According to an increasing number of credible experts, within the next one to five years there will not be enough crude oil produced to meet the World's needs, even though half the World's original supply of crude oil will still be in the ground.

The cause of this is two-fold: First that no new significant oil fields have been discovered in the past 30 years, and, second, that extracting the second half of an existing oil field is exponentially more difficult and expensive -- pumping crude up from deeper depths, in a heavier form, and is far more complex and expensive to refine. 

HUBBERT's PEAK

Back in the 1950’s and 60’s, a now famous oil industry analyst named M. King Hubbert developed a forecast model that utilized a bell curve to predict when oil production would “peak” for known reserves in the United States. The “peak” was defined as the time when production (extraction of oil from an oil field) would hit the highest possible output levels, given the amount of oil in reserves. Once the peak was hit, a decline in production would ensue from that point forward, roughly mirroring in a downward trend the upward curve of increased production during the early life of the given oil reserve. While his 1956 theory was soundly rejected by numerous skeptics, his prediction became profoundly prophetic in accurately predicting the year in which U.S. oil production would peak. That occurred in early 1970. He was almost exactly on target, literally within months, in a prediction made more than fifteen years earlier using his model. When the accuracy of his model was confirmed, oil industry geologists began applying the model to total global oil production. Today, numerous credible industry experts and geologists are proclaiming that global oil production will peak within the next few years, if it hasn’t already.  Most optimistic estimates predict a peak sometime in the coming decade.    

The implications are sobering. Oil currently accounts for about 40 percent of the world’s commercial energy supplies and global demand for crude oil is presently increasing by 1.5% per year, with projected increases of 3% per year after 2009. China is already increasing consumption by more than 3% per year as they enter the industrial age, with India not far behind.  This growth projection means that within 20 years, by 2025, world demand will increase by 50%, to 125MBD. Once World production reaches its peak, supplies simply cannot be increased and global demand can no longer be met; the price of crude oil will increase rapidly, and shortages will prevail and continuously increase in severity. There will not be an end to the resulting oil shortages, forever. 

Since oil plays such a vital role in our very existence the problem goes much deeper than the price of gas that we pay at the pump. Crude oil is certainly the source of gasoline, but also is the raw material for all plastics, most lubricants, 95% of fertilizers, most pesticides, and hundreds of thousands of other products that we use and depend on every day.  Another startling fact is that the United States population consists of 5% of the World's inhabitants yet consumes 25% of the World's crude oil production, importing 60% of the oil it consumes. 

NIAGARA FALLS

Current global oil consumption is roughly 84 million barrels of oil every day.  This is the equivalent in volume to more than 26 continuous minutes of the water flowing over Niagara Falls.  Every one million barrel increment in supply is more or less equivalent to 20 seconds of the water flow over Niagara Falls.  Again, that's per day.  What do you think will be required by the oil industry, in terms of infrastructure, to increase exploration and production by that amount by 2025?  Using the growth projections mentioned previously, world oil production will need to increase by the equivalent of more than thirteen and a half minutes of the flow of water over Niagara Falls, then totaling the equivalent of 40 minutes of flow in daily production. Today the United States, alone, consumes a little more than 21 million barrels of this oil every day, or 7 minutes equivalent flow.  

These volumes are staggering to comprehend.  Put quite simply -- discovering, extracting, pumping, refining, and transporting these projected oil volumes to consumers worldwide on a daily basis by 2025 cannot be realistic (10 million gallons per hour, or 167,000 gallons per second, on a 24/7 basis.)  Yet this enormous volume of liquid is quite simply the substance that sustains and grows our economy, and the world's economy.

International Energy Agency (IEA) data projects a nearly 20% shortfall of supply relative to demand by 2020 that will have to be replaced by "unidentified unconventional" sources (i.e., known oil-sands deposits have already been taken into account in the calculation). Exxon Mobil projects energy demand to increase by 50% in the coming 25 years and has publicly indicated (despite contrary New York Times advertisements by the firm) that these supplies will need to be derived from as yet undiscovered oil deposits and improved extraction technology, or alternative energy sources. 

(Graph at right: Actual average daily oil production, by month through March of 2006, averaged from estimates by the EIA and IEA, together with 13 month centered moving average, and recursed moving average of the moving average. The last two data points in the monthly data are from the IEA alone, and the moving average windows are reduced at the graph edges to only include the data that exists. Click to enlarge. Believed to be all liquids. Graph is not zero-scaled. Source: IEA, and EIA.)

SO WE'LL JUST FIND MORE OIL,... Right?

The last large discovery of oil on the planet occurred more than 30 years ago, and virtually the entire globe has been searched to find additional deposits. 80% of oil being produced today is from fields discovered prior to 1973. These fields are now in terminal decline. In the 1990's oil discoveries averaged about seven billion barrels of oil a year, only one third of what was being consumed. The discovery rate of multi-billion barrel fields has been declining since the 1940's, and that of large (500-million barrel) fields since the 1960's. In 1938, fields with more than 10 million barrels made up 19% of all new discoveries, but by 1948 the proportion had dropped to only 3%. The average reserves of oil field discoveries today is less than ten million barrels of recoverable oil; and ten million barrels will meet less than half a day's oil demand for the United States alone.  So to just fulfill U.S. oil consumption the world would need to discover more than 750 of these new fields, each year, to replenish what was consumed in the previous year, not to mention still more discoveries to compensate for existing wells that become exhausted, and to fulfill the anticipated 2-3% increase in demand each year.

The ratio of oil consumed to oil discovered each year is now about six to one: 30 billion barrels consumed, to only five billion barrels discovered. Consider the Alaska National Wildlife Refuge (ANWR.) The preparation of the oil field at ANWR for production is scheduled to take about ten years. With its projected reserves of approximately 16 billion barrels of economically recoverable oil (based on prices of $50 per barrel, according to the US Dept. of Energy), this will supply an equivalent of under two years of total US daily oil consumption. 

ASPO-USA says, "The returns are coming in on how well exploration for new oil and gas fields fared in 2005. Overall the picture is disappointing despite the expenditure of some $15 billion by publicly traded companies alone. There were no significant (billion barrel or more) discoveries announced in 2005. Worldwide, total new oil discovered during the year comes to 4.5 billion barrels -- a 53-day supply at current rates of consumption. New discoveries in 2004 and 2005 were the lowest recorded since World War II."

Obviously, the inability of oil production to meet demand will raise the costs of gasoline. But when the price of oil increases, virtually every sector of the economy is affected in some way; whether it is the shortage of the raw material in manufacturing goods such as those above, the costs of transporting those goods to the market, storage in climate-controlled facilities, the machinery used in construction of those facilities or structures of any kind, most fertilizers and pesticides used to maintain production yields in agriculture, and a list of other dependencies that is longer than is practical to note here. But that is only the beginning of the impacts that such a situation will have on our society. The resulting “domino effects” will generate enormous price increases across the board for all products and services in existence, making a significant number of them economically impractical. And while the lack of oil supplies will affect the manufacture or availability of all of these products and services, the product which will likely be impacted the most will be food. 

"Globally, some 28 per cent of the energy used in agriculture goes to fertilizer manufacturing, 7 per cent goes to irrigation, and 34 per cent is consumed as diesel and gasoline by farm vehicles used to plant, till, and harvest crops.   The rest goes to pesticide production, grain drying, and facility operations (see latest data from the Earth Policy Institute here)."

Significantly, global population growth is only sustainable through dependency on the infrastructure provided by cheap oil. Oil-based agriculture is primarily responsible for the world’s population exploding from 1.5 billion at the middle of the 19th century to 6.4 billion at the beginning of the 21st. As oil production increased, so did food production.  As food production increased, so did the population. As the population grew, the demand for food escalated, which increased the demand for oil. Today, 95% of all the energy used by the agriculture industry to produce, store, and transport food comes from oil; from tractors to harvesters to irrigation pumps, energy for storage, and the trucking and flying of those foods to market. In the US, on average, a piece of food now travels 1,400 miles before it ends up on your plate.

How will shortages and prices of oil affect you and your family? Consider the current amount of "miles per gallon" your personal automobile provides.  Now imagine pushing your car that distance, by yourself.  That's how much energy is in a single gallon of gasoline.  What about the affects of energy shortages on your community? How do you think shortages and prices will affect industry and the economy?

The most important message in all of this is that the decline in oil production will not be temporary. This will be a permanent, worsening condition. Once the peak has been reached, there will never again be enough oil produced to supply the needs of our current oil-based society. 

A massive change in the existence of humanity is imminent.   

WHAT ABOUT ALTERNATIVE ENERGY SOURCES?

Consumption of renewable energy rose to supply approximately 6% of total energy consumption for the Unites states in 2004. Biomass and Hydroelectric power made up 92% of that total renewable contribution while solar and wind made up just under 3%. It is also important to note that the end product of many alternative energy sources such as nuclear, hydroelectric power, wind, solar, geothermal, and tides is electricity, which is not a replacement for oil and natural gas in their important roles as raw material for a host of products ranging from paints and plastics, to medicines, and inks. But probably the most vital of all uses is to make the chemicals which are the basis for modern agriculture. Certainly, the costs and infrastructure required to retrofit the 900 million+ internal combustion vehicles currently in use on the planet to an electricity-based propulsion will pose enormous challenges.

Coal: There is enough coal left in the ground to supply us for 200 years. However, coal mining operations, machinery and transportation all run on fossil fuels. Coal currently has an energy profit ratio (EPR) of 8 to 1, meaning 8 units of coal can be produced using the energy produced by one unit of coal [this calculation is also known as EROEI, or Energy Returned on Energy Invested.] Compare that to oil’s current EPR of 10 to 1 (10 barrels of production at the energy cost of one barrel of oil) and, with oil supplies depleting and coal resources becoming more difficult to mine, coal’s EPR estimate for 25 years from now is 1 to 2, meaning it will take the energy equivalent of two units of coal to produce a single unit of coal.   When it takes more energy to extract a substance than that substance can produce, it is no longer an energy resource, rather it is an energy drain.  The U.S. Army War College estimates that a 2% increase in coal use over current consumption would reduce the total world supply lifetime to under 100 years, and gasification of coal for liquid fuels (motor fuels for example) could reduce it further to half of that.     

Hydrogen: Hydrogen is not an energy source, rather it is a carrier of energy. Hydrogen currently supplies approximately 0.01% of the energy used in the United States. Hydrogen energy must be made from oil, gas, coal, wood, biomass, or water. Yet in every case, it currently consumes more energy to make hydrogen than the energy it can provide (an EPR of less than 1.) Further, the infrastructure to deliver and use hydrogen (converting the internal combustion engines in use today) is not currently in place, will cost untold billions to develop and deploy, takes four to eleven times the physical space to transport and store (as compared to oil), is not suited to aircraft or sea-going vessel propulsion, and cannot be used for plastics or fertilizers. 

Nuclear Power: This energy source currently provides about 8% of US energy resources through approximately 100 nuclear power plants. This number would need to be increased by 800 to 1,000 of the biggest plants to replace the energy provided by oil today in the United States alone, and from 8,000 to 10,000 additional plants globally.  If 10,000 nuclear power plants were put into operation the global reserves of needed uranium would be completely depleted in under twenty years, making this solution a short bridge at best.  Further, it would require the retrofit of fossil-fuel-powered machinery and vehicles to an electricity-based propulsion system to utilize its energy to replace liquid-fuel-based propulsion systems. It can not be used to produce plastics or fertilizers and has its own waste and security implications to consider. Further, the infrastructure required to power the five to ten year manufacturing process to build each nuclear power plant is currently based on fossil-fuel-powered machinery and manufacturing processes. And, finally, to build just 1,000 nuclear power plants at current costs would require some 3 to 5 trillion dollars.

Natural Gas: This energy source currently provides approximately 23% of energy production in the United States and more than half (52%) of the grid energy in the state of Texas.   The US natural gas supply already peaked in 1970 and is currently only producing at 1/3 its peak level. Global natural gas deposits are already peaking in many fields and will start running out from 2020 on.  Demand for natural gas in North America is already outstripping supply, especially as power utilities take the remaining gas to generate demands for electricity. Even in its “US Annual Energy Outlook 2004” the US Administration forecasts a significant growth in natural gas consumption in the US for the coming 20 years for which, according to many industry observers, the resource base is completely lacking.  North Americans will continue to face high prices to power, heat and cool their homes and may endure some natural-gas shortages during cold winters. The rising demand for gas, coupled with flat production, has quintupled prices in the last four years. The infrastructure to import and transport natural gas is not in place, although 59 LNG terminals have been approved for development in the USA, but will take years to bring online. Finally, natural gas, in that it is not a liquid fuel, is not suited for existing jet aircraft, ships, vehicles, and equipment for agriculture and other products.

Ethanol and biomass: Ethanol has been used as fuel in the United States since at least 1908.  It has historically taken more energy to produce than is derived from its use (a recent fifty-page study on the subject in the journal Critical Reviews in Plant Science claimed "Ethanol Production Consumes Six Units Of Energy To Produce Just One") and is only viable in America today because of massive government subsidies. Ethanol from corn costs about $1.74 per gallon to produce, compared with about 95 cents to produce a gallon of gasoline.  E85, a common ethanol product, is a mixture of 85% ethanol to 15% gasoline.  Ethanol has only 72 percent of the energy value of gasoline, according to the Energy Department. If E85 is priced higher than 72 percent of gasoline's price - which it is most places - motorists are paying more to go the same distance.  And now that ethanol has received such a push from the President's State of the Union address, 30 to 40 new plants are under construction with another 150 on the drawing board, but many are planning to use coal as a source of power [see article]...up to 300 TONS of it per day, per plant.

Currently, the majority of ethanol production is based on a dry milling technique that utilizes more than 1 billion bushels of corn to produce 3 billion gallons per year or just under 200,000 barrels per day of ethanol (Fuel #1).  The dry mill process converts the starch from the kernel of corn into sugar and then the sugar into ethanol. Ethanol requires enormous amounts of agricultural land to produce.  But President Bush is pushing a new kind of ethanol - made from crop waste and wood chips, rather than just corn.  Scientists have been working for years on economical methods of breaking down plant fiber, or cellulose, into the sugars needed for fermentation into alcohol. The technology also would make conventional ethanol plants more efficient, since it would be possible to make ethanol from the fiber found in corn kernels.   

Current research is finding that these additional parts of plants called cellulosic fibers will increase production yield dramatically.  And, a technology that processes the fiber waste of corn plants has been shown to be able to extract 75% of the corn oil from that waste at an extraction cost of only 15% of current corn oil extraction costs. Today, the 1 billion bushels of corn currently used in the dry mill ethanol process contain roughly 300 million gallons of corn oil in the waste byproduct, which is currently sold for about $0.03 per pound as commercial feed. The new corn oil extraction technology presents another option - cost effective conversion into Biodiesel (Fuel #2).  The U.S. ethanol industry now has 95 plants nationwide. Analysts say by 2012 it will double in volume, from producing 4.3 billion to 7.5 billion gallons of biofuels. That growth will be aided by the Energy Policy Act of 2005, which gives ethanol producers sizeable subsidies, including a federal tax credit for small refiners. With an aggressive development plan, the nation could produce enough ethanol per day by 2050 to vastly reduce fossil fuel consumption in the transportation sector.

Micro algae's present another excellent option for producing Biodiesel, in quantities that could be sufficient to completely replace petroleum. While traditional crops have yields of around 50-150 gallons of Biodiesel per acre per year, algae's can yield 5,000-20,000 gallons per acre per year. Algae's grow best off of waste streams -- agricultural, animal, or human. Some other studies have looked into designing raceway algae ponds to be fed by agricultural or animal waste.

Methane, a natural gas created by the decay of biological organisms, including coal, can also be produced from animal manure and biomass.  Methane is generally extracted from coal beds in a similar fashion to natural gas, or generated through the decay of manure or at landfills.  Each pound of manure generates roughly 50 cubic feet of gas, less than 1/4 of household gas usage per day for a typical home. It is also worth mentioning that the methane or biomass gas generation process requires considerable time to produce because it is a biological process depending upon decay.  Most biomass energy is produced from wood, wood waste, and agricultural or landfill byproducts and waste. 

Hydroelectric power: Currently accounting for 2.8% of U.S. energy production, it can be safely stated that virtually all locations suitable for large hydroelectric power plants have been exploited, and many of the rivers and lakes behind these dams are silting up rapidly, threatening their long-term viability. In the northeastern United States are a large number of locations where small hydroelectric operations could be reactivated – providing supplemental power to small towns and communities.

Solar Energy: Power from photovoltaic arrays account for 0.28% of current (2005) energy production in the United States. To increase this amount to any meaningful degree of energy production would require more than a 1000% increase in the deployment of solar power generating platforms. Estimates are that more than 20% of our land area would be required to replace one half of our current energy needs. Energy production is also largely impacted by cloud cover and density, the daily pattern of light and darkness, seasons, and dust in the air. This energy is not reasonably storable or portable energy like oil or natural gas, so it is unsuited for present vehicles and industry. The platforms additionally require the use of extensive fossil fuels to manufacture the solar cells, and to install the energy platforms. The batteries are bulky, expensive, wear out in 5-10 years, and have their own disposal issues due to the toxic materials contained in them. However, according to Home Power Magazine, over 156,000 homes in the United States run solely on solar electricity.  (Rocky Mountain Institute estimates that a typically inefficient house uses up to 10 kilowatts (a kW is 1,000 watts) of demand, but an efficient house needs less than 1 kW maximum and only about 100 W on average—which can be provided by about 10 four-square-foot panels.)  Solar water heating, is, in fact, a very valuable commodity provided by solar energy, with more than 10,000 megawatts of generating capacity installed world wide as of 1998.  In early 2006, reports out of South Africa indicate a revolutionary breakthrough in solar panel technology.  Instead of silicon, the new micro-thin solar panels use a patented semiconductor material: copper indium gallium selenium sulphide, or Cu(In,Ga)(Se,S)2 for short.  The panels are said to be able to generate enough energy to run stoves, geysers, lights, TVs, fridges, computers - in short all the modern conveniences of the modern house.  The new panel is much more efficient than traditional solar panels, costs roughly 1/3 that of a traditional silicon panel, and the photo-responsive alloy can operate on virtually all flexible surfaces, which means it could find a host of other applications in the future.  Some international experts have stated that nothing else comes close to the effectiveness of the South African invention, which should start shipping in 2007.  One of the world leaders in solar energy, German company IFE Solar Systems, has invested more than R500-million (about US$30 Million) in the South African invention and is set to manufacture half a million of the panels before the end of the year at a new plant in Germany.  Production will start next month and the factory will run 24 hours a day, producing more than 1 000 panels a day to meet expected demand.

Wind: Wind power is now the world’s fastest growing energy source, accounting for about 0.4% of the US energy supply, and is a worthy alternative energy source. It is four times as efficient as solar PV. But, again, to increase power production from this resource to any meaningful level of contribution to our energy needs will require increases in wind farm deployments of astronomical proportions. It is also worthy to consider the enormous energy requirements, in the form of oil-dependant machinery and manufacturing processes, to construct the generators, towers, transmission grids, and to deploy wind farms. Further, wind energy is dependent upon variable wind speed and, although there is wind blowing all night, energy demands are at their lowest point at that time and wind energy is not easily storable.  The global wind energy industry is expected to enjoy strong growth in coming years with total installed capacity seen more than tripling from current levels by 2014. Over the next eight years, international installed capacity is expected to increase to about 210,000 megawatts from today's installed total of about 59,000 megawatts.  Consider that if United States consumers owned several thousands of electric vehicles, which were plugged in overnight to recharge, those thousands and thousands of storage batteries would provide a massive ability to store such energy.  Overall, the wind industry is booming, according to The American Wind Energy Association which reports that last year 2,500 megawatts of new generation equipment were installed in in the USA in 22 states, valued at $3 billion.  

Shale, tar sand, coal beds:  The major problem with these sources is that they cannot be exploited before the oil shocks cripple attempts to bring them online, and the rate of extraction is far too slow to meet the huge global energy demand. Shell Oil is a key investor in oil sands.  Their Chief Executive, Jeroen van der VeerHe, has stated "the overall plan for oil sands is to make just 5 million barrels a day by 2030."  It is so expensive to extract (roughly $18 per barrel as compared to $1 per barrel for regular oil) that, after hundreds of millions of dollars attempting to exploit shale, thirteen companies, including big oil corporations, gave up their shale interests. Wringing four barrels of crude oil from the sands requires burning the equivalent of a fifth barrel (roughly 5x what it costs to extract oil from a traditional well.)  However, as oil prices continue to rise, the economic viability of these deposits are becoming far more attractive. However, there are enormous environmental implications tied to the extraction of oil from shale, tar sands, and coal beds – the mines and refineries use enormous amounts of oil and natural gas to extract and heat the sands with steam to extract the bitumen, and they release huge amounts of greenhouse gases -- the equivalent each day to more than a third of California's daily car emissions.  

SUMMARY 

While none of these alternative energy sources is currently a viable replacement for the enormous energy demands currently supplied by oil and fossil fuels, the rapid development and deployment of all of these resources, combined, is absolutely critical to meeting the future energy needs of the nation, and will certainly ease the impact of the depletion of energy derived from fossil fuels in the years ahead.

We can expect a transition in the next five to ten years in the way we will live our lives, in this country and in our community. In fact this will most probably be the greatest transition in lifestyle in the vast history of humankind. What we as individuals and as communities do now, today, will have a direct and significant impact on the comfort levels and challenges of that transition. 

We urge you to take this issue very seriously, to become educated on the subject and its consequences, and to take preparation action now in your personal life, that of your family, your neighborhood, and your community at large.

(c) 2005/2006 - Peter Lunsford -all rights reserved

WHAT WE ALL CAN DO NOW

1.      Reduce your personal oil consumption and conserve. 

• Use public transportation where available. 

• Downsize your vehicle, carpool and rideshare, ride a bike, or walk. 

• Purchase items made locally instead of from afar. Support localization. 

• Plan trips to the store and errands so you aren’t hauling a 2-ton machine with you to the store every time you just want a gallon of milk or a loaf of bread,...or a six pack. 

• If you must drive somewhere, plan the timing to avoid heavy traffic and congestion.

• Improve the insulation in your home to improve its efficiency.

• Adjust your thermostat (warmer in summer and cooler in winter.) Try opening the windows and not using A/C for at least one or more days each week.  Get a programmable thermostat.

• Replace your light bulbs now with long-life compact fluorescents - For every incandescent bulb you replace with a compact florescent, over the life of that compact florescent bulb as compared to incandescent bulbs, you will have saved the energy equivalent of 500 pounds of coal.

• Consider Austin Energy’s credits for installing solar panels or purchasing highly efficient appliances.  Join the GreenChoice program as soon as possible.

• Reduce your use of products made from oil (including plastics) 

• Reduce your use of electronic devices 

• Recycle and re-use plastic products 

• Design and build efficiently to minimize energy requirements 

• Use manual tools instead of power tools (including the lawnmower and weed eater and food processor.)

• Minimize, or better yet eliminate debt.  (See this article.)  An economic crisis could cause lenders to call in loans, even if you have stellar credit and always pay on time.  If other folks begin to default, the banks will need the cash to pay off their investors.  The absolute worst thing anyone can do is to borrow to pay basic living expenses...like for groceries or gas.

2. Think Local Rather than Urban Sprawl

• Minimize urban sprawl wherever possible 

• Lobby community leadership for walking communities by design

• Move closer to work or work closer to home. Better yet, telecommute. Go ahead, ask your boss. 

• Purchase/utilize locally produced products and services. Support localization.

• Support local development rather than urban sprawl 

3. Get Involved

• Educate yourself on the peak oil issue, and understand the implications 

• Educate yourself on how oil shortages will impact you and your community

• Talk to others in your community about it – encourage a dialog 

• Get to know your neighbors – now.

• Start a garden at home now, and learn to preserve food.

• Identify wasteful behavior and be courageous enough to speak up about it 

• Pull people along with the idea of conservation rather than push it on them 

• Submit ideas to your local community leadership on ways to prepare for the post peak oil world, and then follow up and track what they are doing. Vote accordingly.

• Lobby governments and community leaders to spend heavily now on renewable energy, public electricity-based mass transportation, and improving localized agricultural practices.

• Lobby governments and community leaders now on reducing spending for more roads, urban sprawl and inefficient infrastructures, or dependence on long-distance consumption.

• Utilize resources of all kinds sensibly, but especially energy. 

• Think about everything you do in relation to how your life will be affected after oil hits peak production.