What is “Peak Oil”?

You may not have encountered the principles of Peak Oil in the media. Don’t let that lull you into a false sense of security. There was a time when Climate Change suffered the same lack of exposure.

Peak Oil is not about “running out of oil” – we’ll never run out of oil. There will always be oil left in the ground because either it’s too hard to reach or it takes too much energy to extract. Ponder on a fact that the economists conveniently gloss over – regardless of how much money you can make selling oil, if it takes an oil barrel’s worth of energy to extract a barrel of oil, the exploration, the drilling and the pumping will stop.

Peak Oil is about the end of phenomenon of cheap and plentiful oil, the recognition that the ever increasing volume of oil being pumped into our economies will peak and then inexorably decline. It’s about understanding how our industrial way of life is absolutely dependent on this ever-increasing supply of cheap oil.
From the start of the 1900s, plentiful oil allowed a coal-based industrialised society to massively accelerate its “development”. From that time, each year there has been more oil (apart from the two oil shocks in the 1970s when middle east crises caused worldwide recessions). And each year, society increased its complexity, its mechanisation, its interconnectedness and its energy consumption levels.

The problems start when we’ve extracted around half of the recoverable oil. At this point, the oil gets more expensive (in cash and energy terms) to extract, it’s lower quality and it flows out more slowly. At this point, for the first time in history, we aren’t able to increase the amount of oil that’s coming out of the ground, getting refined and reaching the market.

At this point, oil supply plateaus and then declines, with massive ramifications for industrialised societies. Very few people are paying attention to this phenomenon, and it’s easy to understand why.

The misleading petrol tank analogy

Most of us have experienced running out of petrol at some time while driving, and this can subtly misinform our expectations around oil depletion.

The pattern is simple. Your car runs smoothly as you use up the petrol, right until the last fraction of a litre – when it’s about 97% empty. That’s the only time you start to feel the impact of your “petrol depletion”. The car starts juddering and sputtering, letting you know that you’d better act fast otherwise it’ll come to a sudden standstill. This pattern means we can ignore the petrol gauge until very late in the depletion cycle.

However, the way oil depletion affects industrial society couldn’t be more different. The key point isn’t when you’re close to running out of oil. It’s when the “tank” is half full (or half empty). Here’s why…

Back to Peak Oil

Peak Oil recognises that we are not close to running out of oil. However, we are close to running out of easy-to-get, cheap oil. Very close.

That means we’re about to go into energy decline – that extended period when, year on year, we have decreasing amounts of oil to fuel our industrialised way of life.

The key concepts and implications of this are as follows:

  • of all the fossil fuels, oil is uniquely energy dense and easy to transport.
  • ever-increasing amounts of oil have fuelled the growth of industrial economies.
  • all the key elements of industrial societies -transportation, manufacturing, food production, home heating, construction -are totally reliant on oil.
  • understanding the depletion pattern of oil fields is crucial. There is a consistent pattern to the rate of extraction of oil -and this applies to individual fields, to an oil region, to a country and indeed to the entire planet -namely, the first half of the oil is easy to extract and high quality. However, once about half the recoverable oil has been pumped out, further extraction starts getting more expensive, slower, more energy intensive and the oil is of a lower quality.
  • this pattern means that the flow of oil to the market, which has been steadily increasing over the past 150 years, will peak. After that, every successive year will see an ever-diminishing flow of oil.
  • a growing body of independent oil experts and oil geologists have calculated that the peak will occur between 2006 and 2012 (a few years of hindsight is required in order to confirm the peaking point).
  • technological advances in oil extraction and prospecting will have only a minor effect on depletion rates. As an example, when the US (lower 48) hit their oil production peak in 1972, the rate of depletion over the next decades was high, despite a significant wave of technological innovations.

It’s difficult to overstate what this means to our lives in the developed countries.

To understand the degree to which this will affect the industrial world, here is the opening paragraph of executive summary of a report prepared for the US government in 2005 by an agency of experts in risk management and oil analysis:

    • “The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem. As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social, and political costs will be unprecedented. Viable mitigation options exist on both the supply and demand sides, but to have substantial impact, they must be initiated more than a decade in advance of peaking.”

Peaking of World Oil Production: Impacts, Mitigation & Risk Management. Robert L. Hirsch, SAIC

This report only came to light after being buried by the US administration for close to a year. A perusal of the far-reaching implications of the report gives a clear indication why the government was so keen to keep it out of the public domain.

Despite the denial by governments, their agencies and oil companies that there is a problem, both Chevron and Total have both admitted that we’re at the end of the era of cheap oil.

Jeremy Gilbert, former Chief Petroleum Engineer at BP, in May 2007 said the following:

    • “I expect to see a peak sometime before 2015… and decline rates at 4-8% per year“


Several US senators, principally Republican Roscoe Bartlett, are raising the issue in the upper house.

In New Zealand, Jeanette Fitzsimmons, co-leader of the Green Party, is raising awareness about the threats of Peak Oil. In 2006, Helen Clark, the Prime Minister of New Zealand said this:

    “…oil price is very high because probably we’re not too far short from peak production if we’re not already there.”

In Australia, the MP Andrew McNamara is heading up the Queensland Oil Vulnerability Task force.

But in general, national leaders are not stepping up to address these problems in any meaningful way. Yet.

So if the political leaders aren’t going to fix the problem, what is?

Technology is often touted as the panacea for Peak Oil and Climate Change problems. However, a careful review of the reality of these technological solutions indicates their immaturity, their often disastrous environmental consequences and their lack of connection to the real world.

We could dither about, waiting for technology or governments to solve the problem for us. However, general consensus now appears to be that this is a rather high risk option.

It’s up to us in our local communities to step up into a leadership position on this.

We have to get busy NOW to mitigate the effects of Peak Oil. The good news is that many of the solutions and mitigations for Climate Change will also address the threats from Peak Oil -and vice versa.

Extract from “Transition Initiatives Primer” from the Transition Network

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