Arguments hover around the reality of Peak Oil, but the notion has garnered sufficient weight that the financial sector is now taking it seriously. Willem Kadijk, a senior equity broker at the Amsterdam based Kepler equities, plans to start an investment fund to capitalise on the looming crisis for world economies as cheap oil begins to run out. It must be stressed that Peak Oil means the end of cheap oil, not the end of oil itself. There is plenty left, but it will become increasingly difficult and expensive to extract, and that will impact greatly on the existing industrialised nations in the west, predominantly, and the developing economies in the east such as China and India. According to the latest financial predictions, the price of crude oil will rise to $200 a barrel, around three times the present cost. There remains debate as to when exactly the "peak" will hit, as I have noted in previous postings, but many geologists think that it will happen by 2010, or even that it is already with us. The U.S. had its own peak in the early 1970 's in almost exact accord with the prediction of "King Hubbert", the originator of the hence named "Hubbert Peak" model. At the peak, half the world's oil will have been used - a resource that cannot be replaced (or not from that same source). As the economic demands of the world escalate, more oil will be needed to fuel them, and so the remaining resource will be depleted ever more avidly.
The oil industry is more sanguine in its estimates of exactly how much oil there is left on earth in total, and thinks that the peak-oil protagonists are being unnecessarily pessimistic. Russ Roberts of Exxon Mobil Corp. believes that production will continue to rise until 2030, which leaves us sufficient time to develop "alternatives". Daniel Yergin, Chairman of Cambridge Energy Research Associates, is a leading peak-oil critic and in his opinion, production will reach an "undulating plateau" sometime in the future.
Colin Campbell is a major figure in the 'peak-oil is "here" and what are we going to do about it?' school. He says that it is too late to develop alternative sources of power such as solar cells, nuclear reactors and windmills, to fill the gap before energy prices soar. "We have come to the first half of the oil age", he says. Arguably, predictions of oil "running out" are as old as the industry itself, but always new and bigger fields were then discovered "in the nick of time"; however, there have been no such major new discoveries for some decades now, and it may be there are no more to be made. Speculation reigns as to exactly how much oil is contained in particular fields. Shell got itself into some hot-water a couple of years back, over claims that it had deliberately hiked up the estimates of those reserves under its jurisdiction. Given their principal station as the world's main oil-supplier, it is the fields in Saudi that are the focus of particular concern over what resource they do in fact hold. That particular conundrum is compounded by the forced-production methods introduced there, to maintain pace with world demand, which it is thought may have damaged the geology of the region, and even the oil reservoirs themselves.
The ability to extract oil does not depend only on how much oil is contained in a particular reservoir, but on the surrounding geology that permits the oil to flow out from it. Predicting this is rather complicated but in essence, the best flow would be through unobstructed channels in layers of undamaged rock. If the rock becomes "crushed" for whatever reason, the detritus from that will act to impede the flow, and a good "sweet" well may be very hard to get the goods from. Only one well out of every ten "dug" will provide a facile source of oil, and only one in a hundred prove to be a "major field". Hence why exploration for oil is an expensive and demanding enterprise.
It all adds up to the same thing, and matters of exact dates, and so forth are almost an irrelevance. The "peak" in easily extracted (and hence cheap) oil is coming any time now, if it is not already here but camouflaged by enhanced extraction techniques, which permit the exploitation of otherwise low-yield deposits. Oil is about to become much more expensive and the $200 barrel will impact on everything, including food supplies. The situation is most likely worse than having to triple the price of food in the shops (i.e. $70 up to $200), since the markets may "panic" and the instability that would cause could do more economic damage than does the price of oil in its own right.
The world should take heed but not panic. We can get through this, but we have to reassess our demands on oil and energy, and make a stock-review of what is needed. This will not happen though, while money is perceived as the only criterion of import. We need practical solutions based on geology and technology, and perhaps philosophy to create a functionally (never perfect) reasonable society that will be able to thrive even if oil does cost $200 a barrel or even more. The alternative is to permit an anarchic wasteland of human values by default. Poverty of the pocket and of the soul. "For evil to triumph it is only necessary that good men do nothing."