Peak Oil: Alarm or Alarmism?
Peak Oil Theory
Peak Oil is the moment when oil production hits a maximum and starts to decline. If demand continues to rise at this point, then energy prices will soar.
Peak Oil Theory was developed by the petro-geologist M King Hubbert in the late 1940s. Hubbert proposed that production for any geographical area, whether a country, a region or the world, followed a bell curve, rising to a peak then falling. He used his method to predict in 1956 that petroleum production would peak in the United States between the late 1960s and the early 1970s. US oil production did indeed peak in 1970, and the Arab oil embargo in 1973-74 resulting in an energy crisis. In 1974, Hubbert projected that global oil production would peak in 1995 "if current trends continue". Two years later he modified this to say that the actions of OPEC could flatten the curve and delay the peak by a decade. He died in 1989 so we can't ask him for his latest opinion.
So Where Are We Now?
We don't know.
What we do know is:
- Oil production has already peaked outside OPEC countries;
- OPEC countries do not subscribe to any internationally recognised standard of reporting their oil reserves.
This puts the world in a very precarious position. The global economy is relying on reserves that we have no sure way of assessing.
Governments around the world use the International Energy Agency (IEA) outlook to make judgements on oil reserves. In 2008, the IEA predicted that oil would peak in 2020. This conclusion was disputed by the UK Energy Research Centre and the Swedish University of Uppsala who both concluded “we are already in the peak zone”. This debate got more controversial in late 2009, when the Guardian newspaper reported that two whistleblowers claimed that the IEA had come under undue pressure from the US Government to present an optimistic scenario. One was quoted as saying "we've already entered the peak oil zone." The CEO of Shell recently came out for 2015.
The most optimistic prediction for an oil peak that I have found is from Cambridge Energy (CERA) who go for 2030, but with a very gradual decline thereafter. Their scenario relies on the use of unconventional and highly polluting/carbon intensive sources such as tar sands and coal to liquid technologies. This prediction has been criticised for underestimating the cost of these sources.
My view? If the UK and Swedish assessments are correct, then once the global economy recovers, oil prices will shoot back to the record levels of July 2008 and way beyond. While they give a little more time for adjustment, the Shell and official IEA positions still represent a massive challenge. So I believe the risks are far too high to ignore the threat of Peak Oil.
So What Should We Do?
To protect your organisation from the risk of Peak Oil, the response is pretty much the same as for climate change:
1. Rapidly decarbonise your organisation through energy efficiency and new ways of working;
2. Switch to renewable energy sources.
So, keep reading future editions of The Low Carbon Agenda for more free advice on how to do this.
 Dates for your diary
We are now holding two receptions to launch my new book, The Three Secrets of Green Business, to which all readers are very welcome.
- 6pm, 28 Jan 2010, Newcastle Business School, City Campus East, Newcastle upon Tyne (click here for a map)
Please RSVP if you would like to attend and you haven't told us already.
I am also presenting at the "Sustainability in the Service Sector" seminar held by The Service Network, 11 Feb 2010, Newcastle Falcons Rugby Club. Click here for more details and to register.
Low Carbon News
The Danish press have dubbed the 2009 Copenhagen climate change summit "Klimafarce". It is hard to disagree, but I can't help feeling that attempting the type of binding international agreement that was being put forward was always going to fail (remember the MAI?). On the other hand, it was great to see the issue being taken so seriously by so many world leaders. Let's hope they realise that international failure doesn't preclude national progress.
The UK tax incentive for liquid biofuels for road use will be removed in 2010 (source HMRC). This could cause serious problems for the many small scale producers of biodiesel from waste vegetable oil.
Small & Medium Size Enterprises in the North East of England who want free advice on installing micro-renewables should click here.
If you are involved in smart grid development (a possible topic for a future edition), the UK Govt has announced a funding stream for demonstration projects - click here for more.
Next Month
Next month we're going to look at the digital economy can contribute to a low carbon economy for all of us.
|
