The hike in oil prices: Peak Oil or price cycle?

12-08-2005: The hike in oil prices: Peak Oil or price cycle?
By Dan Percival

[ article excerpt ]

First what is Peak Oil? A gross oversimplification can be as follows. Let's say that all the world's oil come from only one gigantic oilfield. This oilfield is very homogeneous with a simple shape e.g., round.

After careful study of the characteristics of this oilfield, a number of wells are drilled into it, placed for optimal extraction of the crude and all these wells are linked to a single pipeline with a single valve.

When the valve is first opened, crude oil gushes out under high pressure and the valve is opened just wide enough to allow a flow rate that meets demand.

Demand for oil is largely driven by the world economy and as the economy grows, the increasing demand is met by the simple process of opening the valve a little bit more, increasing flow.

Over the years, there will come a time when the valve finally reaches the fullest extent of its opening ie it is fully opened and we can then remove the valve and just let the crude flow straight through. This is Peak Oil. The simple solution of just opening the valve more to meet oil demand doesn't work any more.

In the real world, things are not so straightforward but data from oilfields show that simple oil production from an oilfield follows a bell-shaped curve, and peak oil is the top of the curve. Note that peak oil doesn't mean the oil has run out.

On the contrary, the peak is reached when half or slightly more than half of the recoverable oil has been extracted. What is important is that on the other side of the peak, production starts to decline unless additional measures to boost production are applied (drilling more wells or using secondary recovery techniques).

These measures carry a cost and do not necessarily increase the amount of recoverable oil.

The 'peak oil' theorists had great success in predicting the oil shocks that hit the American economy (and ultimately the world economy) in the 70s, when America's oil production peaked and it had to become a net importer of crude.

Subsequent to this, the 'peak oil' theorists extended their calculations to the world oil production, attributing the current oil price hike to a peak in world oil production.

The problem with this is that the calculation of 'peak oil' is a mathematical exercise, and heavily dependent on the accuracy of the data.

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The Coming Energy Crisis

COAST TO COAST AM WITH GEORGE NOORY: SHOWS: "The Coming Energy Crisis"

Commentator James Howard Kunstler, the author of The Long Emergency, laid out what to expect, now that we are on the brink of global peak oil production.

He predicted a long arc of depletion that will cause great hardships to the American economy.

Suburbia, he declared, 'is the greatest misallocation of resources in the history of the world,' and will be particularly hard hit because it depends utterly on supplies of cheap oil. Its destiny is to become 'dysfunctional and devalued,' he opined.

Yet large cities won't necessarily fare better in an era of energy shortages, he noted. The most successful places to live, he believes, will be smaller towns and cities that are in close proximity to local farms. 'The age of the 3,000 mile Caesar salad is coming to an end,' Kunstler quipped. American society will be 'compelled to reorganize itself' focusing on localized efforts, he added.

National retail outlets like Wal-Mart will hit the skids by the end of the decade and regional areas dependent on cheap air conditioning such as the Southwest will face severe troubles, he forecast. Leadership in facing this upcoming crisis is lacking, said Kunstler. As a first step, he advocated for the restoration of a passenger rail system in the US, that would be akin to the efficient trains of Europe. This would help to boost national morale and get rid of the incentive to build more urban sprawl, he argued. "

Agriculture and Peak Oil

Agriculture and Peak Oil: Agriculture and Peak Oil

We face the massive challenge of bringing our dead soils back to life. Bio-farming takes at least 4 years to enrich the soil, and farmers will need large subsidies and education programs as they move from monoculture or 'one crop' farming to a system of 'crop and cow' rotation.

Crop farmers will need to know livestock, and livestock farmers may need to grow crops. It may even require a significant return of our population to the land to run post oil agriculture, and many suggest that our cities will have to shrink and grow food much more locally.

As they all say, 'Gone are the days of the 3000 mile Caesar salad!'

Note: If you only read one article on this page, make it Eating Fossil Fuels.
For more information about the organisation that produced this excellent but just plain scary article, go to www.fromthewilderness.com"