Peak oil is the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline. This concept is based on the observed production rates of individual oil wells, and the combined production rate of a field of related oil wells. The aggregate production rate from an oil field over time usually grows exponentially until the rate peaks and then declines—sometimes rapidly—until the field is depleted. This concept is derived from the Hubbert curve, and has been shown to be applicable to the sum of a nation’s domestic production rate, and is similarly applied to the global rate of petroleum production. Peak oil is often confused with oil depletion; peak oil is the point of maximum production while depletion refers to a period of falling reserves and supply.
Some observers, such as petroleum industry experts Kenneth S. Deffeyes and Matthew Simmons, believe the high dependence of most modern industrial transport, agricultural, and industrial systems on the relative low cost and high availability of oil will cause the post-peak production decline and possible severe increases in the price of oil to have negative implications for the global economy. Predictions vary greatly as to what exactly these negative effects would be. If political and economic changes only occur in reaction to high prices and shortages rather than in reaction to the threat of a peak, then the degree of economic damage to importing countries will largely depend on how rapidly oil imports decline post-peak.
Optimistic estimations of peak production forecast the global decline will begin by 2020 or later, and assume major investments in alternatives will occur before a crisis, without requiring major changes in the lifestyle of heavily oil-consuming nations. These models show the price of oil at first escalating and then retreating as other types of fuel and energy sources are used. Pessimistic predictions of future oil production operate on the thesis that either the peak has already occurred, that oil production is on the cusp of the peak, or that it will occur shortly. The International Energy Agency (IEA) says production of conventional crude oil peaked in 2006. Throughout the first two quarters of 2008, there were signs that a global recession was being made worse by a series of record oil prices. [...]
A Dark Warning on Global Oil Demand
Many top corporate and political figures gathered in Houston on Tuesday for the annual CeraWeek conference on the outlook for energy, and they got an earful from John B. Hess, chairman and chief executive of the Hess Corporation.
“An energy crisis is coming, likely to be triggered by oil,” he predicted. “Demand is expected to grow on an annual basis by at least one million barrels per day, driven by the developing economies of the world and by a growth in transportation as we go from one billion cars today to two billion cars in 2050.”
The problem, he said, is not that the world is running out of oil. He estimated that while the world has produced one trillion barrels of oil, two trillion more remain in the ground. Meanwhile surplus oil production capacity is three billion to four million barrels a day.
But watch out for the future. “As demand grows in the next decade, we will not have the oil production capacity we will need to meet demand,” Mr. Hess said. “Supply will then have to ration demand, and prices will skyrocket – with the likely outcome of bringing the world’s economy to its knees.”
So where are oil prices going? “The $140-per-barrel oil price of three years ago was not an aberration,” he said. “It was a warning.”
Mr. Hess’s policy prescription was not surprising: he wants more drilling, including in the Gulf of Mexico, and more natural gas used in the generation of electricity, among other proposals. His stark vision of the global energy future stood out nonetheless.
Either way, Peak Oil or Increased Demand, the same end result: rationing? Are the days of abundant cheap energy about to become a thing of the past? At least in the way that we knew it be. As more energy producing sources are developed, and more efficient ways of using energy are implemented... well. I can't say exactly how it's going to turn out. But it's likely going to be different from what we have known. Another unfolding aspect of Our Brave New World.