Foreword
Contents

『Preface

¹The graph above is copied from Kenneth S. Deffeyes: Hubbert’s Peak - The Impending World Oil Shortage. Princeton University Press, 2001. (page 6)

　From 1900 onward, people have been “crying wolf” when they had done their R/P arithmetic on conventional oil reserves (R) and annual oil production (P) and found that the ratio was only 10 years or so. However, as reserves grew at a faster rate than production, the ratio kept growing, being now about 40 years. So far, so good. Today no one disagrees that the wolf is out there but differences in analyses and opinions as to when it will attack the sheep still prevail. An R/P ratio of 40 years does not mean that production can be sustained at the present level for 40 years. Production will peak and begin declining long before the last barrel has been produced. The question is, when is the peak likely to occur and how steep is the decline likely to be ?
　In recent years several experienced oil geologists and some economists have sought to draw attention to their analyses of the prospects for the future supply of cheap, conventional oil, which - according to their findings - is likely to peak within the next ten or fifteen years. If demand continues to grow until the production peak occurs, the following irrevocable decline in production will have grave social and economic consequences.
　Other researchers, notably researchers in the United States Geological Survey (USGS), which is the governmental body responsible for oil and gas research in the US, and the US Energy Information Administration (EIA) refute the validity of these analyses, claiming that the predictions of an imminent peak in conventional oil production are unrealistic. Also the OECD’s Paris-based International Energy Agency (IEA) states in its World Energy Outlook 2002 that supply can meet demand at least until 2030, provided that very large investments in exploration and the development of production capacity and pipelines are made. Similar projections are presented by the European Commission in the report World energy, technology and climate policy outlook 2030 (WETO, 2003). However, the IEA explicitly states its concerns regarding the strenuous actions to be taken by governments in order to increase production at such a rate that economic development in the OECD countries as well as in the transition economies and the developing countries can be sustained.
　Any prediction of future demand and production is counterfactual and, therefore, uncertain. However, the functioning of modern societies is so heavily dependent on oilbased technologies and, therefore, on the supply of oil that governments must gain qualified information about the past and the probable future development in reserves and production capacities in order to assess the number of years that may be made available for the substitution of oil-based technologies before the decline in the supply of oil sets in.
　This review draws attention to the technological and economic characteristics of the brief singular era in the history of the Earth in which cheap conventional oil has been available in abundant amounts and presents the perspectives for the prospective ending of this era as assessed by various researchers who base their analyses on different methods.
　It is recognised that the assessments to be made should not concern the total geological depositions of oil and other fossil hydrocarbons from which oil can be extracted or synthesised. Assessments of these abundant amounts are practically irrelevant for the assessment of supplies in the next decades. The assessments to be made concern the volume of the reserves and the production capacities which can be made available in a foreseeable future at competitive costs and without unacceptable environmental impacts. Also, governments should assess the compatibility of the global oil consumption rate with climate change mitigation policies.
　No conclusions are drawn in this review. However, it is found that the evidence provided from public domain sources, upon which this review is based, warrants the scrupulous and politically unbiased assessment of the opportunities to balance global oil demand and oil production capacity in the next decades and the consequences of a decline in oil production capacity for the economies in the affluent countries and the economic development in the poor regions.
　If the time-horizon for the impending peak in the production of cheap conventional oil is as short as one or two decades or less, the problems involved in handling the situation are of a specific, practical nature. Therefore, economic policies should not rely on general, theoretical assumptions that technological progress will ensure sufficient supplies of oil or
substitutes for oil. Engineers and oil geologists should assess the investments in new, more energy-efficient end-use techniques and new discovery and recovery techniques needed to ensure that demand peaks before a decline in supply sets in. And economists should make governments aware of the national and international economic consequences of a
peak in oil supply for which governments, industries and consumers are unprepared and spell out economic policy conditions required for the implementation of the investments needed in end-use and supply industries in order to mitigate the consequences before the peak occurs.
　The low cost of conventional oil has allowed the development within a few decades of a world economy which is based on extravagant and wasteful use of this unique, most valuable fuel and thus depletes its precious resource base much faster than long-term economic considerations would justify.
　In each chapter of this review the factual evidence referred to is presented in the form of quotations from articles found in professional journals; conference proceedings; books written by prominent authors in the field of oil geology and oil economy; and reports published by authoritative institutions. This evidence constitutes the basic substance of the review. It is the subject matter of the interpretations and discussions offered.

Future oil supply is a controversial subject. The professional discussion is very heated. Not only the media but also professional journals have set up a verbal boxing ring where the socalled “pessimists” fight the so-called “optimists” - notions which suggest that professional judgement in this field is based on subjective sentiments rather than objective assessments based on well-documented evidence, theories and methods. This should be disquieting as the subject matter is of crucial importance to the world economy. Disagreement between professional analysts is no excuse for responsible politicians not to examine the evidence available and take a stand. 　The verbal boxing ring is good entertainment in the media. However, the truth does not reveal itself when a contender takes the count. Irrespective of human controversies, the truth relentlessly reveals itself as time goes by. And whether we like it or not, it is biassed towards the realities of this world. Regarding oil production, scrupulous research and analysis of the geological, technological, economic, and political evidence available is the only way to trace it. No one knows what the future will bring. But men and women are born to use their intellect to look ahead and pass warnings from the crow’s nest to the helmsman - so as to avoid the fate of the Titanic. From the author’s presentation of this review at the Copenhagen conference 2003

“Is the future going to be a rerun of the past ? I don’t think so. “ 　“We’ll see an exchange of the cheap and easy with the expensive and slow.” Francis Harper at the Copenhagen conference 2003

The conventional wisdom of the prevailing economic theories relies on the axiom that worldwide economic growth of a nature which implies continued growth in the production and consumption of energy-consuming hardware can continue for an indefinite length of time. That market forces will ensure that new resources and new technologies will always be at hand when access to the resources upon which our societies depend becomes restrained and present technologies therefore become obsolete. 　History shows that man has hitherto succeeded in making life easier by means of new energy sources and technologies. From manpower to horsepower. From horsepower to coal-fired steam engines. From steam engines to oil-engines. Thus economic development has, so to speak, been a ride downhill with the wind behind us. However, there is nothing in sight which is so easy and cheap to get, handle, store, and to use in cars, buses, trucks, tractors, ships, and aeroplanes as oil from oil wells. 　Therefore, unless something unknown today turns up or our oil-based consumer culture takes a turn towards less oil-dependent activities, we face an arduous ride uphill against a headwind when one day the supplies of cheap conventional oil become restricted. 　History may reveal that the prevailing axiom of sustainable economic growth is a theoretical derivative of the cheap-oil era. In contradistinction to economic theory, oil geologists have voiced concerns about future oil supply.

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Summary
　Depletion scenarios
　The economy and the geological reality of oil supply
　Oil and natural gas. Energy costs of oil production
　Oil consumption and climate change
　The need for international regulation
　Transportation
1. The Cheap-oil Era
　1.1 The oil-world
　1.2 Towards the end of the windfall energy economy
　1.3 The aging resource base
2. Oil - the Unique Liquid Fuel
　2.1 Conventional oil
　　2.1.1 Liquid fossil oil deposits
　　2.1.2 Natural gas liquids (NGL)
　2.2 Non-conventional fossil oil
　　2.2.1 Heavy oil, extra heavy oil, and tar sand
　　2.2.2 Oil Shale
　　2.2.3 Synthetic oil from coal and natural gas
　2.3 Oil from biomass
　2.4 The terms ‘Reserves’ and ‘Resources’
3. Demand and Supply
　3.1 The IEA World Energy Outlook 2002 and World Energy Investment Outlook 2003
　3.2 World energy, technology and climate policy outlook 2030 (WETO)
　3.3 The higher the rise the steeper the fall
　3.4 Options for the reduction of the demand for conventional oil
　　3.4.1 Oil demand determinants
　　3.4.2 Ways and means to restrain the demand for conventional oil
　　　1) Reduction of inefficient, unnecessary, wasteful or extravagant use of oil
　　　2) Reduction of the demand for oil by the replacement of oil-based technologies
　　　3) The substitution of non-conventional fossil oil and oil from biomass for conventional oil
4. Conventional Oil Reserve Assessments
　4.1 Reserve development
　4.2 Future discoveries and enhanced recovery techniques
　4.3 Ultimate reserve estimates
　　4.3.1 Laherrere’s estimates
　　4.3.2 Campbell’s estimates
　　4.3.3 USGS’s probabilistic assessments
　　4.3.4 The WETO POLES model
5. Oil Demand and Reserve Depletion Scenarios
　5.1 Demand and supply
　5.2 Hubbert depletion scenarios
　5.3 Campbell’s depletion scenario
　5.4 EIA’s R/P based depletion scenarios
　5.5 OILPROSPECTS scenarios
6. On the Economy of Oil
　6.1 On the economy of the cheap-oil technology complex
　　6.1.1 Motorcars
　　6.1.2 Speed
　　6.1.3 Trucking
　6.2 On the new economy of oil supply
　6.3 Administering a market with low marginal production costs
　6.4 Market experiments with the global economy

Figure 5.8 Demand and production scenario computed from the data shown in the box above and a 1.6% demand growth until 2030. In this example, it is assumed that production from existing reserves in a region begins to decline when 50% of the ultimate reserves in the region has been produced. Figure 5.9 Demand and production scenario resulting from a 20% increase of remaining reserves (2000) and new findings as compared to the values given in the box above and a reduction in demand growth to 1%.