July 05, AU Edition

THE GOOD OIL
Are we heading for a world with less petrol, or is there enough black gold in the ground to keep us driving 4WDs for five hundred years? CLARE SWINNEY looks at ‘peak oil’, the latest cry of ecological doomsayers and wonders if this time, the sky really is falling
Sydney, 2019. Centrepoint Tower basks in the glow of the sun’s last rays of the day before it slips below the distant and hazy ranges of the Blue Mountains. The motorways though, are almost empty, as they have been for most of the previous 18 months – ever since petrol hit the latest in an ongoing series of highs – $8 per litre. These days, the traffic is mostly buses and trucks, commuters having long ago given up on runs into the CBD each day in preference for telecommuting from their home computers. The ambitious and expensive network of tunnels built under the city are now largely falling into disuse by everyone except for squatters; it’s too expensive to keep it all roadworthy for the few remaining paying coustomers. And in the CBD, luxury high-rise ghettoes are crammed with people trying to escape now-isolated suburbs.
Such a scenario may sound outlandish, and perhaps it is, but according to a growing number of energy analysts Australians are in danger of living the dream-turned-nightmare. Oil, they say, is running out. The ubiquitous black gold that lubricates our daily lives and makes the economy hum is getting harder and costlier to extract from the ground. On this much virtually everyone, even the skeptics, agrees.
What they don’t agree on is when it’ll happen.
‘In the next three years’, argues author and researcher James Howard Kunstler in a recent interview with Grist magazine in the US, ‘we are going to be feeling the pain. Our lives are going to be noticeably beginning to be disrupted. In the next ten years, you will see the beginning of a major collapse of suburbia’.
Australia is a country heavily reliant on oil. Our strength as one of the world’s leading agricultural producers hinges on not just fuel oil for transport, but oil by-products as fertilizers.
According to Kunstler, rising fuel costs will force city-dwellers to grow their own food literally in household backyards and farms on the back doorstep. Many people, he says, will find their lifestyles change to accommodate a necessary grow-your-own component. Prices for lifestyle blocks and large city sections will soar, while prices of apartments will plummet.

Although Kunstler was speaking to an American audience, there are those in Australia, like the Green Party, who are convinced by his message, and throw the threat of falling oil supplies into an already-confused local debate over environmental policy and where the country – and world is hidden. For while on the one hand, environmentalists worry that the world is running out of oil (though they never mention that such a scenario would also go a long way towards cut greenhouse gas emissions), on the other, scientists such as Bjorn Lomborg, author of The Skeptical Environmentalist, disagree. According to Lomborg, there are vast reserves of oil in tar sands and shale, and while it is more expensive to extract, these sources could also keep the well from running dry for many, many years – 5,000, to be exact.
It’s not hard to understand why the skeptics would be, well, skeptical. After all, back in the 1970s environmentalists were predicting that today civilization would be beating back glaciers and that nations would be going to war over food. And there’s currently huge debate over whether rising temperatures are the result of man’s planet-destroying hubris which needs urgently to be put in check, or simply caused by natural long-term fluctuations in the climate. After all, if meteorologists can’t predict whether Saturday’s trip to the beach will be a wash-out, what makes them think they can project the temperature, five, ten, or fifty years down the track?
So is this matter of peak oil really much ado about nothing and another tactic by the Greens to garner inner-city votes and reduce vehicle emissions? Or is it the skeptics who are misinformed?
New Zealand-based geologist Alan Hart, who has worked on the frontline of the oil industry for 30 years, believes the ramifications of this ‘final’ oil crisis will be very serious indeed and our media has fundamentally failed to alert people to the realities of what lies ahead. Born in Texas in 1951, he graduated from the University of Texas at Arlington with advanced degrees in petroleum geology in 1974 and 1979, and has worked for several oil companies, including the 7th largest US petroleum company, ARCO. Since 2002, he has been on the board of directors of Canadian company, TAG Oil, which is concentrating on exploration efforts in New Zealand.
‘These journalists and radio hosts are entitled to their opinions and can denigrate spokespersons like myself all they want, but I personally know that peak oil will arrive in two or five or ten years. From that point on, the world as we know it will be changed unless the global community meets it head on and begins its preparations now.’
The act of taking oil from the ground is called producing it. Since the start of oil production in the nineteenth century, the world has produced about half of its ultimately recoverable oil resource. At the halfway point, the world will achieve what is referred to as its production peak – more oil will be produced in a year near the halfway point than ever before – or thereafter. This is what is referred to as peak oil.
There are varied opinions regarding when peak oil will occur. Dr Colin Campbell, a petro-geologist who is perhaps the world’s foremost expert on predicting oil trends, calculates that it will occur in 2006. Dr Campbell, who was conferred with a PhD from Oxford University and has worked as a geologist, manager, and consultant for a variety of oil companies, is currently the convener and editor of the Association for the Study of Peak Oil (ASPO) and a Trustee of the Oil Depletion Analysis Centre in London. He told the Guardian in late-April 2005 that about 944 billion barrels of oil have thus far been extracted, some 764 billion remains extractable in known fields or reserves, and that a further 142 billion of reserves are classed as ‘yet-to-find’ – that’s the oil geologists expect to be discovered. He said if this is so, then the overall oil peak arrives next year – with unpredictable and perhaps drastic consequences for the world.
Optimists focus on the figures and assume that just because the production peak has arrived doesn’t mean that oil is under imminent threat. But Campbell and James Howard Kunstler argue the petro-optimists are missing the point.
‘We don’t have to run out of oil or natural gas to have severe problems’, says Kunstler. ‘All you have to do is head down the arc of depletion on the downside of world peak production.’
In other words, as production decreases yet demand continues to increase, oil prices become problematic for the world long before the wells actually dry up.
The peak oil debate has recently heated up especially across the Tasman, where Energy Minister Trevor Mallard told Investigate the Government stands by its view that peak oil will occur sometime between 2021 and 2067, with ‘probability highest around 2037’, statistics that come from the United States Department of Energy’s Energy Information Administration.
‘I stress that other estimates abound’, concedes Mallard, ‘and that I’m not claiming that this is the right one, but it’s in our view the best estimate we have to work to for now’.
But critics say politicians like Mallard have no choice but to play it cool, lest the healthy economic outlook be exposed as a fraud. The man who just purchased a new 4WD on hire purchase would think the bottom had dropped out of his world and the young couple who’d just built their dream home an hour’s drive from their work places, where there was no alternative but to drive, would be gutted. It’s far simpler, say petro-pessimists, for the Minister to use smoke and mirrors to provide an illusion of a rosy future, which allow for the continuance of current trends over the coming years, rather than to tell it like it is. It’s like booking us to go First Class on the Titanic and moving all the furniture towards the end that will sink first.
It is significant that peak oil is getting much more coverage in the international media than it is in Australia’s daily press. But this will change. Ordinary people are learning about the theory, thanks largely to word of mouth and the internet. One who ascribes to this view is Kiwi builder Robert Atack. For six years now, this 47-year-old has been a modern Jeremiah informing people about the impending oil crisis. He, like some experts in world energy studies, believes it will have a catastrophic impact on humanity, an impact which could be lessened if we start our preparations now.
Atack has plunged $9,000 of his own cash into the issue, printing and distributing leaflets, CDs, DVDs, videos and books, which carry information from experts of Dr Colin Campbell’s ilk, to members of the public and parliament.
‘During the last term of government I had 10,000 copies of The Oil Crash And You printed and sent about 5 copies each to every MP. And I’ve sent a lot of e-mails – and I think probably most of the current government have had something sent to them’, offers Atack.
‘Trevor Mallard’s been in denial. Any official reply I’ve seen from his office since he became Minister of Energy is just the regurgitated rubbish Pete Hodgson’s secretary sent out, who became Mallard’s when he took over the job of Minister of Energy.’
Beyond the rhetoric, there is evidence that the oil industry really is in dire straits. According to oil geologist Hart it is an industry virtually working at full capacity now. It’s being pushed to its limits. He can tell by the number of oil tankers traveling around the world, the number of seismic vessels gathering seismic data for oil companies, as well as from the number of oilrigs in use.
At present, the world can produce about 84 million barrels of oil a day at the most.
Over 82 million barrels per day are being used at present and there’s an increasing demand for more. The world economy grew by 5.1% in 2004 – the fastest in nearly three decades. Among the leaders were China, (with around 1.3 billion inhabitants), expanding at 9.5%, Argentina at 9% and India at 7.3%, (around 1.1 billion people). Projections for the fourth quarter of 2005 indicate that 86 to 87 million barrels of oil a day will be required and this won’t be met. Although the biggest oil companies, ExxonMobil, Chevron, Texaco, and BP talk about there being ‘plenty of oil’ and being able to produce more, their production figures are actually going down every year, a problem compounded by a lack of refineries that create supply bottlenecks and push the price of petrol north.
While the oil industry can function well at the moment, it won’t in the imminent future. Compounding the oil availability problems is that for the past 20 years the industry has failed to attract enough new personnel. Faced with the choice of studying oil geology or the glamour of IT during the dotcom boom of the nineties, many students chose IT. The grim period of mergers and downsizing in the oil business added to the perception that the oil business was a beast in its death throes. As perhaps it is.
Managing editor of the Oil & Gas International Journal, Dev George, puts it, ‘It seems as though every major petroleum industry conference these days has at least one session devoted to bemoaning the critical shortage of new blood, the lack of young professionals – engineers and geologists and geoscientists as well as business and industry generalists – entering the industry.’
Hart says this spells doom for the oil business, because the ability to successfully locate and drill for oil is highly dependent upon having an employee base with extensive work experience.
‘In 1985, the average age for a member of the American Association of Petroleum Geologists was 38. The average age last year was 53. This shows that at this critical time when the industry really needs experienced employees, they won’t be there. It is really a dreadful situation we face’, offers Hart despondently.
The American Association of Petroleum Geologists has been providing videos and encouraging its 31,000 members to speak in public forums about the possibility of future oil shortages for the past 15 years. Hart began making presentations to various civic and business groups down under several years ago in an attempt to alert the public to the coming end to cheap oil, but finds it difficult to disseminate the message because the public is chiefly ‘unbelieving.’
‘Some people think that “peak oil” is nothing but evidence of a greedy oil industry trying to talk up the oil price’, but this is not so, says Hart: ‘Why would the industry manipulate prices so high that they drive away the very customers that are required to keep them in business? The last thing the oil companies want to see is a chaotic global event [peak oil] that destroys their carefully cultivated consumer base. If there was anything the producers – especially OPEC and petroleum companies could do to slow the price juggernaut,
believe me they’d be doing it now, not tomorrow.’
Hart says it’s the plight of his own four children that motivates him to inform the public about peak oil, because while he can educate them on the impending oil crisis, without the cooperative efforts of the rest of the community and nation, their entire livelihood is threatened by the coming dilemma.
Dr Peter Ballance, formerly Associate Professor of Geology at Auckland University, specialised in sedimentary and oil geology and holds a Doctorate of Science from the University of London. He contends that the threat of peak oil should be taken seriously. ‘It’s a physical fact. One which we may reach this year or in 10 year’s time’, he warns.
In regard to whether skeptical cientists such as Bjorn Lomborg are correct in claiming that there is plenty of oil, Dr Ballance admits that ‘people who say there’s plenty of oil are right in one sense, but in the sense of plenty of the ideal oil, they’re wrong. Much of that remaining oil will be in tar sands, oil shales, deep-sea locations and Arctic locations. All of that’s very expensive and environmentally damaging to extract.’
The cost of oil is not the real issue. The availability of oil is. It is currently cheap because we’re extracting fuel from easy fields whose technical infrastructure was put in place and paid for decades ago. When those fields empty, sooner rather than later, prices will rise.
It is commonly suggested that technological advances will play a role in finding meaningful quantities of more oil. Unfortunately, according to Hart, while technology has and will continue to enhance the oil industry’s ability to locate significant new accumulations of petroleum, it cannot compensate for the huge amounts of cheap oil we are chewing our way through.
‘Anyone who believes that technology will “save the day” like the plot of a Hollywood blockbuster is not facing up to reality. Technology alone cannot replace the amounts of cheap oil [less than US$10/barrel to produce] we are currently consuming on a global scale. It’s going to take a conservation effort too’, he asserts. Wishful thinking, whilst correct to a point, still ignores the reality that markets rely on plenty of advance warning and new discoveries, not magic wands, and that if another chemical existed that could replace oil as a fuel, or in plastics or any of the other myriad uses for oil, we ought to know about it by now. And we don’t. And on a worst case scenario those ‘markets’ may only have another five years to find the mystery new elixir, test it and produce it.
Yes, solar power can help reduce some of the dependence on oil, but currently we use oil to create solar generation capacity. The power and telephone lines into our homes are manufactured from oil. Computers are dependent on oil. Many pharmaceutical and health products require oil. For the markets to truly ‘take care of it’, planning has to begin immediately, argue petro-pessimists.
Some still refuse to face the possibility of a world with less oil, however, like those who believe Thomas Gold’s theory that oil is abiotic, or non-organic in origin. This theory, which holds a growing number of followers, suggests that oil is being produced within the mantle of the earth, from where it continually moves upward, to provide an unlimited supply. Dr Ballance says that there is no substance to Gold’s theory. ‘It’s one of the many myths on which people build hopes’, he says.
Although the oil industry has repeatedly proven that oil is biotic, meaning that it is derived from the degeneration of organic plant and animal remains from which the carbon molecules have been converted to complex hydrocarbon molecules through pressure and time, the Gold theory has retained many believers for a number of reasons.
There are genuine accounts of oil wells refilling, and drilling at levels deeper than 10,000 metres, which some say is evidence that has supported Gold’s theory. Ballance counters that the reason the wells have been refilling is not because oil is being magically produced deep within the earth, but simply because oil moves through permeable rocks in response to a pressure gradient. It can continue to move after a well has ceased to provide economic quantities of oil. Thus, it’s to be expected that old wells will in some cases refill with oil, but in no where near the quantities that will make any difference to a world that uses over 82 million barrels a day.
Likewise, the drilling beyond 10,000 metres does not lend support for the abiotic theory, either because when hydrocarbons are subjected to the temperatures and pressure that exist below 9,000 metres, they are generally destroyed says Hart.
Former industrial chemist Kevin Moore, who has an Honours degree in chemistry from Auckland University, has studied the abiotic theory and says its proponents are asking us to accept a process that defies the laws of chemistry. ‘Until the proponents of abiotic oil present a plausible theory, and they’ve presented none to my knowledge, it’s just junk science’.
The deepest bore to date was drilled by Russians in the Kola Peninsula to 12,262-metres from 1970 to 1994 and cost more than US$250 million. However, it was not drilled in order to search for oil or natural gas, but to study the nature of the earth’s crust. ‘While there’s no ultra-deep oil except in a couple of unusual fields, there is ultra-deep gas in many places. No matter where people get their information from, they can be assured that petroleum is not generated in the mantle. And if Russia, which passed peak production in the late-1980’s, has all of this deep oil, why isn’t it selling it on the world market?’, questions Hart.
According to peak oil advocates, Australia should be doing a thorough analysis of each sector of the economy to understand how vulnerable it is to oil prices and shortages and what can be done. For example, can our food be grown closer to where it is eaten? How do we maintain soil fertility without nitrogen-based fertilizers – which are made from fossil fuels? Can we invest now in expensive infrastructure that will be hard to afford when oil is expensive – like rail, wind turbines and solar technologies, to say nothing of nuclear power, which is once again on the agenda.
Australia is competing against the world for a limited amount of liquid energy. As long as oil demand outstrips the industry’s ability to supply oil, the prices will continue to rise. When global oil production does peak, and it soon will, the disparity between demand and supply will continue to grow and the situation will so worsen. It’s not a case of if, but when. While one can hope and pray that gigantic new sources of petroleum will be found tomorrow, if the majority of people working in the petroleum industry are correct, this won’t happen and continuing our gas-guzzling ways is only going to add to an already critical situation.