C4CC (3): The problem of Peak Oil, part three

I think this analysis still holds up - only one more on peak oil after this.

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So, two points thus far: oil production must necessarily come to a peak and then decline; and oil production is unlikely ever again to reach the level attained in 2005. In addition to those truths, another one is crucial, and this is called the 'Export Land Model'. Put simply, this states that, for a particular country that exports oil, if the domestic consumption of oil is increasing then the decline in the availability of oil for export will be much more rapid than the decline in oil production as such. This is not an abstract theory. It has happened to the United Kingdom, it has happened to Mexico, it has even happened to Saudi Arabia which has seen six years of declining net exports despite the sustained and massive high prices of the last several years. Profound geopolitical consequences follow from this.

This has been the primary factor behind the rise in the oil price seen in the first decade of the twenty first century. It has not been the only factor: clearly financial speculation played a part in the run-up to the peak price in 2008 of $147 per barrel. Yet if the supply situation had not been so tight then the speculators would have had no room for manoeuvre in the first place. One writer, Robert Rapier, has called the experience of this decade 'peak oil lite', as it has served as a foretaste of what is to come. The writing is on the wall for those who have eyes to see it.

At this point, thoughts turn to alternatives. These might be: alternative sources of oil; alternative fossil fuels; and then alternative energies more widely. None of these is sufficient to replace the oil that we presently consume. Part of the explanation for the absence of alternatives to oil lies in something called 'net energy' or, more specifically, the Energy Return on Energy Invested (EROEI). When oil was first pumped from beneath the Saudi Arabian desert, the energy cost of producing the oil was around 1% of the energy gained from the oil itself. This meant there was an abundant supply of extremely cheap energy – very little had to be done in order to make that energy available. That is not the case today. With conventional 'sweet' oil, new supplies are only available in the Deep Sea areas, often beneath miles of rock. It is therefore an extremely risky and expensive proposition to produce oil from these sources – expensive in both financial and energy terms, with the risk of disasters such as the 'Deepwater Horizon' never far away. The energy that is now available is much more expensive and harder to obtain than energy was in previous decades. The 'low hanging fruit' has already been picked. So-called Heavy Oil, such as the Canadian tar sands for example, is, even in the best of circumstances, unlikely to achieve more than 4mbpd of gross output – and that, not just at extreme environmental cost, but also at a dubious net energy gain.

Each fossil fuel faces the same declining EROEI – the easiest and best sources of energy were accessed and used first; now the lower quality and harder to access sources are being brought into production. As this process continues, there will come a point when the energy needed to obtain the fossil fuel is more than the energy released from the fossil fuel itself – at that point the oil well or coal mine is uneconomic and is closed. Note that this use of the word 'uneconomic' is not an essentially financial point, although that may well be the case – the point is that there is no extra energy available from the exercise. We would have more energy available if we chose not to use those fossil fuels. This is why we will never 'run out' of oil, or gas, or coal. We will simply get to a point when nobody will bother trying to extract those resources from the ground for energy purposes.

There is some better news available from the world of 'alternative energy', with solar, wind, wave, geothermal and other sources. The EROEI from wind power, for example, has been estimated at being around 20:1. This is not as good as the 100:1 obtained from early oil wells, but it is significantly positive. The principal problem with alternative technologies is that the form of energy produced is electricity. Such sources will do a very great deal to ensure that some form of civilisation will be possible in those areas with access to alternative energy in the coming decades. What it will not do, however, is supply our existing transportation system. Peak oil is not first and foremost an energy crisis, although in the long run it is most certainly that. It is a liquid fuels crisis. That is where peak oil will wreak its most destructive effects.

Consider: some 95% of transportation infrastructure is powered by oil. That infrastructure is not simply the vans and lorries used for transporting goods from one place to another, it is also the network of petrol stations and pipelines that support those vehicles in their journeys. We cannot simply say 'let us shift to electrical transport', as if this was something that could be accomplished overnight. The most detailed examination of this issue is a report commissioned for the US Department of Energy and published in 2005, popularly known as 'The Hirsch Report' and easily found via Google . It considers the problem of peak oil, not in order to establish when the peaking will happen, but in order to ascertain what the problems caused by peak oil will be, and what might be done to mitigate the worst effects. The conclusion is sobering: “The world has never faced a problem like this. Without massive mitigation more than a decade before the fact, the problem will be pervasive and long-lasting. Previous energy transitions (wood to coal and coal to oil) were gradual and evolutionary; oil peaking will be abrupt and discontinuous.”

Our contemporary way of life in the affluent West is built around the easy availability of cheap liquid fuel. It powers our way of life – not just in the obvious ways like fuelling our cars and our aeroplanes – but in hidden ways like producing our food and clothing, resourcing our communications and helping to heal diseases. To get some sort of handle on this, consider how petrol has affected your life since you woke up this morning, in terms of breakfast (where did it come from, how was it grown and transported to your plate?), personal hygiene (hot water and soap), clothing (what materials?), access to medication (how developed?). There are very few aspects of our lives that are not impacted by our decades-long dependence on the wonderful wonderfuel of oil.

How will we adjust to a situation where, instead of fuel being cheap and abundantly available, that fuel becomes first more and more expensive, then more and more scarce? In particular, how will private individuals fare when, in a situation of scarcity, those supplies which are available are restricted to 'essential uses' such as the emergency services and other government-sponsored activity? The United Kingdom had a small foretaste of what this would mean – more writing on the wall – during the time of the fuel tax protests in September 2000. It did not take very long for the supermarket shelves to empty and for the economy to grind to a halt. The effects of peak oil on our societies will be extremely difficult – a 'great dislocation' as we shift from one pattern of living to another, probably much poorer, one.