Economic vulnerability to Peak Oil
Christian Kerschner Global Environmental Change Volume 23, Issue 6, December 2013, Pages 1424–1433
Key points from a review of this article at Green Energy
This study shows which sectors could put the entire U.S. economy at risk when global oil production peaks (‘Peak Oil”). The sectors most affected are transport services, primary agriculture, metals and metals processing, non-metallic mineral and textiles, chemical and plastic products, and food and food processing. Other affected sectors are construction, wood and paper, transport equipment, utilities, and trade.
Researchers say Peak Oil may already be here, and is a real threat to national and global economies. Their study is among the first to outline a way of assessing the vulnerabilities of specific economic sectors to this threat. “In this paper, we analyze the vulnerability of the U.S. economy, which is the biggest consumer of oil and oil-based products in the world, and thus provides a good example of an economic system with high resource dependence.”
August 11, 2012. The next great oil crisis. Miami Herald.
Note: the Miami Herald has removed this from their website – it used to be at: http://www.miamiherald.com/2012/08/11/2946593/the-next-great-oil-crisis.html
Technology is making it possible to tap vast new oil supplies. But that could be the proverbial drop in the gas tank compared to rising demand overseas.
After nearly a decade of warnings that the world’s oil supply was running out, Americans now are hearing about technology breakthroughs that can unlock vast U.S. deposits of natural gas, help reverse a 40-year slide in domestic oil production and perhaps transform America into the next Middle East.
Despite the euphoria, there’s a major problem: The looming American oil glut may simply not be enough to sate the United States and the rest of motorized humanity.
Experts say soaring demand from China and India is sure to send oil prices back above $100 a barrel. A supply disruption in the coming years, they say, could trigger panic, gasoline hoarding and perhaps lead to lines at the pumps akin to the 1973 Arab oil embargo and the 1979 Iranian revolution.
Global shortfalls of other fuels also could develop sooner than many people think, as a planet of nearly 7 billion people and more than 1 billion gasoline-gulping vehicles strains the limits of combustible energy resources that are the underpinning of modern civilization.
While oil industry officials take strong issue with these dim views, critics charge that governments here and abroad have been less than candid about future oil supplies and the ramifications of failing to shift to alternative fuels.
One outspoken Energy Department consultant, Robert Hirsch, alleged that the administrations of both Presidents George W. Bush and Barack Obama have engaged in a cover-up of the likelihood of an oil shortage. Hirsch predicted a shortfall will hit in the next four years and send shockwaves through the world economy, possibly leading to gasoline rationing.
Few governments have implemented intensive conservation programs to stretch out supplies during a decades-long transition to more fuel-efficient vehicles.
Instead, critics say that even as oil prices nearly quadrupled from 2003 through 2011, government and industry leaders have played down the world’s worsening energy predicament.
- While U.S. industry officials have trumpeted new drilling techniques that can recover huge deposits of previously unreachable oil and natural gas, most say little about the likelihood of surging Third World demand overtaking supplies, causing shortages and skyrocketing prices.
- Industry watchdogs say that some U.S. Energy Information Administration forecasts have been wildly optimistic, especially a projection that between 2011 and 2035, global production of liquid fuels will see a 21.6 million-barrel rise in daily output – the equivalent of the current reserves of the five biggest Middle East oil producers.
- Other projections and policies by the Energy Information Administration, which is the Energy Department’s independent information arm, as well as the Paris-based International Energy Agency and even the U.S. Securities and Exchange Commission, have masked mounting risks of shortages of oil and possibly natural gas, several experts say. A McClatchy computer analysis suggests that proven reserves of all of the world’s primary fuels are likely to diminish much faster than the EIA and the IEA have suggested, raising questions about how long mankind can continue to increase consumption of finite resources.
Researchers at the International Monetary Fund, while not yet speaking for the fund, predicted in May that rising oil demand would drive prices to nearly $200 a barrel, “permanently, ” within a decade. Commodities speculators could exacerbate a price surge if they echo their behavior in recent oil spikes.
The world must accept “the outlook for flattened oil supplies” and “the reality that the era of abundant cheap oil is over,” said Sadad Al Husseini, a former No. 2 executive for Saudi Arabia’s national oil company, Aramco. In emails to McClatchy, he called for worldwide energy conservation measures.
The U.S. Energy Information Administration’ s deputy chief, Henry Gruenspecht, defended his agency’s main global oil supply forecast as stemming from “careful consideration of a wide range of factors.” He noted, however, that there’s “significant uncertainty” about future supply and demand of liquid fuels and a lack of transparency regarding some nations’ reserves. An international group of scientists and energy experts argues that global oil production has peaked or soon will as the second half of the oil age begins. The experts, known as peak oil advocates, say that the output of 500 existing giant oilfields that provide most of the world’s liquid fuels has begun a gradual decline that will create a 17 million-barrel daily deficit by 2035.
If they’re right, and if the Energy Information Administration has accurately projected future demand, liquid fuels production must fill a daunting, 38.6 million-barrel daily void to keep pace – an amount equal to more than 40% of the current global output.
“We’re facing a situation that is real hard for anyone to grasp,” said Kjell Aleklett, the Swedish president of the Association for the Study of Peak Oil.
Oil industry officials strongly disagree.
Industry consultant Daniel Yergin, chairman of IHS Cambridge Energy Research Associates, said that peak oil advocates have underestimated technology advances. While the costs are high, adequate supplies exist “if they can be developed in a reasonable time frame,” he said. Yergin, whose latest book, The Quest: Energy, Security, and the Remaking of the Modern World, details the worldwide scramble for fuel, pointed in an interview to an almost 25 percent increase in U.S. oil production since 2008 and major new discoveries in the North Sea and off the coasts of Brazil and Ghana.
Exxon Mobil’s chairman and chief executive officer, Rex Tillerson, told the Council on Foreign Relations recently that high oil prices have spurred the industry to “develop resources that were previously not accessible.” The latest technology will enable recovery of trillions of barrels of oil embedded in underground shale in Western states – enough “to carry us well into the latter part of this century at current production rates,” he said.
“There’s no question the world is running out of cheap oil,” said Brookings Institution scholar Charles Ebinger, who has advised 50 countries on energy matters. “Are we running out of expensive oil? I’m not convinced.”
Aleklett countered that, in a global context, most recent oil discoveries have been modest. For example, he said that if Norwegian oil company Statoil’s new discovery in the largely tapped North Sea amounts to a billion barrels, “that’s what the world consumes in 12 days.”