It’s real and it’s serious – the world is running out of the cheap, conventional oil upon which industrial society was built.
That’s why fracking has become such a huge controversy all over the world. Why deep sea rigs are having to drill over five kilometres deep. Why major oil corporations are in financial hock.
Now include the climate change problem and it’s not hard to see that life with dramatically lower energy consumption is inevitable. It’s better to plan for it than to be taken by surprise.
This site aims to help Tasmanians understand how these issues will impact upon us and how, with optimism, creativity and decisive action, we can not only rise to this challenge but create a healthier, more sustainable society at the same time.
Why the oil crunch won’t go away
World oil supply from large, conventional oil wells peaked some eight years ago and in the intervening period world demand of some 96 million barrels per day has been propped up by what are called ‘unconventional’ hydrocarbons.
These are liquid hydrocarbons that are extracted from shales and multiple small oil deposits locked into rock structures. How long can this situation last?
The International Energy Agency (IEA) is the pre-eminent global forecaster of world oil production and demand. Recently it admitted that its oil production forecasts were based on economic projections rather than geology or cost; ie on the assumption that supply will always meet projected demand.
In its latest annual forecast, however, (New Policies Scenario 2016) the IEA has also admitted for the first time a future in which total global oil production (i.e. conventional and unconventional) could start to fall within the next few years.
Bank corporation issues strong warning
For a critical analysis of the current world oil supply situation, we suggest that you read about a 2016 significant report from HSBC – one of the world’s largest banking and financial services organisations.
HSBC international operates in over 80 countries and territories. It can’t afford to issue careless or faulty analysis, so this has very high credibility.
The bank report can be downloaded here. (You may need google drive.)
Here is a snapshot of their ten conclusions:
Ten things you need to know
- The oil market may be oversupplied at present, but we see it returning to balance in 2017e
- By that stage, effective spare capacity could shrink to just 1% of global supply/demand of 96mbd, leaving the market far more susceptible to disruptions than has been the case in recent years
- Oil demand is still growing by ~1mbd every year, and no central scenarios that we recently assessed see oil demand peaking before 2040
- 81% of world liquids production is already in decline (excluding future redevelopments)
- In our view a sensible range for average decline rate on post-peak production is 5-7%, equivalent to around 3-4.5mbd of lost production every year
- By 2040, this means the world could need to replace over 4 times the current crude oil output of Saudi Arabia (>40mbd), just to keep output flat
- Small oilfields typically decline twice as fast as large fields, and the global supply mix relies increasingly on small fields: the typical new oilfield size has fallen from 500-1,000mb 40 years ago to only 75mb this decade
- New discoveries are limited: last year the exploration success rate hit a record low of 5%, and the average discovery size was 24mbbls
- US tight oil has been a growth area and we expect to see a strong recovery, but at 4.6mbd currently it represents only 5% of global supply
- Step-change improvements in production and drilling efficiency in response to the downturn have masked underlying decline rates at many companies, but the degree to which they can continue to do so is becoming much more limited