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A research paper on M.K. Hubbert’s Peak Oil Theory

In partial fulfillments to Fr. Daniel J. McNamara, S. J. For the Science 10 Class Section CC

Raymund Vincent Aaron Luis C. Vega II BS Management Major in Communications Technology Management

Submitted on the 19th day of March S.Y. 2006-2007


Relevance of Oil Oil does not just refer to the oil inside our gas tanks. Oil including other Petrochemicals

and natural gasses are used in many other processes connected to our everyday lives. Most of these are needs that we value most in our lives. However, its continuous presence could be jeopardized come the change in oil supply and the increase in its price. • Food In the article “Eating Fossil Fuels” by Geologist Dale Allen Pfeiffer, he mentions that approximately 10 calories of fossil fuels are required to produce every 1 calorie of food eaten in the US. The high ratio is primarily because of the fact that the different steps in producing food actually relies on oil, petroleum products or other depleting natural resources. First of all, chemicals used for growing crops are dependent on these resources. Pesticides needed to protect crops are made from oil. Aside from this, there are also commercial fertilizers made from ammonia, which is made from “nearly peaking” natural gasses. Farming implements also rely on the abundance of affordable oil. Tractors and trailers are constructed and powered using oil products. Another example is that food storage systems such as refrigerators are manufactured in oil-powered plants and are run by electricity which comes from coal or natural gas. Transporting these food materials also play a big part on how food supply depends on oil. In the US, the average piece of food is transported around 1,400 miles before it gets to a consumer’s plate. • Water

Globally, commercial energy consumed for delivering water is more than 26 Quads, which is already 7% of total world consumption. Energy is very much needed for the extraction,

cleaning and distribution of water. Energy is used for needed processes such as lifting ground water. And after this, more energy for pumping though pipes. And lastly, more energy is needed for its treatment and desalination in the different facilities. • Modern medicine The progress of medical knowledge and practice in the modern era has depended on the steady rise in fossil-fuel usage. Petroleum is the key ingredient in the wide variety of plastic medical supplies used in medical and surgical life-support systems. It is used in medicines such as cough syrups, antibiotics, antibacterials, sedatives, tranquillizers and also for pill coatings. Petrochemicals are also used in specialized products such as dermatological creams. It is also an important substance for both production and cleaning of medical instruments and supplies such as anesthesia, catheters, dishes, drains, gloves, heart valves, needles, syringes, tubes, etc.

National defense Many issues come up when it comes to national defense and oil. A major example is the

Iraq wars. It has been reported that battles are not just for control over Iraq's cities but there is also a constant struggle to protect its petroleum infrastructures against sabotage and attacks. This long-running war for oil has been creating a major impact not just to economy but to people’s lives as well. • Production of Plastics Problem in oil can affect everyday materials such as foam cups and nylon, which are largely made from oil-based chemicals. Other products like carpets, automotive bumpers, dashboards, tires, CD cases, and plastic boxes that use a blend of chemicals from oil and natural

gas are also affected by these issues. In Canada, roughly 5% of its oil output and 18% of natural gas are just used as a raw material for manufactured goods. • Computers and High-tech Devices.

From computers and their chip to cars and their parts, all of these consume precious resources. The construction of an average car consumes the energy equivalent of approximately 20 barrels of oil. Just the same, the production of one gram of microchips consumes 630 grams of fossil fuels. And the construction of the average desktop computer consumes almost the same amount of its weight in chemicals and about ten times its weight in fossil fuels. II. What is Peak Oil?

After understanding the relevance of oil, we realize how much our world is so dependent on oil because it runs a major aspect of our world. Ever since the beginning, oil has been seen as a great commodity and different companies today have taken the next step of juicing out this commodity. However, in the process, we can see that there are pros and cons to every action, and for our paper, we see this in a theory known as Peak Oil. As a result, Peak Oil is the main concern that our paper will focus on and hopefully, the reader will understand how might be crucial to be aware of in the approaching future.

In formal terms, Peak Oil Theory states that: “The Hubbert Peak Theory speculates that for any given geographical area, from an individual oil field to the planet as a whole, the rate of petroleum production tends to follow a bell-shaped curve. It also shows how to calculate the point of maximum production in advance based on discovery rates, production rates and cumulative

production. Early in the curve (pre-peak), the production rate increases due to the discovery rate and the addition of infrastructure. Late in the curve (post-peak), production declines due to resource depletion.1”

Marion King Hubbert, also known as “King Hubbert” worked at the Shell institute in Houston, Texas as a geophysicist. Because he worked at Shell, a major oil company that delivers a big percentage of the world oil throughout the globe, he was tasked to research and analyze the different effects of his company to the world. He also knew the different implications of the depletion of the oil resource and in 1956, he coined the “Peak Theory” as stated above, and its effects would be seen as early as 1970. Surprisingly enough, his predictions became true as the US Domestic Production for Oil peak in the year 197 and from then on, he slowly became famous for his theory.


Hubbert Peak Theory < http://en.wikipedia.org/wiki/Peak_oil_theory>

As mentioned in the theory, the Peak Oil theory follows a normal bell curve where there is a increase in production of oil in the upslope, that reaches a peak of its prime production and then is followed by a down slope, emphasizing the decrease in production and effects in modern society. Although there have been inaccuracies in calculation, the basic idea that the theory says that we have already surpassed the peak and we are already on the downward slope of the curve. Worldwide oil production in the year 2030 will be the same as it was in 1980. However, the world’s population in 2030 will be both much larger (approximately twice) and much more industrialized (oil-dependent) than it was in 1980. Consequently, worldwide demand for oil will outpace worldwide production of oil by a significant margin. As a result, the price will skyrocket, oil-dependant economies will crumble, and resource wars will explode.2 Here, we can see that things are in a way, retracting, as they were before, the only major difference is that there is a greater demand for this commodity by the population of the world, and the production levels are equal to that in the other symmetrical end of the bell-curve. That is why there is a greater need to see, understand its applications and be aware of this inconvenient truth. III. Major Players in the Global Oil Industry Table 1. Top 5 Major Producers and amount of Production (2004) Major Producer Saudi Arabia Russia USA Iran Mexico Amount x106 Barrels Per Day 10.37 9.27 8.69 4.09 3.83

Only two of these Top 5 producers are part of the Organization of Petroleum Exporting Countries or OPEC: Saudi Arabia and Iran.

Are we ‘Running-Out’? < http://lifeaftertheoilcrash.net/>

Table 2. Top 5 Major Consumers and amount of Consumption (2004-05) Major Consumer USA China Japan Russia Germany Amount x106 Barrels Per Day 20.73 6.39 5.58 2.8 2.68

The United States of America consumes almost a fourth of the world’s oil demands of 84M bbl/day. Table 3. Top 5 Nations with the Largest Proven Crude Oil Reserves (2005) Major Consumer Saudi Arabia Iran Iraq Kuwait United Arab Emirates IV. • Effects of Peak Oil Amount x106 Barrels Per Day 264, 211 136, 270 115, 000 101, 500 97, 800

The Prediction That Changed the View on Oil The first effect that was concretely seen to support this

theory was the 1970s Peak of Domestic Oil Production of the United States of America. King Hubbert first mentioned the revolutionary new reserves in US in the year 1930 that started the great and bountiful production of oil in America. Then the Energy Crisis in the 1970s occurred. After predicting his theory, there was a great awareness to Hubbert’s ideas. In April 5, 1979, the average price of crude oil was $15.85 and 12 months later,

the price skyrocketed to $39.503. 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%4. However, this was only one of the early predictions of Hubbert and the greater effects for the entire globe were predicted to be felt after the turn of the millennium.

It’s All About The Money

However, the greatest effect that the Peak Oil will bring about in our countries is the immediate effects of dramatic changes in the prices of oil. In our growing global population, there is an increasing demand for the oil to be supplied to every country where it is used without any doubt of shortage. However, the reality is that we are constantly approaching shortage day after day and before we know it, the world’s total consumption for oil will be too strong of a demand. Indeed, the demand for oil will surely outpace the supply, thus fragmenting the oil prices of its suppliers in our world today. This is the precise reason as to why we approached this
3 4

1979 Energy Crisis <http://en.wikipedia.org/wiki/1979_energy_crisis> Book Byes: The Coming Decline Of Oil <http://www.earth-policy.org/Books/Seg/PB2ch02_ss2.htm>

paper with the relevance of oil. Because of its dominating demand and our lifestyles greatly depend on its uses; we are slowly depleting this resource until the future will undergo dramatic changes to adjust to this depletion. As a result, oil companies that either import or export will soon come to realize that their production levels will decrease and this will, in turn, lead to the mentality of stretching or making the most of what is left. This is only natural when supplies last in any given situation in the world. In order to continue profit from their businesses, stretching their reserves entitles increasing oil prices. As it becomes clear that even a moderate cut in production may double world oil prices, the long-term value of their oil will become much clearer.

Like Water, Like Oil A second thought to this is that it might not necessarily mean that once this supply for oil

is depleted, only then will we see the effects and the dangers that this could cause on our society. As a matter of fact, we are already feeling the effects of this doom. Consider the analogy of the human body and its strong dependence on the resource of water. Our human bodies are approximately composed of 70% percent water. In this respect, we can see the strong

dependence of the body on water, as our society may also be dependent on the supply of oil to function our daily processes such as cars, industries, factories and machineries. Therefore, a 200 pound person will comprise of 140 pounds of water. Because of this dependence, our bodies do not need to deplete these 140 pounds of water before undergoing the negative effects, but even a slight loss of water, such as 10 – 15 pounds, will be enough to kill the person. This is how our society faces the issue of Oil Crisis. Because our society has been modeled and created in such a way that it is greatly dependent on oil, we may suffer tremendously if this depletion of this

important resource will occur. And with the Peak Oil theory, we may not even have to wait for total loss of supply for the markets or even the societies to crush, but such minute differences will occur in the most hazardous of ways.

Effects on Societies5 Our industrial societies and our financial systems were built on the assumption of continual

growth – growth based on ever more readily available cheap fossil fuels. Oil in particular is the most convenient and multi-purposed of these fossil fuels. Oil currently accounts for about 43% of the world's total fuel consumption and 95% of global energy used for transportation. Oil is so important that the peak will have vast implications across the realms of geopolitics, lifestyles, agriculture and economic stability. According to these statistics, we can see the implications that will result in the crash of the world functions.


Peak Oil Primer <http://www.energybulletin.net/primer.php>

Countries on the Decline6 Reports show that out of the 65 major oil producers and suppliers of the world, 54 have

already reached its peaked, and among some of these are Indonesia, and the famous prediction of Hubbert, the 1970s decline of domestic production levels of the US. In percentages, 83% of the world’s major suppliers are on the decline, and the 2nd largest oil provider in the world, Mexico, will start to feel the effects of the decline in the coming year.


Conclusion and Recommendations

With the continuing depletion of oil reserves around the world, it would be easy to say that nations switch to alternative forms of energy instead. But this is easier said than done. OPEC believes that demand for oil will still remain the most important source of energy in years to come. From the information stated above, it is evident that oil is more ubiquitous in people’s lives than they come to realize. Even with the technological advances that promise to cut down on oil consumption, as well as the continued efforts of nations to decrease their use of nonrenewable energy, oil still makes the world go round. With every new piece of technology that claims to save energy comes another form of technology that would need oil to operate. With every nation that agrees to cut back on its oil consumption comes another nation who would need more to supply a war. It seems like every step forward to counter the decreasing supply of oil in the world is actually two steps back in solving it. However, we recommend the following actions be done by nations to stabilize oil consumption so that there will still be some left for future generations. First of all, nations must continue to encourage the use of alternative methods of transportation like hybrid cars,

The Oil Supply Tsunami Alert < http://www.energybulletin.net/5655.html>

hydrogen-powered cars, and electric-powered cars. These would lessen the use of nonrenewable energy since oil used for transportation comprises a big part of what finishes the supply worldwide. Different sources of energy must also be explored and improved on. Examples of which are Coco Diesel, Bio Diesel, Nuclear Powerplants, and Solar-Nanotechnology. Even if there is technology to lessen oil consumption exists, these are not still widely available for everyone to use. Governments must also encourage its citizens to be more aware of such technologies and how these could help assuage the worsening conditions. Producers of these advanced pieces of energy-saving technology must make its prices reasonable for an average person to have access to and buy. It takes a global effort to reduce oil consumption, so everyone in the world must have access to such methods in order to contribute to the preservation of these oil reserves for a more sustainable and long-lasting source of energy for everyone to make use of and enjoy in the future.

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