The theory that oil production will soon peak and then go in to decline at a time of ever rising demand was not taken seriously by many people until recently, even though it should be obvious that a finite resource cannot be extracted in ever larger amounts for ever. For us, who worry about the challenge of feeding a growing and more demanding world population, it is very important as our farming system cannot now function without adequate and reliable supplies of oil and gas.
The following is part of an article from The Buffalo News:
” It seems longer ago than it really was: gasoline prices at the pumps were half what they are now, and oil prices by the barrel were a quarter of the current price. In recent years, politicians and news media have discussed these issues — and yet the prices keep rising. Each time there’s a significant jump, oil company executives give simplistic excuses for the reasons they make $20 billion to $40 billion in profits per year.
“It’s a bad enough situation. But what is rarely discussed is that in less than a decade, the issue will not be the price of gasoline — it will be whether gasoline is available at the pump at all.
“The world is heading toward a ‘peak oil’ situation. What this means is that in 2012, world consumption of oil will reach the peak capacity of existing oil resources. Available resources in the Gulf of Mexico already reached that peak in 2005.
“When the peak-oil theory was publicized in Kenneth Deffeyes’ ‘Hubbert’s Peak,’ Richard Heinberg’s ‘The Party’s Over,’ David Goodstein’s ‘Out of Gas’ and Paul Roberts’ ‘The End of Oil’ earlier this decade, energy industry officials and their government friends quickly ridiculed the notion. The idea of an imminent peak — and subsequent decline — in global petroleum output was derided as crackpot science with little geological foundation.
“’Based on [our] analysis,’ the U.S. Department of Energy confidently asserted in 2004, ‘[we] would expect conventional oil to peak closer to the middle than to the beginning of the 21st century.’
“Recently, however, high-level government and industry reports have begun to suggest that the peak-oil theorists were far closer to the grim reality of global oil availability than industry analysts were willing to admit. Industry optimism regarding long-term energy supply prospects, these official reports indicate, has now given way to a deep-seated pessimism, even in the biggest of Big Oil corporate headquarters.
“The peak-oil theory originally was formulated by petroleum geologist M. King Hubbert in the 1950s. The concept is that worldwide oil production will rise until approximately half of the world’s original petroleum inheritance has been exhausted; once this point is reached, daily output will hit a peak and begin an irreversible decline. Independent analysts are convinced that we have now consumed just about half of the original supply and therefore are at, or very near, the peak-production moment predicted by Hubbert.
“The numbers involved in conventional oil output have increasingly been obscured by oil derived from “unconventional” sources — deep offshore fields, tar sands and natural-gas liquids, for example — that is being blended into petroleum feedstocks used to make gasoline and other fuels. There is, however, a second aspect to peak-oil theory that is no less relevant when it comes to the global supply picture — one that is far easier to detect and assess today. One doesn’t need to be a rocket scientist to understand that the first half of the world’s oil was easy to extract: we are consuming oil close to the surface and concentrated in large reservoirs, oil produced in friendly, safe and welcoming places.
“The other half of the world’s petroleum supply is the tough oil — oil buried far offshore or deep underground; oil scattered in small, hard-to-find reservoirs; oil that must be obtained from unfriendly, politically dangerous or hazardous places. A July 27 article in the Wall Street Journal headlined, “Oil Profits Show Signs of Aging,” noted that investors are bracing for disappointing results in future quarters as the cost of new production rises and output at older fields declines.
“’All the oil companies are struggling to grow production,’ said Peter Hitchens, an analyst at the Teather and Greenwood brokerage house.
“It was not surprising that the price of benchmark U.S. light sweet crude oil for next-month delivery soared to new highs three days later, topping the previous record for intra-day trading of $77.03 per barrel set in July 2006. Prices above $80 per barrel followed, and some think we are only a headline of significance away from $100 per barrel oil.”