(This translates a slightly different article previously posted in Spansih at the author’s blog, The Oil Crash. Translation by Fabricants de Futur.)
A reader has written to me to say that she does not completely understand if we have a serious problem with oil or not, and I have written her a long explanation which I think is worth sharing. That’s the story.
What is Peak Oil?A recurring topic in these discussions is the confusion between resources and production. Let me explain.
In the world today there exist enormous, I might even say vast, resources of liquid hydrocarbons (a more appropriate name than oil, because it involves many diverse substances which are not completely equivalent).
If we take a look at just conventional crude oil, there is enough to supply current consumption for about 30 years.
If we include the extraheavy oils (bitumen), there is enough to cover current consumption for a century.
If we include the resources contained by the lutitites and similar formations (shale oil which is extracted by fracking) there is enough to fuel current consumption for more than two centuries.
Intuitive conclusion: there is no problem with oil, or at least not an urgent one. Right?
This is how the mass media sees it, and that is the reason why I decided to create The Oil Crash blog.
What is the reality?
The reality is that it does not matter how much there may be in the subsoil, but the rate at which you can extract it. In other words, what is the production going to be? I will give you an example.
Imagine you are thirsty and want to drink some water. I tell you that there is a glass of water available.
Possibility 1: There is a glass full of water. You take it and you drink it. This is what the world has done with oil since the 19thC up until 1970.
Possiblility 2: The water is spread over a smooth surface. You take a straw and, with a lot more effort than in the previous case, you manage to drink the water. This is what the world has done with oil since 1970 up until 2000.
Possibility 3: The water is mixed with sand. You have to heat up the sand in a watertight container, condense the water which might evaporate and which ends up in the glass via a distillery, and then you must wait for it to cool down. The process is not perfect, part of the water never evaporates from the sand and part is lost because it comes out of the end of the distillery in the form of gas or it evaporates from the glass because it is still quite hot, and so you recover 2/3 of the original glass. Moreover, the process is really slow and creates a lot of heat, so you feel even more thirsty and the process never takes your thirst away. This is what the world has done with oil from 2000 until 2010.
Possibility 4: There is no liquid water, but I tell you that you can condense it in the air. It is a very slow and inefficient process, but you are thirsty and you have to find water from somewhere. The problem is that you have to keep drinking but the relative humidity of the room keeps going down. There is still a lot of water in the air, but it is extracted more and more slowly each time. You could build a mega-machine in order to “dry out all the air” in one go, but you don’t actually have the resources to do that, so in fact you have to make do with what you have. This is what is happening with oil since 2010.
Obviously, in the real world we have a mixture of the 4 possibilities, from simple oilfield extraction (possibility 1) to the ludicrously expensive oilfield extraction (possibility 4), however as time goes by the simple oilfields are running dry and we are finding ourselves left with the more complicated oilfields.
From time to time you come across economists who tell you, ok, that’s true, but by investing more money and with advances in technology those possibility 4 oilfields will be made profitable and quick. That is a lie. The problem is not the economic profitability of the oilfields but the energetic profitability (in other words, how much energy is gained for every unit of energy expended in obtaining it). If you spend more energy than you manage to extract, then forget it, this extraction will not be energetically profitable and will not therefore be economically profitable for obvious reasons. If you only gain a little bit of energy, then the extraction will certainly not be economically profitable, because there are other costs. In order for an oilfield to be worth extracting, practically, you have to gain much more energy than you spend. And as for technology, the thermodynamics set the limits on the yield given by the processes, limits which you cannot go beyond, and we are already far too close to those limits. There are no big improvements to hope for (there will be improvements, undoubtedly, but they will not be big).
This is the situation we are in now. The liquid hydrocarbon deposits which we have left are bad quality and it is difficult to extract the oil from them. For this reason, oil production will not now increase and will probably fall sharply in the next few years. Oil is not going to finish in 30 years, nor 100, nor 200: it will be here for many more centuries. What will happen is that we will have less of it available as each year passes. When I give a talk I always say that the situation is similar to a person who keeps having their wages reduced. In the beginning they earn £2,000 a month and they’re fine, unworried. Next year their wage is lowered to £1,800 a month and, ok, things are still fine. In the next year their wage is lowered to 1,600 and the person starts to get annoyed. The following year it’s lowered to 1,400, and the next it’s lowered to 1,200, then 1,100, then 1,000, then 900, then 850, then 800, then 775… They never stop receiving their wages, but with what they are earning, life gets more and more difficult. This is our situation: our energy wage is going to get smaller and smaller with each year and we will have to learn to live with less and less.
Don’t expect a breaking point, things are not going to change radically overnight, rather there will be a gradual fall, however not exactly a slow one. There will be times with disruptions, with sharper falls, but in general the process will be fairly even and will take place over decades. However, in all events, the coming decade will be quite critical. And so, if you have understood what I have told you, you will know that we do indeed need to worry about the problem of resources.