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34 B u l l e t i n o f t h e Ato m i c S c i e n t i S t S N O V E M B E R / D EC E M B E R 2 0 0 8

hat may be one of the most important de-

bates of the 21st centu- ry has been taking place

just below the threshold of public perception. This debate con- cerns how much longer it will be before world oil production starts to fall, forc- ing a transition to other sources of ener- gy and probably a simpler lifestyle.

From time to time, a spike in gasoline prices or an election forces aspects of this debate to the public’s attention, and var- ious solutions—more drilling, more wind turbines, more biofuels—are proposed . Most of these solutions fail to grapple with the real issue—that world oil pro- duction, according to the Internation- al Energy Agency (IEA), has been essen- tially flat for several years and will soon steadily and irreversibly decline. Few want to hear this message for it will mean the rapid and dramatic decline in the world’s standard of living. In many of the underdeveloped megacities in Africa and Asia supplies of kerosene and propane for cooking already are in short supply or are becoming unaffordable. Sputter- ing hydroelectric stations affected by droughts and unaffordable $100-per-bar- rel oil are resulting in electricity short- ages and failing water and sanitation systems. For many, the peaking of the world’s oil supply will raise issues not just of living standards but of survival.

For the last 40 years, the United States, which has been largely insulated from the early tremors of oil depletion, has im- ported all the oil its population has need- ed with large trade deficits and the sale of U.S. Treasury bills to foreign countries. Real trouble, however, is not far away, ac- cording to peak oil theory. Sales of U.S.- made automobiles are in free fall due to

$4-per-gallon gasoline, and the U.S. air- line industry is contracting rapidly.

The declining availability of oil prod- ucts will mean steadily increasing prices for nearly everything else. As prices rise, the use of gasoline-powered automobiles, boats, all-terrain vehicles, and RVs will wane. Gradually, more and more people could be priced out of using their person- al vehicles as freely as they do now.

Before we get too far ahead of our- selves, let’s go back in history to un- derstand where the idea of such a potentially dire future arose.

If you don’t believe in the theory of evolution, then you are likely to believe that oil is abiotic and is constantly being formed and pushed up for our use from somewhere deep in the earth. For the rest of us, however, fossil fuels are un- derstood to be composed of organic mat- ter from organisms that lived hundreds of millions of years ago, which was buried and pushed deep underground by geolog- ical forces. Over the eons, that material was converted into oil, coal, and natural gas by high temperature and pressure. Peak oil starts with not only the question of how much fossil fuels were formed but also how much can realistically be ex- tracted from beneath Earth’s surface.

Hydrocarbons within the earth come in many forms, ranging from the desir- able light, low-sulfur crude oils to heavy oils, tar sands, kerogen (sort of a “pre- oil” substance found in prodigious quan- tities inside shale), and finally natural gas and coal. Fossil fuels are also found in a wide variety of locations. Some are found on land, some deep beneath the sea, and some below polar ice. Much of the debate over the future of world oil production stems from a failure to appreciate that all oil is not created equal. Unfortunately,

most of the high-quality, cheap, and easy- to-extract oil has already been consumed.

From the very beginning of the oil age, some 150 years ago, experts have pre- dicted that it was about to run out. Until 50 years ago, such predictions were idle speculation, as most of the world had not been fully prospected and no one had a clear idea about how much oil existed. The first real insight was gained in 1956, when Shell Oil geologist M. King Hub- bert calculated that U.S. oil production in the lower 48 states would peak in 1970. Hubbert, of course, had the benefit of studying a region that, by that time, had been fully explored so that major new oil finds were unlikely.

The heart of Hubbert’s theory is the observation that the rate of oil produc- tion from a well or a field generally fol- lows a bell-shaped curve and reaches peak production after about half of the oil has been extracted.

When U.S. oil production actually did peak when Hubbert predicted and the country’s demand for oil continued to rise, the United States could no longer control world oil prices as it had done for many previous years. Power shifted to OPEC, the Mideast oil cartel, which had substantial oil, little domestic con- sumption, and the ability to control pro- duction and thereby prices.

In 1973, the world learned a new lesson about oil, which haunts us to this day, when OPEC exercised its power over the global oil market to enforce an embargo on Israel’s supporters in the Yom Kippur War. U.S. imports of Arab oil dropped within two weeks from 1.2 million bar- rels per day to 19,000. The United States experienced nationwide gasoline short- ages and the quadrupling of gasoline prices. Shortages also developed during the early days of the Iran-Iraq War, when supplies of oil were reduced.

Later, however, in the 1980s and 1990s oil experienced its golden years. New

IN REVIEW

Peak oil By tOM whipplE

W

Vol. 64, No. 5, pp. 34-37 DOI: 10.2968/064005011

N O V E M B E R / D EC E M B E R 2 0 0 8 B u l l e t i n o f t h e Ato m i c S c i e n t i S t S 35

discoveries in Alaska, the North Sea, Mexico, and off the coasts of Africa and Brazil led to a surfeit of oil. Crude prices stayed around $20 a barrel and supplies were plentiful. World oil consumption grew rapidly from 58 million barrels per day in 1980 to 76 million in 2000. While the Soviet Union may have been done in by cheap oil in the late 1980s (oil was selling so cheaply that it was below the Soviets’ cost of production), in the Unit- ed States, plans for oil conservation and efficiency that were formulated dur- ing the oil shocks of the 1970s went by the wayside, and the country went on an oil binge that lasted for the next 25 years. Consumption increased and reli- ance on imported oil (and the countries that exert control over supply and thus price) increased as well. Today, nearly 70 percent of oil consumed daily in the United States is imported.

Warning bells began to sound again when an article by two respected European geologists, Colin Campbell and Jean Laherrère, appeared in the March 1998 issue of Scientific American indicat- ing that the world was rapidly consum- ing its known oil reserves. Crude oil was being pumped out of the ground much faster than new oil was being discovered.

The authors predicted oil peaking global- ly within 10 years.

The article’s publication marks the be- ginning of the peak oil debates that con- tinue to this day. Most criticism of peak oil has centered on the idea that increas- ing oil prices would bring forth new sup- plies from unconventional sources, such as the Alberta tar sands, long considered too expensive to extract and process into usable oil. Many have pointed to devel- oping technologies such as horizon- tal drilling, 3-D seismology, and oil field flooding, which peak oil critics believe will bring so much new oil to market that prices will fall, providing plentiful sup- ply for at least another 30 –40 years. The U.S. National Geodetic Survey contrib- uted to this belief by releasing a report that estimated another trillion barrels of conventional oil were waiting to be dis- covered and produced.

But an important part of this debate, often left out by such projections, is that oil these days is not always the black stuff that comes up from a well. Although tra- ditional petroleum constitutes the bulk of what is called oil, there are also liquids that are extracted from natural gas, heavy oil that is extracted from tar sands, and biofuels that are produced by distilling

sugars from plants and processing plant oils. While conventional crude oil and the liquids that condense out of the natu- ral gas that comes out of the ground with the crude currently amount to about 74 million barrels per day, total oil produc- tion, which is also known as “all liquids,” amounts to 86 million.

For six years after Campbell and Laher- rère’s article not much happened. Oil pro- duction (of all liquids) climbed to about 80 million barrels per day in 2000 and then slipped back a couple of million bar- rels due to an economic downturn. Some thought they were witnessing the peak of world oil production in 2000, but this was not the case. After 2003, when oil produc- tion surged, peak oil doubters ridiculed those who had called the peak in 2000.

With the end of the recession in 2003, world oil production and prices began to climb rapidly. The inflation-adjusted price of oil had been steady at $20–$25 per barrel since the mid-1980s and had reached a low of $15 per barrel in 1998. From 2002, when oil was $26 per barrel, oil began a steady upward surge in both production and price. Crude went from an average of $30 per barrel in 2002 to a high of $147 in July 2007. World oil pro- duction (all liquids) climbed from 76 Al

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36 B u l l e t i n o f t h e Ato m i c S c i e n t i S t S N O V E M B E R / D EC E M B E R 2 0 0 8

million barrels per day in 2002 to about 86 million in 2008.

By 2004, surging prices and consump- tion brought the issue of peak oil to wider attention. Blogs and websites on the sub- ject began to proliferate (many blogs fo- cusing on peak oil date from that year). New books foretold a very bleak future for the world without oil. Some were so apocalyptic in their pronouncements that their authors and peak oil adherents were labeled “doomers.”

This development moved the peak oil debate in a slightly different direction as the so-called doomers argued with the “techno-fixers,” those who believe that there are many alternate sources of en- ergy, including nuclear, solar, wind, wave, and biofuel. For the doubters, peak oil is simply another item to be added to the list of possible, but improbable, dangers—cataclysmic comet strikes, thermonuclear war, and a super virus— that people should worry about, but not too much. Somewhere in all this uproar , which mostly took place online, the real issue of peak oil got lost. The question asked by peak oil is simply whether the world can produce enough new oil each year to keep up with falling production at older fields.

Peak oil is the last thing anyone really wants to hear or think about because it illustrates how humanity has blown through the planet’s fossil fuel stores in a couple of centuries and that without these resources, life on Earth will be- come much rougher. Consider what hap- pened to President Jimmy Carter some 30 years ago, when he told Americans to put on sweaters to deal with high fuel prices and was ridiculed for it. Few offi- cials anywhere in the world will public- ly say that worldwide oil production is nearing a peak, if that is truly the case, and that preparations should be made for this eventuality. Instead, U.S. politi- cians talk in circumlocutions, decrying the country’s “addiction to oil” or touting a need for “energy independence.” The press is also culpable, for as yet few sto- ries connect all the dots in the peak oil story. Most reporters and editors content themselves with focusing on high gaso- line prices. Few in the Western media have noticed that many places in the

underdeveloped world are already suf- fering power and cooking fuel shortages due to unaffordable oil.

So what is likely to happen? Has oil re- ally peaked? Production of crude oil has basically been flat since 2005, accord- ing to the U.S. Energy Department and the IEA, which both track worldwide oil production. Occasionally a single month will set a slightly higher production re- cord, but annual production figures are no longer climbing. Although the “other liquids” number is climbing a bit as the world increases its production of natu- ral gas–derived liquids and biofuels, it is important to realize that many of these alternate sources of liquid fuel contain substantially less energy than conven- tional oil does, so adding other liquids to world crude oil production overstates the amount of energy available.

In the last year, high prices have led to reduced consumption in parts of the world. U.S. oil consumption is down nearly 5 percent according to Energy, and in the rest of the Organization for Economic Co-operation and Develop- ment (OECD) countries consumption is flat. Chinese and Indian consumption, however, continues to grow rapidly.

What started out many years ago as a geological theory has become a much simpler issue that is readily observable— can new oil production keep up with the depletion of existing reserves? In recent years, “megaprojects analysis,” a new way of approaching this issue, has at- tempted to answer this question.

Megaprojects analysis starts with an assessment of just how fast existing world oil fields are running dry. Ascer- taining this information should be easy, but in many oil-producing countries de- pletion rates are a closely guarded state secret. Although there are many vari- ables that determine the rate of oil de- pletion, such as oil field management and the use of water or gas flooding to force oil to the surface, the conservative consensus among oil watchers is that the rate is about 5 percent annually. This means that if no new projects begin pro- ducing oil in a given year, by the end of that year about 4 million fewer barrels per day will be produced. In short, the world’s oil industry has to find 4 million

READING LIST

for more information on the ideas and issues discussed in this essay, the bulletin recommends reading:

“The End of Cheap Oil,” Colin J. Campbell and Jean H. Laherrère, Scientific American, March 1998. the article publicized peak oil when crude oil was selling just slightly higher than $10 per barrel and u.S. automakers were selling sports utility vehicles like hotcakes. the authors predicted that peak oil would be reached sometime before 2010. in mid-October, oil was selling under $90. Beyond Oil Kenneth S. Deffeyes (2005). A former oil industry geologist and emeritus professor of geosciences at princeton university, Deffeyes predicts the peak has already been reached. But instead of just doom and gloom, the author examines alternative energy resources and makes some suggestions. he also wrote an earlier volume on the subject titled “hubbert’s peak” in 2001. The Party’s Over Richard heinberg (2005). this book is an overall primer on peak oil. heinberg has written seven other books on the subject in addition to many magazine articles. he is a senior fellow at the post Carbon institute.

The Oil Drum www.oildrum.com. An online clearinghouse for all things related to peak oil that includes expert blog postings, user discussion, and links to other sites. Editors and contributors include academics, energy industry employees, and others from all over the world.

Association for the Study of Peak Oil & Gas www.peakoil.net. An international organization dedicated to the study of peak oil and natural gas, ASpO hosts international conferences, seeks to discover how much oil and gas is left for exploitation, and raises public awareness.

N O V E M B E R / D EC E M B E R 2 0 0 8 B u l l e t i n o f t h e Ato m i c S c i e n t i S t S 37

barrels of new production each day, each year just to stay even, much less keep up with growing demand.

Yet most new production comes from giant, expensive projects that when fully operational produce no more than 50,000 barrels per day. Today such proj- ects cost billions and take six to seven years to complete, hence the term “megaprojects.”

Megaprojects are too big and expensive for a country to hide, so periodic updates on their progress are available from pub- lic announcements and in the trade press. Even with all this information, predicting how much new oil production will come online per year is still more art than sci- ence. Multibillion-dollar project dead- lines have a tendency to slip, sometimes by many years, both as to when they will start production and when they will reach their peak production goal. Due to such variables, just how much new oil pro- duction will come online in the next few years is open to debate.

Despite all the unknowns, a consensus seems to be emerging among those

tracking megaprojects, most notably Chris Skrebowski, editor of the London- based Petroleum Review, and a mega- projects team connected to the peak oil blog The Oil Drum, that at sometime be- tween 2010 and 2012, new oil production will not be sufficient to keep up with de- pletion and that world oil production will begin dropping.

The reduction in oil production will stretch over decades or more likely cen- turies. Once major conventional oil fields go into decline, it is unlikely that new fos- sil fuel extraction technologies will come along to reverse that trend. Trillions of barrels of hydrocarbons certainly are de- posited in Alberta’s tar sands, in Colora- do’s shale, in Venezuela’s Orinoco heavy oil fields, and under the polar ice caps. While such “oil” can be exploited, the cost, time, and energy required to extract it will not keep up with the coming de- cline in conventional sources.

A decline in world oil production may also come from a lack of demand. The price of oil has been dropping for the last two months because the markets

collectively believe that a major world- wide recession is coming. If the current economic difficulties are serious and long- lasting enough, the reduction in demand could mask the geological peaking of oil for many years. With the recent rapid growth of China and India, it is also possi- ble that future Asian demand will be high enough to offset any drop in demand from OECD and underdeveloped countries.

A last important factor in the peak oil equation is that the major oil exporters are using more and more of their own oil domestically, so there is less available to sell. This is particularly true of the Middle East and Russia. Statistics from the IEA indicate that total world oil ex- ports are beginning to decline; in 2007 they were down by 2.3 percent, or 1 mil- lion barrels per day. Mexico’s exports are dropping rapidly due to a very high de- pletion rate at its largest oil field, so fast that Mexico may become a net oil im- porter within three or four years.

This year has, without a doubt, been an eventful one in the U.S. economy.

CONtiNuED ON p. 41.

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In Review: Peak oil continued from p. 37

Crude prices soared from below $100 per barrel to $147 in July and then fell back to below $100 a barrel in September. The ongoing U.S. mortgage crisis has turned into an economy-wide liquidity crisis and now a worldwide economic crisis. In September, a pair of hurricanes slowed U.S. oil production and refining, which resulted in gasoline shortages across the southeastern part of the country.

U.S. voter concern about high gasoline

prices has transformed this year’s pres- idential election into a search for pain- less energy solutions with proposals to increase drilling and the production of biofuels, increase taxes on oil compa- nies, punish speculators, and build more nuclear plants.

Yet no one is seriously talking about the world’s flattening oil production, the like- lihood of declining oil imports, the near certainty of much higher gasoline pric- es, or how we adjust to a world without cheap, abundant oil.

Alternative, renewable energy sources

—solar, wind, tides, and biofuels—as yet provide only a tiny fraction of our en- ergy needs. As the peaking of world oil production becomes more and more evi- dent, our society will have to get by with considerably less energy, particularly from oil, in the next few decades, until new energy technologies can be brought into production and energy efficient forms of existing technologies become more widely adopted. <

Tom Whipple is the editor of Peak Oil Review, a publication of the Association for the Study of Peak Oil & Gas-USA.

Rethinking personal sacrifice continued from p. 14

1. Paul Hawken, Amory Lovins, L. Hunter Lovins, Natural Capitalism: Creating the Next Industrial Revolu- tion (New York: Little, Brown and Company), pp. 1–2.

2. Matt Palmquist, “Old Without Wheels,” Miller- McCune, August 2008, p. 18.

3. William Connolly, The Ethos of Pluralization (Minneapolis: University of Minnesota Press, 1995), pp. 112–113.

4. Ibid., pp. 111–112.

Agreeing to disagree on nuclear rights continued from p. 19

1. President George W. Bush has commented on the existence of a “loophole” in the NPT, but non- proliferation experts point to the fact that Article IV of the treaty, which provides for the acquisition of peaceful nuclear power programs by all treaty parties, was a central element of the strategic bar- gain that allowed the NPT to be concluded. This point will be discussed further below. For more on President Bush’s comments, see Wade Boese, “Bush Outlines Proposals to Stem Proliferation,” Arms Control Today, March 2004.

2. This list is derived from a paper by Raymond Arnaudo, “The Unique Nature of the Antarctic Treaty System: Problem or Advantage?” Wilton Park Proceedings, Britain, November 14, 2001.

3. The fourth such celebration of peaceful scien- tific exchange in the polar regions has been taking place since 2007. For more on the current initiative, see U.S. National Committee for the International Polar Year 2007–2008, “A Vision for the Interna- tional Polar Year 2007–2008,” National Research Council, 2004, available at http://books.nap.edu/ catalog.php?record_id=11013.

4. Richard E. Byrd, Alone (New York: G. P. Put- nam Sons, 1938).

5. For further detail, see: “Question of Antarctica,” U.N. General Assembly, August 11, 2005, available at www.unep.org/dewa/assessments/Ecosystems/ Polar/Antarctica/PDF/A-60-222.pdf.

6. “President Bush’s Radio Address Focuses on Energy Issues,” Office of Public Affairs, Energy Department, February 18, 2006, available at www .energy.gov/print/3222.htm.

7. Article IV of the NPT states, “Nothing in this Treaty shall be interpreted as affecting the inalien- able right of all the Parties to the Treaty to develop research, production and use of nuclear energy for peaceful purposes without discrimination and in conformity with Articles I and II of this Treaty.”

8. Peter Crail and Jessica Lasky-Fink, “Middle Eastern States Seeking Nuclear Power,” Arms Control Today, May 2008. It must be noted that the United Arab Emirates (UAE) announced a new nuclear en- ergy program, but explicitly eschewed the develop- ment of indigenous enrichment capabilities as a mat- ter of national policy. Other Mideast countries may follow suit. See Lin Noueihed, “UAE Says to Explore Nuclear Energy for Electricity,” Reuters, March 24, 2008. We are grateful to Amb. Thomas Graham for emphasizing this point.

9. John Deutch, Arnold Kanter, Ernest Moniz, and Daniel Poneman, “Making the World Safe for Nuclear Energy,” Survival, vol. 46, no. 4, Winter 2004–05, p. 69.

10. We are grateful to Amb. Norman Wulf for pointing out the importance of clear incentives for participation in the new arrangement.

11. See, for example, George Perkovich et al., Univer- sal Compliance: A Strategy for Nuclear Security (Wash- ington, D.C.: Carnegie Endowment for International Peace, 2005) pp. 66, 116.

12. For more on the Trilateral Initiative, see the Na- tional Threat Reduction summary “IAEA Monitoring of Excess Nuclear Materials,” which can be found at www.nti.org/e_research/cnwm/monitoring/trilat-

eral.asp?print=true%20-%2073k. Another precedent to consider is the transparency program associated with the U.S.-Russian highly enriched uranium (HEU) deal, under which HEU from Russian weapons is blended into low-enriched uranium for use as power plant fuel.

Indian nuclear forces, 2008 continued from p. 40

1. Staff Report, “IAEA Board Approves India- Safeguards Agreement,” International Atomic En- ergy Agency, August 1, 2008.

2. Indian Ministry of Defence (MOD), “Annual Re- port 2004–2005,” pp. 14, 15–16.

3. Government of India, Press Information Bureau, “India Will Continue to Strive towards Achieving Minimum Deterrence—Antony,” MOD press release, February 13, 2007.

4. Vishal Thapar, “N-Capable Agni-III Ready, but Aircraft Remain First Choice,” CNN-IBN, May 8, 2008.

5. Some sources list a third Mirage squadron, No. 9, at Gwalior, but the Indian Air Force list does not. Moreover, commercial satellite images show only 18 Mirages at the base, not enough for three squadrons.

6. “Agni III Not Targeted at Any Particular Coun- try: Army,” Times of India, May 8, 2008.

7. Ajai Shukla, “Agni Missile to Get Multiple War- heads,” Business Standard (India), January 28, 2008.

8. U.S. Air Force, National Air and Space Intel- ligence Center, “Ballistic and Cruise Missile Threat,” NASIC-1031-0985-06, March 2006, p. 23.

9. “India Successfully Tests Submarine-Based Mis- sile,” Reuters, February 26, 2008.

10. “India Test-Fires Sea-Based Nuclear-Capable Missile,” Agence France Presse, February 26, 2008.

11. On the ATVs, see “India Plans to Buy 6 New Subs, Says Navy Chief,” Times of India, December 2, 2007.

12. Sujan Dutta, “Fearless Tomahawk-Type Missile on Radar,” Telegraph (India), July 20, 2007.

13. Ibid.

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