Are the days of cheap oil over? With prices soaring above $50 a barrel, the world is beginning to take the peak oil theory seriously.
The Hubbert Peak Theory, developed in 1956 by geophysicist M. King Hubbert, is casually called the peak oil theory.
It says oil and fossil-fuel production will soon reach a peak and then rapidly decline, driving prices up.
In 1956 Hubbert predicted that production would peak in the United States in the late 1970s, which it did.
According to the Association for the Study of Peak Oil, global oil production has peaked as of April 2005.
There are signs that oil executives have recognized the trend and are currently positioning to increase their reserves.
According to the San Francisco Chronicle, ChevronTexaco purchased rival Unocal and its healthy oil reserves for over $16.4 billion, in a sign to some that the company is betting prices will continue to climb.
The idea is alarming to the United States because its economy has long depended on abundant sources of cheap energy.
Europe, the United States and Japan consume about half of the world’s annual output of oil.
Demand in China and India is expected to increase sevenfold by 2030.
The Department of Energy reported (PDF) in February that increases in prices could be measured on a trillion-dollar scale.
“Previous energy transitions were gradual and evolutionary. Oil peaking will be abrupt and revolutionary,” the report concluded.
In the International Monetary Fund‘s April 2005 economic outlook report the agency warned, “Spare oil capacity is now reduced to historically low levels and there are significant risks that the oil market will continue to be tight going forward.”
The strain is usually thought of in terms of transportation.
However, world food systems would also likely face catastrophic challenges.
In the article titled “Eating Fossil Fuel,” geologist Dale Allen Pfeiffer points out that 10 fossil fuel calories are needed to produce every food calorie Americans eat.
Without fossil fuels, world food supplies would be dependent on solar energy. Under such a system, according to Pfeiffer, it would take one worker three weeks to produce the amount of food now consumed by the average American in a single day.
Other sectors will also be affected by shortages, incuding national defense, medicine, plastics and water distribution.
A March 29 article in the Christian Science Monitor documented the effects of rising oil prices on everything from fruit to home electronics.
Peak oil theory has lately gained some credibility among politicians.
Congressman Roscoe Bartlett, (R-Md.) gave an address on March 14, 2005, warning Congress that the worldwide oil peak was near.
“At some point, you pass the point of no return where there is not enough readily available high-quality fossil fuels to support our present economy while we make the investment we have got to make to transition to these renewables,” he said.
In the presentation he illustrated that drilling in ANWR would have little effect on the downward production trend.
He said if people had listened to Hubbert in the late 1950s and not “relegated him to the lunatic fringe” then the U.S. could have made the transition on its own.
Some nations are already planning for the change.
On April 25, the Royal Museum of Scotland in Edinburgh will host Peak Oil UK: Entering the Age of Oil Depletion, a meeting between former oil executives and U.K. policymakers to discuss creating a national strategy for any shortage.
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M. King Hubbert Biography
ChevronTexaco’s CEO banking on peak oil situation
San Francisco Chronicle, April 8, 2005
Peaking of World Oil Production: Impacts, Mitigation & Risk Management (PDF)
Department of Energy, February 2005
Economic Outlook Report
International Monetary Fund, April 2005,
Eating Fossil Fuels
From The Wilderness, October 2003
Oil prices spread to grapes, TVs, pizza
Christian Science Monitor, March 29, 2005
Rep. Roscoe Bartlett, March 14, 2005