What is Peak Oil?

Our present industrial civilization is living on borrowed time, and, in a sense, has been since the first oil well was drilled, over 150 years ago. Since that time, our society has become increasingly dependent on oil, until now, in the beginning decades of the 21st century, there is little that we do that is not in some ways reliant on petroleum products. It's not just transportation that is fueled by oil (although currently our transportation infrastructure is 95% oil-driven), it's agriculture, manufacturing, and energy production as well. 44% of oil production is used to produce gasoline. Another 30% is used to make diesel fuel. The rest is used to make kerosene (jet fuel) and av-gas, asphalt, tar, virtually all plastics, fertilizer, pesticides, heating oil, cosmetics, and dozens of other products that we use in our daily lives.

Particularly important is the relationship between oil and food production. Here in North America, we consume about 10 barrels of oil per person per year to produce food, and there is a direct, one-to-one relationship between oil consumption and food production. In our heavily-industrialized agricultural system, the machinery used to till the soil, plant seeds, irrigate, distribute fertilizer and pesticides, harvest, transport, prepare and deliver food are all run on petroleum. The pesticides themselves are made from oil, and fertilizers are made from oil and natural gas. A three percent drop in oil availability would (under our current agricultural system) likely trigger a corresponding two to three percent drop in food production.

The production of other forms of energy is also closely tied to oil. The equipment used to generate electricity (including such renewable energy sources as solar panels and wind turbines) are made from many oil products, and the energy powering the manufacturing process comes, at least in part, from petroleum. The equipment used to service and maintain the electrical grid runs on oil.

All this means that our way of life is intimately connected to the easy availability of cheap, abundant fossil fuels. Since oil was first discovered, global production has increased steadily, keeping pace with our ever-increasing demand.

But there are disturbing indications that this trend may not continue for much longer. Mounting evidence seems to indicate that we may be at, or close to, (or perhaps even past) a point known as "peak oil", the point at which global oil production reaches its maximum output, after which it will enter a terminal, and irreversible, decline. When this happens, unless our trend of ever-increasing demand changes, it will for the first time introduce a gap between our demand for petroleum products, and the ability of the global infrastructure to supply it. And that is going to have a serious impact on virtually every aspect of our lives, and the basic fabric of our global society.

It is important to understand that:

1. this is a geophysical constraint. It has nothing to do with extraction technologies, or the number of wells we dig, or the price of oil, or other economic or political considerations. It is an inherent, unchangable property of oil resources; and
2. this is nothing to do with "running out" of oil. However, it has everything to do with running out of cheap, easily-available oil.

How do we know that we're close to "Peak Oil"?

Back in the mid-1950's, oil geologist M. King Hubbert came up with a mathematical model for predicting the behaviour of oil producing resources. The mathematics are rather abstruse, but the result is essentially a bell curve: production rises to a maximum ("peak oil") and thereafter enters a decline. This model has since become known as the Hubbert Peak, or the Hubbert Curve, and has been shown to be accurate for oil resources at any scale, an individual well, a group of wells, an oil field, an oil-producing nation and, presumably, the world. By applying his mathematical model, Hubbert was able to predict in 1956 that domestic oil production in the United States would peak some time in 1970 or 1971, and enter a decline thereafter. His prediction was ridiculed by his colleagues at the time, but proved to be accurate to within a year. U.S. oil production did peak in late 1970 triggering the oil crisis of the early '70s. Since that time, the United States has shifted its emphasis to foreign oil, imported from Saudi Arabia, Venezuela, Mexico and Canada, thus alleviating the shortage, but domestic production continues to decline to this day, and the U.S. imports a larger percentage of its total consumption every year.

By applying the Hubbert Curve to global oil production, we arrive at a figure of between 2005 and 2007 for the peak of conventional (i.e. light sweet crude) oil production, and 2010 for the peak of oil from all sources, including tar sands, deep-water and polar oil.

More Evidence

• Of the 800 largest oil fields on the planet, 700 are in decline.
• Of the 5 largest of the large oil fields, all are in decline.
• Of the 98 oil-producing nations in the world, 70 are in decline.
• The last large oil strike was in 1965.
• As of 1981, we began extracting more oil than we were discovering, and we are currently extracting 5 barrels for every 1 barrel of new oil deposits we discover and develop.

The International Energy Agency (a not-for-profit, internationally funded organization whose annual "World Energy Outlook" report is used by national governments to formulate their energy policies) has stated that in order to meet expected demand through 2030, we would need to discover the equivalent of "three Saudi Arabias". However, we now have a very thorough understanding of the geology of oil production, and we can safely say that there are no more large oil fields that have not already been developed. We have, in other words, picked all the "low-hanging fruit". It's a pretty safe bet that any remaining undeveloped oil fields are all small, and in remote, hard-to-get-to (and thus expensive) locations, and/or are comprised of low-grade oil--such as the Tar Sands (see below), and the Oil Shale deposits of the western U.S.

Energy Density

Oil is the most energy-dense substance we know of, apart from nuclear fuels (which derive their energy from atomic interactions, instead of chemically.) Currently we consume about a cubic mile of oil per year, globally. This is the equivalent to the output of 4 Three-Gorges Dams (currently the largest hydro-electric project in the world) every year for 50 years, or 104 coal-fired generating stations every year for 50 years, or 52 nuclear power plants a year for 50 years, or 32,850 wind turbines a year for 50 years, or 91,250,000 solar panels a year for 50 years.

In short, this means that there is no viable substitute for oil. Our only option is to greatly reduce our energy consumption, and adjust our societal and industrial infrastructure accordingly.

So, What About Those Tar Sands?

A measure of the cost of utilizing an energy resource is a figure called the EROEI, "Energy Return on Energy Invested." When a new, conventional oil field is first opened up, the oil is under pressure, and gushes from the ground. The EROEI of a new field is close to 100:1, in other words, we retrieve 100 barrels of oil for every 1 barrel of oil (equivalent) that we invest in extraction (this doesn't factor in the energy cost of shipping and refining.) As the field matures, the extraction EROEI drops to 50:1, and as it passes its midpoint and output begins to decline, that figure drops even further. At some point, the pressure is gone, and the oil must be pumped from the ground. Eventually, pumping alone cannot extract enough oil, so water is injected down into the oil deposit to repressurize it and force the remaining oil to the top of the field where pumping can continue to extract it. At this point, the EROEI drops to 15:1, 12:1, 10:1 and lower, until by the time it reaches 5:1 or 6:1, the field is considered to be depleted.

The U.S. Department of Energy has recently declared the Athabasca tar sands in northern Alberta a "major oil resource", totalling some 170 billion barrels (the second largest deposit remaining on the planet, after Saudi Arabia.) However, the EROEI for tar sands extraction is currently around 4:1 or 5:1, and it is unlikely that enhancements in extraction technology will raise this figure above 6:1. This is why the price of oil needs to be above $100 US a barrel for tar sands oil to be economically viable.

This is because the process of extracting oil from sand is very energy intensive. It must be washed with hot water, a process that produces enormous quantities of greenhouse gases (see Climate Change) and also produces enormous quantities of highly-toxic waste water (tailings). Even at this early stage of tar sands development, there are already tailings ponds in the Athabasca region large enough to be visible from space, and containing water so toxic that to stand in it up to the knees for more than a few minutes would likely cause adverse health effects just through toxins absorbed through the skin. The effect on migratory birds and local ground and surface water has yet to be determined, but indications are that it is significant, and highly detrimental.

Tar sand extraction also requires the destruction of thousands of square miles of boreal forest in order to expose the deposits, destroying entire ecosystems and greatly reducing the region's ability to act as a carbon sink (see Climate Change).

Finally, the end product of tar sand extraction is low-grade bituminous oil that is not refinable in its initial form. It must then be treated with hydrogen before it can be refined. Currently, natural gas is being used as a hydrogen source. Natural gas, of course, has its own peak and decline curve.

What Does This Mean for Canada?

Most of the oil-producing nations in the world have re-assumed national control over their oil resources. Canada is an exception, and for that we have NAFTA to thank. Under NAFTA, Canada is legally obligated to export 60% of its domestic oil production to the United States (as of 2005 Canada is now the largest oil supplier to the U.S.), and this figure will not change with changing demand or supply.

Currently, Eastern Canada imports close to 50% of the oil it uses from Saudi Arabia in order to meet demand, and there is no infrastructure in place to move greater quantities of western oil East in the event that Saudi Arabia makes significant cuts in production.

Canada also exports about 50% of its natural gas production to the United States under NAFTA, supplying the U.S. with about 12% of its total consumption. There is some significant debate as to the applicability of the Hubbert Peak to gas, but there is little doubt that gas will also have its own peak and decline at some point in the future, and because of the geology of gas deposits, it is likely the decline will be much steeper than with oil.

What Does This Mean for the Future?

Put simply, it means that the future is not going to be a continuation of the present. The trajectory of human development will, at some point in the near future, strike a point of discontinuity, and the arc of technological and social progress will alter. Economic growth is entirely based upon the availability of cheap, abundant energy in ever-increasing amounts, and there will come a point where the curve of energy availability will change direction. The impact that this will have on the basic fabric of society and the global economy will be profound.

Just how severe this disruption will be, nobody knows. There are some analysts (colloquially known as "doomers") who believe that we are already at--or past--the peak and, as proactive mitigation is no longer possible, predict that the end of easily available oil will trigger a cascading collapse throughout society, resulting in the end of industrial civilization, possibly leading to large population declines within a short period, and a return to a kind of primitive feudalism; or, as Transition-Town Movement co-founder Rob Hopkins puts it, "Mad Max without the good bits." While this possibility certainly cannot be ruled out, it is important to understand that this result is not inevitable. At the other end of the spectrum, there are those who believe that future technological innovations will step in to fill the energy void created by the decline in fossil fuels, allowing a future that is essentially "business as usual." Again, while this outcome is possible, there are, at this time, few indications that we are heading in that direction.

It is virtually inevitable that we are in for a certain amount of pain over the medium term. Economic growth and energy are intimately linked. Any significant decline in energy availability will trigger a contraction in the global economy (virtually all recessionary periods of the past 50 years have been preceded by a spike in energy prices.) The collapse, or at least the severe contraction, of the large, heavily oil-dependent industrial sectors (the airline and auto industries, for example) will likely result in a significant spike in unemployment in many industrialized nations--Canada and the U.S. in particular--and may well trigger a global recession of unprecedented severity.

The 2005 Hirsch Report on Peak Oil, commissioned for the U.S. Department of Energy, states: "The world has never faced a problem like this. Without massive mitigation... the problem will be pervasive and will not be temporary. Previous energy transitions were gradual and evolutionary. Oil peaking will be abrupt and revolutionary." ASPO (Association for the Study of Peak Oil and Gas) founder Colin Campbell stated at the 2003 ASPO conference, "The second half of the Age of Oil now dawns and will be marked by the decline of oil and all that depends on it, including financial capital. It heralds the collapse of the present financial system, and the related political structures… I am speaking of a second Great Depression." And author James Howard Kunstler said, in his book The Long Emergency, "The world oil production peak represents an unprecedented economic crisis that will wreak havoc on national economies, topple governments, alter national boundaries, provoke military strife, and challenge the continuation of civilized life."

This is certainly not good news, but it is important to realize that while many jobs may disappear, meaningful work certainly won't. The most important shift we must make, as the oil age draws to a close, is the shift in consciousness away from the belief that the status quo must be maintained at all costs, and that perpetual growth is the only way in which a healthy society can function. It may be hard to accept that the job for which one has trained no longer exists. However, we may find it necessary to adjust our priorities toward the more basic necessities of life, the production of food, shelter, and basic consumer goods, and direct our energies toward those goals.

Almost certainly, the North American standard of living will deteriorate, at least as it is currently measured. However, there is hope that while lifestyles may become simpler, they may also become more satisfying, as we re-awaken to the understanding that in order to survive and thrive in this new social paradigm it becomes necessary to reconnect more strongly with community, with the natural world, with the global systems that support our lives, and with ourselves.

Rob Hopkins says, "Inherent within the challenges of peak oil and climate change is an extraordinary opportunity to reinvent, rethink and rebuild the world around us... A future with less oil could be preferable to the present, if we are able to engage with enough imagination and creativity sufficiently in advance of the peak."

If we act now, we may ultimately be headed for what author Pat Murphy (Plan C: Community Survival Strategies for Peak Oil and Climate Change) calls, "A low-energy, high satisfaction lifestyle."

"The real issue of our age is how we make a graceful and ethical descent." -- David Holmgren