Peak Oil Is Back With A Vengeance

M. King Hubert and his famous curve, which he has calculated for US oil production. Image source

The great misunderstanding

Oil, however, is not a ‘product’ rolling off from a manufacturing line, but a finite natural resource with its own set of limitations. In reality, when you drill a well oil starts to flow at a relatively moderate, but ever increasing rate — up until the point (when roughly half of the oil in that given well is still underground), the flow starts to slow at a gradual, but similarly ever increasing rate (take a look at the chart again). Oil companies then push more and more water or CO2 underground to keep the juices flowing, until it no longer worth to keep the equipment pumping (churning energy and machine time while returning ever dwindling returns) and finally plug the well. In many cases with some oil still left in it.

Put many wells together — all producing according to their own Hubbert curves — and you get one big Hubbert curve for a given field, country or even the world. Yes, before you ask, the laws of physics and geology are the same everywhere on Earth.

What about the shale revolution?

Hubbert’s peak as observed in the US. Image source: Researchgate

Is it really worth it?

“The total energy needed for the oil liquids production thus continually increase from a proportion equivalent today to 15.5% of the gross energy produced from oil liquids, to the half in 2050. We thus foresee an important consumption of energy to produce future oil liquids.”

As a result, no matter how many different unconventional resources we tap, we will eventually reach peak net energy from oil by 2023. That is: next year.

Firstly, our findings suggest that unless the world rapidly weans itself off oil for reasons of climate change, there are likely to be significant economic and political consequences due to oil resource limits, as first conventional oil, and then all-oil, become supply-constrained. Particularly hard hit are likely to be developing countries, as without significant financial reserves accessing oil will be difficult, as is currently the case for Sri Lanka. Large oil importing economies, such as India and China, also may well see their economies contract; while large oil exporters will face very changed market conditions. The latter is because oil prices cannot go much higher for long, as this destroys demand as was clear in the early 1980s. Finally, the near-term aim of a number of countries to reduce their imports of Russian oil (and gas) due to the recent war in Ukraine is likely to further exacerbate petroleum supply/demand balances. Such findings suggest difficult times ahead.

But there is a range of other constraints that seem likely to impede the global energy transition, and which in our view are also seeing insufficient consideration in most current energy modelling. These constraints are set out in The Energy Pivot report (Ratcliffe et al., 2021), and include the following:

- The near-term resource-limited maximum in the global production of conventional gas.

- Declining ore concentrations of many minerals, with impacts on mineral availability and on the energy used for their mining and benefaction, and hence on mineral price.

- The fact that the energy transition still has a long way to go, with currently the ‘new’ renewables of wind, solar, biomass and geothermal energy combined contributing only some 5% to global primary energy (BP, 2021).

The interlinkage between the various factors involved above are complex, and include population growth, rising economic expectations across many populations, the issues of hydrocarbon and minerals availability mentioned above, declining EROIs, the impact of ‘dynamic’ EROIs, and the need for a diversion of considerable financing to the energy sector (Hall et al., 2014; Perèz et al., 2020). Also important is the combined effect of these factors on GDP per capita, which some studies expect to see fall because of the energy transition. Perhaps only ‘systems dynamics’ modelling can handle the required degree of linkage, and here the results from the still relatively few systems dynamics models that look at these issues are unfortunately not encouraging; see for example (Perèz et al., 2020; King and van den Bergh, 2018; Solé et al., 2018). Perhaps of greatest concern is that if many people see a decline in their financial well-being, which they will perceive mostly as inflation, they will blame politicians or other groups, thus making governance more difficult, and the tackling of problems related to declining net energy delivered to society harder to achieve, as discussed by Ahmed (Ahmed, 2017).

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