Azara Blog: Are we running out of oil?

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Date published: 2006/11/30

There was a "debate" this evening at New Hall about "Are we running out of oil?" (part of the Environment on the Edge series). Well of course the supply of oil is not infinite and we are using a heck of a lot of it each day, so eventually it will run out. The real question, which is what the "debate" was about, is "When we will hit peak oil?" (i.e. the maximum of oil production).

The "debate" consisted of two speakers each giving a presentation, with some questions from the audience at the end.

The first speaker was Jeremy Leggett. He worked as an oil industry consultant, before becoming an environmental campaigner (working for Greenpeace), before becoming the CEO of a solar energy company. Given his credentials, it is not too surprising that he gave a slick performance.

He is in the camp that believes that the peak of oil production will happen within the next five or six (or so) years. He claimed that not many people belong to this camp, instead most people (e.g. most oil companies, most journalists, most financial analysts, most governments, the IEA) allegedly believe peak production will not happen until the 2030s. Well, you don't have to read much in the press to know that that black-and-white view is not quite right, lots of people worry about oil production tailing off in the near future.

Leggett claimed he hoped he was wrong, but given the environmental damage that oil causes you have to wonder if that was a genuine sentiment or not.

He went through a potted history of oil. The peak of oil discovery in the 48 continental US states was in 1930. By analysing discovery versus consumption, some chap by the name of Hubbert predicted that production would peak around 1971, and it did peak in 1970. World oil discovery peaked in 1965. So will the world follow the US pattern. (Of course looking at the 48 states conveniently ignores the huge oil fields discovered in Alaska. And presumably also ignores oil in the Gulf of Mexico.)

The main problem with analysing this question seems to be lack of data. OPEC has stated reserves, but Leggett showed a table that made it pretty clear these stated reserves are just made up. Apparently in 1985 Kuwait arbitrarily increased its stated reserves from 64 to 90 (billion barrels). (Presumably to get an increased quota.) Then Iraq increased its stated reserves from 47 to 100 in 1988 and the rest of OPEC joined the game. And it seems that from 1990 until today the stated reserves of the major OPEC oil producers have pretty much remained constant from year to year, which means that by some miracle the oil produced has magically somehow exactly matched the oil allegedly discovered.

Of course the demand for oil is increasing (circa 1.8% per year currently). So if the supply starts to fall, the world is going to be in for a nasty shock, and within ten years if you believe peak oil is upon us. Leggett called this shock an "economic dislocation", which is a nice way of saying it will be a massive depression probably with massive inflation (so stagflation).

The second speaker was Ian Vann, Group Vice President Exploration and Production for BP. In contrast to Leggett, Vann came across as a folksy engineer-type. And his talk was not nearly so slick. His main argument was that the limit to oil production were political more than geological, technical or economic. He did not particularly give a convincing argument that this was the case, but unless you're a day-in-and-day-out energy expert, you cannot really judge.

Apparently the cumulative amount of oil consumed to date is around 1 trillion barrels, and the world currently consumes around 30 billion barrels per year. Vann claimed that somehow there might be another 3 trillion barrels which might be able to be produced. Apparently, for example, there has been no real oil exploration in Iraq for forty years, so there might be huge reserves there still to be discovered. But this seems more like wishful thinking than anything else.

At the end there were some questions from the audience. Of course several people pointed out that even if there are 3 trillion barrels of oil waiting to be produced, climate change is so serious that we perhaps shouldn't even want to produce this oil.

One person asked whether oil companies should be sued like tobacco companies. Vann took this question in stride, and rather politely pointed out that we are all accountable for consuming oil. Of course smokers are also responsible for their own health, but that has not stopped them suing the tobacco companies, and no doubt people will similarly start suing the oil companies rather than accepting their own responsibility, that is the way of the world. (Indeed, the state of California has said it will sue car companies for foisting cars on the state. Which is a similar statement of denial.)

Leggett pointed out at this point that nobody blamed smokers, but of course that is the problem. Already in 1970 the Boston Science Museum had an exhibit of a normal lung and a smoker's lung, and even a ten-year old could understand that smoking was not good for your health. Unless someone held them down and shoved cigarettes in their mouth when they were kids, smokers have nobody but themselves to blame. And similarly for people and oil.

(Leggett actually then diverted off onto a completely unrelated point about suing oil companies because they are exaggerating their reserves. That is a completely fair point but irrelevant to the question at hand. Unfortunately this kind of diversion of a question is a bit too common for political types. Perhaps now that Leggett has a proper job he was just tired and his mind wandered.)

Now Leggett works for a solar energy company so was happy to plug that technology (no matter how unsuitable it currently is for Britain) when given the chance. But even he admitted that it is nowhere near likely to fill the gap left when, as he sees it, oil production drops in a few years.

Indeed the main problem for the world is how to adjust if the oil supply suddenly comes nowhere near meeting demand. Well, there will be an "economic dislocation". Eventually the world will adjust, but how will it adjust. As Leggett sees it, there could be two alternatives scenarios. Either the world becomes a low-carbon economy, or the world, in a panic, throws environmental considerations out the door and goes down the path of short-term fixes such as using even worse fuels than "conventional" oil, like "tar sands" oil and coal.

Well, it is pretty obvious that the low-carbon economy will not be here in ten years. So if you really believe that peak oil is coming in a few years, the only conclusion is that the second scenario is much more likely. Governments of the world would not be very popular if they did nothing to find energy sources and keep their economies going. It's a no-brainer. The academic middle class of Britain might tut-tut, but they will be ignored.

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