Since the 1950’s it is safe to say that oil has become the most important source of energy in the world. When we think about it, we usually imagine crude oil and its refinement to become fossil fuels; but the uses of oil go beyond that, as it is essential in the production of most of the everyday essentials like plastics, fertilizers, soaps, paints, medicine and pretty much all chemical products. Oil as a component has become ubiquitous in our everyday lives and we often take its importance for granted of believe that it is only used to power our automobiles.
Crude oil is produced in 31 different states with Texas, North Dakota, California, Alaska and Oklahoma first on the list with about 65% of the total national production in the US. Internationally more than 100 countries produce crude oil as well, with almost half of the world’s total production coming from Russia, Saudi Arabia, United States, China, and Canada in that order.
Peak oil is an expression used to describe a scenario in which the amount of oil that can be extracted from a particular location within the globe or in the entire planet generally has reached its maximum point. This means that due to obvious geological limitations, the amount of oil that can be produced will begin to steadily decline, making the extraction more difficult and more expensive.
The term “Peak oil” is based on a theory postulated by American geophysicist M. King Hubbert, who came up with a method of predicting the production curve and the eventual decline of production due to depletion of the product in question.
Hubbert’s Peak (as it is called) was reached in the United States in the early 1970’s, and while production significantly declined right after that, it picked back up a few years later with a major increase in production due to better and more modern extraction techniques due to advances in technology.
To better understand the situation we must stop thinking about oil as something that simply “runs out” and look at as more of a problem with our ability to extract the material. As easy-to-produce fields become low on their proportion of oil in the oil/water mix, they are abandoned in favor of places that while having a larger concentration are also much harder to drill and extract. The increased difficulty of certain areas where oil is discovered makes production more expensive as it takes more and more oil rigs, more able personnel, and more investment to extract the product. After we run out of equipment, personnel and the investment stops being sound, then we can say we have reached “Peak Oil”.
While it is true that we continue to discover oil everyday, we must also consider that the size of those deposits is not as large as it used to be and that our rate of consumption is also a lot higher than it was 50 years ago.
The demand for oil globally has risen. This is mostly due to a global economic growth in many countries with emerging markets and at the same time, it makes those countries become the first victims to suffer from a scarcity that translates into much higher oil prices. Right now there is a gap that grows larger each year between the amount of oil that is produced globally and the quantity the world “wants” to use and that is why the International Energy Agency (IEA) asks the Organization of Petroleum Exporting Countries to produce more in order to make up for the difference.
As peak oil becomes a tangible reality, more countries are interested in finding alternative energy supplies to offset their dependency on fossil fuels that become more expensive each year. This is something that most people believe to be the answer to the questions posed by peak oil, that as the real problem is something that continues to be years away, we will be able to find ways to move away from oil and not be affected by its eventual depletion.
We are at a pivotal point in history where a few interesting things are happening in the energy industry.
First of all, we have an increase in the need of oilfield services as companies must explore, find additional reserves and drill rigs in order to offset shortages. Large companies continue to be a safe bet for investing because their stocks will most likely go up in the event of more raises in the price of crude oil.
Secondly, alternative ways of extracting oil like oil sands and oil shale are becoming economically feasible considering oil prices right now and their projection for the immediate future.
Finally, the era of alternative energy has arrived since we are now more than ever, investing in finding ways to truly offset our dependency on oil by moving to new resources that contemplate things like wind, solar and geothermal energy as an alternative that is becoming financially sensible.
For more interesting articles on the subject, check out our webpage at Suzzanne Uhland’s Blog today.
* Featured Image courtesy of SMelindo at Flickr.com