Global oil production will probably reach a peaksometime during this decade. After the peak, the world's production of crude oilwill fall, never to rise again. The world will not run out of energy, butdeveloping alternative energy sources on a large scale will take at least 10years. In the meantime, there will be chaos in the oil industry, in governments,and in national economies. What will happen to the rest of us? In a sense, theoil crises of the 1970s and 1980s were a laboratory test. We were the lab rats.You might remember it. Most Americans' real standard of living droppedprogressively lower for several years. And those crises were far less severe thanwhat's coming this time.
Do you think I'm crying wolf? Admittedly, for the first half of the twentiethcentury oil forecasters did a lot of that. People who divided the then-known U.S.oil reserves by the annual rate of production would periodically start screamingthat the nation's petroleum industry was going to die in 10 years. During eachensuing decade, more oil reserves would be added and the industry actually wouldgrow instead of drying up. But in 1956, M. King Hubbert, a world-renownedgeologist at the Shell Oil research lab in Houston, pioneered a different methodof analysis and predicted that U.S. oil production would peak in the early 1970s.Hubbert's analysis divided those who follow these things into two warring camps.The controversy raged right up until 1970, when the U.S. production of crude oilstarted to fall. Hubbert was right.
Around 1995 several analysts began applying Hubbert's method to worldwide oilproduction. Most of them estimate that the peak year for world oil will bebetween 2004 and 2008. These analyses were reported in some of the most widelycirculated sources of scientific news: Nature, Science, and ScientificAmerican. Yet none of our political leaders has yet paid any attention.
Hubbert realized that, over time, the graph of annual oil production willfollow a bell curve. For his first analysis, he found the curve that best fit thefacts of past oil production and some well-educated guesses about the totaloutput that will eventually be produced from conventional wells. Later, hediscovered he could eliminate much of the guesswork. The production curve, hefound, lags consistently behind the bell curve of cumulative oil discoveries (allthe oil produced up to a given year plus the reported reserves for that year). Inother words, the discovery curve is a predictor of eventual production. It wasthis trick that allowed Hubbert to see into the future.
But reliable estimates of oil reserves are a vital ingredient in a Hubbertanalysis, and this leads to the chief difficulty in using the method to predictthe peak of world oil production: In the late 1980s, several OPEC nationsreported huge, abrupt increases in their oil reserves. OPEC had recently changedits rules, assigning each member nation a share of the oil market based not juston the country's annual production capacity but also on its oil reserves. MostOPEC countries promptly hiked their reserve estimates.
These increases were not necessarily fraudulent. "Reserves" exist in the eyeof the beholder. Oil reserves are defined as future production, using existingtechnology, from wells that have already been drilled. (They should not beconfused with the U.S. "strategic petroleum reserve," which is a storage facilityfor oil that has already been produced.) Typically, young petroleum engineersunconsciously tend to underestimate reserves. It's a lot more fun to go into theboss's office next year and announce that there is actually a little more oilthan last year's estimate predicted. The abrupt increase in announced OPECreserves in the late 1980s was likely a mixture of updating old underestimatesand wishful thinking.
The result is probably an overly optimistic view of future oil production.I've made corrections for OPEC optimism in my own Hubbert predictions; othershave used different estimates. But our predictions are all in the same ballpark.It's a good guess that the best numbers were available to a firm in Geneva,Switzerland, called Petroconsultants, which until recently maintained a hugeprivate database, to which the rest of us had no access. One long-standing rumorhas it that the U.S. Central Intelligence Agency was Petroconsultants' largestclient. This much is known: The loudest warnings about the predicted peak ofworld oil production came from Petroconsultants.
So who is listening? probably the OPEC oil ministers. Prices ofcrude oil have doubled in the past year. I suspect that the OPEC countries knowthat a global shortage may be only a few years away; and if they can trickle outjust enough oil to keep the world economies functioning until that glorious day,they can market their remaining crude at mind-boggling prices.
It is not clear, though, whether the major oil companies are facing up tothe problem. Most of them display a business-as-usual facade. My limited attemptsat spying turned up nothing useful. A company taking the 2004-2008 hypothesisseriously would be willing to pay top dollar for existing oil fields. There doesnot seem to be an orgy of reserve acquisitions in progress.
But you have to understand, internally the oil industry has an unusualpsychology. Exploring for oil is an inherently discouraging activity. Nine out of10 exploration wells are dry holes. Only one in a hundred exploration wellsdiscovers an important oil field. Darwinian selection is involved: Only theincurable optimists stay. They tell each other stories about a Texas county thatstarted with 30 dry holes yet had a major discovery with its next well.
Are they right? Is there some way the crisis could be averted?
In any case, it takes a minimum of 10 years to go from a cold start ona new province to delivery of the first oil. One of the legendary oil finders,Hollis Hedberg, explained it in terms of "the story": When you start out in a newarea, you want to know whether the oil is trapped in folds, in reefs, insandstone lenses, or along faults. You want to know which are the good reservoirrocks and which are the good caprocks. The answers to those questions are thestory. After you spend a few years in exploration work and drilling holes, youfigure out the story. For instance, the oil is in fossil patch reefs. Then pow,pow, pow--you bring in discovery after discovery in patch reefs. Even then, thereare development wells to drill and pipelines to install. It works--but it takes10 years.
Rising prices and the supposed magic of the free market won't change that. Infact, history shows the price of oil to be mostly irrelevant to finding oil. Moreoil was discovered in the United States in the 1930s than in any decade before orsince. That was during the Depression--when the price of oil was $1 a barrel andthe price was that high only because of production rationing.
Nothing we initiate now can substantially postpone the world production peak:No Caspian Sea exploration, no drilling in the South China Sea, no SUVreplacement, no renewable energy projects can bring results quickly enough toavoid a bidding war for the remaining oil. And we can only hope that the war iswaged with cash instead of far worse weapons.
So what should we do? The Hubbert analysis definitely has itsweaknesses. In the book from which this article is adapted, I offer readers someexpertise in evaluating the problem. If the experts' scenario for the years2004-2008 reads like the opening of a horror movie, readers can make up their ownminds about whether to accept the scary account. But ignoring the problem is theequivalent to wagering that world oil production will continue to increaseforever.
My own opinion is that the peak in world oil production may even occurbefore 2004, and while I would be delighted to be proved wrong, the truth is, itwould take a lot of unexpectedly good news to postpone the peak even to 2010. Ineither case, by the time my granddaughter reaches retirement age, worldproduction of oil will be down to a fifth of its present size.
My recommendation: Bet that the experts' prediction is roughly correct, makegood use of the few years before the crisis actually hits, and start planning nowfor increased energy conservation and alternative energy sources. In 1980 the oilcrisis was a problem in distribution; the oil was there, but it wasn't getting tothe corner gas station. In 2008 the oil won't be there. Psychologically, therealization that the change is permanent may be as devastating as the shortageitself. Still, if we take the experiences of past oil crises as guides, we canbenefit from what we have learned.
First, beware of any salesman peddling just one brand of snake oil. Manyhucksters will claim to have found the new elixir that will solve the energyproblem. Some of them will truly believe they have. We should know better.Prudence dictates that we make good use of each innovation where it fits best andfind others to use elsewhere. Use geothermal energy where it is most effective;don't try to find a geothermal solution for the entire range of U.S. energy needs.
Second, beware of the salesman peddling an enormous variety of snake oils. Themessage: "There are so many possibilities, some of them are bound to comethrough in time to save us." The long list of innovations--including gashydrates, subsalt seismic reflections, coal-bed methane, and deepwater drilling,to name just a few of the usual promises--will give the impression that doomsdaywon't arrive in our lifetime. We'll muddle through. Unfortunately, every item onthat list was already identified 20 years ago. Most are still not deliverable.Muddling is going to be painful.
Third, beware of narrow focuses. In earlier oil shortages, we became fixated onimproving automobile efficiencies in miles per gallon. Unfortunately, some ofthose improvements came at the cost of higher energy consumption in the refinery.We need to look at the whole system--from the refinery to the driver intraffic--when we make "improvements."
Finally, we need to approach energy use the way a butcher approaches a side ofbeef. He could convert all the meaty part to hamburger, with high efficiency, butbutchers (and economists) know to slice off some high-priced steak and a roast ortwo, then grind up the rest for hamburger. Electricity is steak; space heating ishamburger.
When I switched my house from home heating oil to natural gas, I paid extrafor a high-efficiency furnace. The efficiency is listed at 94 percent. Soundsfabulous. Here's the problem: Just downstream from my gas-air flame, thetemperature is over 1,000 degrees--very high-grade energy. My "efficient" furnaceignores it, dilutes heat by design, and delivers 70-degree air to my heatingducts. A smarter idea is co-generation: Use the high-temperature gases to produceelectricity and then use the lower-temperature air to heat the house. (Today, thesmallest co-generation units operate on the scale of an apartment block.)
I also think we need to get over our nuclear phobia. We certainly need betterengineering and better operators. A nuclear plant operator ought to receive thelevel of training and the salary of a commercial airline pilot. Maybe it willhappen when the economic squeeze gets everyone's attention.
The point is, crude oil is much too valuable to be used for fuel.Eventually we'll figure that out, and it will be used only in manufacturing neededorganic chemicals--plastics, fertilizers, that sort of thing. "You burned it?"our grandchildren will ask someday. "All those lovely organic molecules--and youjust burned it?" Sorry, we burned it.
In contrast to the hundreds of millions of years it took for the world's oilendowment to accumulate, most of the oil is being extracted and refined in about100 years. (The short bump of oil exploitation on the geologic time line hasbecome known as "Hubbert's peak.") In a sense, fossil fuels are a onetime giftthat lifted us up from subsistence agriculture and eventually should lead us to afuture based on renewable resources.
