Will Peak Oil cause a depression from 2010?

7 August 2006 Category: Boom then depression by 2012, Peak oil water food resources and leadership 3 Comments

Extract: When world oil production peaks, there will still be large reserves remaining. Peaking means that the rate of world oil production cannot increase; it also means that production will thereafter decrease with time. “When world oil peaking will occur is not known with certainty. Some experts believe peaking may occur soon … within 20 years.” It may occur as early as 2010. World oil demand is expected to grow 50 percent by 2025. “Peaking will result in dramatically higher oil prices, which will cause protracted economic hardship in the United States and the world. However, the problems are not insoluble. Timely, aggressive mitigation initiatives addressing both the supply and the demand sides of the issue will be required.” North America has 5% of global oil reserves, a declining 17% share of global oil production and consumes 30% of the worlds oil. The Middle East has 62% of global proven oil reserves, produces 31% and consumes 7% of the worlds oil.

The previous article A technology boom through to 2010 highlighted the potential for a technology boom through to 2010, to be followed by a depression. The primary cause for the depression post 2010 was demographic. After 2010, the “Baby boomers” retire and spending on goods and services decline. Peak oil may also cause or contribute to a depression post 2010. This post was inpsired by a documentary on Peak Oil. The broadband version of the documentary is available here and the supporting information is here.
According to Wikipedia:

““Peak Oil” as a proper noun, also known as Hubbert’s peak, refers to a singular event in history: the peak of the entire planet’s oil production. After Peak Oil, according to the Hubbert Peak Theory, the rate of oil production on Earth will enter a terminal decline. “

“The Hubbert Peak theory posits that for any given geographical area, from an individual oil field to the planet as a whole, the rate of oil production tends to follow a bell-shaped curve. Early in the curve (pre-peak), production increases due to the addition of infrastructure. Late in the curve (post-peak), production declines due to resource depletion.“

Oil production may peak as early as 2010. Up until 2010, supply may be able to satisfy demand. From 2010, demand will exceed supply by a significant margin. This will cause significant rises in oil prices. Consumers that have been use to cheap petrol will have to adjust.

Oil companies have been reluctant to invest in additional production, refining and transportation capacity. It takes seven years for an investment to result in oil production. In the three previous periods of high oil prices, oil companies have invested and seven years later, the prices were much lower. Oil companies have been accumulating cash or returning cash to shareholders.
Peaking of World Oil Production: Impacts, Mitigation and Risk Management February 2005 (PDF)

Extract:

““World oil demand is expected to grow 50 percent by 2025.”“

““When world oil production peaks, there will still be large reserves remaining. Peaking means that the rate of world oil production cannot increase; it also means that production will thereafter decrease with time.” “

““The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem. As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation,the economic, social, and political costs will be unprecedented. Viable mitigation options exist on both the supply and demand sides, but to have substantial impact, they must be initiated more than a decade in advance of peaking.” “

““Besides further oil exploration, there are commercial options for increasing world oil supply and for the production of substitute liquid fuels: 1) Improved Oil Recovery (IOR) can marginally increase production from existing reservoirs; one of the largest of the IOR opportunities is Enhanced Oil Recovery (EOR), which can help moderate oil production declines from reservoirs that are past their peak production: 2) Heavy oil / oil sands represents a large resource of lower grade oils, now primarily produced in Canada and Venezuela; those resources are capable of significant production increases;. 3) Coal liquefaction is a wellestablished technique for producing clean substitute fuels from the world’s abundant coal reserves; and finally, 4) Clean substitute fuels can be produced from remotely located natural gas, but exploitation must compete with the world’s growing demand for liquefied natural gas. However, world-scale contributions from these options will require 10-20 years of accelerated effort.”“

““Important observations and conclusions from this study are as follows:

“1. When world oil peaking will occur is not known with certainty. A fundamental problem in predicting oil peaking is the poor quality of and possible politicalbiases in world oil reserves data. Some experts believe peaking may occur soon. This study indicates that “soon” is within 20 years.

2. The problems associated with world oil production peaking will not be temporary, and past “energy crisis” experience will provide relatively little guidance. The challenge of oil peaking deserves immediate, serious attention, if risks are to be fully understood and mitigation begun on a timely basis.

3. Oil peaking will create a severe liquid fuels problem for the transportation sector, not an “energy crisis in the usual sense that term has been used.

4. Peaking will result in dramatically higher oil prices, which will cause protracted economic hardship in the United States and the world. However, the problems are not insoluble. Timely, aggressive mitigation initiatives addressing both the supply and the demand sides of the issue will be required.

5. In the developed nations, the problems will be especially serious. In the developing nations peaking problems have the potential to be much worse.

6. Mitigation will require a minimum of a decade of intense, expensive effort, because the scale of liquid fuels mitigation is inherently extremely large.

7. While greater end-use efficiency is essential, increased efficiency alone will be neither sufficient nor timely enough to solve the problem. Production of large amounts of substitute liquid fuels will be required. A number of commercial or near-commercial substitute fuel production technologies are currently available for deployment, so the production of vast amounts of substitute liquid fuels is feasible with existing technology.

8. Intervention by governments will be required, because the economic and social implications of oil peaking would otherwise be chaotic. The experiences of the 1970s and 1980s offer important guides as to government actions that are desirable and those that are undesirable, but the process will not be easy.”“

“

Who has the oil? Who supplies oil? Who demands oil?

BP Statistical Review of World Energy 2005 (PDF) (BP’s annual world energy report. )

Extract:

Region	Global proven reserves 2004 (%)	Global production 2004 (%)	Global consumption 2004 (%)
North America	5%	17%	30%
South and Central America	8%	9%	6%
Europe and Eurasia	12%	22%	25%
Middle East	62%	31%	7%
Africa	9%	11%	3%
Asia Pacific	4%	10%	29%

	Global share of reserves – Top countries	Global share of production – Top countries	Global share of consumption – Top countries
	Saudi Arabia (22%) Iran (11%) Iraq (10%) Kuwait (8%) UAE (8%) Russia (6%) Venezuala (6%) Libya (3%) Nigeria (3%) Kazakhstan (3%) USA (2%)	Saudi Arabia (13%) Russia (11%) USA (8%) Venezuala (4%) Iran (5%) China (4%) Iraq (4%) Kuwait (3%) UAE (3%) Nigeria (3%)	USA (25%) China (8%) – with 15% growth Japan (6%) India (6%) Canada (4%) Russia (3%) Germany (3%) France (2%) Spain (2%) UK (2%) Mexico (2%)

North America has 5% of global oil reserves, a declining 17% share of global oil production and consumes 30% of the worlds oil. The Middle East has 62% of global proven oil reserves, produces 31% and consumes 7% of the worlds oil. China produces 4% of global oil production and consumes 8% of the worlds oil. China’s demand for oil is growing at 15%.