Knowledge Brings Fear

Peak Oil

The Peak Oil theory has been around for a while. It basically says that we are now somewhere the time when the volume of exploitable new oil reservoirs found is getting lower then the volume of oil pumped in the same timeframe. One of the main sites where the Peak Oil proponents write is From the Wilderness , which incidentally has also a lot of interesting detail information on the state of the oil market.

Peak Oil has been discounted as unrealistic panic-mongering by the "serious" economists for years. They argue that new technology will make exploitation of previously hard-to-reach reservoirs economically possible. They also argue that Saudi Arabia has still vast amounts of untapped ressources that are only not yet tapped because of price stability and infrastructure considerations. They also say that since new oil countries and previously unapproachable countries (like Libya and Irak) become more accessible, new reserves will be discovered that can only be found with superior western technology.

This year we have seen a sequence of events that make it, at least to me, much more plausible that the Peak Oil people are roughly right with their predictions. Or that maybe the current short-term shortages come at the right time to make the markets aware that searching for alternative energy sources is a real high priority now.

First the re-evaluation of reserves by Shell and some other major producers. Apparently reporting oil reserves is a very complicated, highly political science that is influenced by many non-technical factors. One example are tax-incentives for oil pumpers, granted by the oil-owning countries (like Nigeria), when the company "discovers" more reserves then it pumped in the same period of time. In short: the predictions of the oil multis are to be taken with several truckloads of salt.

Second, apparently the quality of the oil pumped declines. More and more reservoirs with oil that contains a lot of sulphur are found or coming on-line (oil term for having the pumps connected to the pipeline network). This sharply contrasts with the currently available refinery capacity for such kinds of oil, and with the increasing demand for low-sulphur fuels (for environmental reasons).

Third, these days the reassurances of Saudi Arabia oil officials that they have plenty of spare capacity and will bring it on sound more hollow by the day. The additional capacity seems to be largely from fields with low-quality, light, sulphuric oil which does little to lessen the upward drive on the oil price. And it seems to be much less then the assumed 1.5mil barrel per day (BPD) previously assumed to be available. Now, Saudi Arabia has according to all sources about 24% or worlds proven oil reserves (for discussion on what the term "proven" means in this context, please see the links above). Now, reserve capacity is something completely different then proven reserves. Reserve capacity simply means how many BPD can be pumped with the installed wells, pumps, pipeline infrastructure and loading terminals. It is mainly a measure of how much spare capacity has the production (pumping) and distribution infrastructure. But oil markets are very sensible now. If the Saudis are getting caught with lying about one central aspect of their oil production, market confidence in their reserve reporting will also drop.

So the cynic view is, that a massive oil shortage comes just about in time to cause an eventual change in energy economics within the next decades, thereby maybe saving the planet the very worst effects of Heavy Weather. The unfortunate consequence is that until some radically new ways for energy production (like fusion reactors of the hot or cold variety) can be made working, large parts of the world will be stuck with a nuclear renaissance and periodic severe energy shortages. Solar, wind and other renewable energy may cover a certain share, but how big that share will be, no one knows. The key question for renewable energy is energy storage, since wind and solar based productions is inherently bursty. Sun shines only so many hours per day and wind is even more unpredictable. Hydrogen might be the solution for many areas, but other more efficient forms of storage are needed as well. So putting money into energy storage research is a wise choice.

One possible technology on the horizon are flywheels . In the end we will end up with a distributed production and storage system that requires a lot of built-in intelligence to balance the whole thing to an acceptable average quality level. "Distributed" can as well mean that you need some sort of personal energy storage system in your house or your flat to get you through the inevitable periodical brownouts and blackouts. Alternatively, large numbers of nuclear powerplants will be built.

In short: the higher the renewable energy share, the lower the volume of radioactive waste we will export into the future. This is the choice that at latest our children will face.