"It is hard to envisage the effects of a radically reduced oil supply on a modern economy or society, writes Michael Meacher, UK environment minister from 1997 to June 2003."Financial Times, Jan 05, 2004
Four months ago, Britain's oil imports overtook its exports, underlining a decline in North Sea oil production that was already well under way. North Sea oil output peaked at about 2.9m barrels per day in 1999, and has been predicted to fall to only 1.6m bpd by 2007. Even the discovery of the new Buzzard field, the biggest British oil find in a decade, with a total of some 500m barrels recoverable, will not alter by much the overall picture of dwindling resources.
This prospect would not be so bleak were it not that similar trends are now becoming manifest around the globe. The three main oil-producing regions are Opec, the former Soviet Union, and the rest of the world. According to papers presented at the latest annual meetings of the Association for the Study of Peak Oil, Opec's future production is expected to peak in 2020 at about 40-45m bpd. Under-production in the former Soviet Union in the 1990s has been followed by a new surge in east Siberia and Sakhalin. Together with new discoveries in the Caspian, this will yield a peak of about 10m bpd in 2010.
Combining the models for Opec, the former Soviet Union and the remaining 40 or more major oil-producing countries puts ultimate world oil recovery - past and future - at some 2,200bn barrels, with production peaking at about 80m bpd between 2010 and 2020. To this may be added non-conventional oil and other liquids brought into commercial production by the rising price as oil becomes more scarce. These include oil from coal and shale, bitumen and derived synthetics, heavy and extra-heavy oil, deep-water oil, polar oil and liquids from gas fields and gas plants. These sources, though at very much greater cost, could provide an ultimate recovery of about 800bn barrels and might peak in 2050 at around 20m bpd. But the combined model suggests a peak from all sources of about 90m bpd around 2015.
Today we enjoy a daily production of 75m bpd. But to meet projected demand in 2015, we would need to open new oilfields that can give an additional 60m bpd. This is frankly impossible. It would require the equivalent of more than 10 new regions, each the size of the North Sea. Maybe Iraq with enormous new investments will increase production by 6m bpd, and the rest of the Middle East might be able to do the same. But to suggest that the rest of the world could produce an extra 40m barrels daily is just moonshine.
These calculations place the coming oil crunch some time between 2010 and 2015, perhaps earlier. The reserves in the world's super-giant and giant oilfields are dwindling at an average rate of 4-6 per cent a year. No more big frontier regions remain to be explored except the north and south poles. The production of non-conventional crude oil has already been initiated at enormous cost in Venezuela's Orinoco belt and Canada's Athabasca tar sands and ultra-deep waters. Yet no major primary energy alternative can replace oil and gas in the short-to-medium term.
The implications of this are mind-blowing, since oil provides 40 per cent of all traded energy and no less than 90 per cent of transport fuel. But not only are the motor vehicle and farming industries dependent on oil, so is national defence. Oil powers the vast network of planes, tanks, helicopters and ships that provide the basis of each country's armaments. It is hard to envisage the effects of a radically reduced oil supply on a modern economy or society. Yet just such a radical reduction is staring us in the face.
The world faces a stark choice. It can continue down the existing path of rising oil consumption, trying to pre-empt available remaining oil supplies, if necessary by military force, but without avoiding a steady exhaustion of global capacity. Or it could switch to renewable sources of energy, much more stringent standards of energy efficiency, and a steady reduction in oil use. The latter course would involve huge new investment in energy generation and transportation technologies.
The US response to this dilemma is very striking. The National Energy Policy report prepared by Dick Cheney, US vice-president, in May 2001 proposed the exploitation of untapped reserves in protected wilderness areas within the US, notably the Arctic National Wildlife Refuge in north-eastern Alaska. The rejection of this extremely contentious proposal forced President George W. Bush, unwilling to curb America's ever-growing thirst for oil, to go back on White House rhetoric and accept the need to increase oil imports from foreign suppliers.
It was a fateful decision. It means that, for the US alone, oil imports, or imports of other sources of oil, such as natural gas liquids, will have to rise from 11m bpd to 18.5m bpd by 2020. Securing that increment of imported oil - the equivalent of total current oil consumption by China and India combined - has driven an integrated US oil-military strategy ever since.
There is, however, a fundamental weakness in this policy. Most countries targeted as a source of increased oil supplies to the US are riven by deep internal conflicts, strong anti-Americanism, or both. Iraq is only the first example of the cost - both in cash and in soldiers' lives - of facing down resistance or fighting resource wars in key oil-producing regions, a cost that even the US may find unsustainable.
The conclusion is clear: if we do not immediately plan to make the switch to renewable energy - faster, and backed by far greater investment than currently envisaged - then civilisation faces the sharpest and perhaps most violent dislocation in recent history.
The writer was UK environment minister from 1997 to June 2003
Source: Financial Times, Comment, with apologies.