Implications of Peak Oil - Timing of Peak Oil

Timing of Peak Oil

In Feb 2010 the US Joint Forces Command issued the Joint Operating Environment 2010 warning US military commands "By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day.

"A severe energy crunch is inevitable without a massive expansion of production and refining capacity. While it is difficult to predict precisely what economic, political, and strategic effects such a shortfall might produce, it surely would reduce the prospects for growth in both the developing and developed worlds. Such an economic slowdown would exacerbate other unresolved tensions, push fragile and failing states further down the path toward collapse, and perhaps have serious economic impact on both China and India. At best, it would lead to periods of harsh economic adjustment. To what extent conservation measures, investments in alternative energy production, and efforts to expand petroleum production from tar sands and shale would mitigate such a period of adjustment is difficult to predict. One should not forget that the Great Depression spawned a number of totalitarian regimes that sought economic prosperity for their nations by ruthless conquest.

"Energy production and distribution infrastructure must see significant new investment if energy demand is to be satisfied at a cost compatible with economic growth and prosperity.

"The discovery rate for new petroleum and gas fields over the past two decades (with the possible exception of Brazil) provides little reason for optimism that future efforts will find major new fields."

The military warning of timing issue is graphically noted in the International Energy Agency's (IEA) World Energy Outlook 2010. The IEA graph notes that depleting conventional oil will be replaced by "fields yet to be found" and "fields yet to be developed."

M. King Hubbert initially predicted in 1974 that peak oil would occur in 1995 "if current trends continue." However, in the late 1970s and early 1980s, global oil consumption actually dropped (due to the shift to energy-efficient cars, the shift to electricity and natural gas for heating, and other factors), then rebounded to a lower level of growth in the mid 1980s. Thus oil production did not peak in 1995, and has climbed to more than double the rate initially projected. This underscores the fact that the only reliable way to identify the timing of peak oil will be in retrospect. However, predictions have been refined through the years as up-to-date information becomes more readily available, such as new reserve growth data. Predictions of the timing of peak oil include the possibilities that it has recently occurred, that it will occur shortly, or that a plateau of oil production will sustain supply for up to 100 years. None of these predictions dispute the peaking of oil production, but disagree only on when it will occur.

According to Matthew Simmons, former Chairman of Simmons & Company International and author of Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, "...peaking is one of these fuzzy events that you only know clearly when you see it through a rear view mirror, and by then an alternate resolution is generally too late."