Demand Management of Oil Will be a Persistent Problem after Peak Production

An eventual peak in oil production is viewed by many to be the unavoidable consequence of the consumption of a resource that is by its very nature nonrenewable. Debate continues as to when this peak will eventually be reached, and it depends largely on our ability to sustain oil production through new methods of exploiting unconventional sources of fossil fuel. Hughes and Rudolph (2010) point out that avoiding a peak depends largely on oil fields that have yet to be discovered, and that unconventional oil sources are costly not only in terms of their energy return on energy invested (EROEI<!–[if supportFields]> XE “Energy Return On Energy Invested (EROEI)” <![endif]–><!–[if supportFields]><![endif]–>), but also with regards to the amount of carbon dioxide expelled in their extraction. When an eventual peak is reached, jurisdictions will primarily be limited to three different methods of coping: reduction of demand for energy, replacement of oil with other sources of secure liquid fuel, and restriction of new demand for energy to sources not based on fossil fuel. The authors conclude that the third option seems more likely, but that problems such as finding clean sources of electricity generation and the difficulty of obtaining natural gas in gas-poor regions would still present significant hurdles to our transition away from oil. —Steven Erickson
Hughes, L., Rudolph, J., 2010. Future world oil production: Growth, plateau, or peak? Current Opinions in Environmental Sustainability special issue Energy Systems.

Hughes and Rudolph (2010) analyzed production and demand growth, sources, alternatives, and production outlooks for oil to reach an opinion on the likelihood of an oil peak. They then proceed to offer possible policy reactions to this peak if it were to occur on a timeline similar to that presented by the International Energy Agency (IEA). They conclude that if a peak due to resource exhaustion were to occur, it would be extremely taxing upon the world’s economies, and the resulting problems would not be overcome in a simple and timely manner.
          Hughes and Rudolph begin by emphasizing the importance of oil in today’s world. They state that oil represents 34% of the world’s total energy demand, with coal<!–[if supportFields]> XE “coal” <![endif]–><!–[if supportFields]><![endif]–> and natural gas making up another 47.4% of aggregate energy demand. This was made possible by the exponential and unprecedented growth of oil production. From the dawn of the 20thcentury all the way through the 1970’s, oil production doubled about once every ten years. Following the oil shocks of 1975 and 1980 growth in oil production has continued, though in a less dramatic linear fashion.
          The authors go on to analyze the sources of this oil production. They say that about 85% of oil is produced from conventional sources, for example onshore reserves and those situated in shallow water. However, these sources have largely been in decline, forcing oil companies to resort to more energy intensive unconventional sources, such as the oil sands of Canada<!–[if supportFields]> XE “Canada” <![endif]–><!–[if supportFields]><![endif]–> or the heavy oil of Venezuela, as well as substitutable liquid fuels such as liquefied coal<!–[if supportFields]> XE “coal” <![endif]–><!–[if supportFields]><![endif]–> and natural gas and fuels created from biomass.
          The main difference pointed out between these two sources is not their ultimate product, but rather the amount of energy required to obtain the fuel. In the beginning of the 20th century it has been estimated that oil reserves in the US had an EROEI<!–[if supportFields]> XE “Energy Return On Energy Invested (EROEI)” <![endif]–><!–[if supportFields]><![endif]–> of nearly 100, while the estimated EROEI of newer conventional crude oil wells is closer to 11, with biofuels currently yielding an EROEI somewhere between 1.0 and 3.2. The authors conclude that if increasing demand for oil is to be met, it will be both expensive and environmentally harmful.
          Hughes and Rudolph move on to address the theory of peak oil. Although peak oil has been criticized for its missed predictions in the past, the authors remind the reader that methods of predicting oil production have been improving and such predictions should not be taken lightly. They examine the production outlooks provided by the IEA, which show an increase in liquid fuel production through 2030. However, the authors point out that this depends largely on crude oil that has yet to be found as well as a growing reliance on liquid natural gas. If either of these prospects do not pan out, a peak or plateau in oil production would likely be reached between 2020 and 2030.
          The authors do state that although the IEA’s study is rigorous, there is a shortage of data regarding oil reserves in the Middle East, as much of these data are unavailable to the public. It is unclear whether this would make IEA under or overestimate the total amount of remaining reserves.
          If a peak occurs, meeting future demand for oil would be an unprecedented challenge to world governments and economies. The authors explain that accommodating such a large change would require long-term planning that would likely require a decrease in energy consumption. Strategies to meet the peak would fall under three main labels: reduction, replacement, and restriction. Reduction would involve lowering energy use through conservation and efficiency, replacement would require replacing oil with other liquid fuels, and restriction would limit new energy demand to non-oil sources.
          Hughes and Rudolph conclude that restriction will be the most likely strategy, and that for at least the near term energy usage would likely be restricted to natural gas and electricity. This of course presents its own unique problems. Providing natural gas to gas poor regions like Europe<!–[if supportFields]> XE “Europe” <![endif]–><!–[if supportFields]><![endif]–> would require either new pipelines or the large-scale liquefying of gas. Either of these solutions would subject places like Europe to intense political pressure from suppliers of natural gas. The major problem with electricity on the other hand is the steady supply of environmentally sustainable energy. Countries like the United States and China<!–[if supportFields]> XE “China” <![endif]–><!–[if supportFields]><![endif]–> have already shown a willingness to rely on their massive coal<!–[if supportFields]>XE “coal” <![endif]–><!–[if supportFields]><![endif]–> reserves, which is not environmentally desirable. The authors state that perhaps the best options are renewables such as solar and wind, despite the fact that they would require a change in energy consumption attitudes, from one where usage determines output to output determining usage.

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