. Among other things, their website archives recent papers offering elaborations and refinements of Hubbert’s model.

[1] I have in mind the web page http://www.hubbertpeak.com/Hubbert/1956/1956.pdf
[2] e.g. the European Union’s Guenther Oettinger. see http://www.reuters.com/article/idUSBRU01112520101110
[3] Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, 1776. This work is now in the public domain. See e.g. http://openlibrary.org/works/OL76827W/The_wealth_of_nations .
[4] http://www.peakoil.net/

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