Oil Peak Could Catch USA Unprepared

Oil Peak Could Catch USA Unprepared



March 2007 - The U.S. government 
needs a strategy to coordinate and prioritize federal agency 
efforts to reduce uncertainty about the timing of an oil peak 
and to advise Congress on how best to mitigate consequences, 
finds a new report by the Government Accountability Office, 
GAO, the investigative branch of Congress. 
The oil peak is that point when global production reaches its 
maximum and then can only decline. 
The GAO report, published Thursday, says most studies estimate 
that oil production will peak sometime between now and 2040. 
But today, a Swedish scientist warned that the peak could come 
as early as next year. 
Fredrik Robelius in the Department of Nuclear and Particle 
Physics at Uppsala University published his doctoral thesis 
today in which he says the rate of extraction from giant oil 
fields is a better indicator of the peak than oil prices. 
"The reliability of the oil price as a single parameter can be 
questioned, as earlier times of high prices have occurred 
without having anything to do with a lack of oil," said 
Robelius. 
"Instead," he said, "giant oil fields, the largest oil fields 
in the world, can be used as a parameter." 
Future demand for oil is expected to increase annually by 1.4 
to 1.7 percent, Robelius says. 
"A worst-case scenario sees a peak in 2008, and the best-case 
scenario, following a 1.4 percent demand growth, peaks in 
2018," Robelius predicts. 

Texaco oil workers drill a vertical compound well. 
The GAO says the range of estimates it found for the date of 
peak oil is wide because the timing of the peak depends on 
"multiple, uncertain factors" that will help determine how 
quickly the oil remaining in the ground is used. 
These factors include the amount of oil still in the ground; 
how much of that oil can ultimately be produced given 
technological, cost, and environmental challenges as well as 
potentially unfavorable political and investment conditions in 
some countries where oil is located; and future global demand 
for oil. 
Demand for oil will, in turn, be influenced by global economic 
growth and may be affected by government policies on the 
environment and climate change and consumer choices about 
conservation, the GAO said. 
In any case, the GAO said, the federal government is not well 
prepared at this time. Federal efforts are spread across 
multiple agencies and are not focused explicitly on peak oil. 
A giant oil field contains at least 500 million barrels of 
recoverable oil. Only one percent - 507 out of some 47,500 oil 
fields in the world - are giants, and the majority are found 
in the countries surrounding the Persian Gulf. 
Fredrik Robelius is a PhD student in the Uppsala Hydrocarbon 
Depletion Study Group at Sweden's Uppsala University. 
Over 60 percent of the 2005 production and about 65 percent of 
the global ultimate recoverable reserve is from giant fields, 
says Robelius. 
But giant fields are things of the past, the Swedish 
researcher says, since a majority of the largest giant fields 
are over 50 years old, many have begun to decline, and the 
discovery trend of fewer giant fields with smaller volumes is 
clear. 
Robelius developed a model, based on past annual production 
and the ultimate recoverable reserve, to forecast future 
production from giant fields. 
"In all scenarios," Robelius says, "peak oil occurs at about 
the same time as the giant fields peak." 
The world's four largest oil fields are - Ghawar in Saudi 
Arabia, which produces 4.5 million barrels per day, Cantarell 
in Mexico, which produces nearly two million barrels per day, 
Burgan in Kuwait which produces 1.7 million barrels per day 
and Da Qing in China which produces one million barrels per 
day. 

Oil rig in the Gulf of Mexico off the coast of Louisiana 

The most mature oil region, the continental United States, 
peaked in 1970, while the latest oil region discovered, the 
North Sea, peaked in 2001. Both regions continue to decline 
despite strong demand and high oil prices, which motivates 
high production rates, Robelius says. 
"The declining trend in giant field discoveries suggests the 
good prospects are already drilled," he says. 
In the United States, alternative fuels and transportation 
technologies face challenges that could impede their ability 
to mitigate the consequences of a peak and decline in oil 
production, unless sufficient time and effort are brought to 
bear, the GAO said in its report. 
"Although corn ethanol production is technically feasible, it 
is more expensive to produce than gasoline and will require 
costly investments in infrastructure, such as pipelines and 
storage tanks, before it can become widely available as a 
primary fuel," the GAO said. 
Key alternative technologies currently supply the equivalent 
of only about one percent of U.S. consumption of petroleum 
products, and the Department of Energy projects that even by 
2015, they could displace only the equivalent of four percent 
of projected U.S. annual consumption. 
In such circumstances, the GAO said, "an imminent peak and 
sharp decline in oil production could cause a worldwide 
recession." 
Oil rig off the coast of Saudi Arabia 
But if the peak is delayed, these technologies have a greater 
potential to mitigate the consequences, the GAO said. 
To better prepare for a peak in oil production, GAO recommends 
that the Secretary of Energy work with other agencies to 
establish a strategy. In letters to the GAO, the Energy 
Department and Department of the Interior agreed with most 
aspects of the report. 
The Department of Energy projects that the technologies could 
displace up to 34 percent of U.S. consumption in the 2025 
through 2030 time frame, if the challenges are met. 
"The level of effort dedicated to overcoming challenges will 
depend in part on sustained high oil prices to encourage 
sufficient investment in and demand for alternatives," the GAO 
said. 
In its letter to members of Congress who requested the report, 
the GAO writes that U.S. consumers paid $38 billion more for 
gasoline in the first six months of 2006 than they paid in the 
same period of 2005, and $57 billion more than they paid in 
the same period of 2004, in large part because of rising oil 
prices, which reached a 24 year high in 2006 when adjusted for 
inflation. 
Robelius writes that new oil discoveries are not likely to 
help ease consumers over the peak oil point. 
"Although contributions from new field developments and 
deepwater is large, production from the 333 giant oil fields 
still dominates," says Robelius. "Despite optimistic 
production forecasts of the undoubtedly large resources of 
Orinoco and Alberta, their contribution is not enough to 
offset peak oil." 
The Robelius study, "Giant Oil Fields - The Highway to Oil: 
Giant Oil Fields and their Importance for Future Oil 
Production," is online here. 





 

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