The graph below shows a comparison between the world’s likely demand for liquid fuels (including oil) over the next 20 years (the blue line) and the various components that will make up the supply of liquid fuels over that time. The emerging gap is alarming, as “Unidentified Projects” would actually be more accurately described as “unfulfilled demand” – meaning quite literally a demand for oil that will not be able to be met.
Perhaps what is most interesting about this graph is that it doesn’t come from a peak oil thinktank or an environment group – it comes from the USA Department of Energy. It is their official forecast for the supply of liquid fuels over the next 20 years. Forget wondering when peak oil might happen in the future – the answer to that question is: it’s already happened.
As anyone who has ever done even the most basic study of economics would know, what happens when demand is greater than supply is that prices go up. This prices enough people out of the market to bring the level of demand back down to what is actually supplied – as you can’t exactly consume something which doesn’t exist. An interesting analysis of the possible effects of peak oil can be found here (Hat Tip, AKT).
From the same source it’s interesting to look at how the split of where that oil goes is estimated to change over the next 20 years:
Transportation is projected to become an increasingly large consumer of liquid fuels over this time – largely due to rising car ownership in developing world countries. This is likely to place even more pressure on the supply of transportation-grade fuels – potentially pushing up their price even further.
So what does all this mean? Well for a start we can bank on petrol being a heck of a lot more expensive than it is now in the relatively near future. Secondly, as we get towards 2030 it might actually be somewhat difficult to even secure a reliable supply of liquid fuel for our vehicles – as there will be such a huge gap between the high level of worldwide demand and the available level of fuel supplies. In short, the days of the petrol-powered vehicle are limited.
Now the answer may be electric vehicles, but they still require a lot of oil in their manufacturing while the roads they drive along also require a tremendous amount of oil to build. Furthermore, electric vehicles are incredibly expensive at the moment and it may be a while before their prices truly come down. Given that last time petrol prices cracked $2 a litre here in New Zealand traffic volumes fell quite significantly, one does wonder how sensible it is to be spending $11 billion on state highways over the next decade.
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No one has invented the electric aeroplane or truck yet, and this could have more of a profound impact than the problem of private vehicle propulsion. There are a number of alternatives that work quite well for private transportation – scooters, bikes, walking, public transport and possible electric vehicles to name a few, but its trucks and planes for which we have no solution yet. The only thing put forward is biofuels, but these are not simply not scalable and in some cases (corn ethanol) have a negative energy returned on energy invested. (EROIE)
Supply and demand are both dependent on price. It doesn’t make any sense to plot a demand curve without specifying the price that it is based on. If demand exceeds supply then the price will increase until the demand equals supply… that is secondary school economics.
The world has never run out of any “input”. The stone age didn’t end with the world running out of stones. Ditto the bronze age and the iron age. What happens is that an old input or product is replaced by a new one which is better and cheaper. The old input will still be around thousands of years later and will be relatively inexpensive, as bronze is today. The price of oil might bounce around for the next few years but there is still enough there to tide us over until its replacement comes along, whatever it is.
This is a reason I’m doing my OE this year… Might be the last chance…
Damn good point Cam, and what about the electric container ship too? Asia and Europe (even the states now) are pushing ahead with high speed rail and freight links that could be readily adapted to run in an oil-free manner. But New Zealand is a remote island nation where international land transport is not an option, without relatively affordable air and sea transport the country would become economically isolated.
Jeremy, you could always do what I have planned, an OE via railway, bus and ship… assuming you can make it from NZ to a continental land mass easy enough.
Obi, the problem is that oil has SUCH a high level of energy stored in it that it is actually quite inconceivable we will come up with something with so much energy that is so easy to transport and store.
Of course the Stone Age and Bronze Age didn’t end because of a lack of stones or bronze, they ended because we found something way better to do that job a LONG time before we came close to running out. Where’s the better thing to oil?
I do think a lot of the issue the “unidentified projects” creates will be addressed in countries like NZ, US, UK etc by:
– Taking fuel efficiency seriously and not using increases to simply travel further
– Running PT properly and electrifying it
– Future developments will tend to intensification
All these things will be driven by market forces (except running PT properly that will take political re-organisation)…
We might need to expand our wharves to accomodate all the extra passenger ferries. I’m sure many on this blog have read Christopher Flannery’s “The Future Eaters” where he talks how a de-carbonised energy world might look. He talks about international travel involving giant cruise ships with giant sails to maximise fuel efficiency. Already the cargo vessels are starting to slow down to save fuel- NZ exporters are not happy as their goods are taking a week longer to get to Europe- sounds liek they will have to get used to it!
Admin: “Of course the Stone Age and Bronze Age didn’t end because of a lack of stones or bronze, they ended because we found something way better to do that job a LONG time before we came close to running out. Where’s the better thing to oil?”
Known oil reserves are enough to last us 100 years or so (and I haven’t looked up the figure… my argument holds whether we have 50 years or 150 years remaining). If people start looking hard then we might have another 100 years or more. That is plenty of time to develop a successor technology. Especially considering the rate of technological change these days.
None of this effects my support for efficient urban public transport. I’m just not sweating the oil issue and I can’t imagine that any successor technology will cause people to have to abandon cars and revert to 19th century transport patterns. If it did then that would be the first time in recorded human history when a successor technology was less useful than its predecessor.
Obi, you’re missing the point. It is completely irrelevant when we will use the last drop of oil, what matters is when supply starts to decrease and prices skyrocket because demand is still growing.
That point is likely to happen in the very near future.
According to the graph that is 2012…
The “there’s enough oil” spiel trumping what major research bodies and the US military are saying… Look, “stay the course” has never been a mistake! Ever!
Obi, reserves are useless if getting at them is so expensive that they are too expensive for the average punter – or for a nation which needs so much of them that it has a huge competitive disadvantage to others. We might be ok here in NZ in some respects (i.e. electricity generation, and coal reserves) but we will be so SCREWED in our transport system that rising oil prices will hit us hard nonetheless.
Successor technologies will of course be developed. But as Jarbury has said, in terms of economical efficiency, oil is hard to top, we are addicted to it, and the change-over costs are extreme. Therefore, we are still using it, even though this “efficient” technology has been choking us in fumes for decades! Real change will only happen once the prices rise, and rise – but I see no successor technology close enough to prevent years and likely decades of upheaval. Just because a specific scenario like the one you describe hasn’t happened doesn’t mean it can’t.
Max: “The “there’s enough oil” spiel trumping what major research bodies and the US military are saying”
What does the US military have to do with this? As far as I know they have no responsibility for energy market prediction or for producing oil.
Petrol is one of the most taxed products in NZ. Only tobacco and alcohol are in the same league. If oil prices increase to the point that our transport system is “screwed”, then there is a large margin for the government to reduce the tax to compensate. And we’re no where near being screwed yet… oil prices are still a lot lower than they were in the late 1970s and early 1980s, and lower than they were in the late 1800s even when cars were a niche luxury for the very rich.
People have been predicting that the world is close to running out of oil for nearly 100 years now. In 1914 the US Bureau of Mines said there was 10 years left. In 1937 the US Dept of the Interior predicted 13 years. They also predicted 13 years in 1952. A lot of people spent the 1970s predicting that it would all be gone by 2000. The Malthusians have been wrong for 100 years, and I have a hard time believing that they’re correct now.
Obi, the graph in this post comes from the US Department of Energy. One might expect them to know a thing or two about the situation.
In terms of reducing petrol tax, all that will do is result in less money available to maintain and develop our transport system, not really what we want I think.
The only serious past prediction about oil supplies I know of was by M. King Hubbert in the 1950s who said that US oil supply would peak around 1970. He was bang on the mark.
Curious to know where you got the information for your “there’s enough oil for another 100 years” claim in an earlier post. Also curious whether that takes account of rising demand and the ‘bell curve’ way that oil fields are pumped out??
Admin… The Department has to do a lot of guessing about issues such as future price, future domestic political pressures for and against producing oil, and future stability and political conditions overseas. They’ve been consistently wrong in the past so I don’t put too much faith in them for the future.
If our economy was completely poked by high oil prices and this meant that cars became a luxury that only the rich could afford to run then I am absolutely sure that the government would reduce petrol taxes. There are plenty of other things that they can tax to raise revenue.
King Hubbert was lucky. The US has plenty of offshore and Arctic oil reserves. If they’d chosen to pump them then he’d have been wrong by a large margin and I don’t believe that he ever stated that his predictions were dependent on environmental political pressure.
The 100 years was a ball park figure. I do know that Saudi Arabia has 75 years at current rates and Canada has 150 years. They’re the two largest reserves in the world. 100 years feels like a good compromise between the two. But what happens if demand does exceed supply? In that case prices increase, cars become more efficient, and people use more public transport. On the other hand, geologists start exploring like crazy and (most importantly) the oil that can be *commercially* extracted automatically increases with the price. The trend throughout the 20th century was for the number of years of known reserves to increase rather than decrease. If prices doubled then the Canadian reserves probably increase from 150 years to 200 or 250 or more.
Obi, you are completely misunderstanding the difference between peak “cheap” oil and oil running out…
The world has plenty of oil reserves, 100s of years, but lacks the ability to pump and refine it at the amount it is (or soon will be) consumed, that means we are unlikely to ever increase the amount of oil we produce even as price increases… This is scary because the world economy is based on expanding GDP and expanding credit (our worldwide central banking system now depends on it to avert collapse), the only way we have found in the past to expand GDP is to expand energy use, unless we can delink the two we are basically at peak everything, peak GDP, peak standard of living, peak housing, peak transport, peak consumables, etc, etc…
You talk about the Canada tar sands, which cost about 3 times middle eastern crude to extract, meaning if the world relies on this source, oil is three times more expensive (which completely changes how world trade would work) there is 175 billion barrels there, each barrel requires 300 gallons of water to extract, this water is then toxic and is kept in toxic tailing ponds which can already be seen from space… Going forward to you think there is going to be 52,500,000,000,000 barrels of fresh water available..? Do you think Canadians are going to allow half their country to become a toxic tailing pond..?
There are many encouraging signs though, population growth is slowing even faster than expected and might top out at 9 billion, constrained oil supplies will likely lead to the decline of many of the most environmentally damaging activities and encourage true development of alternatives…
In a way I agree with obi on this one, as Jeremy knows I’m a firm believer in new technology coming to replace it, and I still am. Haha sorry Jeremy you have yet to convince me.
I’m not saying we will still end up with cheap oil as we have now, I’m saying I highly doubt we will run out of ‘relatively cheap’ oil before we find a reasonable solution, albeit it might be slightly in superior to start with. Oil supplies are almost impossible to predict however, even in a field you are mining you hit soft and hard spots, spots with more oil and spots without, in the same hole. That’s the most fascinating thing, the unpredictability, the risk and the reward.
It’s also the reason every time I see a chart showing oil supplies, demand vs. supply etc, I tend to tread carefully looking at them, and would definitely not base opinions from them.
In saying that oil is not a renewable resource, and we won’t be able to rely on it forever, electric power is a logical progression as it is allowing us to chose our source of energy, electric power is a form we can convert many different energies into. But there are many other options to consider, water power, hydrogen power, even nuclear power. There will be people who pick these different energy opportunities and invest money into them, as long as there will be a return on their investment available, as fuel prices rise more money will be thrown at research and development, eventually we will see a technology that not only matches our current fuel of choice but surpasses it.
From a roading point of view, I would expect to eventually see the roadway charging our vehicles as we drive, with battery packs for off-road use only, we are already seeing development in inductive charging (without cables), and these methods could eventually be tied into road design and construction, this will be useful for congestion charging as well, as this technology would be able to indicate how much the vehicle is using the national road energy grid etc. In-terms of plane technology we will have to wait and see what the future brings but I’m sure something will pop-up. Shipping could come from a number of existing technologies, such as a combination of wind solar and even converting water to hydrogen for fuel, there is plenty of water out there.
That’s my rant anyways, as with obi, I’m not really concerned about the oil crisis thing, I’m supportive of PT for other reasons such as efficiency and congestion, to me creating a balanced transport system which combines many different forms is important.
Ha Ha, I shall keep trying Joshua… Lately I’ve tried to purposefully ignore the social, sustainability and pollution aspects of transport and focus on the economic as this is the only facet of transport that appeals to right-wing, left-wing and centrists alike, money talks..!
“What does the US military have to do with this?”
Contrary to what you may think, they are highly interested in oil peak / supply questions, because it will affect geopolitics hugely (and also their own budget and fighting ability). So they did United States Joint Forces Command did their own research:
Quoting from the report as quoted on the AKT blog over at http://www.aucklandtrains.co.nz/2010/04/24/us-defence-forecast-oil-almost-out/
“By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 MBD. To generate the energy required worldwide by the 2030s would require us to find an additional 1.4 MBD every year until then.”
“During the next twenty-five years, coal, oil, and natural gas will remain indispensable to meet energy requirements. The discovery rate for new petroleum and gas fields over the past two decades (with the possible exception of Brazil) provides little reason for optimism that future efforts will find major new fields.”
The indicator light is on, we are running on fumes, but nobody seems to want to do much about it.
Max… The military aren’t in the business of developing economic and political predictions. They don’t have the skills to do it and it would duplicate the work of other government agencies and researchers. They take a range of possibilities that other people have predicted or told them to plan for and then they ensure that the military has the plans, resources, and training required to adequately respond if those predictions turn out to be true. Notice the two “could”s that appear in the first sentence you quote.
Similarly, I’ve seen people claim that “what if” exercises performed by the US military endorse man made climate change. As if there is a climate research unit based in the Pentagon performing original research in competition to environmental government agencies and universities.
Joint Forces Command is a planning and training command. It isn’t a uniformed economics forecasting or climate change research group.
Who would you believe Obi..?
You don’t believe the US Department of Energy or the US Military, would you believe the IEA whose sole purpose is to chart energy availability and whose chairman recently said, “we need to learn how to live without oil before it leaves us”..?
Have you just decided it isn’t something to worry about and won’t change your mind..?
I’m not worried about peak oil, I’m actually quite looking forward to it. The sooner we are weaned off our oil addiction the better. It is quite literally killing the planet.
Jeremy: “Have you just decided it isn’t something to worry about and won’t change your mind..?”
150 years ago, people in large western cities were worried about pollution caused by their transport. Which happened to be thousands of tonnes of horse shit that clogged the streets, washed in to the waterways, and stank. No doubt some people concerned themselves with the problems of horses and a limited supply of horse feed. What if every peasant wanted a horse? How would they be bred, how would you feed them, where would you park them, and what would you do with their waste? The solution wasn’t planning a giant network of horse breeders, blacksmiths, and poo shovellers. Or a tax on horses to stop peasants owning one. Or of stopping road construction because obviously horses wouldn’t be around to walk on them in the future. The solution was the train, and later the car, both of which were invented by clever people with a great idea.
I have a lot of faith in human ingenuity. Technology change is a constant throughout human history. Since we’ve never run out of anything ever before then I’m not worried about it happening this time. Lastly, my home is full of cool stuff that is so much more advanced than the stuff my ancestors owned that they would have trouble imagining it. I didn’t worry about inventing the wind up gramophone to replace blokes with accordions. Or of inventing the electric record player to replace the wind up variety. Or of cassette players. Or of CD players. Or MP3 players. They all happened without my worrying and they were all better than their predecessors because of clever people.
“I have a lot of faith in human ingenuity.”
I do too, Obi. I just have no faith in what our current NZ politicians are doing. They show none of that ingenuity, and in fact spend lots of money in ways which will make it harder for us to overcome the coming challanges.
And even ingenuity does not overcome problems instantly. The well-prepared people are the least likely to suffer during any troubled times. Some things you can indeed see coming. Nobody here is asking for us all to stop using our cars. What we are asking for is the absolute “running blind and headlong into a cul-de-sac” behaviour to stop. Changing that behaviour would have huge benefits even if peak oil never happened. Not changing it will have huge disadvantages when it does.
As for you not worrying / caring to do anything about it – fine. Your choice. But a bit strange on a blog that has, if I can speak for Jarbury, has the goal of making you care.
ingolfson: “But a bit strange on a blog that has, if I can speak for Jarbury, has the goal of making you care”
This is a macro versus micro thing. If a group of Aucklanders want to organise themselves to discuss and lobby for, say, the CBD rail tunnel then I believe they can have influence in making it happen and I care. It is a well understood problem with a well understood solution. But on the other hand, I don’t believe that collectively we’ll invent the technology that replaces oil for the world. I do know it WILL be invented. I trust that it will be better than petrol. And I am almost certain that it’ll be invented by an individual or group of individuals, and the best thing the rest of us can do is not get in the way. By, for instance, subsidising an unsustainable competitor like biofuel. Or subsidising an obsolete vested interest like General Motors. Or by devising a national peak oil plan or something. My caring takes the form of saying the problem will sort itself out, so don’t sweat it.
I agree that we will probably EVENTUALLY come up with a long term replacement for oil, I guess the worry is about how traumatic that change will be. My ultimate point is that it’s silly to invest $11b in state highways in the nexy decade when the future of the fuel that drives the vehicles is so uncertain.
Admin, Obi, maybe you should consider the immediate personal impacts of a serious ‘oil price crisis’. For one it has the potential to put the world into a depression the likes of which we have never seen. It could be like the unsustainable financial system that the world operated on coming into the 20th Century. Eventually new ways of doing things sorted that out, but in the meantime people had to live through the effects of the process of adaptation, they called it the Great Depression.
I think there are actually plenty of examples of things ‘running out’ and not having some new technology step in to fix it. Look at the technological and social sophistication of the Roman Empire for example. That culture grew to the point where it outstripped the the capacity of the communication and transport technologies of the day and there was no silver bullet technology to improve on them. The end result was the culture collapsed under its own weight and Europe entered the dark ages. It took about a thousand years for European civilisation to return to where it was under the Romans. Or take the Easter Islanders. They had an amazing culture capable of carving and moving enormous statues, but it was all based around access to large amounts of timber. Eventually they cut down all the trees on their island once the population grew and demand for timber outstripped supply. Sure they knew how to work stone and had the capability of using that as a replacement, but their culture never survived the shock of ‘peak wood’. Part of the population survived of course, but it was only a shadow of the former civilisation.
Too true Nick, there are risks associated with reaching the “energy ceiling” that peak “cheap” oil is, not least of which that our fractional banking system, the world over, relies on expanding GDP ergo expanding energy use…
Will the “market sort it out..?
Possibly, but surely it is a good idea to have in place the tools that can tide us over until the “next big thing” comes along… Tools like the current PTMA, a NW busway, a few new rail lines, better district plans allowing for intensification, better public space that attracts people to live centrally, use PT and therefore less oil, etc..?
I’d be surprised if we saw sudden long-lasting spikes in prices: http://offsettingbehaviour.blogspot.com/2009/09/peak-oil.html