The Oil Age : nearly over

Our world is an illusion. Ah, thinks reader, ageing hippy post about maya and zen and all that on the way. Nope. I am talking about oil. Civilisation is about to crack, but nobody seems willing to stop the party until the police are actually hammering on the door. We are not talking centuries or decades, we are talking years.

A few brave souls have been trying to tell us this for a while (check out the Oil Drum; Peak Oil News; and Guardian articles here and here) but its finally seeping into the mainstream media. Partly this is because the price of oil is at a record high – not just the highest ever in cash terms, but the highest ever in real terms – higher than the early 1980s panic after the Iranian revolution. Now at $96 per barrel, it is about to burst the magic $100 dividing line, which of course is the kind of thing the media like. At the same time, in the UK, we are hiiting another psychological line – £1/litre at the petrol pumps.

The market is a complex thing – a high price does not prove scarcity. The real point is supply drying up. Now the level of oil reserves is a notoriously contentious subject, but a recent report by the Energy Watch Group (EWG) takes a different approach, looking at the rate of discovery. Oil fields follow a characteristic curve, with the rate of supply being a time-delayed copy of the rate of discovery. You can see this effect in US oil, which peaked in the 1970s. Applying this analysis to the world’s supply, the Energy Watch Group show that the peak of supply is basically NOW.

The report is very clear. Two key figures are reproduced below. The first figure shows that the rate of discovery peaked in the 1960s, and that the rate of production is now much larger. We are using more than we are finding. The second figure shows the EWG forecast for future supply, and the grossly contrasting “World Energy Outlook (WEO)” forecast of the International Energy Agency.

Well, somebody is being dumb. I think I know where my guess is. The WEO forecast of growing production nicely matches the growth of world demand of course. Dr Pangloss lives on.

The traditional question people ask is “when does it run out” ? Reserves are generally reckoned at around 1200Gb (Giga-barrels); current consumption is around 30Gb/yr, so thats 40 years left… On the optimistic side, some industry analysts claim we will hit something big and there is maybe more than 3000Gb .. so thats a century of oil. On the pessimistic side, EWG reckon the truth may be more like 850Gb, and by 2020 demand will be 45Gb/yr, so we have more like 20 years. We can get/make more oil, from tar sands, shales, and biofuels, but if we do that our energy consumption and climate change problems get even worse.

The correct question is “how long before supply fails demand ?” The answer to that looks like during the next few years. This seems hard to escape even if some vast new discovery is made. The world will start fighting over the resource.

Which country’s oil production peaked in the 1970s ? US. Which country’s oil production peaked in 2000 ? UK. Which countries led the invasion of Iraq ? Hmm. Let me think now.

Of course, once Iraq has a nice stable democracy the troops will be leaving. Well apart from the odd fifty thousand or so needed to man the fourteen permanent bases. Maybe Bush ain’t so dumb after all.