Feature
Peak hour
by Andrew Janes
Should we heed warnings that the oil age is coming to an end?
For most of us, the recent high oil prices mean nothing more than forking out a few extra bucks at the petrol station, but for Robert Atack, a 47-year-old builder from the Kapiti Coast, they are the harbinger of a global apocalypse.
Atack, who admits that he is a glass-half-empty type of guy, foresees a future in which skyrocketing oil prices lead to the breakdown of international trade and to conflict as states compete for dwindling oil stocks. For the past few years, Atack has been issuing dire warnings to anyone who’ll listen. In a recent letter to Nandor Tanczos, Atack castigated the Green MP over the birth of his daughter, calling him irresponsible for bringing a child into a world on the verge of collapse.
Atack is at the extreme fringe of a growing movement known as “peak oil”. Led by retired Irish oil industry geologist Colin Campbell, peak oil theorists contend that the oil age is rapidly coming to an end. If we don’t switch to alternative energy sources soon, their argument goes, dwindling oil supplies and rising prices will result in a global economic slowdown, which will make the 1970s oil shocks look minor in comparison.
The peak oil movement traces its lineage back to American oil geologist M King Hubbert. In 1956, Hubbert published a graph predicting that US oil production would peak in the early 70s. Although ridiculed at the time, Hubbert’s predictions subsequently proved correct, forcing the US to become reliant on overseas oil.
A few years ago, when the oil price was as low as $US10-12 a barrel, Campbell and his fellow travellers were similarly derided. But with current oil prices currently approaching $US60 a barrel, the world is suddenly taking notice. The Wall Street Journal recently published a major piece on peak oil and in the past year Campbell has spoken before a joint committee meeting of the British House of Commons, addressed a group of J P Morgan Chase & Co investors and been visited by officials from Swedish auto manufacturer Volvo.
Norwegian Kjell Aleklett is the president of the Association of Peak Oil (ASPO), a network of academics, geologists and ex-oil industry people. On the line from Uppsala University in Sweden, where he is a professor of physics, Aleklett is keen to distance ASPO from those on the doomsday fringe of the movement. “There’s no cause for panic,” he says. “It’s about opening our eyes so we can make a smooth transition [away from oil to other energy sources].”
Aleklett reckons that oil production in 2020 will be about the same as it was in 2000 and somewhere in the middle there will be a peak. But, although production remains relatively static, increasing demand, especially from the rapidly growing Chinese economy, will push up prices.
“The US Energy Department’s Energy Information Administration is saying that, in the future, oil production must come up to 120 million barrels a day to meet rising demand. But I’m saying that’s just not possible.”
Aleklett takes issue with the long-range forecasts coming out of organisations like the US Energy Department and the Paris-based International Energy Agency, which are used by governments around the world to inform policy.
The IEA’s just-released 2004 World Energy Outlook forecasts worldwide oil demand growth of 1.6 percent a year, reaching the 120 millon barrels-a-day level by 2030. Despite its prediction that oil prices will peak this year and then decline, the IEA is confident that production can keep up with demand without spiralling prices if the necessary investments are made.
But Aleklett says that expecting prices to stay down in the long term is akin to believing in Santa Claus. $US60 a barrel is a realistic long-term oil price, he says.
Part of the problem, he explains, is that the data available on oil reserves and production estimates is not very reliable. “For the North Sea [oil fields], the data is beautiful. But it’s not transparent in the Middle East. It’s very hard to get data. Saudi Arabia, for example, considers [the size of its oil reserves] a state secret.”
Aleklett was in Abu Dhabi in the United Arab Emirates recently and likens it to a gold-rush town in the 19th century. “They don’t want to increase production too much because they want to protect their reserves for coming generations. Iraq is probably the only country in the Middle East that can push production up significantly if they can get stability.”
The IEA and the US Department of Energy are also overly optimistic about how much more oil can be extracted from existing fields and the chances of finding new ones. “With improving extraction technology,” says Aleklett, “they can probably keep supply constant, but you need to find new fields for production to go up and that’s not likely.”
Governments, the US in particular, don’t want to to face up to the fact that there might not be enough oil to fuel growth. “If the US just increased its taxes on petrol to European levels, demand would drop and we wouldn’t have a problem. But what US President is going to raise petrol taxes?
“What’s really needed is a completely independent investigation of the situation.It should be handed to the UN – the same as with climate change.”
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