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Ad Majorem Dei Gloriam

PEAK OIL
ANOTHER INCONVENIENT TRUTH
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
I. 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.

1
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 Amount x106 Barrels Per Day


Saudi Arabia 10.37
Russia 9.27
USA 8.69
Iran 4.09
Mexico 3.83

Only two of these Top 5 producers are part of the Organization of Petroleum Exporting

Countries or OPEC: Saudi Arabia and Iran.


2
Are we ‘Running-Out’? < http://lifeaftertheoilcrash.net/>
Table 2. Top 5 Major Consumers and amount of Consumption (2004-05)

Major Consumer Amount x106 Barrels Per Day


USA 20.73
China 6.39
Japan 5.58
Russia 2.8
Germany 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 Amount x106 Barrels Per Day


Saudi Arabia 264, 211
Iran 136, 270
Iraq 115, 000
Kuwait 101, 500
United Arab Emirates 97, 800

IV. Effects of Peak Oil

• 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
1979 Energy Crisis <http://en.wikipedia.org/wiki/1979_energy_crisis>
4
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.

5
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.

V. 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,
6
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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