A lot of things happened in 2006, but I bet you don’t recall reading about peak oil in the headlines. Peak oil refers to when the rate of petroleum extraction is reached, at which time production enters decline mode. According to the International Energy Agency (IEA) crude oil production peaked at 70 million barrels per day in 2006 and will never regain that height again.
What does this mean? It means, “The age of cheap oil is over,” said Fatih Birol, IEA chief economist. With nations making little to no effort to slow the demand for oil, prices will continue to rise.
According to the IEA, to keep production stable, it will mean much more production from oil fields (new and undiscovered) and monstrous investments, about $8 trillion over the next 25 years. The IEA also reports that production of tar sands will need to triple in that same time frame. However, tar sand production (barrel for barrel) is more expensive and worse for the environment, releasing between 5-15% more carbon dioxide compared to conventional oil production.
As Guy Caruso from the Center for Strategic and International Studies says, “It’s partly geological resource limitations,”–production has fallen faster than expected. He goes on to point out that there are other known areas of oil–Venezuela, Iraq, Kazakhstan, and Nigeria. He also points out that because of political turmoil, production in these countries is below its potential.
If we choose to extract oil from any of those four countries, we’ll be in the same (or worse) position we’re in right now. We will still be importing oil from politically volatile places. We will still be vulnerable to price spikes and shortages (spikes being something economies have the hardest time dealing with, says Caruso). We will still be in a position where we want to protect and control the flow of supplies which will require some form of military presence. We will still be shelling out trillions of dollars into a quickly dwindling resource.
Sir David King, director of Oxford’s Smith School of Enterprise and the Environment said that, “historians of the future will look back and see the Iraq war as the first resource war of the 21st century”, and I’m inclined to agree. Since the Carter Doctrine, the U.S. has been dependent on areas of the world subject to conflicts, violence, and overall disturbances for oil. The U.S. has used military force to assure the unimpeded flow of oil to Americans who rely on it for almost every aspect of life. Oil markets are becoming increasingly volatile, to protect U.S. interests, a strong military hand will be (and has been) present in those oil rich countries as a disruption in oil supply would hit every aspect of the U.S. economy. This was true in the Gulf War, in the Iraq War, and will be true in any country we depend on for natural resources.
If conventional oil production has indeed peaked, we are at a crossroads of how to proceed as far as our energy production and consumption. Will we invest $8 trillion dollars in the oil industry? Will we go into yet another nation wrought with political discourse wielding our military might to secure what we want? Will we spend billions of dollars on said military might?
Perhaps, it’s high time to make a change and invest that $8 trillion into something other than oil. Maybe, it’s time we focus on finding a source of energy that can be produced domestically…something renewable…something sustainable…something that doesn’t spew carbon dioxide and countless other toxins into the environment…
Have you heard of anything like that?