Looking beyond oil

by Bob Parkins, Energy Services manager,
Sierra-Nevada Region

As an Energy Services manager I'm always looking for ways to help customers identify alternative energy solutions and find new resources. I encourage customers to look to the future, and remind them about hedges against resource depletion.

Getting information

I often attend workshops and study the market to keep in step with developing theories. Last August, I returned to the summer study offered by the American Council for an Energy Efficient Economy in Pacific Grove, Calif.

The event draws energy efficiency experts from around the world and offers interesting speakers and great networking opportunities. The lead speaker this year started the conference with a sobering look into the future of petroleum-based energy resources. Princeton University Physical Geology Professor Kenneth Deffeyes, is the author of Hubbert’s Peak, The Impending World Oil Shortage published by Princeton University Press.

Although other experts have said that the world is running out of oil, Deffeyes' point of view strikes me differently. His credibility comes from more than 50 years in the oil industry and he backs his conclusions with numbers.

Oil production peaking

The world’s oil production will peak in five years—maybe even two or three—after which, production will decline. He bases his conclusion on the pioneering work of Shell Oil Co., geologist M. King Hubbert, who in 1956 predicted that U.S. oil production would peak in the 1970s. He was right—it peaked in 1971.

The historical 100 years of U.S. oil production is referred to as Hubbert’s Peak. A graph of the historical data is a bell curve, with U.S. oil production for 2002 on the downward slope. The key to maintaining oil production is to discover new, untapped fields. But the United States discovered its last huge field in 1948, and the last big field in the world was discovered in 1975. As of 2000, of the 26 oil fields in the world that produce more than 300,000 barrels per day, all but two are more than 25 years old.

Oil vs. world economics

So where are the new fields to fuel the world’s economy? Deffeyes uses Hubbert’s methods to show that the trend in world oil production closely follows the pattern of U.S. discovery and depletion—but lagging by several decades.

The North Sea and Norweigian oil fields already follow the model, based on actual production data and known reserves. Deffeyes concludes that the world will reach its oil production peak within five years or less. After that time, less and less oil will be produced as the reserves are depleted and new discoveries fail to materialize.

And, since natural gas field and oil reserve discoveries normally coincide, the same principle applies—gas production is also governed by Hubbert’s Peak. Natural gas peaked in the U.S in 1973 and is predicted to peak in Canada—the source of much of our gas resources—within this decade. Considering how fragile gas resources are, gas-fired electric power generation suddenly becomes a risky endeavor.

Watching the store

Hubbert’s Peak is both fascinating and sobering. Most intriguing to me, however, was a question from the audience. “How many copies of the book are being read in the Middle East?” Deffeyes replied, “One."

I wondered—who is watching the store in Saudi Arabia? And who is watching the store here?

Note: The views in this article are those of the author and may not reflect agency policy.)