Peak Oil is You

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The implications of peak energy

The implications of peak energy thumbnail

Our current society is one based on whim. Whatever we want can be had if we have the money. Not only can we have what we want any time we want it, it’s the done thing to throw it away and buy something else when it breaks or the latest upgrade comes out. We are conditioned to believe there are no limits within the current framework, and growth is our reason to be. The ‘how’ we can have all this fantastic stuff is considered someone else’s problem. But with a growing middle class population, for how long will it be possible to utilise finite, non-renewable resources in this linear fashion?

To date, our civilisation has been built on non-renewable natural resources.  What has facilitated all this is our sources of energy – the master resource.  Oil, coal and gas has accounted for the vast amount of industrial development over the last 160 years.

World population, per capita-, and total energy consumption by fuel as a percentage of 2011 consumption, 1850-2011

Currently, we are a petroleum based society, where petroleum products and petrochemicals derived from oil provide goods and services for most of the vital requirements of our industrial civilisation. Everything from food production to plastics manufacture is dependent on oil in some form (there are some synthetic alternatives but they are costly and not as effective as natural crude oil as a raw feed product). World growth in GDP, energy consumption and oil consumption all correlate to demonstrate this basic concept.  The world economy is dependant not just on oil but high quality and high net energy oil.


But all is not well with the oil sector.  Between 2000 and 2012, $2.6 Trillion USD was invested in oil infrastructure CAPEX, with no gain in oil production (this data includes shale oil production in USA).¹  Global crude and condensate production has plateaued since approximately 2005. The problem with this is world population is 13.8% larger now than in 2005 (7.4 billion people 5/2/2016 vs 6.5 billion in 2005). Increasingly unconventional sources of oil are being used to meet demand, where these sources are expensive to extract and struggle to meet the desired quantities.

Increasingly, conventional sources of crude oil have been difficult to discover and exploit. The picture below shows the pattern of oil discovery, listing all of the major plays that have dominated oil production.


There will come a point where total oil production will peak and decline, the question is just when this will happen. Conventional crude oil production peaked in 2006, something now recognised by the International Energy Agency (Source: IEA World Energy Outlook 2010). Unconventional sources like tight oil (also known as shale oil) in the US have come on line to meet demand requirements, which have for some discredited previous predictions around peak oil.

However, The global combination of conventional crude oil production and unconventional oil production is predicted to peak and decline very soon, according to various studies. A sophisticated analysis on oil production has been conducted by retired actuary Gail Tverberg, where total oil production is predicted to have peaked in the year 2015. Others have suggested that we are in fact past peak, such as the report released by the Energy Watch Group (EWG), which claims that peak oil production (conventional and unconventional) happened around the year 2012.

conventional and unconv
Source: Zittel, W. et al, Fossil and Nuclear Fuels – the supply outlook Energy Watch Group March 2013

Gas as a commodity is important to our industrialisation. As industrial sites require large quantities of power, a gas fired power station is often installed. Acquiring data for gas production has been difficult but it is believed that conventional production of natural gas peaked in the year 2011 (data is spotty). To meet industrial demand, unconventional sources of gas like fracking and Coal Seam Gas (CSG) have been developed. Unconventional gas supply was believed to replace conventional sources of gas, and is in the process of doing so.

gas production
Gas supply scenario projections until 2030. Source: Zittel, W. et al, Fossil and Nuclear Fuels – the supply outlook Energy Watch Group March 2013

Coal is another energy resource that our industrial grid depends on to generate its electricity requirements. It is also often the case that the domestic power grid that supplies electricity is dependent on coal. The EWG report has a peak in coal production at approximately the year 2020. Four years away. Even if this estimate is imprecise, as it now takes about five years to build an industrial power station, it would behove us all to consider a replacement energy source.

Global coal production. Source: Zittel, W. et al, Fossil and Nuclear Fuels – the supply outlook Energy Watch Group March 2013

Each energy source often serves different purposes, so one resource cannot necessarily directly replace another.  For the purposes of comparison though, all energy sources discussed have been put onto one graph:


energy sourcespeak energy reference

(Another good estimate has been provided by G. Tverberg  in “A Forecast of Our Energy Future; Why Common Solutions Don’t Work”)

Peak total energy is projected to be approximately in the year 2017. This means that industrialisation in a global context, based on the current rules of the game, will soon tip into contracting economies – the end of growth based economics. As this challenges would have taken 20 years to meet with an engineered alternative (once a viable one has been presented) (Hirsch 2005), the implications of the above charts are quite serious. Even if the projection was incorrect by 10 years, our industrial society would still be faced with an unprecedented challenge.

To examine the usefulness of a replacement energy source, the Energy Return On Energy Invested ratio (EROEI) is used, which is the ratio of the amount of usable energy acquired from a particular energy resource to the amount of energy expended to obtain that energy resource.

Oil when it was originally discovered was very good and returned about 100 units of energy for every one invested.  Now it’s around 12-18:1.  Most alternative energy sources are much lower than what oil currently delivers.  To put this in perspective, the European medieval society EROEI was Approximately 1.5:1.  For our industrial society to function, an EROEI ratio of 10:1 is required.

Energy Return On Energy Invested (EROEI ratio)

What this means is we have no replacement energy source that is as calorically dense as oil. It is simply not practical to replace oil as an energy source and maintain current energy demands. Colloquially, oil is butter-fried-steak wrapped in bacon and alternative energy is lettuce. This is why peak oil is so relevant and is the rate determining issue amongst the network of problems facing society at this time. With the possibility of peak energy on the horizon, the solution may lie in a fundamental upgrade to the operating system for our economy.

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15 Comments on "The implications of peak energy"

  1. Pennsyguy on Wed, 2nd Mar 2016 3:05 pm 

    “What this means is we have no replacement energy source—–” That says it all. ‘Too bad human population is still growing.

  2. penury on Wed, 2nd Mar 2016 3:09 pm 

    Good summation of the predicament that the world faces. I am afraid that the stated conclusion is another Unicorn fantasy.

  3. dave thompson on Wed, 2nd Mar 2016 8:27 pm 

    The last line, “the solution may lie in a fundamental upgrade to the operating system for our economy.” Should read;”the solution WILL lie in a fundamental downgrade with a shut down to the operating systems for our economy.”

  4. HARM on Wed, 2nd Mar 2016 9:14 pm 

    I used to visit the Oil Drum regularly and recall similar graphs projecting a peak circa 2006, followed by steep declines. And yet here we are in 2016 with $30/BBL oil and U.S. frack-driven production near the previous 1971 peak.

    Yes, peak oil (and gas & coal) will come *someday*, but let’s not kid ourselves into thinking that new (or old) technology cannot push out that curve further than any of us would have guessed 10 years ago, or that we can accurately predict when it will happen.

    Depletion is a game humanity cannot win in the end, but as Keynes famously said, “In the long run we’re all dead”. TPTB will marshal every resource they can to prop us the status quo and kick that can as far out as possible for as long as possible. It’s very hard to predict exactly what they’ll cook up next.

    Case in point: housing prices are now at or above their previous 2007 bubble peaks and showing no signs of slowing down. Now that ZIRP and QE seems to be losing its mojo, the banks are trying NIRP. Apparently, Dick Cheney was right after all. The oligarchs really *do* create their own reality. Perhaps they’ll repeal the Laws of Gravity and Thermodynamics next.

  5. Northwest Resident on Wed, 2nd Mar 2016 9:42 pm 

    “TPTB will marshal every resource they can to prop us the status quo and kick that can as far out as possible for as long as possible.”

    They’ve been doing that for a long time.

    “It’s very hard to predict exactly what they’ll cook up next.”

    Who could have predicted the excessive debt, the fraud and financial manipulation, the total gutting of the American middle class, and so much more that we have been witness to since 2008, and even before. So yeah, what will they cook up next, since everything they’ve done so far has only served to buy a little more time and now they are reaching rapidly diminishing returns. More “fun and games”, to be sure.

  6. twocats on Wed, 2nd Mar 2016 10:58 pm 

    All this conventional oil has to be good for something. From what I can tell Conventional Oil Production is around 83 mbpd, but Demand is around 94 mbpd. So someone somewhere is using that unconventional and making it all work.

    Some might claim that the energy industry itself is using that oil to pump more oil in a Red Queen Doomstravaganza. I’m not buying that.

    2012 to now has been an epic Hockey Stick Save by civilization. And that’s the end of the story. Whew! now time to fire up my EV and drive into the sunset!

  7. Apneaman on Wed, 2nd Mar 2016 11:06 pm 

    HARM, yeah I think The Red Queen might be on steroids given her mind boggling stamina. Anybody know if she is originally from the old DDR?

  8. makati1 on Thu, 3rd Mar 2016 12:30 am 

    EV? Lawnmower? Golf cart? Techie pretender? Like a Cadillac parked in front of a rundown house? Yep!

  9. GregT on Thu, 3rd Mar 2016 1:31 am 

    “It’s very hard to predict exactly what they’ll cook up next.”

    War. It’s pretty much the only option left.

  10. charmcitysking on Thu, 3rd Mar 2016 4:58 am 

    “There will come a point where total oil production will peak and decline, the question is just when this will happen”

    …Take it away, Rockman….

  11. shortonoil on Thu, 3rd Mar 2016 7:08 am 

    It is important that authors like Dr Michaux are bringing public attention to the very critical energy situation that is evolving. It is unfortunate, in another respect, that they portrait it as a Gross energy problem. Viewing it from that perspective is likely to make it appear that the day of reckoning is several more decades into the future than it actually will be.

    Gross energy is the amount of energy released when a fuel source undergoes a combustion process. For the average barrel of oil that is 5.88 million BTU. Not all of that energy is however available for use by the end user. Some of it is needed to extract, process, and distribute the fuel, and about a third is lost as waste heat. What remains can be used by the economy to do work; it is called Deliverable, or Net energy.

    The critical value is the Deliverable energy, and it requires a specific quantity of it to operate, and maintain the modern world economy. That quantity is probably about 150 quad BTU (10^15) per year. Because depletion mandates that the energy to produce energy must increase as the resource is extracted the Deliverable energy falls faster than the Gross energy. It therefore becomes necessary to increase production, Gross energy, at an every increasing rate to maintain the needed amount of Deliverable energy. The critical point when the Gross energy production rate can no longer be increased fast enough is when the economy starts to become anemic for lack of adequate energy supply. That point has already been reached for petroleum.

    An inadequate Deliverable energy supply results in a weaker economy, which results in lower demand, which results in a lower price for the energy source. Petroleum’s recent 70% plunge in price was undoubtedly triggered by just such a shortage. The Red Queen is running her last lap!

  12. penury on Thu, 3rd Mar 2016 9:22 am 

    short Your information is exactly what people need to understand, Running out of oil does not necessarily mean quantity, but quality is a nebulous meaning to most. Keep printing, slowly people might come to understand why this is the utmost importance.

  13. Robert Spoley on Thu, 3rd Mar 2016 10:54 am 

    Been in this business for 50 years. Predictions arte a dime a dozen. Alternate energy sources that can maintain exponential human growth and energy usage are not on the immediate horizon. That doesn’t mean one won’t show up. In that vein it should be noted that human expansion is not everywhere. Most is in undeveloped “third world places”. This includes inner cities in the western world. Solving that part of the problem will postpone the other part which is shrinking viable energy sources. We need to do what we can. Nice guys don’t finish last, they don’t finish.

  14. Kenz300 on Fri, 4th Mar 2016 9:30 am 

    Climate Change is real…. it will impact all of us……we need to move to clean energy production with wind and solar power and clean energy consumption with electric vehicles………

    Fossil fuels are the cause of Climate Change….. we need to deal with the cause….

    VW should have focused on electric vehicles instead of TDI diesels…….. NO EMISSIONS………..

  15. Jerry McManus on Fri, 4th Mar 2016 12:16 pm 

    I’m with HARM, every peak oil graph I’ve seen for the last ten years has shown a sharp near term peak and steep down slope.

    Yet the bean counters are still at it, jealously counting every barrel as if it were the last.

    A far more robust analysis, solidly based on thermodynamics and the dynamics of complex systems and not just our nominal energy supply, can be found in the book Limits to Growth.

    In that study they take great pains to avoid making “predictions”, as has already been pointed out no one can predict the future, however the dozen or so simulations that they ran do paint a pretty dismal picture of ecological overshoot and collapse occurring throughout the decades of the 21st century.

    Starting right about now, give or take a decade or two.

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