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When oil peaks
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By Tony Wesolowsky
PRAGUE - Fertilizer, DVDs, rubber, cheap
flights, plastics and metals. None of these things
have anything in common, right? Think again. An
ingredient in all of them, in one form or another,
is oil.
Oil is the precious primer of the
world economic engine, making it hum. Oil provides
40% of the world's energy needs, and nearly 90% of
all transportation. It's also a building block for
many products and goods. Cut supplies of this
natural resource and life as we know it could
change.
But while some experts say the
world runs no risk of running out of oil, others
disagree. Sounding the alarm is the Association
for the Study of Peak Oil and Gas. Its president
is Kjell Aleklett, a physics professor at Sweden's
Upsalla University.
"[During] the next 30
years we will find more than 150, maybe 200, but
probably not, but 150 billion barrels of oil is
roughly what you're going to find," Aleklett said.
"And during the same period, we will consume 1,000
[billion barrels of oil]. So that means we are now
digging deep into the reserves we have at the
moment."
Aleklett is among a group of
international experts - ex-oil executives and
geologists - who believe there is less oil
percolating under the ground than the oil industry
acknowledges. They say the world has burned up
nearly half of all its oil - an estimated 900
billion barrels of crude.
In industry
jargon, that halfway point is the "peak", after
which reserves no longer rise but drop. No one
denies this will happen eventually. After all, oil
is a finite resource. But these oil skeptics -
so-called "peak" oil analysts - say the "peak" is
coming sooner rather than later, maybe even in
2008. They paint a gloomy picture: falling oil
supplies plus rising demand will equal shortages -
and perhaps a rising risk of war.
Mainstream experts, however, dismiss such
talk as scaremongering. They say predictions about
the end of petroleum have been made since shortly
after the first commercial oil rig went up in
western Pennsylvania back in 1859. The reality,
they say, is that supplies are growing, with more
oil coming out of Iraq, Russia, the Caspian Sea
and elsewhere.
And if supplies dip and
prices rise, these experts say that will spur the
industry to explore for more. Plus, breakthroughs
in technology will make it easier to extract oil
hard to get at now, such as the petroleum locked
in sands in Canada.
Michael Lynch, a
critic of the peak oil movement, said the
movement's guru, geologist Colin Campbell, has a
long record of making inaccurate predictions. "The
people who predict peak oil have been predicting
it any day now for 15 years," Lynch said. "Like
Colin Campbell said in '89 that this is the peak
right now, in '91 he said the peak is next year,
and in '95 he said it's in '97 and so forth. I've
generally been predicting continued rise [in oil
supplies] since I started working on this; really
making forecasts in the late '80s. I think over
the next 30 years you won't see a peak unless it's
from the demand side."
But with oil
breaking the US$50-a-barrel barrier in October,
and amid other concerns, the peak oil crowd is
grabbing more attention. One of their most
startling claims is the following: six barrels of
oil are now used for every new barrel discovered.
Major oil finds - that is, more than 500 million
barrels - peaked in 1964. In 2000, there were 13
such discoveries; in 2001, six; in 2002, two; and
in 2003, zero - the first time that had ever
happened.
The "peak" oil analysts also say
oil-industry investment patterns seem to indicate
that there isn't much oil left to discover.
In 2004, the Financial Times quoted a
study by Scottish energy consultant Wood Mackenzie
showing that major oil companies had invested $35
billion to develop existing oilfields in 1998.
Five years later in 2003, the amount was $50
billion, a record, according to the Mackenzie
study. During the same time period, spending on
oil exploration dropped from $11 billion to $8
billion. Peak oil analysts contend that the oil
companies were putting their money where the oil
is - and that's not oil exploration.
Analyst Lynch refuted that claim.
Exploration is down, he said, because companies
are drilling even more oil from existing fields.
He said there are other factors at play as well.
"When you look at oil discoveries and production,
these are partly influenced by geology, but they
are heavily influenced by politics, economics and
infrastructure, and things like that," Lynch said.
"So they [the peak oil people] are mistakenly
assuming that what they're seeing is a lack of
oil. In other words, geology is determining it,
when in reality what's happened is that people in
the Middle East cut back drilling because they had
a huge surplus of oil and they nationalized their
operations in the '70s and so forth."
Depletion of reserves
Saudi
Arabia holds one-quarter of the world's proven oil
reserves - some 260 billion barrels. But even here
there are signs of field depletion. No major
fields have been discovered since 1970.
Aquifers are being drained to pump oil out
from deeper and deeper in the ground, a sign that
the easier and cheaper-to-drill oil near the
surface is gone or going. The Saudis, and the
world's biggest oilfield, Ghawar - a
500-kilometer-long sliver of land near the Persian
Gulf - are not as robust as they once were.
Mathew Simmons, an energy investment
banker and onetime adviser to US President George
W Bush, said no one really knows how much oil the
Saudis have. The state-owned oil company Saudi
Aramco has not provided production data for more
than two decades. But Simmons noted that the
Saudis have been talking about the risk of
depleting their own reserves since the 1970s.
"What I find interesting is that there
clearly has been a running debate going on within
the ranks of Aramco going all the way back to the
1970s when Saudi Arabia had the market
opportunity, or, you could argue, was forced into
opening its valves faster and faster to keep
global markets supplied," Simmons said. "And by
1974, when their oil production had grown from
under 3 [million] to over 8 million barrels a day
in a four-year period of time, there were already
debates going on within Aramco as to whether they
were already overproducing these fields."
On the record, Saudi Aramco officials
confidently speak of increasing production in the
future. But "peak oil" analysts are not so sure.
After the "peak", these analysts say, oil supplies
will start to drop, prices will rise and then risk
of conflicts over resources will grow.
Bullish oilmen, however, still
enthusiastically point to possible new discoveries
in places as far-flung as Colombia and Sudan. Or
the Caspian region, which has long been cited as a
potential paradise of oil riches.
In 1997,
the US State Department put the possible value of
Caspian Sea oil at an amazing $4 trillion. One
field, Kashagan in Kazakhstan, was thought to be
particularly bountiful. But as Simmons explained,
Kashagan - and Caspian oil - might have been more
hype than reality.
"Now, there's an
enormous project that got sanctioned to begin
development spending in the middle of 2004 called
Kashagan that is being billed by some people as
the biggest oilfield found in the last 30 years,"
Simmons said. "Interestingly enough, three of its
original partners who held collectively 30% have
already bailed out."
Even oilmen admit
that Caspian Sea prospects were probably
overblown, although reserves there are still
significant. But new discoveries often do not have
a major impact on world oil supply.
"Fifty
percent of all the oil we are using today is just
from something like 150 oilfields, and there are
something like 40,000 [oilfields] in the world,"
said Aleklett of Upsalla University.
But
if discoveries are down and supplies dipping,
demand is up. Driving it is population growth led
by China, with 1.3 billion people. Buoyed by an
economic boom, China has overtaken Japan as the
world's second oil-consuming country after the
United States.
The US Department of Energy
predicts that through 2020, energy consumption in
China will rise about 4.3% a year, and by at least
3% in three other large developing countries:
India, Brazil and Mexico.
Aleklett and
other peak oil analysts warn that meeting future
demand without seriously drawing down reserves is
impossible. Aleklett said China is aware that oil
will be scarcer in the future and is scrambling to
buy up or contract for as much oil as it can -
even negotiating with Canada, America's top energy
supplier.
Possible Sino-American jousting
for Canadian oil could be just a glimpse of what
will be a more fierce global competition for black
gold. Michael T Klare, author of Resources
Wars, noted that the biggest oil supplies are
found in some of the most volatile regions: the
Middle East, the Caucasus and Central Asia. He
said major world powers won't be drawn into direct
conflict there but they won't sit on the
sidelines, either.
"But rather, proxy
conflicts where all these countries get involved
in local disputes within Kazakhstan, within
Georgia, Azerbaijan, these other countries; one
side favoring one party to a dispute, the other
side favoring the other side to a dispute," Klare
said. "So you get these big powers getting
involved in local conflicts and escalating into
something larger."
Klare highlighted the
Caspian region. The five states that share its
shores - Kazakhstan, Russia, Iran, Azerbaijan and
Turkmenistan - have been haggling for years on how
to divide the sea and divvy up its riches. As oil
and gas become more precious, Klare said, that
competition could become more intense and less
compromising.
Aleklett and other peak oil
analysts have argued that the West must curb its
hunger for oil now to avoid problems later. He
pointed out that the US has 5% of the world's
population, but uses 25% of its resources.
The father of the peak oil movement, US
geologist M King Hubbert, said an economic model
based of infinite growth but fueled by finite
natural resources is doomed. Ironically, there's
also a saying from oil-rich Saudi Arabia that
goes: "My father rode a camel. I drive a car. My
son flies a jet airplane. His son will ride a
camel."
Tony Wesolowsky has been
working at RFE/RL since 1995 and mainly mans the
overnight desk for the News and Current Affairs
Department in Prague. He speaks Russian and Czech
and has published articles in the Christian
Science Monitor, the Philadelphia Inquirer and the
Bulletin of the Atomic Scientists, among others.
(Copyright 2005 RFE/RL Inc. Reprinted
with the permission of Radio Free Europe/Radio
Liberty, 1201 Connecticut Ave NW, Washington,
DC 20036.) |
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