Tuesday, April 29, 2008

Conrad on Peak Oil....

From Conrad via email:

While driving on Miramar Road looking for gas station, I saw an ARCO sign with all of the prices taken off. All the pumps were surrounded with yellow tape. Great, sold out. I cursed my luck, then pumped gas at a more expensive place.

After returning home, I surfed the web on the cause of high gas prices then stumbled upon the Peak Oil and possible terrifying implications.

In the 1950's, Dr. M. King Hubbert,a geologist who worked for Shell Oil and the U.S. Geological Survey, proposed Peak Oil. The rate of petroleum extraction from a oil field is like a bell shaped curve. At first, the oil is easy, and cheap to extract.This is the light sweet crude that reporters talk about in financial news shows. The rate of extraction rises dramatically. When about half the oil has been extracted from the field, the rate that oil can be extracted reaches a peak, then it declines dramatically. This post-peak oil is more expensive to extract. This bell curve also applies to countries, and the entire planet.

There was a time when the United States was a net exporter of oil, but those discoveries of new oil fields reach a peak in the 1930's. Hubbert predicted that oil production in the continental United States would reach a peak around 1965 to 1970. During the OPEC led oil embargo of the 1970's, many oil experts believed he was right. The discoveries of new oil fields world wide reached a peak in the 1960's. Hubbert predicted world wide oil production would also peak. The Association for the Study of Peak Oil (ASPO) believe that people have already extracted and consumed half the world's petroleum between 2004 and 2008.

Petroleum is the backbone of our Industrial Age civilization. We turn it into gasoline, fertilizer, pesticides, and plastics. It fuels our cars, it fuels our GDP, our infinite desires. The United States and Europe have consumed this finite resource at an increasing rate. The people of India and China seem to desire the life that Americans are living. However, for the past several years, the world production of petroleum has not increased. Some of those who believe in Peak Oil say that soon the production will soon dramatically decline, oil prices will sky rocket, leading international shortages and high inflation, leading into a new Great Depression, leading into either a new Dark Age or World War Three.

I believe that even though we may have reached Peak Oil, it does not signify the end of Industrial Age civilization. One of the mitigating factors is reserve growth, the increase of production in already discovered and developed oil fields. The Kern River field in California was originally estimated to have 54 million barrels in 1942. After 44 years of pumping, the field produced 736 million barrels of oil and 970 million barrels are left to extract. Improved technology was able to more efficiently extract that could not be economically extracted earlier.

Here is an article from Reason magazine that provides a critique of Peak Oil:


There are many other sources of energy besides petroleum. Our civilization can still use coal, natural gas, and tar shales. However, because those are finite resources, those resources have a similar production rate of Hubbert's Curve. Wind energy is renewable, and cost about the same as coal, about 4 cents per kilowatt hour. There is technology on the horizon to turn algae into biodiesel.


People can conserve energy. After the OPEC embargo, the United States reduced petroleum consumption for a time. A company in Germany will sell a diesel car that get 157 miles per gallon. It is priced about 11,000 Euros.


A Norwegian company is selling an electric car with a 110 mile range that will cost about $25,000.


With the rising popularity of hybrid cars, perhaps the financially struggling Detroit automobile companies could realize it may be a good idea to build more ecologically friendly cars or face what Schumpeter call "creative destruction."

There are organizations that are creating cost-effective, energy conserving cars, buildings, manufacturing processes as the price of oil increases like the Rocky Mountain Institute.


Of course, I could be completely wrong, and we are all doomed. If you want to see what that doom could mean, check out World Without Oil, an online Alternate Reality Game to simulated what would happen for the first 32 weeks after Peak Oil and how people would struggle to survive in an energy crisis that would never end.


I welcome comments.


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