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Tackling the oil depletion issue is very important for the following reasons:

Tackling the oil depletion issue is very important for the following reasons:

  1. The world is under the impression that oil shocks of the 70s are over. The calculation that oil resources would last till the year 2000 alone has been disproven.  Hence world nations should not imagine wrongly that the resources can last for few centuries more.  This will result in unwise usage of scarce oil resources.  As a result the resources would deplete faster than expected and the world would soon land in a worst halt.  This has to be avoided.  This article presents the facts related to this issue.
  2. Peace and harmony among nations is the vital factor which is the present requirement of the world nations. Already nations stand divided on sharing water resources.  With depleting oil resources, the world nations might resort to warfare once again.  Handling the depleting oil resources issue in a planned and amicable manner would help in avoiding wars.  People would continue to live in peace, harmony and happiness.
  3. Routing the scarce resource to vital operations and avoiding wastage is possible only when there is more awareness about depleting oil resources. That is why organizations across the world work hard to achieve this awareness.  Nations should reach a good understanding in sharing the scarce resources.  This will automatically enable the routing of oil resources in a defined manner.  The resources would be used only for productive purposes like manufacturing, industrial production etc.  Reckless transportation usage will be minimized.  This awareness would make the world realize that time has come to research and find alternative cheap energy resources.

These coming hydrocarbon production peaks

These coming hydrocarbon production peaks (firstly, of all non-OPEC oil; then of all oil; and finally of all hydrocarbons) will place massive strains on the economies of the world. Market signals alone will provide insufficient warning of the problems ahead. Mitigating the effects, and handling the political consequences, will require high levels of public comprehension, and international co-operation.

Oil resources are formed naturally over millions of years.  Nations keep extracting them at an alarming rate.  However, these resources cannot be replaced at the pace at which they are extracted.  The production of oil wells would be at a fastly diminishing rate.  When the production is no longer profitable, the geological circumstances, engineering practices, and government policies lead to a decline in oil production.  A sudden stoppage on one day would result in the following consequences:

  1. World population has grown manifold due to an improved life span of human beings. Hence food production has increased in parallel terms.  This entirely depends on fertilizers.  The manufacture of fertilizers entirely depends on natural gas resources.  Various other aspects of farming need oil resources- like running the farm equipment.  Sudden stoppage in the supply of oil resources can hit food production.  Rising food prices can result in widespread food scarcity and malnourished population.  Use this link to know more on this issue.
  2. Depleting oil resources can hit manufacturing industries. This will lead to widespread unemployment.  When manufacturing of essential commodities is halted, prices would soar.  The imbalance between demand and supply would push the cost of living in an upward direction.  This will further worsen the situation as most of the commodities will be out of reach of common people.
  3. Sudden stoppage of oil supply will hit the transportation and power generation industries too. Without power and transport, people would go back to the stone age era.

These problems can result in widespread unrest among nations.  Nations would compete among themselves in an unfair manner to tap the depleting oil resources.  This would lead to widespread violence and unfair practices like cartel formation, excessive pricing, hoarding, etc.  From all the above reasons it is clear the depleting oil resource is not only a multi-national issue, but it is also a risk factor which can affect the very existence of this world.

For more detail on the coming hydrocarbon production peaks, and the historical context, see The Oil & Gas Situation

Which Precious Metal Should You Invest In – Gold Or Silver?

If you wish to invest in the commodity market, then precious metals are highly sought after as a good investment instrument. Silver and gold are in demand not just because of their beauty but because they make a good investment option. For many years gold was seen to be a better investment option than silver. However, the trend is changing these days. The Bitcoin Trader would tell you that investing in cryptocurrency is also a good investment step.

 

Investing in silver is practical and smart. However, silver follows the trend of gold. Look beyond the traditional currencies as the Bitcoin Trader does. If you want to invest in silver, then you would be glad to know that silver has the potential to offer phenomenal returns. There has been a good amount of increase in its demand in recent years.  The precious metal has gained popularity among the investors. Hence it may be a great decision to include silver in your portfolio. Also, read this source if you want to trade in Bitcoin.

 

Silver or Gold – The debate

Silver and gold both come under the category of precious metals. So which one should you buy? Gold has been the obvious investment choice, and unfortunately, silver has still not received the same limelight as that of gold. It is the reason why many are still not aware of the trend that silver is following and also the returns that it could offer in the future. For most investors investing in precious metals means to invest in gold.

 

Gold has given returns in the past, and it is still doing so. However, silver has taken the lead in the performance that it has offered to its investors. If you are wondering whether this is true, then gold gave a return of 25% in the year 2010 whereas silver gave a performance of around 80% in the same financial years. So you can very well see that if you want to make money and better returns on your investment then silver may be a better option for you.

 

Why did the price of the silver hike?

The hike in the price of silver is recent, and the primary cause for this is because of its extensive use in industries. Silver is a precious commodity, and its use in industries is only going to increase. It means that its price is not going to stop anytime soon. Because of the rise in the popularity of silver, its demand is rising and so are its prices.

Silver should be seen as a long term investment to reap maximum benefits from this investment.

 

 

GOVERNMENT INTERVENTION, OR MARKET FORCES?

This is an important topic, and this website will return to it more fully at a later date. Certainly, the prevailing view within the UK’s DTI is that there are no oil supply difficulties on the horizon, but if there were, it would be best to let the efficiencies of the market resolve them. 1

The question of government intervention, or market forces, breaks into two parts: should the government intervene; and will the government intervene?

The process of oil production involves huge investment outlay.  Hence prices would be naturally higher.  Moreover, most nations do not have natural oil resources and hence are not self-sufficient.  They depend on a limited number of companies/countries which produce oil.  When the purchase price itself is higher, government control can be only to a limited extent.  You can find here the full related details regarding this.

Historically, at least since the Second World War, whenever energy supplies became difficult, the government felt obliged to act. Whether this was true of the UK Prime Minister during the UK’s ‘Fuel Protests’ in 2000 (after having initially expressed a view that the matter was for the industry to resolve), or the Governor of California during the rolling blackouts, or earlier, the public’s need for energy is so important that when supplies are threatened governments have been driven to act.

Should the government act, is another matter. Companies (‘the Market’) are numerous, in evolutionary competition, and contain tens of thousands of bright, motivated people. Fast and effective solutions come from the market. By contrast, government contains extraordinarily few thinkers (in terms of those who actually influence decisions), is slow, and is dogged by multiple, conflicting, objectives. If you want to solve a cost-based problem that is current, ask the companies to do it.

But the first problem is that, intrinsically, the Market is about production and consumption, not about reduction and saving. Companies make profits by making more goods, or providing more services; they make losses if they sell less. Certainly, given high prices, or adequate legislation, energy supplying and conserving technologies will be efficiently invented and developed. But fundamentally, the drivers of the Market push for doing more with more, not less with less.

 

An equal difficulty, however, is that companies respond very poorly to problems with time lags. Unless a problem is crystal clear, and almost immediate, effort expended today to resolve the problem is lost profit, weakened market position, and, in the current ridiculous share-price driven economy, makes the far-seeing company a prime take-over target.

 

(This is not a diatribe from an idle academic; we last heard these views from the most senior UK executive of a European oil major, ranting about the short-sighted stupidity of the City – in whose square mile the conversation took place – that would not let him invest realistically even in exploration, as the loss in this quarter’s bottom line would look too bad to the stock-pickers analysing away in the neighbouring buildings. That this same company, only a few weeks later, gobbled up a large rival, whose bargain share price was the direct result of doing less well in the ‘reserves replacement’ game, told volumes. 2)

 

Certainly, there is a degree of company expenditure in anticipation of problems, but absolutely nothing on the scale needed to move the economy rapidly away from oil when supply becomes tight. Even the oil companies we speak to spend virtually nothing on looking at future global oil availability. 3

 

In virtually every case that one can think of, from tobacco, asbestos, pesticides, fluorocarbons, general Health and Safety legislation, to building insulation codes and forthcoming CO2 controls, it is government that has to anticipate future problems, and set the parameters within which companies can efficiently respond. Companies simply cannot risk spending significant money before the signals (whether from price, or legislation) arrive.

 

And the awfully long time lags associated with changing an economy’s basic energy sources means that if the signals do not come now from a government doing sensible calculations about the hydrocarbon future, that when the signals do arrive, from high prices and shortages, and the efficient companies finally swing into gear, the pain and shocks will be those of the 1970s writ large.

 

Notes.

 

  1. When the University of Reading was presenting data to the DTI, in the presence of a Shell representative, once Shell had raised the appropriateness of the market for solving any future supply problem, the sigh of relief from the DTI bureaucrats was palpable, and the meeting swung rapidly to a close.

 

  1. Of course, intrinsically, it is not the stock-pickers fault either. They must get the best return on their investment funds today if they, too, are not to be out of business or taken over. We have been told of the evils of economic ‘short-termism’ by many very senior people across all aspects of the oil and investment business. It is an issue that needs serious attention.

 

  1. ‘Well, we used to look at [global oil supply]; now I think we have one girl back in [a European capital city] who is working on this.’

ECONOMIC ASPECTS

Contents:  The Issues, Why no Price Signal?, Oil Supply has little impact on GDP, Increasing Price Accesses More Oil, The European 2000 Fuel Protests, References

The Issues

For many years now the geologists have been warning that conventional oil production will start to decline once about 1000 Gb have been used, (see Past Forecasts). In the 1970’s this 1000 Gb threshold was a safe three decades into future, now it is close. Throughout this period, the economists have derided this position, and explained that the geologists just do not understand economics. 1

The general arguments of the economists are:

–  It is impossible for there to be any near-term risk of oil resource limits; if there were, the market would have warned us via rising prices. 2  Put another way: the market will ive adequate warning. 3

–  Oil supply difficulties will not be of much significance anyway, oil is a much lesser part of the global GDP than back in the 1980’s. 4

–  When the limit of current reserves eventually approaches, the resulting higher prices will solve the problem: increasing reserves through increased exploration, and by bringing on new field extensions, fields, technologies, and sources of supply (tar sands, gas-to-liquids, shales, etc.) that are currently uneconomic. 5

 

These arguments are discussed below. (top)

 

Why no Price Signal?

 

The economists ask: Why, if oil resource limits are imminent, has there been no price signal? The answer to this question is five-fold:

 

(i).  Commodity prices are intrinsically volatile.

 

Oil, to some degree, behaves like other commodities, where price is set by very small differences between supply and demand. Demand is a strong function of global economic activity, itself partly determined by oil price. Supply reflects a host of competing production trends. It is therefore hard, perhaps impossible, to forecast changes in supply and demand in the detail required to identify the small amounts of over/under supply that drive the short-term price. In this regard, oil price forecasting is as difficult as for other commodities, such as metals, foodstuffs (wheat, coffee), or ‘commodity’ chemicals (e.g., ammonia, sulphuric acid.)

Oil being the basic essential in most manufacturing industries is constantly in demand.  Presently only a handful of nations are engaged in oil production.  Hence the rest of the world depends and hop over these guys for their oil requirement.  A small hike in price increases the cost of production in a huge manner.  Thus oil price rise pushes the price of other commodities in an upward direction.

Such intrinsic price volatility is aggravated in the case of oil by very poor information (e.g., on real reserves), and sometimes by market over-reaction, even hysteria.

 

Thus the first lesson is that for oil, with its intrinsic price volatility, it is hard to pick out the underlying price trend. Trying to communicate the message of oil’s near-term resource limits when the price fell to $10/bbl in 1999 (due in part to weak Asian demand) was a thankless task.

 

(ii)  The price warning of oil difficulties is likely to be short.

 

The economists say that when the fundamental oil limits approach, the price signal will give adequate time for response.

 

The answer to this view is, in a sense, a corollary of (i), above. Commodity prices tell a lot about the current over/under supply situation; they contain less information on the longer term. The oil supply fundamentals that drove the US peak in 1971 had been known to analysts for 15 years, but the price signal that warned of impending difficulties was only available for about three years, prices doubling from about $9 to $18/bbl in to-day’s money between early 1971 and late 1973. But this increase was not perceived to be significant, so the subsequent trebling of the price in 1973, to nearly $60/bbl in to-day’s money, came as a surprise to most.

 

Underlying to-day’s situation is the fact that sunk costs, and hence the need for return, dictates a short-term requirement on pricing by producers. Since future supply is never known for sure, even a strong feeling that next year’s price will be higher is unlikely to close the spigot, at least for commercial companies or nation-states with large budget requirements, as it is to-day’s income stream that dominates.

 

So the second lesson is that oil price contains mostly short-term information.

 

(iii).  Part of the natural ‘market-based’ price warning has occurred, but was disguised by geopolitics.

 

Of course, over the longer term, commodity prices tend to average out at cost price plus some reasonable return; and this is the basis for the economists’ argument that for all minerals an approaching scarcity (hence lower grade ore, hence more expensive extraction costs) must be reflected in price.

 

But many factors can push a commodity price away from the ‘cost-plus’ price for long periods. Producers may accept disastrously low prices for long periods wishing to retain market share; or just hoping things will improve; while prices well above production cost can also last, due to difficulties of market entry for new producers, hoarding in expectation of still higher prices, or geopolitics of supply.

 

For oil, the latter cause of ‘price disequilibrium’ has been in operation since 1973.

 

In its early days, oil was a true commodity, and its price was indeed volatile (see graph in BP’s Statistical Review), with successive shortages, and times of over-supply, sending the price on a roller-coaster. As increasing numbers of new basins came on-stream, the problem became one of chronic over-supply. It took heroic efforts before pro-rationing, backed by US Federal mandate, was finally installed. 6  The days of ruinously low prices were over, and the ‘Seven Sisters’, in conjunction with Uncle Sam, set oil on a long period of tranquil markets, with price steadily decreasing as technology and scale were brought to bear.

 

The sequestration of oil company assets by host states, and the peak in US production, ended this idyllic state. The US was left with nothing to pro-ration, as US fields were running flat out, and the Seven Sisters were no longer in quiet competition, but at the mercy for much of their supplies from sellers newly aware of their position.

 

Exploration had already found the new oil in Mexico, China and Russia, and the entirely new basins of Alaska and the North Sea, and the high prices encouraged these supplies on-stream. But, crucially, because of geopolitics, oil was no longer coming from just the cheapest sources. Had the ‘Seven Sisters’ still been in command, oil would have mostly flowed from the cheap Middle East, with the more expensive sources largely left until later. But this did not happen, and some of the ‘scarcity-driven’ price rise (due to pumping intrinsically more difficult oil) occurred in the 1970’s.

 

The third lesson, therefore, is that part of the scarcity price signal has already occurred.

 

(Subsequently, flush production from the new sources more than satisfied world demand, and OPEC’s share fell. Saudi Arabia sacrificed its own production to hold the cartel together, until finally it could accept no further reductions and the price collapse of the mid-1980’s ensued. To-day those ‘new provinces’ are getting old, either near or past their peak production, and there is little in the way of newer provinces to take their place, except for Kazakhstan, which, in reality, is a very old province indeed).

 

(iv). Market ignorance.

 

Markets are not very knowledgeable. Were the dot.coms really worth a lot one year, and little the next; did Marconi change in intrinsic value almost overnight?

 

For oil, the ignorance of the market is appalling. If Chief Economists can show so little understanding of the business; if City of London analysts think ‘replacement of proved reserves’ is significant, and if Newsweek does not understand the difference between reserves and recoverable resource, what hope is there for the punters out there? Adequate price warning requires the market to know what is happening. Otherwise the price signals do arrive, but they come like a summer storm.

 

(v).  The price rises since January 1999 are due, in part, to scarcity.

 

Some of the ‘scarcity-driven’ price rise was taken in the 1970’s, but there is also an aspect of scarcity in recent price moves.

 

Currently (Spring 2002), OPEC has several million barrels per day of potential production in hand, while the former Soviet union (FSU) may be able to up its production by perhaps 3 million barrels per day over the next 10 years or so. But most of world production outside these two regions is already in decline, making these regions the primary market setters. It was the resource limit in non-OPEC, non-FSU conventional oil that allowed the OPEC quotas of recent years to stick (despite OPEC members cheating), and which led to the price rise from $10 to $30/bbl that started in 1999.

 

The latter led in turn to the European ‘Fuel Protests’ of 2000. Had the warnings the University of Reading passed to the UK government in 1998, of OPEC soon regaining control of the marginal barrel, been passed on to the UK Farmer and Freight lobbies, it is probable that the UK fuel protests would have been averted, or at least managed more rationally. (See

European 2000 Fuel Protests, below.) (top)

 

‘Oil Supply has little impact on GDP’

 

The UK fuel protests had at least one beneficial effect. Up till then the UK’s Department of Trade and Industry (DTI) was convinced that oil played only a minor role in the UK economy; the UK using less oil than previously, having switched to gas. 7  In many quarters the argument still holds, that, since oil is only a small part of GDP, price rises will be of little consequence. 8

 

The reality is very different.

 

It is true that oil is now a smaller percentage of the global energy mix than in 1973 (some 40% of traded energy to-day vs. 50% in 1973); and, because oil is also currently cheaper in real terms, its proportion of the global GDP is smaller still.

 

But to-days’ use of oil is greater in absolute terms (some 25 Gb to-day vs. 20 Gb in 1973), so Humankind is now more dependent on oil to do the many things our burgeoning population wants and needs. And as the fuel protests showed so graphically, transportation, now largely oil-based, is the lifeblood of modern society: in the protests the doctors and nurses couldn’t reach the hospitals, the food did not get to the shops, the schools closed. Society, deprived of transportation, without adequate time to adjust, collapses.

 

Humankind is in the process of replacing light oil that flows at great rates from single wells with oil obtained by digging up and processing large quantities of sand coated in modest quantities of heavy, degraded oil. That is, the end of conventional oil is the end of intrinsically cheap oil. To-day the ‘cheap’ oil may be priced at $25/bbl due to market control, and the ‘expensive’ oil at $18/bbl due to prime sites, cheap local energy and sunk costs; but as the world moves progressively from real $5/bbl oil to real $25/bbl oil we all lose out. Humankind becomes the poorer, and the world’s real GDP decreases.

 

And if the difficult oils cannot be brought on-stream fast enough, perhaps because of technical constraints, or because doing so would breach Kyoto limits by unacceptable amounts, then we face actual shortages. Of course, demand then falls to meet supply. But this is what recession (some predict depression, and some even worse) is all about, a world economy running at a significantly lower level. Facile arguments about oil’s current low proportion of global GDP are frighteningly naďve.

 

So much for generalities; what about the detail of the economists’ specific contention that a price rise will not be significant? As long as the oil price stays within a moderate range, this is true. Following the 1973 shock, the oil price was about $40/bbl in to-day’s money. This halted growth, but did not push the world into major recession. That only happened following the second shock, when the oil price, in the first half of the 1980’s, averaged around $60/bbl in to-day’s money. So as long as the world sees no shortage of oil, and the price stays below, say, $40/bbl, the impact will not be too great. 9

 

But shortage is shortage, and the succession of production peaks (non-OPEC conventional oil, all-world conventional oil, and ‘all hydrocarbons’) will move the world into very dangerous and totally uncharted economic waters. As the peaks roll by, bland assurances that oil ‘does not matter much’ will look foolish indeed. (top)

 

‘Increasing price accesses more oil’

 

A strong defence by economists is that price will solve the supply problem. 10

 

Higher price clearly does curb demand, and bring on more supplies, but in the latter case, the question is: By how much?

 

This is a numerical question, and is partly addressed in the University of Reading publication: Perspectives on the Future of Oil, Energy Exploration and Exploitation, Vol. 18, Nos. 2 & 3, pp 147-206, 2000; and the ODAC publication: Global oil and gas depletion: an overview. Energy Policy,Vol. 30, No. 3, February 2002 pp 189-205.

 

The availability of a mineral is often seen as a pyramid; a small resource of cheap mineral at the pyramid’s apex, and ever-larger resources of more expensive (typically, lower concentration) mineral as one descends within the pyramid.

 

As explained earlier, such a view is essentially correct for all the hydrocarbon resources combined (but where extraction technologies for some of these are not available, or at negative net energy cost). But it is decidedly not true for conventional oil, where the latter is defined by extraction technology. For conventional oil, there is no large base to the pyramid waiting to be tapped at marginal increase in cost. The oil-water contact defines what fields exist; the size distribution in basins dictates that only the large fields (almost all already discovered) contain significant oil; while the physics of oil entrapment in reservoirs, coupled with the technology specified, determine the proportion of oil-in-place that can be extracted. The ‘resources pyramid’ analogy is not correct for conventional oil.

 

In this respect, it is worth recalling that the job of oil exploration geologists, like Ivanhoe, Laherrčre, Campbell, and Hardman, is not just to identify a probable location of oil, but also to make a detailed financial case to persuade their Boards to drill. The latter decision depends critically on the cost of wells, and on the perceived future price of oil. All of these people have lived through times of both plummeting and soaring prices, so know in their bones that price can change the economic amount of oil in a reservoir, sending it to zero in a difficult reservoir when the global oil price is low, raising the amount when the oil price rises, or the engineers dream up a better extraction technology. So these geologists have an intimate feel, that their economist critics deny them, of what price and technology can do. The oil geologists’ experience leads them to conclude that the impact of price on the date of peak, though real, will not be large, primarily because most of the world’s oil is in large, known fields. (top)

 

The European 2000 Fuel Protests

 

Because it was an early manifestation of the coming resource limits, it is worth saying a few words about the European fuel protest of 2000.

 

Following a period of disastrously low oil price, when commercial companies were producing some their barrels below full cost, and national oil companies were putting far too little into their countries’ exchequers, OPEC decided to be rigorous about quota reductions. At that time, much of the financial community saw OPEC as a ‘non-cartel’, as an organisation where political differences, and a tendency to over-run quotas, would always prevent effective co-operation. Few seemed to realise that OPEC, like virtually all other commodity cartels, finds it difficult to stay together in an over-supplied market (like the late 1980’s, and much of the 1990’s), and easy to stay together when product is tight. Talking to the financial community about OPEC back then was like mentioning the Suffragettes: OPEC was universally seen as an organisation once important, but currently with little relevance.

 

So when OPEC decided on significant quota reductions, most of the financial community thought little of it, and the best current view was that the oil price would head further downwards, to $5/bbl, not up. 11

 

But reality intervened. The amount of non-OPEC oil available to compensate for the OPEC cuts was small, with nearly all non-OPEC, non-FSU oil production either in decline, or reaching plateau. Though the OPEC producers cheated on quotas quite substantially, as was expected, supply tightened, and the price rose roughly threefold to about $30/bbl.

 

Fishermen in France were the first to complain, seeing the cost of business hit; the views spread across Europe, including to UK farmers (who use low-tax fuel on-farm, so feel the price rise in full), and freight hauliers who could see rival companies on the continent using lower taxed diesel. Not a word in the entire debate mentioned resource limits, and in a re-run of the 1970’s, attention focussed instead on oil company profits (a foretaste of problems yet to come) and OPEC’s behaviour, but mainly, at least here in the UK, on the government tax take.

 

The latter is illustrated in the Figure below.

 

UK Fuel prices 1980-1999

 

[FIGURE 12:]  UK Petrol Prices: Fuel Cost, and Taxe

Data in pence/litre, real 1990 prices.

Upper lines: prices at the pumps; Lower lines; excluding taxes and duty.

Source: Booklet, UK Energy in Brief, DTI/National Statistics.

 

As this Figure shows, the UK government increased tax and duties on fuel as the underlying cost of fuel price fell dramatically from about 1985. These tax and duty increases (partly reflecting the ‘fuel price escalator’, put in place for CO2 reasons) were very large. They rose from about 100% of the basic cost of fuel in the 1980s to over 300% by the end of the 1990s. Consumers largely did not notice these tax hikes, as the pump prices changed relatively little. But once the OPEC quotas bit, and the government did not revoke the taxes, conditions were in place for the fuel protests.

 

The next time prices rise, the same culprits (OPEC, oil companies – they need to be beware of windfall taxes), and government will all again be blamed in error. What is required instead is a better understanding of the hydrocarbon resource base, and its capacity to deliver. (top)

 

References

 

  1. Numerous references. A key example was a meeting held at the IEA in 1997 to discuss the question of global oil resources. Speakers included Campbell and Laherrčre, Odell, Adelman and Lynch. Campbell and Laherrčre made the quantitative case based on Petroconsultants’ data. Odell said ‘now let’s look at some real data’, and used the 1980’s gains in proved reserves to argue for a world ‘running into oil’; Adelman said the oil resources were “unknown and unknowable”, but effectively infinite, so price could always turn resources into reserves; Lynch listed many failed forecasts from the past. At day’s end, the rapporteur, an American economist, summed up by saying ‘We’ve heard the geologists’ Chicken-Little views before; on-balance I go with the economists.’ [Chicken Little in the story cried: ‘The sky is falling!’] Incidentally, one fellow present, on hearing of the accuracy of Hubbert’s 1956 prediction for the US oil peak said: ‘Well, somebody had to guess it right’.

 

  1. See, e.g., P. Davies’ ‘Balanced View’ article, or W. Schollnberger’s submission to the European parliament. (both op cit.)

 

  1. This is a widely held view, for example the UK House of Lords Select Committee report (Feb., 2002, op. cit., p18) has: “ .. we accept .. that at some stage this century oil production will start declining. However, we go along with the majority view to the extent that we do not believe that this presents an immediate security issue of itself. … we should receive adequate warning of any shortage of oil through the normal mechanisms of the market – higher prices .. .”

 

  1. Many references, see, e.g., Refs. 7 & 8, below.

 

  1. The peak in conventional oil production is the beginning of the decline of availability of cheap oil. More expensive oil is there a’ plenty. The question is: at what rate can the more expensive oil be brought on-stream?

 

  1. D. Yergin. The Prize, Simon & Schuster.

 

  1. Discussion between the DTI and the ‘Oil Group’ at the University of Reading (including David Fleming). The DTI listened to geological resources argument, but made no comment, saying they had little knowledge in that area. Where they felt on solid ground was in strongly denying Reading’s assertion that oil supply was important. (One of the DTI economists present has since joined the Treasury, the other gone to the antipodes.)

 

  1. For example, Newsweek, April 8th – 15th, 2002, p34, has: “The United States is also increasingly immune to oil shocks. In 1980, when prices shot up due to the Iran-Iraq war, the United States spent 8 percent of GDP on oil, and the shock produced a deep recession. In 1999, prices spiked by a similar magnitude, but the United States had cut oil costs to 3 percent of GDP, and many economists believe it’s no accident that the recession was surprisingly mild.”

 

  1. See, e.g., papers by Professor Oswald of the UK, and from Los Alamos(?) of the US, correlating past recessions with energy prices, driven by oil prices. (But we are surprised at not having read of more tangible linkages than correlation. Access to company internal reporting must be able to tie changes in ‘primary energy user’ companies activity to external energy costs; and this could be analysed for indicative companies in selected sectors, with additional analysis for ‘downstream’ companies dependent on the primary companies, in order to make the energy-price/recession mechanism explicit. More fundamental work would also seem possible, tracking the effect of increased energy costs in terms of reductions in Humankind’s ‘energy slaves’, and hence global loss of productivity, hence real GDP loss.)

 

  1. This refers to increases in supply, but the economists also look at demand, e.g., Newsweek, April 8th – 15th, 2002, p34 has: ‘ “You know, it’s hard to have a supply crisis to-day”, says Adam Sieminski, a strategist for Deutshce Bank. The energy market works: if prices are allowed to go up, demand goes down. Crisis averted.’

 

  1. The Economist, cover article: ‘Drowning in Oil’, 1999(?). Oil company CEO’s were quoted as seeing $5/bl well on the cards.

Global depletion of the World’s conventional oil and gas is set to cause major near-term supply problems.

Hydrocarbon production is fixed mainly by past discovery. Key facts for conventional oil are:

U.S.A     –  Discovery peaked in the 1930s; production in 1971.

–  The U.S. has now burnt between half and 3/4 of its original endowment.

Go to my blog to know the major ways in which oil is consumed in the US.  It can be simply listed as below:

  1. Transportation: All the modes of transportation irrespectively use oil-based fuels.  The automobiles on the road are increasing day by day.  This fact is true for other modes too.  Research reveals that the US alone consumes 14.02 million barrels of oil per day towards transportation.
  2. Industries: Industrial growth has swallowed most of the usable land and water resources.  In most nations industries are the second major consumers of oil fuels.  The impact of depleting oil would hamper the growth of these industries and affect production, employment and cost of living factors too.
  3. Residential: Think about the propane used in homes for cooking, heating, etc.  This too comes under the category of depleting resources only.   In the countryside, the usage is still high owing to agricultural operations.
  4. Electrical: For generating one type of fuel, a depleting source of another fuel is used constantly.  Most electrical power plants around the world need oil-based fuels.

U.K.      –  Discovery peaked in the early 1970s; production in 1999.

–  The U.K. has burnt about half its original endowment.

 

World   –  Discovery peaked in the 1960s; to-day only 1 barrel of oil is found in new fields for every 3 barrels consumed.

–  World production will peak 2010 to 2015; non-OPEC production will decline earlier.

–  The World has burnt between a third and a half of its original endowment of conventional oil.

 

In total, over 50 countries are past their resource-limited conventional oil production peak, and are in production decline. The global regions of Europe, Asia-Pacific and North America (excluding tar sands) are all in production decline.

 

For conventional gas, depletion of the original endowment is less advanced. The World, in addition, contains large stores of non-conventional oil and gas. But the total production of all hydrocarbons (oil plus gas, both conventional and non-conventional) is likely to peak fairly soon, probably around 2015.

 

These limits to global hydrocarbon availability will have economic and political impacts of great consequence. This site gives independent information on the subject, and discusses issues that society will face

ASPO TUTORIAL

The Association for the Study of Peak Oil (ASPO) is a loose association of European independent institutes and governmental and academic bodies who liaise on questions related to global oil depletion and its effects.

ASPO precisely originated in Germany in the year 2000 and Dr. Campbell laid the foundation.  It facilitated the networking of scientists who worked in the field of research related to oil resources.  Initially, the association started its work by sending weekly newsletters to people those who were interested.  The next major step was conducting the first international workshop on oil depletion in Sweden.  The Swedish media rendered good participation in popularizing the efforts taken.  Check my source to know more on this.  From then on every year, workshops were held in major European cities to create awareness about depleting oil resources.  Journalists and celebrities eagerly participated in the shows.  Though the network is an informal one, it has established its firm voice on the depleting oil concerns.  The association initially had to face all forms of legal, commercial and political constraints.  However, the problem of depletion is not an insignificant one.  Its impact on the industries and economy of the modern world in unimaginable.  Hence in spite of all the constraints the association has grown steadily in its functioning.  Presently it is well established with an international board represented by a president, vice president and close to 7 members from various nations.

Dr. Campbell has written the following eight-part Microsoft ‘Powerpoint’ tutorial, and the text has been reviewed by a number of the ASPO membership, and by ODAC.

You may download all or part this tutorial, and, if required, further distribute to others. It is a condition of downloading all or part of this tutorial that further distribution be free of any charge (except for genuine costs incurred in the processes of reproduction or distribution). Acknowledgment of Dr. Campbell or ASPO as the original source of the tutorial is requested.

Updated: 5/April/2002

ASPO tutorial downloads

To download and save these files right click on your chosen link below and select, in Netscape:”Save Link As”, in Internet Explorer: “Save Target As”.

 

 

 

Tutorial No 1 Powerpoint (.ppt) file (2.28 Mb, about 10 minutes to download at 56k)

this is a fully editable version of the tutorial, complete with all notes

 

Tutorial No1 Acrobat (.pdf) file (134 kb, about 50 seconds to download at 56k)

this has all the slides and, where appropriate, the accompanying notes

 

More tutorials to come…………tba

PAST OIL FORECASTS

Contents: Introduction, Conclusion, Table of Forecasts, Notes to Table, Discussion of The Limits to Growth, References

Introduction

One of the main reasons that people, oil experts in particular, are disinclined to believe the situation forecast by current global oil depletion calculations is their conviction that past oil forecasts have been wrong, particularly those made in the 1970’s. This view sees the present calculations as just another example of ‘crying wolf’. 1

If this oil depletion issue is not handled properly, it will lead to a huge war among nations.  Hence this issue is of global importance to ensure world peace and harmony.  This is the best site to get information about the oil depletion issue.  Read on to know full details and the implications of the issue.

On examination, it turns out that most reputable oil forecasts made in the 1970’s were substantially correct.

Oil forecasts made in the 1970’s nearly all fit into one of four classes.

– General, non-quantitative, fears of global supply scarcity, based on the experience of shortages that occurred during the oil shocks.

– Predictions of global oil would run out (i.e., reach exhaustion) in 30 years or so, based on the then-proved oil reserves of about 30 years’ worth of current production.

– Predictions of oil global exhaustion in a much shorter timescale, based on the then proved oil reserves (or some assumed larger amount), but with growth assumed to rise at a fast exponential rate, as had been the case until fairly shortly before the shocks.

– Predictions that global oil would reach a production peak (very different to oil running out) around the year 2000.

It was this fourth view that characterised the forecasts from nearly all reputable organisations at the time, and which was also reflected in many textbooks and monographs on energy published at the time (see a summary of some of these in the Table of Forecasts, later in this section).

This fourth, ‘production peaking’, forecast was based on:

– the then well-accepted estimate for the world’s conventional oil ‘ultimate’ (i.e., original endowment of recoverable oil), of roughly 2000 Gb;

– the knowledge that global production peak would not occur until something like half of this, 1000 Gb, had been used;

– the knowledge that only ~300 Gb had been consumed at that date;

– the assumption that production would follow an ‘unrestricted’ logistic (‘Hubbert’) production profile.

On this basis, the global midpoint was calculated to lie around the year 2000, (a precise calculation by Hubbert giving the date as 1996).

In the event, global demand was substantially curtailed by the price rises of the oil shocks, and an unrestricted logistic profile was not followed; with the result that the estimate of conventional ultimate of around 2000 Gb (still to-day, for this purpose, the best estimate to use) simply moved the global conventional oil production peak to around 2010. This is illustrated in the following Figure.

[FIGURE 11: ] 1970’s ‘Logistic Curve’ Forecast, and Actual Demand

This graph is for ‘narrowly-defined’ conventional oil (i.e., it excludes oil with API < 17.5, oil in waters deeper than 500m, oil in polar regions, and NGLs).

The graph shows:

– Global oil discovery by year (finds prior to 1930 shown in 1930);

– An unconstrained logistic (‘Hubbert’) curve with an area of 1800 Gb;

– Actual production to 1999;

– Estimated future production, also with an area of 1800 Gb. (The short

plateau in production ( ~2000 to 2008) is based on the assumption that price will curb demand.)

As can be seen, the high prices from the oil shocks lopped the top off the unconstrained curve, and shifted the date of peak by about 10 years.

Source: C.J. Campbell.

Conclusion

It is true that there have been calculations in the past warning of oil’s approaching scarcity that turned out to be misleading. Some, like many of those enumerated by Butler of the DoE, correctly indicated that production from a particular region or country was soon to decline, but overlooked the scope for new discoveries elsewhere. Other have been clearly erroneous, such as a CIA forecast from the 1970’s that was predicated not on resource limits, but on assumed structural decline in the Soviet Union; or an early forecast by the UK’s UKOOA that was based only on areas so far licensed. Still others, as mentioned above, predicted oil exhaustion based on only proved reserves, or assumed the continuation of very high growth rates in demand.

But, as pointed out above, nearly all the forecasts made by reputable organisations in the 1970’s combined mid-point peaking arguments with realistic estimates for the world’s original endowment of conventional oil. Hence these forecasts gave, in quantitative terms, exactly the same warnings of the ‘wolf’s’ approach as given by to-day’s oil depletion calculations: that global conventional oil production will peak when roughly 1000 Gb has been produced.

These are warnings it would be wise to heed.

Table of Forecasts of World Oil Supply

Date of Forecast

Source

Forecast Date of Conventional Peak

Assumed Ultimate*

Notes

1972

ESSO

“Oil to become increasingly scarce from about the year 2000.”

2100 Gb

[1]

1972

Report for the UN

Confr. on Human

Environment

“ likely that peak production will have been reached by the year 2000.”

2500 Gb

[2]

1974

SPRU, Sussex

University, UK

n/a

1800 – 2480 Gb

[3]

1976

UK Dept. of

Energy

Peak: “about .. 2000.”

n/a

[4]

1977

Hubbert

Peak: 1996.

2000 Gb (Nehring)

[5]

1977

Ehrlich et al.

Peak: 2000.

1900 Gb

[6]

1979

Shell

“.. plateau within the

next 25 years.”

n/a

[7]

1979

BP (Oil Crisis …

again?)

Peak (non-communist world): 1985.

n/a

[8]

1981

World Bank

“.. plateau around the

turn of the century.”

1900 Gb

[9]

1995

Petroconsultants

Peak: 2005.

1800 Gb, (excl. NGLs)

[10]

1997

Ivanhoe

Peak: 2010.

~ 2000 Gb

[11]

1997

Edwards

Peak: 2020.

2836 Gb

[12]

1998

IEA: WEO 1998

Peak: 2014.

2300 Gb refnce. case

[13]

1999

USGS (Magoon)

Peak: ~2010.

~ 2000 Gb

[14]

1999

Campbell

Peak: ~2010.

2000 Gb (incl. polar,

deep)

[15]

2000

Bartlett

Peak: 2004, or 2019.

2000, or 3000 Gb

[16]

2000

IEA: WEO 2000

Peak: “Beyond 2020.”

3345 Gb (from USGS)

[17]

2000

US EIA

Peak: 2016 – 2037.

3003 Gb (from USGS)

[18]

2001

Deffeyes

Peak: 2003 – 2008.

~ 2000 Gb

[19]

2002

Smith

Peak: 2011 – 2016

2180 Gb

[20]

2002

‘Nemesis’

Peak: 2004 – 2011

1950 – 2300 Gb equiv.

[21]

* Gb = billion barrels.

Notes to Table

[1]. The Ecologist. ‘A Blueprint for Survival’, Penguin, London, 1972; see pp 18 and 130. This report looked at the impact of continued exponential demand growth on oil’s lifetime, but also presented the ESSO forecast given here. (As mentioned above, the calculations of the 1970’s did not foresee the global demand reduction from the oil shocks, so assumed production would rise to peak at about 100 million barrels per day. This put the conventional oil peak earlier than if based on actual demand.)

[2]. B. Ward & R. Dubos, ‘Only One Earth: the Care and Maintenance of a Small Planet, Penguin Books, UK, 1972, p 184. This was a landmark report. Its status was ‘an unofficial report commissioned by the Secretary-General of the United Nations Conference on the Human Environment’, Stockholm, 1972. A committee of 158 extraordinarily eminent ‘scientific and intellectual leaders from fifty-eight countries served as consultants’ in the report’s preparation. The full extract (p184) is: “One of the most quoted estimates for usable reserves [of oil] is some 2,500 billion barrels. This sounds very large, but the increase in demand foreseen over the next three decades makes it likely that peak production will have been reached by the year 2000. Thereafter it will decline.”

[3]. H.S.D. Cole et al., Eds. Thinking about the Future: A critique of ‘The Limits to Growth’, Science Policy Research Unit, Sussex University, Chatto & Windus, 1974. This quotes a variety of estimates of ultimately recoverable oil reserves made mostly in the 1960’s, including those of Hubbert in 1969 and Warman in 1971.

[4]. W. Marshall. Energy research and development in the United Kingdom, Energy paper No. 11, UK Department of Energy, 1976; p 12.

[5]. M.K. Hubbert. Project Interdependence: U.S. and World Energy Outlook Through 1990. Congressional Research Service, Washington, 1977, p 624; quoted in: ‘The Global 2000 Report to the President’, Penguin’, 1982, p 353. Hubbert took Nehring’s world ultimate oil reserves estimate of 2,000 billion barrels, and assumed that oil production would be limited only by resource availability. On this basis, he calculated that world production would reach a peak at about 100 Mb/d, around the year 1996.

[6]. P.R. Ehrlich, A.H. Ehrlich and J.P. Holden. EcoScience: Population, Resources, Environment. W.H. Freeman, San Francisco, 1977, ISBN 0-7167-0567-2, pp 400-404. A widely-quoted textbook. 2 The authors calculated a ‘Hubbert’ peak based on the ‘high-estimate’ for global conventional oil endowment of 10,900 trillion MJ (~ 1900 Gb). (Interestingly, the book also draws attention to the then-controversy which led to the USGS revising down, by a factor of 3, its estimates for US undiscovered recoverable oil and gas.) [As a side comment, it is probable that the famous Simon vs. Ehrlich, Harte and Holdren ‘commodity price bet’ failed in large measure because of the more than two-fold fall in real-terms oil price (reflected also in other energy prices) between 1980 and 1990; energy being a large component of mineral extraction costs. Since the high price of 1980 was driven, fundamentally, by the US oil peak nearly a decade earlier, the conclusions generally drawn by economists from the outcome of that bet probably need revision.]

[7]. A.F. Beijdorff. ‘Energy Efficiency’, Group Planning, Shell International Petroleum Company, London, April 1979; p 1. (Current modeling suggests the world peak may be fairly sharp, rather than the long plateau suggested in this Shell study.)

[8]. BP report Oil crisis … again ?, published in 1979. In terms of UK views, this report is one of the more significant of the examples of ‘failed’ forecasts that people (e.g., J. Mitchell, P.R. Odell) choose to quote. It indicated that non-communist world oil production would peak in 1985. This forecast bears examination. The first step is to add back in communist production. Then, like other forecasts of that time, the report assumed rising production when high prices were in fact reducing demand. Adjusting for this, and for the subsequent increases in production of NGLs and non-conventional oil, makes the resulting prediction look reasonable; forecasting a fall in global conventional oil production from around the year 2000.

[9]. The World Bank. Global Energy Prospects, World Bank Staff Working Paper No. 489, 1981. See pp 37, 46. The report said: “The bulk of the world’s reserves, principally in the Middle East, was built up in most part during the 1960s. Despite increased incentives to explore for oil provided by higher prices, conventional oil production is projected to reach a plateau around the turn of the century.” (Note that by the early 1980’s, the impact of the demand reduction was becoming visible, and hence the calculated global peak date, for a given assumed ‘ultimate’, falls later.) Elsewhere, p 46, this quotes ultimate recoverable oil reserves as being 1,900 billion barrels, and says: “According to some estimates, the world’s ultimate recoverable gas reserves are at least equal to [those of oil]”.

[10]. C.J. Campbell and J.H. Laherrère. ‘The World’s Supply of Oil, 1930 – 2050’. Report from Petroconsultants S.A., Geneva, 1995. (See also: C.J. Campbell & J.H. Laherrère, The End of Cheap Oil, Scientific American, March 1998, pp59-65.) This is one of the more detailed studies to date, and is the basis for the information provided in this website. As explained in earlier sections of this website, this study used full access to the standard industry oil resource database to carry out analyses of hydrocarbon reserves, with those in particular countries requiring adjustment. It also used a range of statistical approaches to assess the yet-to-find, and the logistic model to generate future hydrocarbon production. As critics have pointed out, this study did not explicitly include the effects of technology or price on the assessments of regional and global ‘ultimates’. But the authors maintain, with considerable supporting evidence, that price and technology have only a limited effect on the size of these ‘ultimates’, at least as they affect calculations of production peak date.

[11]. L.F. Ivanhoe. Updated Hubbert Curves Analyze World Oil Supply. World Oil, Vol. 217, No. 11, November, 1996, pp 91-94. Used USGS discovery data, and the fact that production has to largely mirror discovery. A clear warning of the problems to come.

[12]. J.D. Edwards. Crude oil and alternative energy production forecasts of the Twenty-First Century: The end of the Hydrocarbon Era. AAPG Bulletin, vol. 81 pp1292-1305, 1997. A reasonable study, but limited by lack of access to industry data, so arrives at a high global ultimate.

[13]. The International Energy Agency ‘World Energy Outlook’; published Nov. 1998; ISBN 92-64-16185-6. Used the 1994 USGS mean estimate for global conventional ‘ultimate’, of 2300 Gb, for its reference case. It also used a low case of 2000 Gb, (based on the Petroconsultants report) and a high case of 3000 Gb (based perhaps on Odell’s data). The rate of discovery that would support the high case ‘ultimate’ was not examined. The study did not specifically account for the impact of likely price and technology developments, though it did examine the scope for non-conventional oils to come on-stream.

[14]. L. Magoon. USGS Open File Report, 00-320 Version 1. The main USGS 2000 survey (Ahlbrandt et al.) examined total oil available (basin ‘oiliness’), but did not look in detail at the rate at which these resources can be discovered. Magoon of the USGS endorsed data in the Scientific American article by Campbell & Laherrère on the rate at which the resources can become available.

[15]. C.J. Cambpbell. Oil Reserves and Depletion. PESGB Newsletter, Petroleum Exploration Society of Great Britain, March 1999, pp 87-90. A partial update of the 1995 Petroconsultants report. It analysed polar & deepwater oil separately, but added these back in the full analysis.

[16]. A.A. Bartlett. An analysis of US and world oil production patterns using Hubbert-style curves. Mathematical Geology, 32/1, pp1-17, 2000. Bartlett does not have access to the industry data, so predicted peak based on these two assumed values for the conventional ‘ultimate’.

[17]. The International Energy Agency. ‘World Energy Outlook’, 2000. Used the USGS 2000 survey mean oil-plus-NGLs ‘ultimate’, including reserves growth, of 3345 Gb. The IEA state that such data are “authoritative”, but, as mentioned above, the data pay no attention to the rate that such oil can be discovered. Note that USGS 2000 data include a large allocation for reserves growth, contrary to the decision of the previous survey. The USGS team has subsequently re-evaluated its approach of basing global reserves growth on the US’ experience.

[18]. US Energy Information Administration website, 2001. Uses the USGS 2000 mean ‘ultimate’ of for conventional oil (excluding NGLs, but including reserves growth), of 3003 Gb. If the world decline rate is taken as 2% p.a., this puts peak at 2016. If a much steeper (probably unrealistic) decline rate of 10% p.a. is assumed, this puts the peak later, at 2037.As with the IEA 1998 World Energy Outlook above, this study uses USGS 2000 survey results in an uncritical manner, both on the rate of discovery of oil, and on the scope for reserves growth outside the U.S.

[19]. K.S. Deffeyes. ‘Hubbert’s Peak’, Princeton University Press, 2001; ISBN 0-691-09086-6. Uses a range of statistical techniques, based, essentially, on the discovery trend curve indicating the likely ‘ultimate’. This study has no direct access, we believe, to the industry database.

[20]. M.R. Smith. Analysis of Global Oil Supply to 2050. Consultancy report from The Energy Network, March 2002. Production estimates are based on detailed country by country exploration analyses, and use individual depletion curves to meet calculated ‘ultimates’, rather than simple ‘mid-point peaking’. Includes data on the non-conventionals, and expected oil price forecasts. Global ultimate is 2180 Gb, making the global peak in 2011 if global demand is assumed to rise by 2%/yr.; or 2016 at 1%/yr. growth.

[21]. ‘Nemesis’, in a contribution in ASPO/ODAC Newsletter, Issue 15, March 2002. This study generates a range for the dates of peak production, based on cumulative production to-date; plus reserves and ‘net discovery’ data from Campbell and BP’s Schollnberger. This approach avoids the need to use specific estimates of ‘ultimate’, but yields the approximate ‘equivalent ultimates’ listed in the Table.

The ‘Club of Rome’ Report: Limits to Growth

Because of its importance in many people’s perception of resource limits, it is useful here to also discuss the Club of Rome report: The Limits to Growth, (D.H. Meadows, D.L. Meadows, J. Randers and W.W. Behrens III, Earth Island, 1972.)

This report was a key contributor to the 1970’s understanding that resources are finite; that man’s use of these could reach limits within comprehensible time spans; and that the complex interactions between resources, population, capital and pollution demanded system thinking if a proper understanding is to result.

Prior to the report, oil use had been growing at around 7% per year, and the calculations of the Club of Rome correctly showed that if this sort of growth rate were to continue, a resource base of almost any feasible size would be exhausted in a surprisingly short time-span. The lesson, still true today, is that unfettered exponential growth is unsustainable.

The authors gave a table (p 58) listing the then-current proved reserves of various minerals, including oil at 455 billion barrels. The authors recognised that the figure they gave for each mineral represented only the resource discovered so far, and suggested that a larger amount, up to perhaps six times as much, might represent the total useful quantity of that mineral. (In oil’s case, co-incidentally, six times 455 Gb is roughly correct for conventional oil’s original endowment, i.e.,‘ultimate’).

But the authors made no use of these current resource numbers in their modeling. Instead they assumed, in their ‘standard computer run’, that all non-renewable resources, lumped together, had a resource base in 1970 of 250 years’ supply at 1970 rates, (p 126). The standard run then showed that society would collapse in less than a hundred years due to resource depletion, itself driven by:

– population growth,

– compounded by an increasing per capita use of non-renewable resources,

– and further compounded by the assumption that the material capital to extract the

resources increases as the resources themselves are depleted.

Finally a point is reached where too little capital is left for future growth, as investment cannot keep up with depreciation (p 125), and the industrial base collapses, taking food and service production with it. If the authors doubled the resource base (p 127), society still collapsed, now primarily due to pollution limits, but also to severe restraints on resource availability.

Interestingly, in the sequel: Beyond the Limits (D.H. Meadows, D.L. Meadows, J. Randers; Earthscan, 1992), estimates are given for oil’s ultimately recoverable reserves (as opposed to then-current proved reserves given in the previous book), an acceptable range of 1,800 – 2,500 billion barrels (Table 3-2, p 71). But the authors appeared unaware of the Hubbert ‘peaking from the mid-point’ argument.

Overall, the key perceptions about the Club of Rome’s report (despite the details of its simulations) are that, since no major resource shortages have appeared, the report must be fundamentally flawed; that forecasting resource limits is a fool’s game; and that man’s ingenuity and skill will always overcome the outdated Malthusian nightmares of resource depletion. The report is due for re-consideration.

References

1. Numerous references. Recent ones include: Lord Lawson to a British meeting of energy economists; and BP’s Professor Peter Davies in the 2002 UK House of Lords report (op. cit., p 79).

2. Other influential books from the 1970’s, at least on this side of the pond, include:

– G. Foley, with C. Nassim. The Energy Question, Penguin Books, Middlesex, ~1975. This contains a fascinating discussion of the then-generally available data on oil resources; including an early understanding of apparent discrepancies in the data from Professor Odell.

– J.G. McMullan, R. Morgan and R.P. Murray. Energy Resources and Supply, Wiley, 1976. This has an excellent graph, Figure 1.3, showing the possible future production from a wide range of fuels, including fission and fusion. For conventional oil it shows a peak soon after the year 2000. (Professor John McMullan is now at Ulster University, and was Chairman of the DTI’s ‘Foresight Programme’ Energy Futures Task Force);

– G. Leach et al. A Low Energy Strategy for the United Kingdom, Science Reviews, London, 1979, ISBN: 0-905-927-20-6. Page 9 has: “Forecasts show energy needs rising implacably, with widening energy gaps appearing around the turn of the century as oil and gas production begin to decline.” (Gerry Leach is now with the Stockholm Environment Institute, and is based in London.)