What they didn't want you to know: oil's dirty little secret
Copyright 2007 Lloyd's List International
All Rights Reserved
Lloyd's List // July 13, 2007
The theory of Peak Oil is that world production will peak and plateau
at a undefined point in time and then begin to decline, while demand
continues to rise Five decades after it was first brought to the
world's attention, the finite supply of oil and what this means is
only just being accepted
"IT'S the end of the world as we know it", sang US rock band REM, a
sentiment that seems to sum up the 'hard to live with' realities that
Peak Oil will bring to civilisation's most affluent cultures.
And it definitely echoes the view of former BBC journalist David
Strahan, who admits he knew nothing of the oil industry before
starting his research and now wishes the world knew more about geology.
The theory of Peak Oil is simply that world production will peak and
plateau at a undefined point in time and then begin to decline while
demand continues to rise.
This will happen when all the world's oil producers reach their
limits of pumping oil. This essential but finite resource that has
been exploited for one and a half centuries to drive economic growth
and geopolitical influence.
The high oil prices seen over the last few years are strong evidence
that the point where the world is unable to increase production
levels any further is approaching faster than than anyone hoped, or
cares, to admit.
Strahan's book guides the reader through the science behind the
theory and then the argument as to why it will happen within the next
10 years.
In subsequent chapters he examines what could happen to mankind and
the world economy if global oil supply is not enough to meet
increasing demand, and suggests how to reduce our dependency before
it starts to dry up.
Strahan has written the last two chapters as a survival guide to the
imminent extinction of petroleum man after highlighting how terrible
our governments have been in recognising publicly the trend toward
peak oil.
Until very recently, even as late as this year, the oil industry,
governments and their consultants have kept quiet on the world's
finite capacity to produce oil, a hypothesis first outlined to a
shocked audience by Marion King Hubbert in 1956.
In public, they have reassured that there will be enough oil to meet
global demand, even if growth continues at 2% per annum or more. But
that has not prevented wars being fought over petroleum resources.
Hubbert's prediction of a US oil production peak and decline was only
about five years out and sure enough, by the mid-1970s, US output was
falling, imports from Latin America and the Middle East were rising,
tankers were in high demand and oil prices were climbing.
Scientists over the years have used Hubbert curves to predict how
other countries' oil production levels would peak and then decline
and most have been accurate.
The Peak Oil theory has gained favour, but in a world more concerned
with climate change it has remained on the fringes. That changed this
week when the International Energy Agency published its medium-term
oil market outlook.
The Paris-based organisation, which advises the world's largest
consumers, said the world could face an oil crunch in five years'
time because producers outside the Middle East are unable to increase
supplies at the rate demand is growing, meaning consumers will all be
depending on the Opec cartel to pump out more from its fields.
Strahan sheds light, or perhaps doubt, over the estimates for Middle
East production capacity and oil reserves, building on research by
others such as Houston analyst Matt Simmons, and adding to the
argument that oil will start to run out before 2020.
Hubbert based his Peak Oil theories on oil reserves and discovery
rates, and Strahan believes the world's reserve estimates are more
aligned with political hope than actual geological knowledge.
Discovery rates have been in decline for decades.
Optimists will say that heavy oil in Canada and biofuel developments
will save the world from the problem of Peak Oil, while others
believe technology advances and rising oil prices will make new
supplies economically viable to produce.
But generally, the easy oil reserves have been developed so more cash
is needed to chase the harder to exploit reserves.
So what will happen to mankind when oil supplies start to dry up?
Strahan concludes that oil prices will continue to climb, making all
products from fuel to plastics and food to electrical goods more
expensive while transport costs will soar.
With rising costs comes more debt and a slowdown in economic growth.
There could be global recession, promising mass redundancies and
unemployment.
For shipping, there is the possibility that demand for goods will
decline as international economies and trade shrinks, but tanker
owners should profit in the short-term provided the market is not
saturated by tonnage.
For consumers, Strahan's advice is lower your oil use now, get on
your bike, sell the car, grow your own vegetables, but don't panic--
yet.
Last Oil Shock: A Survival Guide to the Imminent Extinction of
Petroleum Man by David Strahan is published by John Murray £12.99.
