What is Peak Oil?

The oil that is used to make our petrol and other transport fuels is a finite resource – literally a ‘fossil’ fuel created millions of years ago.

Modern society, as we know it, is powered by oil. Oil has been the key resource that has delivered phenomenal economic growth. And as our society has grown, so has oil consumption. Around the world we are now using approximately 83 million barrels of it per day. Now our entire systems of production have become totally dependent on it. Without oil and our society would collapse very quickly.

Peak Oil does not mean that oil will suddenly run out. It does mean that the era of cheap oil is over. Simply put, Peak Oil is the point in history when maximum oil production is reached – beyond that point, less and less oil is produced as the major oil reserves run down, leaving a growing gap between supply and demand.

A supply gap like this inevitably results in sharply increasing prices. The graphic below shows this in pictorial form. The yellow area represents oil demand that can’t be met. The ramifications for human society will be very profound.

Why can’t we just increase oil production?
Sounds easy, but oil production is not an easy game.

The problem is, the easy-to-reach cheap oil was discovered and extracted first. This was the land-based oil found near the surface, under pressure and easy to refine. The remaining oil tends to be off shore, deep underground, far from markets, in smaller fields and of lesser quality. This requires more money and energy to extract and refine. And so, the rate of extraction falls.

To make matters worse, all oil fields eventually reach a point where they become no longer viable. Once it takes the energy of a barrel oil to extract a barrel of oil, then there’s no point producing it.

When will Peak Oil happen?
This is not a theoretical future event. It is with us right now. In recent times the debate about peak oil has switched from Will it happen? to When will it happen?

What is definitely known is that for about 30 years the world has been finding less oil than it has been consuming. The rate of discovery of new oil fields actually peaked in the 1960s. Around 50 oil producing countries have already peaked and now produce less and less oil each year – including the major USA and the North Sea oil fields.

The red bars in the above graph shows how oil discoveries peaked way back in the 1960s. The green bars show the rate of oil discovery that we can expect from now on. The black line shows actual growth in consumption.

Every year since 1984 less oil has been discovered than has been consumed. Today, only one barrel of oil is being discovered for every four consumed. Time’s running out.

A number of projections that have been made about the precise ‘peak oil moment’. There is now a growing consensus amongst analysts that is has already peaked’ (July 2008 is a commonly agreed date) or will do so within the next five years – although the oil industry itself projects a much more optimistic 2035.

The chart above is based on actual production and expected oil output from all sources, including non traditional resources such as tar sands.

What does Peal Oil mean for the future?
Whatever the date, society is simply not prepared. Our whole society depends utterly on a single commodity for nearly all of its production, including essential transport and food supplies. It takes decades to change over infrastructure and clearly we don’t have decades to do it.

Peak Oil will firstly translate into higher prices for both food and fuel and this will cause immense stresses on the not so well off. It will wreak havoc on poor developing nations.

In the longer term everyone will be seriously affected. There is no response to Peak Oil other than a total restructuring of our economies and means of production. The earlier we address these problems the less stressful it will be.

This website is dedicated to exploring the likely impacts of peak oil on Tasmania and how we ought to be responding to it.

This entry was posted in Background info. Bookmark the permalink.