The Coming Decline of Oil
by Lester Brown, Washington, D.C 
on 03.16.07
Oil has shaped our twenty-first century civilization, affecting every facet of the economy from the mechanization of agriculture to jet air travel. When production turns downward, it will be a seismic economic event, creating a world unlike any we have known during our lifetimes. Indeed, when historians write about this period in history, they may well distinguish between before peak oil (BPO) and after peak oil (APO). (See also see Chapter 2, “Beyond the Oil Peak,” Plan B 2.0: Rescuing a Planet Under Stress and a Civilization in Trouble, available for free online.)
One way the oil prospect can be analyzed is by separating the world’s principal oil-producing countries into two groups—those where production is falling and those where it is still rising—is illuminating. Of the 23 leading oil producers, output appears to have peaked in 15 and to still be rising in eight. The post-peak countries range from the United States (the only country other than Saudi Arabia to ever pump more than 9 million barrels of oil per day) and Venezuela (where oil production peaked in 1970) to the two North Sea oil producers, the United Kingdom and Norway, where production peaked in 1999 and 2000 respectively. U.S. oil output, which peaked at 9.6 million barrels a day in 1970, dropped to 5.4 million barrels a day in 2004—a fall of 44 percent. Venezuela’s output has dropped 31 percent since 1970.
The eight pre-peak countries are dominated by the world’s leading oil producers, Saudi Arabia and Russia. Other countries with substantial potential for increasing production are Canada, largely because of its tar sands, and Kazakhstan, which is still developing its oil resources. The other four pre-peak countries are Algeria, Angola, China, and Mexico.
The biggest question mark among these eight countries is Saudi Arabia. Its production technically peaked in 1980 at 9.9 million barrels a day and output is now nearly 1 million barrels a day below that. It is included as a country with rising production only on the basis of statements by Saudi officials that the country could produce far more. However, some analysts doubt whether the Saudis can raise output much beyond its current production. Some of its older oil fields are largely depleted, and it remains to be seen whether pumping from new fields will be sufficient to more than offset the loss from the old ones.
This analysis comes down to whether production will actually increase enough in the eight pre-peak countries to offset the declines under way in the 15 countries where production has already peaked. In volume of output, the two groups have essentially the same total production capacity. If production begins to fall in any one of the eight, however, world output could decline.
Another way to consider oil production prospects is to look at the actions of the major oil companies themselves. While some CEOs sound very bullish about the growth of future production, their actions suggest a less confident outlook.
One bit of evidence of this is the decision by leading oil companies to invest heavily in buying up their own stocks. ExxonMobil, for example, with the largest quarterly profit of any company on record—$10.7 billion in the fourth quarter of 2005—invested nearly $10 billion in buying back its own stock. ChevronTexaco used $2.5 billion of its profits to buy back stock. With little new oil to be discovered and world oil demand growing fast, companies appear to be realizing that their reserves will become even more valuable in the future.
Closely related to this behavior is the lack of any substantial increases in exploration and development in 2005 even with oil prices well above $50 a barrel. This suggests that the companies agree with petroleum geologists who say that 95 percent of all the oil in the world has already been discovered. “The whole world has now been seismically searched and picked over,” says independent geologist Colin Campbell. “Geological knowledge has improved enormously in the past 30 years and it is almost inconceivable now that major fields remain to be found.” This also implies that it may take a lot of costly exploration and drilling to find that remaining 5 percent.
The geological evidence suggests that world oil production will be peaking sooner rather than later. Matt Simmons, head of the oil investment bank Simmons and Company International and an industry leader, says in reference to new oil fields: “We’ve run out of good projects. This is not a money issue…if these oil companies had fantastic projects, they’d be out there [developing new fields].” Kenneth Deffeyes, a highly respected geologist and former oil industry employee now at Princeton University, says in his 2005 book, Beyond Oil, “It is my opinion that the peak will occur in late 2005 or in the first few months of 2006.” Walter Youngquist and A.M. Samsan Bakhtiari of the Iranian National Oil Company both project that oil will peak in 2007.
Sadad al-Husseini, recently retired as head of exploration and production at Aramco, the Saudi national oil company, notes that new oil output coming on-line had to be sufficient to cover both annual growth in world demand of at least 2 million barrels a day and the annual decline in production from existing fields of over 4 million barrels a day. “That’s like a whole new Saudi Arabia every couple of years,” Husseini said. “It’s not sustainable.”
For additional information, see Chapter 2, “Beyond the Oil Peak,” Plan B 2.0: Rescuing a Planet Under Stress and a Civilization in Trouble, available on-line.
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I really have to call bullshit on that little graph. Altho I can't speak for the other countries, I know that Canada has plans to go from 1million barrel/day to 5 million barrel/day within the next 5-10 years...
So can anyone explain to me how the hell is the graph showing Canadian production as going down?
Don't get me wrong, I'm all for renewable energy sources...but that graph looks like bullcrap to me.
-Mat
--
editor note: The graph says "Canada (conv)", which means conventional oil. Non-conventional oil production can indeed go up, but it has many downsides since it takes so much energy to get it out of the group. The net energy produced is a lot lower than with conventional oil.
In ref to Canada both conventional oil and natural gas production is in freefall. However, we shouldn't look to the tar sands as the fix. The est tar sands increase from 1-5 mil barrels/day in the next 5-10 years is frankly a dream scape more befitting Alice in Wonderland. See a recent interview with a Senior Geologist with Natural Resources Canada named David Hughes for more detailed info: http://www.globalpublicmedia.com/interviews/823
Also, I know this stuff because my father worked on building the first set of tar sands refineries in Alberta 25-30 years ago. The scale of producing these refineries is absolutely immense. People not involved with building these large engineering projects don't know the effort and time needed to complete them.
Moreoever, even if Canada were to achieve the impossible of 5 mil bar per day in 10 years. Today, the world uses 85 mil bar per day. If Saudi Arabia production is in decline, Canada's (im)possible 5 mil bar per day won't stop the over all oil decline.
I guess as much as it so very frightening to consider the decline of global oil production without widespread alternatives, we must simply face it head on and deal with the practical, intellectual and emotional issues it raises within ourselves and in society at large. To not do so makes it difficult for me to look into my child's eyes, imagining the world she will inherit from me.
To Mat-- you should investigate the claim that Canada is going to increase oil supply to 5 mmb/d in 5 years.
it ain't gonna happen.
Alberta is using up its "stranded" gas supply and contaminating its water to try and scrub the oil out of TAR. The costs of these projects have been vastly underestimated, and the yield will be lucky to reach 3 mmb/d by 2015.
then there's the little fact that whatever increases Canada makes in tar sands conversions, it WON'T compensate for worldwide declines in baseline oil from existing fields...
Perhaps we should be more worried about US and Canadian natural gas production than oil production?.
Look at Dave Hughes' graphs. Falling production requiring lots of more wells to maintain.
http://www.prosefights.org/gas/gas.htm#davehughes
It isn’t important when oil peaks and declines, the importance is that oil is certain to peak and decline, so taking action is a matter of sooner rather than later.
Oil is a finite natural resource that took millions of years to produce, and we're going to consume it in less than 200 years.
We shouldn’t be so selfish to only look at the situation in our lifetimes, our children will inherit the earth that we leave behind, so if the effects of peak oil don’t hurt us, they are sure to hurt our children. The time for arguing is over, the time for action is now.
Yes I agree with several of the comments on this post that the undertaking here is on a scale unlike any other engineering project known to man. If you are using Google Earth simply take a satellite view of this area in Alberta to get an idea on the scale of this immense operation! Secondly, Canada is looking to Nuclear power as an alternative to using its declining Natural Gas supply for processing the Tar Sands. However in both cases I see this as a mere Robing Peter to Pay Paul scenario? I guess the Canadians think it is more important to drive our cars than heat our homes in the future? With NG on the decline in North America I really do not see great prospects for substantially increasing the production from this source and lastly the energy profit ratio on this activity is totally in the negative meaning that it requires more energy to produce than what you get out of it. Frightning reality that we will all have to come to terms with eventually but I am affraid Peak is not to far away now.
I personally believe that global warming is going to be a lot less impactfull than the scientists are predicting because when the oil runs out or starts declining rapidly, our civilization is going to destroy itself. It may sound melodramatic but I foresee famine and slaughter of biblical proportions. If there is no food, people will kill each other for what little is left. Which will eliminate a large portion of the human virus on the planet.
how was this data compiled or rather who made this graph? The initials given as a source does not mean anything to me.
i have seen some curves that show ratio of reserves over consumption that hits zero around 2050 for oil and 2060 for NG. there is a french guy showing plenty of those for each extraction area, but sadly very incoherent output. you just get lost in the graphs. see more on: www.peakoil.net, same idea. but in the graph above you really see the peak.
anyway, it is good to see so many fossil companies diverging into renewables, not just trying to come up with innate ideas to capture co2 and pump them down into the sea bed, that just might dissolve when h20 hits the co2...
so only half a century more of fossil driven society, then what?
This PhD thesis that was defended last week should be of interest:
Giant Oil Fields - The Highway to Oil: Giant Oil Fields and their Importance for Future Oil Production
Fredrik Robelius
The whole thesis is available online:
http://publications.uu.se/abstract.xsql?dbid=7625
http://www.diva-portal.org/diva/getDocument?urn_nbn_se_uu_diva-7625-1__fulltext.pdf
My boss, who's a rabid investor, asked me to find him some charts on oil prices over the years, which I did, along with the chart above. He didn't say anything, which was unusual. I wonder if he looked at the two, and noticed the correlations? He didn't ask for anymore data on oil after that.
There is NOT a "half a centuty of fossil driven society" left -
do your homework.
what will happen when demand exceeds supply?
as some believe is currently happening.
all of a sudden the military intervention in the middle east and the "anti-terror" laws make sense don't they?
Grow Food At Home!
It's hard to see the end of the human race, I can't image that. But I can image things getting pretty damn bad. Let's face it, the amount of money required for investment, and motivation required to stop using fossil fuels is so great, that we aren't going to seriously get "green" until global life expectancy gets down to under 60. I'm talking another 75 years, when there is only 18% oxygen in the air and category 6 storms are nothing out of the ordinary.
I personally would very much like to buy an electric car. Trouble is I live in Asia and they just aren't readily available here yet.
I can't import an electric car, because the local government will impose 200% import tax. So I have to use a petrol car.
It's not that I don't have the motivation to go green, I do. But the government is stopping me.
I'm sure (at least I hope) that people of the 22nd century will look back at us guys and say to themsleves, "wow, can you believe people in the 20th and 21st centuries used to burn petrol to run their cars, what savages!".