TORONTO (ResourceInvestor.com) -- A 67-page report released earlier this year on the subject of Peak Oil and sponsored by the U.S. Department of Energy drew several conclusions:
- World Oil Peaking is Going to Happen
- Oil Peaking Could Cost the U.S. Economy Dearly
- Oil Peaking Presents a Unique Challenge ("it will be abrupt and revolutionary")
- The Problem is Liquid Fuels (growth in demand mainly from transportation sector)
- Mitigation Efforts Will Require Substantial Time
- Both Supply and Demand Will Require Attention
- It Is a Matter of Risk Management (mitigating action must come before the peak)
- Government Intervention Will be Required
- Economic Upheaval is Not Inevitable ("given enough lead-time, the problems are soluble with existing technologies.")
- More Information is Needed
Based on the report (Peaking of World Oil Production: Impacts, Mitigation, & Risk Management) we are probably in quite a bit of trouble if, as some analysts suggest, peak oil is already upon us. The study was led by Dr. Robert Hirsch who is a Senior Energy Program Advisor at SAIC (Science Applications International Corporation), and who has had a long career in Energy milieu in a variety of important positions.
The study envisions three scenarios for dealing with a peak oil reality: scenario one involves action not taken until peaking occurs, and scenarios two and three deal with action taken ten and twenty years prior thereto. The conclusions follow:
- Waiting until world oil production peaks before taking crash program action leaves the world with a significant liquid fuel deficit for more than two decades.
- Initiating a mitigation crash program 10 years before world oil peaking helps considerably but still leaves a liquid fuels shortfall roughly a decade after the time that oil would have peaked.
- Initiating a mitigation crash program 20 years before peaking appears to offer the possibility of avoiding a world liquid fuels shortfall for the forecast period.
"The obvious conclusion from this analysis is that with adequate, timely mitigation, the costs of peaking can be minimized. If mitigation were to be too little, too late, world supply/demand balance will be achieved through massive demand destruction (shortages), which would translate to significant economic hardship, as discussed earlier."
Based on these conclusions, the global economy could stand to suffer incalculable consequences if peak oil is already upon us. Apparently, the world seems to need at least twenty years notice and a serious coordinated effort in order to truly avoid sever economic pain.
According to Hirsch, "The world has never confronted a problem like this, and the failure to act on a timely basis could have debilitating impacts on the world economy. Risk minimization requires the implementation of mitigation measures well prior to peaking. Since it is uncertain when peaking will occur, the challenge is indeed significant."
Like many of the other experts whose opinions have been aired through Resource Investor, Hirsch would appear to find the much-vaunted Canadian oil sands inadequate, though admittedly they have the potential make a positive dent in the problem.
The report states, "In addition to needing a substitute for natural gas for processing oil sands, there are a number of other major challenges facing the expansion of Canadian oil sands production, including water81 and diluent availability, financial capital, and environmental issues, such as SOX and NOX emissions, waste water cleanup, and brine, coke, and sulfur disposition. In addition, because Canada is a signatory to the Kyoto Protocol and because oil sands production results in significant CO2 emissions per barrel, there may be related constraints yet to be fully evaluated."
"The current Canadian vision is to produce a total of about 5 MM bpd of products from oil sands by 2030. This is to include about 3 MM bpd of synthetic crude oil from which refined fuels can be produced, with the remainder being poorer quality bitumen that could be used for energy, power, and/or hydrogen and petrochemicals production. 5 MM bpd would represent a five-fold increase from current levels of production.82 Another estimate of future production states that if all proposed oil sands projects proceed on schedule, industry could produce 3.5 MM bpd by 2017, representing 2 MM bpd of synthetic crude and 1.5 MM bpd of unprocessed lower-grade bitumen."
"it is also worth noting that the bitumen yield from oil sands surface mining operations is about 0.6 barrels per ton of mined material, excluding overburden removal. This is similar to the yield from a good quality oil shale, but is less than Fisher-Tropsch liquid yields from coal, which is about 2.6 barrels per ton of coal.86"
Readers of Resource Investor are far more aware of the energy related challenges ahead than the average man in the street who believes that high oil and gas prices are the result of Iraq, OPEC, and some underhanded, self-serving conspiracy involving Bush, Cheney and Halliburton. Unfortunately, a sound knowledge and understanding of the situation makes us no less vulnerable.
While the specific implications of peak oil remain unclear, there can be no mistaking that any period between involving a lapse in adequate energy supply will be met with economic hardship for the global economy. If peak oil is not upon us already, the chances of minimizing future damage are fair and it is certainly encouraging to know that government authorities are taking the threat seriously. Any way you slice it however, the economy and the consumer are unlikely to escape unscathed through the transition period into other energy sources as the world comes to grips with a new evolving paradigm in satisfying its needs for energy consumption.