Maximum Global Oil Production - Case Study Example

Peak oil describes the time/ era in which the maximum rate of global petroleum mining is attained, as based on King Hubbert’s theory. Essentially, it is after such a point in time that a terminal decline is expected with regard to fossil fuel extraction. The peak oil theory has a basis on the observable rise in oil production, followed by a peak when global oil extraction is at its highest levels. This is usually followed, at times, by a rapid decline of aggregate oil production rates, and ultimately a depletion of the same over time. To be noted is that peak oil pertains to the point of maximum global oil production. The depletion aspect pertaining to the eventual period in which there will be a significant fall in both oil/fossil fuel supplies, because of dwindling reserves. From the aforementioned case scenario, various observers are of the ideal that what will follow such a period, will be of great negative global implications. This is predicted to be during and especially after the expected post-peak production period, as oil prices will ultimately increase significantly. This is informed by the fact that there is a high global dependence on fossil fuels, as a means of energy production vital in many core sectors of the global industry (Deffeyes, 2002:14, 17). From the agricultural sector, to others such as industrial and transportation systems, oil dependency has been fundamentally influenced by the cheap cost, as well as high availability of this fossil fuel. Estimations, on an optimistic note, forecast that the global society is already at the peak production period, after which a global decline is expected. This is projected to commence after the year 2020. Assumptions are also made that such a decline is expected to be offset by the rapid and heavy investment in alternative forms of energy production i.e. wind, solar, geo-thermal and even nuclear. Pundits are of the opinion that in order to avoid a future catastrophic crisis, there is need for major public-private initiatives in such alternative forms of energy production. This is to be matched equally with enhanced invention and production of machinery and equipment, which will utilize such forms of energy, as opposed to exhaustible fossil fuels. Such inventions, augmented by the enhanced production of alternative energy, need to be significant enough so as not to require major changes globally (Greer, 2013:24). This is with respect to the prevailing lifestyle of nations, which are heavily depended on oil consumption. In such a case scenario, the existing models of such assumptions display the gradual escalation of oil prices. This is to be followed by a gradual retreat of the same, as other forms of energy and fuel sources become easily accessible for global consumption. Hubbert’s Peak Theory: Global Implications Through observation of past discoveries, associated production levels, as well as future oil discovery trends, Hubbert utilized statistical modeling (1965) in his quest to accurately depict America’s peak period. From his analysis, he alluded to the nation’s peak, occurring between the years 1965 and 1971. It is this model, in addition to other existing variants, which now compose the Hubbert Peak Theory. Of core importance in using the US in his analysis, is the fact that the nation is as leading industrial state, also leads in the consumption of oil, therefore providing a perfect case scenario. The above model(s) have been utilized in both the description and prediction of the expected/ or already existing peak oil period, in addition to the eventual decline (Deffeyes, 2005:32). This is about the overall production of oil from multinational areas, countries and regions globally. The same is also applied to other existing production-domains of limited resource i.e. minerals, fresh water and lumber/timber. Through utility of a semi-logistical curve model, Hubbert assumed that prevailing production rates of limited resources would naturally follow a generally symmetrical distribution course over time. This depends on the exploitation limitations, as well as prevailing market pressures. Although not very accurate, his models yielded the closest match in terms of prediction and assumptions. Thus, depending on the above, the decline or rise of resource production, over a given period may appear as more stable/linear or sharper/ curved. In terms of implications, energy demand distribution is majorly amongst four broad sectors of the global economy i.e. industrial, transportation, commercial and residential sectors. In terms of utility and consumption, it is the transportation sector, which leads, in addition to having the highest growth demand over the years (Leggett, 2005:47). According the Hirsch Report, transport utilizes an estimated 55% of global consumption, with the USA displaying the highest utility rates. This is at 68.9% of total oil consumption going to transportation, by means of private personal-use vehicles. The development of the internal combustion engine was a core factor in influencing the growth of this sector. Thus, implications especially for main transportation modes and logistics portend to future risks and complications. The USA is the largest single consumer of petroleum products, with respect to the transport sector. Although the developing world has the highest demand growth, this has not surpassed America’s overall consumption rates. According to the EIA (Energy Information Administration), gasoline utility in the USA may have already peaked, as of the year 2007 (Stansberry & Reimbold, 2008, p 67). This is partly because of the increasing nature of mandates for, and interests in the nation’s utility of bio-fuels, as well as enhanced energy efficiency. Through development and industrialization, higher living standards often necessitate the upward drive for energy consumption, majorly so, oil. The PRC (China) and India, as thriving economies, have also quickly become major oil consumers in their own right. The Likely Timeline for Future Supply Depending on the models used, the likely timeline, with regard to future supply is different. The EIA, aforementioned, stated that in the US, petroleum usage may have already picked, by the year 2007. Hubbert’s theory however, portrays the peak period having occurred between the years 1965 and 1971. According to these two statistics, the future supply is at stake, due to the gradual nature of a general decline after the peak. Accordingly, oil production in 33 of the 48 major oil producers has now peaked. To be noted is that, as experts, analysts and energy organizations agree oil depletion is not the issue here. Rather, it is the sustainable ability to continue producing cheap oil of high quality, which is economically extractable (Leggett, 2001:54). The notion of Peak Oil is brought about by the fact that global oil producers have reached the maximum level possible, with regard to the rate at which they can extract oil. Current circumstances portend to the present day consumption and demand for oil to be sustainable for a few more years, decades perhaps. This will be through great expenditure, as well as effort, with the period beyond that being witness to a permanent and irreversible decline. This is in terms of sustainable extraction and mining, as a majority of oil prospects is not concentrated on new discoveries, but rather on existing regions of production. Thus, the core issue is not about the extinction of oil reserves, but rather about the lack of further future growth. Ultimately, this will be followed by a gradual and then a steep decline in production rates. Because of current consumption rates of 4 times faster than the major discovery of oil, since the 1980s, the existing gap continues to further widen, portending to a dire situation in the future. Through a study conducted by the Kuwait Oil Company and Kuwait University by way of multi-cyclic models, which are depended on the known oil reserves and the 2 historical oil production trend, the peak period is estimated to occur in 2014 (Aleklett, 2012, p 78). Therefore, conservatively, the peak period is between 2014 and 2020, after which a decline is inevitable. This holds true, despite the exponential growth witnessed in recent decades globally. Currently, the average global rate of oil consumption growth is 2% per annum (1995-2008). By the year 2025, global demand will have increased by 50% (120mbd). Saudi Arabia, as the major world oil producer, provides 73% of all incremental global demand. It thereby proves influential to current and future supply, demand and pricing of the commodity. As the nation, and the wider Middle East region nears its own oil peak, any existing relied to be gained is but only temporary and limited in nature. A worrying statistic is that 90% of the Kingdom’s production is derived from only 5 mega fields i.e. the Ghewar field (the largest ever discovered). This is further worsened by the fact that all of them are at the risk of unplanned production collapse. This is influenced by the fact that the technique used is unsustainable in the end, as secondary recovery methods only have temporary effects (Simmons, 2005:43). As the IEA (International Energy Agency) estimates, around 93% of all incremental oil demands emanate from non-OECD nations. This thus compares unfavorably with future demand, since there is an exponential increment in demand, which is unsustainable by existing extraction methods as aforementioned. Accordingly, sudden and sharp declines in oil production could occur in the very near future, even with Saudi Arabia’s sustained current rates of production. However, this will not be effective in catering for the rapid rise in global demand, further worsened by the lack of major oil discoveries. Effects and Vulnerability of Different Transportation modes From the above data, it is quite clear that there is need of drastic change in the manner and production of oil. Critically so, is the need for alternative sources of energy, which are unfortunately pretty marginal. This does however require a radical change, not only in terms of energy exploration and mining, but also in how humanity utilizes existing technology (Pfeiffer, 2004:33). The automobile/ vehicle sector of transport is the most energy demanding, followed by trucks and trains. This is informed by the presence of these modes of transport in almost all sectors of global society. The three therefore take the lion’s share in terms of demand and consumption. Ships and aircrafts come after, as their share is less in terms of volume consumption per-day rates. Wind and waves, as well as thermo-generation of energy are all alternatives, though with limited input. This is in terms of completely covering the demand sustained by oil. Coal, nuclear power and solar energy are according to my analysis, among viable options to concentrate on. Hydrogen fuel cells are also viable, as showcased by increased interest, especially within the automobile sector. However, their net effect is disastrous to not only the environment, but also human populations themselves (Heinberg & Leich, 2010:67). Adding to this is the fact that their production of net energy is insufficient to cater for existing demand, especially as influenced by the cost implications present. Thus, the best option is nuclear fusion, which unfortunately is still quite a long way off, in terms of mastering and subsequent energy production. Substitution of oil, in terms of advantages such as richness in energy, ease of use, storage and transportation is unlikely to be matched in the near future. This is however possible after some decades, as development focuses on alternative means of energy production. Thus, the entire model cannot be substituted, not now or in the near future. This is informed by the fact that humanity’s industrialization has and continues being powered and therefore developed around oil as an energy source. Policy measures can engage in useful categorization of demands, as per national and global importance. These include fuel substitution initiatives, energy conservation measures and the utility of unconventional oil (Pfeiffer, 2004:49). In conclusion, through mitigation, a reduction in the overall utility rates of traditional petroleum resources has the effect of postponing the oil peak. Through a substitution effect, there will be a spur in demand for alternative energy sources. Reference List Aleklett, K 2012, Peeking at Peak Oil. Springer Science. Deffeyes, KS 2005, Beyond Oil: The View from Hubbert's Peak. Hill and Wang. Deffeyes, KS 2002, Hubbert's Peak: The Impending World Oil Shortage. Princeton University Press. Greer, JM 2013, Not the Future We Ordered: The Psychology of Peak Oil and the Myth of Eternal Progress. Karnac Books. Heinberg, R & Leich, D 2010, The Post Carbon Reader: Managing the 21st Century Sustainability Crisis. Watershed Media. Leggett, JK 2005, Half Gone: Oil, Gas, Hot Air and the Global Energy Crisis. Portobello Books. Leggett, JK 2001, The Carbon War: Global Warming and the End of the Oil Era. Routledge. Pfeiffer, DA 2004, The End of the Oil Age. Lulu Press. Simmons, MR 2005, Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy. Hoboken, N.J.: Wiley & Sons. Stansberry M. A. & Reimbold J 2008, The Breaking Point. Hawk Publishing. Appendixes Figure 1 Figure 2 Read More