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Peak Oil

In 1956, Shell Oil geologist M. King Hubbert presented a paper at an American Petroleum Institute conference that observed that resource extraction tended to follow a logistic curve (similar to a bell-shaped curve), and asserted that US petroleum production would peak in the early 1970s.

This is the concept of peak oil. Although half the resource would still be available after the peak, the inability to satisfy existing and new demands could result in a disruptive transition to new energy sources (in the best scenario) or conflict over access to a shrinking resource (in the worst case scenarios).

As shown in the figure below, Hubbert's predictions for conventional oil production in the lower 48 states based on a 200 billion barrel ultimate resource fit very closely to actual production over the next 60 years.

However, with the addition of production in Alaska (which began in earnest in the mid 1960s and grew rapidly with the opening of a the Trans-Alaska pipeline in 1977), a significant growth in natural gas plant liquids production (which were insignificant in 1956), and, most notably, the explosion of tight oil production in the early 2010s, total US liquid fuels production far exceeded Hubbert's expectations. As with Malthus's predictions, technological change and resource substitution changed the math that was the foundation of Hubbert's assumptions. Whether the optimistic EIA models prove to be more aligned with the ultimate reality remains to be seen.

In 1969, Hubbert made a similar projection for a world production peak between 1990 and 2000 based on ultimate global production of 1.35 and 2.1 trillion barrels, respectively. In this case, the fit is much weaker, with the geopolitical oil crisis and economic downturn of the early 80s a clear deviation from the logistic curve. While there was a leveling of demand in the late 2000s that led some catastrophists to assert that the peak had been reached, production resumed increasing in the 2010s. Whether this is a trend or transient remains to be seen.

The combination of petroleum dependency and uncertainty about supply has given rise to a cottage industry in books and conferences dealing with the concept of peak oil. Notable books on the subject and its social effects include Deffeys (2005), Kunstler (2005), Rubin (2009) and the websites for the Association for the Study of Peak Oil and Gas (apousa.org) and The Oil Drum (www.theoildrum.com).

Smil (2010, 55-78) stands as one of the most articulate and well-researched skeptics of the peak-oil hypothesis, and notes that the concerns about the exhaustion of oil resources have been present from the beginning of the commercialization of oil in the late 19th century. Regardless, the fairly common consensus is that fossil fuels in general and petroleum in particular are finite resources. So the question is less about whether there will be a peak, than when it will occur and, more importantly, how humanity will adapt when that peak occurs.

Cheap oil has facilitated cheap transportation, which in turn has facilitated vast spatial growth and decentralization in the United States. In that way, oil is embedded in the spatial structure of the US. The multi-trillion investment in vehicles, and the built environment means that undoing that embeddedness will not be easy or painless. In addition, with the rapid spread of development and petroleum-dependent lifestyles around the globe (especially in highly-populous India and China), the potential for violent contention for dwindling petroleum resources poses significant concerns for the future.

The most significant characteristic of petroleum-based fuels is their liquid state. This offers the same unparalleled advantage in density and ease of handling that made gasoline dominant over other power sources at the dawn of the automobile age. Substitutes are available, but they are not as cheap or easy as oil was in its heyday.

EROI

All energy sources require an investment of energy to extract a larger amount of energy and Energy Return on Energy Invested (EROEI or EROI) is used in this paper to evaluate the actual amount of energy available from a resource after the energy investment needed to exploit that resource is subtracted. EROI is a ratio of energy invested to energy gained, with higher values generally being considered preferable. The term EROI appears to originate with Cleveland et al (1984) although the concept dates back at least to Hall (1972). The concept can also be applied to larger biophysical and economic perspectives.

Despite the increasing prominence of life-cycle energy analysis for specific commodities and products, Murphy and Hall (2010, 109) note that there has been a surprisingly small amount of peer-reviewed research on EROI since the heyday of federally-funded American energy research in the 1970s and early 1980s. As with all life-cycle evaluations, differing decisions of where to set the boundaries of analysis can result in significantly different results. In addition, the complexity and opacity of the energy industry make it largely impossible to set definitive, exact values of EROI for any specific energy source. Nevertheless, it seems fair to assert that:

• High EROI has been one of the principle advantages of fossil fuels
• EROI is declining for fossil fuels (diminishing returns)
• The comparatively low EROI for renewables is a fundamental factor limiting their adoption thus far

Murphy (2011) asserts that concern should be focused as EROI starts to fall below 8. Above EROI of 8, the amount of energy needed to get more energy is fairly small, so the difference between and EROI of 80 and 40 is not that great in practical terms (2.5% vs. 1.2%). However, at an EROI of 2, half your energy is being spent to get more energy, which radically changes the economics and energetics of an energy-dependent society.

Given these caveats, EROI values published by Murphy and Hall (2011), with others as noted, are summarized in the table below: