Oil Peak Production: A Local Perspective

According to the world’s foremost geologists, global oil production will peak between 2006 and 2015, meaning half the world’s ultimately recoverable oil will be gone.

In 1999, Goldman Sachs described a "dying industry" in which "90% of global conventional oil has already been found."[1]

Imperial Oil CEO Tim Hearn recently wrote that "about half of the oil and gas that will be needed 10 years from now will have to come from fields not currently in production." Assuming two percent growth from current world consumption of 80 million barrels per day (bpd), 49 million bpd in 2014 cannot be supplied from today’s oilfields. [2]

In the late 1940s, Geologist M. King Hubbert noticed that American oil discovery peaked around 1930, and predicted that once half the oil was gone (around 1970), aging wells would yield less and less oil.

He was proven correct after 1970, when domestic production went into decline. Today, America imports almost half of the oil it consumes, or some eleven million barrels a day.

Since then, geologists have refined Hubbert’s method and applied it to the world.

Global oil discovery peaked in the 1960s, despite recent improvements in exploration technologies. Over the past decade, exploration and development costs increased 75 percent, but discoveries are down and world production has stagnated.

Royal Dutch/Shell has already dropped its reserve estimate 20 percent this year, based partly on new drilling techniques that have not increased yield as much as predicted. Controversy has rippled through the industry, prompting other companies to reassess their reserve estimates as well.

When OPEC introduced export quotas in the mid 1980s, member nations suddenly increased their reserve estimates, suggesting that they have overstated their reserves to "cheat" on their quotas.

China further complicates matters. As Chinese demand for oil increases, it will consume a growing share of the world's daily output, pushing up prices and hastening the day when the world's oil pumps can no longer meet demand.

The International Energy Agency (IEA) has projected that Chinese consumption will grow by a million barrels a day for each of the next three years. China had a million cars in 1990, 10 million cars in 2003, and is expected to have 28 million cars by 2010.

The reader may be forgiven for thinking, "So the oil’s half gone: what’s the big deal?"

First, the oil we’ve already extracted was the proverbial low-lying fruit – close to the surface and easy to reach. What remains will grow increasingly difficult to recover. Eventually, it will take more energy to obtain the oil than the oil itself provides.

Second, energy consumption has increased steadily by about two percent a year over the past century. Our growth-oriented economy depends on a corresponding growth in energy supply. Peak production means that average daily output will begin falling. Long before the oil actually runs out, supply will fall behind demand, causing price hikes and supply interruptions.

Finally, no current or projected alternatives come close to matching fossil fuels for abundance, convenience, or energy density.

I have written elsewhere about the importance of creating cities that aren’t beholden to car ownership. There are plenty of reasons to prefer walkable neighbourhoods and alternative transportation options, but oil transforms the issue from a debate over competing values into a question of basic liveability.

Sprawl swallows farms and forests, costs more to service, and compels auto-dependence, which encourages obesity, harms air quality, and contributes to climate change. To this long tally we may add oil depletion and the accompanying disruptions and dislocations that are sure to tear through our economy.

Oil accounts for some 40 percent of total energy use in North America, almost all of it for transportation. Cheap oil and massive subsidies for road construction have fostered the infamous "doughnut" model of development, in which low density suburbs surround city centres in ever-expanding rings.

In a typical suburb, the nearest store is kilometres away, sequestered in a strip plaza or "big box" compound, separated by winding boulevards, six-lane collectors, huge parking lots, and physical barriers. Nothing is within walking distance: not the 1,200 student 'neighbourhood' mega-school, not the grocery store, not the community centre, not even, often, the nearest playground.

Now try to imaging living in the suburbs without a car. This is not idle fantasy, but a realistic projection from current trends. Suburbs depend on cheap oil, and cheap oil will soon be a thing of the past.

Amazingly, Hamilton, Ontario continues to invest tens of millions of dollars annually in its sprawl infrastructure, starving or abandoning every program that might reduce our car addiction. What use will our expressways be when petroleum is no longer cheap or abundant?

At what point will driving become unaffordable – not only because of the rise in price but also because of the economic contraction that will surely follow constraints in the energy supply?

When that point is reached, will it even be possible to retrofit our suburbs so that we can live there without our cars?

Ryan McGreal
April 22, 2004

Bibliography

  1. Richard Heinburg, "The end of the oil age", Earth Island Journal, Vol. 18, No. 3, Fall 2003 http://www.earthisland.org/eijournal/new_articles.cfm?articleID=713&journalID=69
  2. Eric Reguly, "Be prepared for ever-rising oil prices", The Globe and Mail, April 17, 2004 http://www.theglobeandmail.com/servlet/ArticleNews/TPStory/LAC/20040417/RREGUL17/

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