What is peak oil?
Peak oil is the term used to describe the depletion of the world's oil supply, and the peak in global oil production. Crude oil is a finite, non-renewable resource. It has powered the phenomenal economic and population growth of the last century and a half. The rate of oil ‘production’ (around 84 million barrels/day), has grown almost every year of the last century. Once we have used up about half of the original reserves, oil production becomes ever more likely to stop growing and begin a terminal decline, or ‘peak’. Peak oil is another reason supporters of alternative energy such as solar energy, wind energy, biomass, and geothermal advocate for their expanded use.
Peak oil means higher prices
The peak in oil production does not signify “running out of oil’, but it does mean the end of cheap oil, as we switch from a buyers’ to a sellers’ market. For economies leveraged on ever-increasing quantities of cheap oil, the consequences may be dire. Without significant successful cultural reform (less dependence on oil, more use of renewable energy sources), severe economic and social consequences seem inevitable.
Why does oil peak? Why doesn’t it suddenly run out?
"Oil companies have extracted the easier-to-reach, cheap oil first. The oil pumped first (primary recovery) was on land, near the surface, under pressure, light and ‘sweet’ (meaning low sulfur content) and therefore easy to refine. The remaining oil is more likely to be offshore, far from markets, in smaller fields and of lesser quality (secondary recovery). It therefore takes more money and more energy to extract, refine and transport. Under these conditions, the rate of production drops. All oil fields eventually reach a point where they become economically, and energetically, no longer viable. If it takes the energy of a barrel of oil to extract a barrel of oil, then further extraction is pointless, no matter what the price of oil is."
Source: Energy Bulletin - Peak Oil
Who first predicted an oil peak?
The concept of peak oil comes from a graph produced by Shell Oil geologist M. King Hubbert in the 1950’s. The graph shows that oil reservoirs follow a predictable trajectory from discovery to depletion. Once oil is discovered, production from the reservoir continues to increase until it reaches its maximum output. After that, production plateaus, then begins to decline. Once it declines, production continues downward until the reservoir is depleted.
The earth's combined oil supply should follow this bell curve and the point where it begins to decline forever is the oil peak. This point will come eventually, since oil is nonrenewable. But exactly how long we have until this happens is a matter of heated debate.
Source: Energy Bulletin - Peak Oil
Are there people who don’t subscribe to the peak oil theory?
In 2006, Cambridge Energy Research Associates (CERA) said, “the remaining global resource base is actually 3.74 trillion barrels -- three times as large as the 1.2 trillion barrels estimated by the (peak oil) theory’s proponents”. The organization went on to say that, rather than peak and decline, the world’s oil supply will eventually resemble an “undulating plateau,” with small peaks and valleys that will continue to meet the needs of global oil consumption for decades to come.
In CERA’s opinion, one to which many peak-oil skeptics subscribe, the oil peak theory is just that -- a theory -- and one that it considers questionable. The organization instead believes that plateau will not occur until at least 2030, and by the time demand surpasses the supply plateau, other forms of renewable energy will be sufficiently advanced to “fill in the gaps.”
What does the Hirsch Report say about preparing for Peak Oil?
While solutions meant to alleviate a shortfall face many challenges ahead, doing nothing is the worst option, according to the Hirsch Report, named after its main author, researcher Robert L. Hirsch. This report, published in February, 2005, examined three scenarios: one where no steps are taken to offset a peak until it occurs, one where steps to mitigate a crisis are instituted 10 years before the peak, and one where mitigation is put into practice 20 years before peak.
The Hirsch Report concluded that mitigation -- taking steps to both expand supply through the introduction of alternative liquid fuels, as well as decreasing demand by increasing fuel efficiency -- 20 years before peak would help us make a smooth transition to other fuels. This would minimize the economic or sociopolitical consequences when the oil peak takes place.
The Hirsch Report also found that mitigation measures begun only 10 years before the peak would place the globe into a fuel supply shortfall that we would not be able to restore for about a decade. And mitigation measures that aren’t taken until peak occurs would create a 20-year-long global fuel shortage.
Whether one believes peak oil is has already happened or not, most energy experts agree that a move to renewable energy sources is key to a steady supply of energy.
Source: US Department of Energy - Peak Oil Hirsch Report (PDF)