Scraping the bottom of the (oil) barrel?

PUBLISHED : Monday, 29 December, 2008, 12:00am
UPDATED : Monday, 29 December, 2008, 12:00am

Worried about 'peak oil'? The International Energy Agency's (IEA) annual report, 'The World Energy Outlook 2008', admits for the first time that 'although global oil production in total is not expected to peak before 2030, production of conventional oil ... is projected to level off towards the end of the projection period'. When The Guardian's environmental columnist, George Monbiot, pressed IEA director Fatih Birol on that opaque phrase, the actual date turned out to be 2020.

The IEA's previous reports, which assured everyone that there was plenty of oil until 2030, were based on what Dr Birol called 'a global assumption about the world's oilfields': that the rate of decline in the output of existing oilfields was 3.7 per cent a year. But, this year, some of the staff actually turned up for work occasionally and did a 'very, very detailed' survey on the actual rate of decline. It turns out that production in the older fields is really falling at 6.7 per cent a year.

There are still some new oilfields coming into production, but this number means that the production of conventional oil - oil that you pump out of the ground or the seabed in the good, old-fashioned way - will peak in 2020, 11 years from now. Dr Birol assumes, or rather pretends, that new production of 'unconventional oil' will allow total production to match demand for another decade, until 2030, but this is sheer fantasy.

The IEA presumes that demand for oil will rise indefinitely, so the price of oil only gets higher after 'peak oil' but, in technology, nothing is forever. Set into the front doorstep of my house (and most other 19th-century houses in London) is an iron contrivance called a boot scraper. It is a device for scraping the horse manure off your boots before coming into the house, and it is worn into a shallow curve by half a century of use.

London in the 1890s had 11,000 horse-drawn taxis and several thousand buses, each of which required 12 horses a day. There were at least 100,000 horses on the streets of London every day - each producing an average of 10kg of manure.

As the cities grew, even more horses were needed and the problem grew steadily worse. One Times writer in 1894 estimated that, in 50 years, the streets of London would be buried under three metres of manure.

In fact, within 35 years, the streets of London were almost completely free of horses, and filled with cars instead. They created a different kind of pollution. The same fate is likely to overtake petrol- and diesel-fuelled vehicles in the next 35 years.

The shift will be driven by concerns about foreign exchange costs and energy independence, and increasingly by the need to curb greenhouse-gas emissions. It is starting with ever-tightening standards for fuel efficiency. That will be followed by the first mass-market generation of electric vehicles, due in the next two or three years. The coup de grace will be delivered by third-generation biofuels, probably produced from algae that do not use valuable agricultural land, that are fully competitive with oil in price and energy content.

We will never get back the eight wasted years of the Bush administration, and it may now be too late to avoid drastic climate change, but US president-elect Barack Obama is clearly going to try. You do not appoint Steven Chu as your energy secretary, Carol Browner as your 'climate tsarina', and John Holdren as your chief scientific adviser if you intend to evade the issue.

The same is true elsewhere. Indeed, it is a safe bet that the demand for oil is going to fall faster than the supply over the next 10 or 15 years, even if we are already at or near 'peak oil', for the annual decline in oil production just after the peak is actually quite shallow - around 2 per cent. And, if demand falls faster than supply, the price will also collapse.

Ladies and gentlemen, place your bets.

Gwynne Dyer is a London-based independent journalist whose articles are published in 45 countries