Arguing endlessly over the precise date of the peak also rather misses the point, when what matters is the vision of the long slope that comes into sight on the other side of it.

- ASPO founder, Colin Campbell

The Catalyst Australian TV Report on Peak Oil

The Oil Journey, narrated by Peter Coyote

Oil is one of the most incredible discoveries of our civilization. It is the most energy dense and versatile substance known to man and it is that incredible energy that has allowed us to reshape the entire landscape of this planet in a matter of a few centuries.

More and more mainstrain sources are beginning to admit that Peak Oil is not only real but will happen very soon. Citigroup Inc has released a report predicting a major shift in the world’s leading oil producing nation.  “If Saudi Arabian oil consumption grows in line with peak power demand, the country could be a net oil importer by 2030,” wrote Heidy Rehman, an analyst with Citigroup Inc.

The International Energy Agency, the organization that determine the energy policy of many governments around the world is very concerned that we have already peaked. The German military released a comprehensive report on Peak Oil in 2010 and Germany has an aggressive solar plan which has already surpassed 50% of energy from the sun. The US military is investing heavily into renewable energy research and recently announced it is preparing for a Peak Oil event. The Association for the Study of Peak Oil (ASPO) is a leading authority on the study of Peak oil and their research leads them to believe Oil may peak in 2015 (plus or minus a few years). Some analysts believe it will happen sooner, as early as 2012. While some recent analysis lead some to conclude that conventional oil has already peaked in 2006.  Why does it matter? …because everything is interdependent in today’s global economy. Cheap energy is the chief driver of our modern economy. Hence a dramatic decline in energy, there will be accompanied by a huge decline in economic growth.

It is clear that we have treated cheap oil as an endless supply when it is actually finite. Our entire modern society is made possible by cheap, high energy density oil. Our dangerous dependency has become our greatest vulnerability. While economists are scrambling to develop new economic models that are in harmony with a  finite planet, any sudden global disruptions before the world has eased into the new economic paradigm will cause major disruptions and displacements. Just as the discovery of the power of oil created this modern civilization, Peak oil threatens to topple it if we are not prepared.

A Brief History of Oil

Oil had been discovered more than four thousand years ago. According to Herodotus and confirmed by Diodorus Siculus, asphalt was employed in the construction of the walls and towers of Babylon. It’s widespread use did not begin, however until the invention of the internal combustion engine in the early part of the 20th century. Before the modern exploitation of oil, it was hard for people to imagine the kinds of things oil could make possible. We need only return to the days before oil to look at how people imagined magic in the future.

   People imagined that they could catch a ride on a giant who could walk 7 leagues (or roughly 21 miles) in one stride; today, we have jet planes.
   People imagined that there could be a magic pot with endless porridge; today we have supermarkets with their endless supplies of food.
People imagined magic elves who would work on shoes while the shoemaker slept and when he awoke, all the shoes were made; today, we have China.

The Industrial Revolution

The discovery of the enormous energy densities of hydrocarbons began with coal during the industrial revolution. When the Industrial Revolution began in the mid 1700’s, it heralded an age of unprecedented global prosperity and growth. Although efficient textile machines and iron making techniques were important seeds, the most important was the creation of the steam engine and the use of refined coal to power it. The Industrial Revolution may be more aptly named the Hydrocarbon Revolution. The concentrated power of coal  is what brought about such enormous increases in productivity.

 

Figure 1: Men leaving a pit prior to The Great War, painted by Gerald Palmer for ”More Pictures of British History” by E.L.Hoskyn, A & C Black, London, 1914, p.62.

The Industrial Revolution started in the UK and quickly spread throughout the rest of the world.  The modern history of petroleum began a century later with the refining of kerosene from crude oil:

  • 1823: Russian Dubinin brothers had purified kerosene directly from petroleum in their factory
  • 1846: Refining kerosene from coal was discovered by Nova Scotian Abraham Pineo Gesner
  • 1852: Ignacy Łukasiewicz had improved Gesner’s method to develop a means of refining kerosene from the more readily available “rock oil” (“petr-oleum”) seeps
  • 1853: First rock oil mine was built in Bóbrka, near Krosno in central European Galicia (Poland/Ukraine) in 1853
  • 1854:  Benjamin Silliman, a science professor at Yale University in New Haven, was the first person to fractionate petroleum by distillation
  • 1861: Meerzoeff built the first modern Russian refinery in the mature oil fields at Baku and produced about 90% of the world’s oil
  • 1853: The world’s first commercial oil well was drilled in Poland
  • 1857: The world’s second commercial oil well was drilled in Romania and the world’s first oil refineries were opened at Jasło, in Poland and a larger one at Ploiești, in Romania, shortly after. Romania is the first country in the world to have crude oil output officially recorded in international statistics (275 tonnes).
  • 1858: The first oil well in North America was in Oil Springs, Ontario, Canada dug by James Miller Williams
  • 1859: The US petroleum industry began with Edwin Drake’s drilling of a 69-foot (21 m) oil well on Oil Creek near Titusville, Pennsylvania, for the Seneca Oil Company

During the 1800s’, the industry grew driven by the demand for kerosene and oil lamps. By the end of the century, the Russian Empire, particularly the Branobel company in Azerbaijan had become the top global producer. In the 1900’s, with the introduction of the internal combustion engine, demand skyrocketed and has sustained the industry ever since.

In the two centuries following  the beginning of the Industrial Revolution, the world experienced unprecedented growth. Income per capita increased 10x while population increased 6x. We’ve been increasing our wealth ever since. This easy access to energy is what began our journey into overpopulation and overconsumption and which has catapulted us far beyond the earth’s carrying capacity. Now, there is growing consensus that we have already reached an energy plateau.

The Power of Hydrocarbons

 

 How Much Human Energy Is Contained in One Gallon of Gas?

Dr. David Pimentel of Cornell University calculates: “The 38,000 kcal in one gallon of gasoline can be transformed into 8.8 KWh, which is about 3 weeks of human work equivalent.(Human work output in agriculture = 0.1 HP, or 0.074 KW, times 120 hours.)”, accounting for the energy lost in the process of converting the gasoline into usable energy. The energy converted is:

1 Gallon of Gas = 125,000 BTUs Source: US Department of Energy

3,400 BTUs = 1 KWH Source: US Department of Energy, Bonneville Power Mgt.

1 Gallon of Gas = 125/000 BTUs * (1 kWH / 3,400 BTUs)  = 36.7647 KWH

Human work output in agriculture of .074 KW = 500

Therefore:

1 Gallon of Gas = 36.7647 KWH  *( 1 Hour Agricultural Human work output/ 0.074KW) = 500 Hours of Human Work Output 

How Much Human Energy Is Contained in One Barrel of Oil?

1 Barrel of Oil = 5,800,000 BTUs Source: Louisiana Oil and Gas Association

1 Gallon of Gas = 125,000 BTUs Source: US Department of Energy

1 Barrel of Oil thus contains the energy contained in 46.4 gallons of gas (5,800,000 divided by 125,000 = 46.4 )

1 Gallon of Gas = 500 hours of human work output Source: Calculations Done Above.

Therefore

1 Barrel of Oil = 46.4 gallons of gas * (500 hours/gallon of gas) = 23,200 Hours of Human Work Output

Peak Oil 

There is a geological view of future oil production called Peak Oil which suggests that oil reserves are ultimately finite and that production will peak, after which it will steadily decline to zero. Easy-to-access oil is produced first, and thereafter becomes harder and more expensive to produce as the cumulated amount of oil already produced grows. Oil producers leave oil reserves in the ground when it does not make economic sense to access them. As oil price increases, however, those reserves that were previously not cost effective to drill become cost effective.

This Peak Oil view of oil supply traces its origins back to the work of geoscientist M. King Hubbert (1956), who in 1956 correctly predicted that U.S. oil output would peak in 1970. Decline of supplies is predicted by the famous Hubbert Curve. This graph represents the total gross quantity of energy available, and, as it is traditionally calculated, there are equal quantities of energy available on the left and right side of the peak.

 

Figure 1: Peak Oil Hubbert Curve (Source: Marion King Hubbert, 1971)

According to many Peak Oil scientists, the recently observed stagnant oil production in the face of persistent and large oil price increases is a sign that physical scarcity of oil is either here or at least imminent, and that these limits in supply will eventually overwhelm the stimulative exploration and technology improvement effects brought about by higher prices.
Also troubling is extensive studies of alternative technologies and resources which show that suitable substitutes for oil simply do not exist on the required scale, and that technologies to improve oil recovery will eventually run into limits dictated by the laws of thermodynamics, specifically entropy.

The prominent research groups on Peak Oil are:

Based on a wealth of geological and engineering evidence,  authors at the UK Energy Research Centre in Global Oil Depletion (2009) have concluded that there is a significant risk of a peak in conventional oil production before 2020, with an steady and rapid decline thereafter.

Peak Oil: Our Dependency becomes our Vulnerability

  • Worldwide rate of conventional crude oil production peaked at the end of 2004, and has remained between 72 and 74 million barrels per day (mbpd) ever since.
  • Subsequent tripling of oil prices did not bring new oil to market–a classic signal of peak oil.
  • Oil discovery is in long-term decline, and the world has reached the point at which new drilling has failed to overcome the depletion of mature fields.
  • Adding natural gas liquids, biofuels, synthetic liquid fuel made from tar sands, and other unconventional liquids to conventional crude brings the current “all liquids” total to about 86 mbpd.
  • Unconventional liquids have been responsible for nearly all of the growth in world “oil” production since 2005.
  • Detailed review of the flow rates of the world’s oil producers tells us that world production may not ever exceed 90 mbpd.
  • It appears we are now on the peak oil plateau, or close enough to it that the date of the technical, absolute peak doesn’t matter.
  • The global peak of all liquids will likely occur by 2015 at 95 mbpd or less, but it will only be visible in the rear-view mirror.
  • It does not matter much if the 2015 date is off by a few years in either direction.

Figure 2 Global Oil Production

(Source: Oilwatch Monthly, April 2010)

The following chart shows ASPO founder, Colin Campbell’s 2009 model of past and future oil production. This model is based upon a detailed study of all the world’s major oil fields, with all forms of petroleum taken into account.


Figure 3: Colin Campbell’s World Oil Production Model
(Source: ASPO-Ireland Newsletter No. 100 – April 2009)

 (Source: ASPO Website Dec 2011: Peak Oil Data)

Is Peak Oil Real?

Figure 4A: There are a Total of 98 Oil Producing Countries 2009 (Source: Rob Hopkins,Transition Networks TED Talk)

Figure 4B: By 2009, 65 Oil Producing Countries have Peaked Production 2009 (Source: Rob Hopkins,Transition Networks TED Talk)

 

Figure 5: The History of Oil (Browse more infographics.)

 

  • Depletion is relentless, and eventually leads to production declines as natural reservoir pressure decreases and can not be maintained by water or gas injection.
  • Most new fields are small (reserves < 400 million barrels) or in deepwater basins.
  • Production declines sooner and faster in both cases.

The world’s largest producing fields are also the most mature. These aging giants are now mostly depleted and in some cases:

  • have peaked (Burgan in Kuwait) or
  • are in decline (Cantarell in Mexico).
  • The status of Ghawar in Saudi Arabia, the world’s largest oil field, is unknown, but the prospects for this field are worrisome due to its advanced stage of depletion.
  • Some of the new production capacity in Saudi Arabia will merely replace declines that are likely to occur by 2015.
  • Production in Russia, the world’s largest oil supplier, will likely remain flat or decline after 2012.

There are problems with conventional oil production outside of OPEC (”non-OPEC”) appears to have already peaked.

  • Higher levels of production from OPEC are not guaranteed for a variety of reasons.
  • Chavez’s policies have hampered Venezuelan production, which is declining.
  • Political conflicts in Nigeria affecting production in the Niger Delta or offshore show no sign of abating.
  • Iraq’s production is rising with some new development, but is still at significant geopolitical risk.
  • Iran’s production is endangered by a lack of investment and skilled workers due to its political policies.
  • The other Persian Gulf producers have more incentive to preserve their long-term oil income than to keep increasing production in order to meet rising global demand.

If the world’s overall production decline rate is 4.5%, then new conventional oil production must replace 20 million barrels per day by 2015. Where will these new sources come from?

  • Unlike the period after the disruptions of the 1970’s and early 1980’s, there are no new large oil provinces such as the North Sea or Prudhoe Bay waiting in the wings to substantially boost global supplies.
  • Unconventional oil production from the tar sands of Canada, the Orinoco Basin in Venezuela, and the Green River Shale in the United States is unlikely to surpass 5 million barrels per day by 2015.
  • Biofuels from corn, sugar cane, soybeans, palm oil or other sources will not make a significant dent in replacing conventional oil demand.
  • How about new technologies? The average worldwide recovery factor for all oil fields is about 35%. This means that almost two-thirds of all the oil in place is effectively stranded ─ it is not economically recoverable using existing technology. Despite research & development efforts by the oil industry, recovery factors are not likely to increase much in the medium term. There is no applicable “miracle” technology, no silver bullet, that will increase production rates enough to offset natural declines.
For these and other reasons, ASPO-USA believes that a peak of world oil production is very likely by 2015. Some analysts think it could happen as soon as 2012.

(Source: ASPO Website Dec 2011: Is Production Peaking?)

After Peak Oil, only 27% of Reserves Left, not 50%

The EROI (Energy Returned on Investment) is a critical parameter in oil production. It tells us how much energy we have to invest and how much energy is returned for that investment.  David Murphy, assistant professor, Department of Geography and an associate of the Institute for the Study of the Environment, Sustainability, and Energy at Northern Illinois University has done some informal calculations to estimate how worsening EROI affects the Hubbert curve, a graph created by geoscientist Marion King Hubbert that gives us an indication of where Peak Oil will occur. The answer may shock some.

Hubbert’s curve looks symmetrical so one would expect that after Peak Oil, there would still be 50% Oil Reserves left. According to Murphy, however, there is far less due to a decreasing EROI value.

Professor Cutler Cleveland of Boston University has reported that the EROI of oil and gas extraction in the U.S. has decreased from:

  • 100:1 in the 1930’s
  • 30:1 in the 1970’s
  • 11:1 as of 2000

Hence after 2000, it took the energy in 1 barrel of oil to extract 11 barrels of oil. This cycle is positively reinforcing and declining EROI has the following implications:

  • the net energy contained in each unit of energy delivered to society is decreasing over time, requiring the extraction of increasingly greater quantities just to meet societal demand
  • decreases the quantity of energy remaining in the ground for future society
  • makes it more difficult to find and develop the remaining bit of energy

Industry has always followed the obvious path of high-grading our natural resources. Cleveland’s results reflect that; we use the most easy-to-extract resources first. Once the easy-to-extract resources have been exhausted, we find deposits that are a bit more difficult to extract and so on. With every barrel we pull out of the ground we propel ourselves further down this path, creating a more difficult situation for future generations.

Murphy argues that declining EROI means that the amount of discretionary energy available to society is FAR less than that predicted by a Hubbert curve (Figure 3).  Declining EROI means more energy is used to extract the remaining energy, eating into the pie of discretionary energy available to society.

In Murphy’s analysis, he applied the three point values of EROI above determined by Cleveland and interpolated linearly the values between the points and into the future to a minimum EROI of 1.1:1. Murphy makes his assumptions explicit: he has no a priori reason to believe that EROI has declined linearly or that it will decline to 1.1 and then level off, but it has certainly declined in the past and as long as it is declining the general results reported here are valid.

Murphy then used the following equation to calculate the percent of net energy available from the gross energy produced:

 

Net Energy = Gross Energy * ((EROI – 1)/ EROI)
 

Figure 4 shows the results of this analysis. Unlike the original Hubbert curve that shows equal quantities of gross energy resources on the left and right side, the Net Hubbert Curve is skewed so that most resources are on the left. For example, according to the original Hubbert curve, 50% of the energy resource is remaining when production levels reach the peak, but this is quite different for the Net Hubbert curve corrected by Murphy’s assumptions of declining EROI.

Fig. 6: Peak Oil Hubbert Curve with Net Energy Correction (Source: David Murphy, The Oil Drum)

 

According to Murphy’s calculation based on the figures of declining EROI supplied by Cleveland, by the time peak production is reached sometime in 2015, 73% of the net energy available has already been extracted.The implications of these results are vast, but generally speaking, plummeting EROI is going to make it very difficult to meet the net energy needs of our future society. Although Murphy’s study is not very precise, it does imply that if we have reached Peak Oil (Murphy thinks we have), then human society has already spent almost 3/4 of all the fossil fuel available.

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Comparing EROI of Different Energy Technologies

(Source: David Murphy)

Below is a graph showing various EROI (Energy Returned on Investment) The EROI of Coal is 80:1 while hydroelectric is 40:1. Does this mean Coal is twice as “good” as hydroelectric?  No is the simple answer but it relates to the idea of an EROI threshold and the difference in terminology between Net Energy and EROI.

 

Fig. 7: Comparison of EROI of various Fuel Sources

 

We must first realize that EROI is a somewhat theoretical concept; it is a unitless ratio that does not describe actual flows of energy. What society really cares about, and what is really used to grow economies around the world, are actual flows of energy. More precisely, the economy utilizes flows of net energy. What, if anything, can EROI tell us about the flow of net energy?

To understand how EROI influences the flow of net energy, we must first look at the equation for both net energy and EROI, which are:

Net Energy = Eout – Ein
EROI = Eout/Ein

If we solve the EROI equation for Ein and substitute it into the Net Energy equation, we get:

Net Energy = Eout*((EROI-1)/EROI)

From this equation Mearns (2008) created the “Net Energy Cliff” graph. The net energy cliff figure relates the percent of energy delivered as net energy (y-axis, dark grey) and the percent of energy used to procure energy (y-axis, light grey) as a function of EROI (x-axis).

Fig. 8: Mearn’s Net Energy Cliff Graph

 

The Net Energy Cliff

The exponential relation between net energy and EROI creates what Murphy calls an EROI Threshold at roughly 8:

  • Above EROI = 8 (to the left of the vertical threshold line), due to the asymptotic nature of the curve at high EROIs, there is little difference in the actual flow of net energy delivered from technologies
  • Below EROI = 8 (to the right of the vertical threshold line), extraction/conversion processes result in vastly different flows of net energy

Example 1: Oil Extraction from EROI 50 to 10

  • EROI1 = 50
  • EROI2 = 10

would result in a change in Gross Energy Flow from

  • Net Energy Flow = 98%
  • Net Energy Flow = 90%

Example 2: Oil Extraction from EROI 10 to 2

  • EROI1 = 10
  • EROI2 = 2

would result in a change in Gross Energy Flow from

  • Net Energy Flow = 90%
  • Net Energy Flow = 50%

Hence, differences between Net Energy are insignificant when the EROI’s being compared are well above 8. This is also the reason why coal, with an EROI of 80, is not twice as good as hydro, with an EROI of 40, because the actual difference in the flow of net energy between these two is very small. The truth is that they both deliver well over 90% net energy. What this threshold effect means is that, when substituting renewables for fossil fuels, it is less important to match EROIs (i.e. substituting coal for a renewable that also has an EROI of 80), and more important to focus simply on avoiding very low EROI technologies (EROI < 8).

EROI Threshold Caveat

The logic behind the EROI Threshold only applies if the EROIs being compared are actually commensurable: i.e. that the EROI analyses utilize the same set of assumptions. This is often, however, not the case.

When comparing Fossil Fuels with Renewable Energy technologies, for example,  one must consider the intermittent nature of renewable sources. For wind or solar, for example, there could be significant difference between EROI depending on whether an energy storage system is included to account for times of over- and under-production. The big question is whether this added energy cost will decrease the EROI of renewable systems below the EROI threshold. Currently, there are no peer-reviewed papers reporting EROI numbers that included such costs for renewables.

Bottom-Line
EROI is a useful metric for comparing across energy extraction/conversion technologies, or for comparing the extraction/conversion process of one resource over time. But as EROI increases, and especially as it increases much beyond 8, its relevance, as it pertains to net energy flows, fades. Furthermore, due to the aggregated nature of the EROI statistic, every analysis involves assumptions. It is important that those who use these EROI statistics understand what those assumptions are and what they indicate about the utility of the EROI statistic produced.

What are the solutions to Peak Oil? We explore these in our solutions page for Peak Oil.

REFERENCES

1.Hall, C.A.S.; Day, J.W., Revisiting the limits to growth after peak oil. American Scientist 2009, 97, 230-237.

2.Mearns, E. In The global energy crises and its role in the pending collapse of the global economy, Royal Society of Chemists, Aberdeen, Scotland, October 29th, 2008; Aberdeen, Scotland, 2008.

Colin Campbell has over 40 years of experience in the oil industry. He earned a Ph.D. in geology from the University of Oxford in 1957, and has worked as a petroleum geologist in the field, as a manager, and as a consultant.

He has been employed by Oxford University, Texaco, British Petroleum, Amoco, Shenandoah Oil, Norsk Hydro, and Fina, and has worked with the Bulgarian and Swedish governments. His writing credits include two books and more than 150 papers.

Colin is now a Trustee of the Oil Depletion Analysis Centre (“ODAC”) in the United Kingdom, a charitable organisation in London that is dedicated to researching the date and impact of the peak and decline of world oil production due to resource constraints, and raising awareness of the serious consequences. He has published extensively, and his recent articles have stimulated lively debate. His views are provocative yet carry the weight of a wide international experience.

 

David Murphy is an adjunct professor and post-doctoral research associate within the Division of Environmental Science at the State University of New York – College of Environmental Science and Forestry (SUNY-ESF). David’s most recent research, accepted for publication in Ecological Economics Reviews, focused on the role of fossil fuel consumption in economic growth. In other research, published inEnvironment, Development, and Sustainability, he measured the energy return on investment of corn ethanol production in the United States, and the International Journal of Climatology published a paper that measured how regional temperatures were changing due to urbanization. David has lectured about energy and economic systems to local town committees, non-profit organizations, national conferences, and financial institutions. David received a B.A. in Biology from the College of the Holy Cross in Worcester, Massachusetts in 2003. He received an M.S. in Environmental Science in 2007 and a Ph.D. in the same discipline in 2010, both from SUNY-ESF.