Peak Oil production - Has it happened already?

Written by: Don McDaniel on Oct 12, 2006 9:15 AM EDT

Peak Oil production - Has it happened already?

Peak Oil, or Hubbert's Peak as it is sometimes referred to, is the point in time when global production of crude oil reaches in pinnacle and then enters into a permanent decline. While experts cannot say with exact certainty when Peak Oil will arrive, many believe that it may have already been surpassed. However, their are other petroleum experts who subscribe to the belief that Peak Oil hasn't been witnessed yet but will within the near future.

Colin Campbell of the Association for the Study of Peak Oil & Gas (ASPO) has suggested that the global production of conventional oil peaked in the spring of 2004 albeit at a rate of 23-GB/yr, not Hubbert's 13-GB/yr. Another peak oil proponent Kenneth S. Deffeyes predicted in his book Beyond Oil - The View From Hubbert's Peak that global oil production would hit a peak on Thanksgiving Day 2005 (Deffeyes has since revised his claim, and now argues that world oil production peaked on December 16 2005). Texas oilman T. Boone Pickens has stated that worldwide conventional oil production will top out at 84MB/day.

Of the three largest oil fields in the world, two have peaked. Mexico announced that its giant Cantarell Field entered depletion in March, 2006, as did the huge Burgan field in Kuwait in November, 2005. Due to past overproduction, Cantarell is now declining rapidly, at a rate of -13% year over year. In April, 2006, a Saudi Aramco spokesman admitted that its mature fields are now declining at a rate of 8% per year, and its composite decline rate of producing fields is about 2%, thus implying that Ghawar, the largest oil field in the world, may have peaked.

According to the Hirsch report prepared for the U.S. Dept. of Energy, a global decline in oil production will have serious social and economic implications without due preparation. Peak Oil theorists argue that global economic growth relies on cheap energy, and oil contributes significantly to the worldwide energy pool, particularly for transportation. A decline in energy supply might slow or even reverse growth; it must be noted that the world economy has continued to grow despite multi-year drops in total energy consumption. Brief oil interruptions in 1973 and 1979 caused sharp declines in world GDP growth rate. These sharp declines show that world growth does much better with steady oil supply than without. GPI has been proposed as an indicator that better tracks depletion of resources.

Initially a peak in oil production would manifest itself as rapidly escalating prices and a worldwide oil shortage. This shortage would differ from shortages of the past because the fundamental cause would be geological, not political. While past shortages stemmed from a temporary insufficiency of supply, crossing Hubbert's Peak means that the production of oil continues to decline, so demand must be reduced to meet supply. If alternatives are not forthcoming, then the many products and services produced with oil become scarcer, leading to lower living standards.

Air travel, using roughly 7% of world oil consumption, would be one of the impacted services.

A US Army Corps report on the military's energy options states.

The Army and the nation's heavy use of oil and natural gas is not well coordinated with either the nation's or the earth's resources and upcoming availability.

Shipping costs
On average, a one percent increase in fuel prices leads to a 0.4% increase in total freight rates. Using this rule of thumb, the recent doubling in oil prices has raised averaged freight rates by almost 40%.

Significant indications of economic volatility have manifested themselves in the largest increase in inflation rates in 15 years (Sept. 2005), due mostly to higher energy costs.

These possible impacts of peaking oil, exacerbated by global competition over scarce remaining oil supplies, have led some analysts to predict dire consequences for conventional oil-dependent economies. According to oil industry analyst Jan Lundberg, "Based on today's intensifying trends, warning signs and an understanding of history, one must be ready to see the fossil-fueled phase come to an end most abruptly. When common practices cannot be maintained and too many people suddenly begin hoarding scant supplies, the desired resource dries up. This causes ramifications that quickly compound whatever triggered the crisis." This scenario is referred to by Lundberg as Petrocollapse. Contrasting views note that most uses of oil, from plastics to transportation fuels, have substitutes, blunting the impact of declining petroleum supplies.

For more information on Peak Oil please visit:
http://www.peakoil.net/
www.lifeaftertheoilcrash.net/...
www.hubbertpeak.com/...
www.peakoilportal.com/...

Sincerely:
Don McDaniel

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Location: State of Georgia, GA