Transcript Peak Oil - The Coming Crisis

Peak Oil - The Coming Crisis
1. Understanding Peak Oil
2. Peak Oil - The Big Picture
3. Impact of Peak Oil
4. Peak Oil and India
1. Understanding Peak Oil
2
What are fossil fuels?
 Formed by decomposition of organic matter
 Most common types - coal, petroleum, gas
 Industrial Revolution was powered by coal
 Fossil fuels provide the bulk of the energy used
by modern societies
Not just petrol and diesel
 Industry: electronics, plastics, chemicals, textiles
 Agriculture: machinery fuel, fertilisers, pesticides
 Health: pharmaceuticals
 Household: LPG and Kerosene
 Electricity generation: Coal
Defining Peak Oil
 Label for peak global oil production
 At peak, we would have used half of all the oil
that can be extracted
 Post-peak, oil production begins to decline,
permanently
 Post-peak, supply of oil can’t match demand, and
will lead to massive price rises
World oil discovery & production
Courtesy: Energybulletin.net
Peak Oil - the end of cheap oil
 ‘Best’ and ‘accessible’ oil extracted first
 Best - low in sulphur content, easiest to refine;
Accessible- on land, near the surface
 This is also the cheapest - oil that takes least
money and energy to extract and refine
 Oil that remains is less accessible, of lesser
quality and more expensive to produce
Constraints on oil production
• Economic – extraction from a particular
reserve is viable only at a certain price level
• Technology - viable only if technology exists/is
adequate
• Energy - viable only if energy spent on
extraction is lesser than energy extracted
All oil fields eventually become unviable –
Peak Oil is when entire planet enters this stage
Is Peak Oil when we run out of oil?
 No, it is when oil production reaches its
maximum
 Post-peak, production levels off, starts to decline
 As demand outstrips supply, prices shoot up –
we switch from a buyers’ to sellers’ market
 Rising fuel prices have cascading effect on
economic growth, food security, social order
2. Peak Oil - The Big Picture
Courtesy: Polyp.org.uk
Rapidly declining oil fields
 The first ever detailed assessment of the 800
largest oil fields in the world, covering three
quarters of global reserves, found the bigger ones
among them to be already in decline.
 Those that had begun to decline were doing so at
a staggering rate of 6%.
 The study was conducted by Fatih Birol, the
world’s top energy economist.
We don’t really know how much oil is left
 80% of the world’s oil reserves are in OPEC
countries
 In most OPEC countries, crucial data on oil
reserves is a state secret
 OPEC works on a quota system - members can
export only in proportion to reserves
 Members may have exaggerated reserves to
increase exports (and thus, revenue)
Saudi Arabia exaggerated reserves
Saudi geologist Sadad alHusseini told American
officials that the world’s
biggest oil producer Saudi
Arabia’s oil reserves are
40% lower than stated.
Husseini is former vicepresident of state-owned
Saudi Aramco, the world’s
biggest oil company.
This was revealed in 2011,
when Wikileaks exposed a
secret US diplomatic cable.
When will oil peak?
 54 of the world’s 65 top oil producing countries have
passed their peak of production
 Experts* have stated that the global oil peak may
have occurred in 2005
 The International Energy Agency** too says we
might have passed the peak in 2006
 Others disagree, pointing to new oil discoveries and
improved technologies
 But the fact is, for every single barrel of new oil that
is discovered, we use up three***
*Colin Campbell **Chief economist Fatih Birol ***Transitiontowntotnes.org
Are price hikes connected to Peak Oil?
 World oil prices started rising in 2003 (40 USD per
barrel), peaking in July 2008 (USD 147)
 Global price rise is partly because supply can’t keep
up with demand
 Oil production has almost plateaued since 2005
 Inability to increase production despite demand
could be because of Peak Oil
 Peak Oil could be behind other price factors speculative trading, increasingly heavier crude etc
3. Impact of Peak Oil
Oil - lifeblood of modern societies
 We are highly dependent on oil-intensive industry
and transportation system
 Modern agriculture, manufacturing, medicine all
directly depend on oil and byproducts
 Globalised hi-tech world that relies on worldwide
movement of goods and people
 Increasingly urbanised society that is more
dependent on oil and byproducts than a rural one
Direct impact of Peak Oil
 Rising oil prices will impact cost of living
 Impacts food security - cost of transportation,
fertilisers, pesticides all increase
 Impact on manufacturing & industry transportation, raw material costs increase
 Impact on economy - growth slows down as
production & consumption shrinks
Indirect impact of Peak Oil
 Social and political unrest due to increase in cost
of living
 Shortages of food and essential goods as
production and distribution shrinks
 Economic growth slows down, and eventually
reverses - with severe social impact
 Geopolitical conflict as countries compete for
shrinking energy resources
“… a major economic shock”
“In the longer run, unless
we take serious steps to
prepare for the day that
we can no longer increase
production of oil, we are
faced with the possibility
of a major economic
shock—and the political
unrest that would ensue.”
James Schlesinger
former US Energy Secretary
4. Peak Oil and India
Courtesy: MSNBC India
Oil consumption in India
 Oil provides 98% of energy used for
transportation in India - mainly diesel and petrol
 Food security is highly dependent on oil - for
irrigation, food production & distribution
 Nearly 20% (58% of urban and 9% of rural) of
Indian households use LPG for cooking
 Kerosene - 43% rural households use it for
lighting, 22%* urban households for cooking
*figure for year 2000
Why India is more vulnerable - 1
 India is completely dependent on oil imports
 India consumes 3.2 million barrels of oil per day
 76% of India’s oil is imported, in crude form,
mostly from Middle East
 India is world’s fourth largest importer of oil
*2010 statistics
Why India is more vulnerable - 2
Mimicking a bankrupt economic model
 It is cheap fossil-fuel inputs that powered modern
economic growth [coal in 18th century England, oil in
20th century America].
 Countries like India and China assume that they too
can do the same, and have opted for a similar,
energy-intensive economic model.
 Consequently, India is changing from a localised, lowenergy-input economy to a globalised, high-energyinput one.
Why India is more vulnerable - 3
Flawed assumptions, upside down priorities
We are remaking our transportation [investing in
highways rather than railways], urban planning [cardependent suburban sprawl], agriculture [industrial
agriculture and agribusiness] - in fact, our whole
economic system - based on the assumption that
oil will continue to be cheap and abundant, which
will in turn fuel perpetual economic growth.
Why India is more vulnerable - 4
Bad policies, worse timing
 The age of cheap, abundant oil is over.
 Cheap oil has powered western industrial
advancement. It is one thing to do it a hundred years
ago, when all the oil on earth lay buried
underground.
 But to do it now, in the age of Peak Oil, is suicidal,
especially for the world’s fourth largest oil importer.
Why India is more vulnerable - 5
Zero awareness
 Peak oil is being debated in the West, but even the
term is unfamiliar to most ordinary people in India.
 We have few experts/institutions that study energy
issues - so the government itself is largely unaware.
 Lack of awareness of the actual problem means we’ll
be unable to initiate effective action.
 Above all, lack of awareness means lack of
preparation.
Why India is more vulnerable - 6
Alternative energy is not enough
• Nuclear - supplies 1% of energy (or 3% of electricity),
facing opposition due to safety concerns
• Wind and solar energy - only 2%, yet to prove
themselves on a large scale
• Biofuels - doubts about viability, especially its impact
on food security
• Most alternatives sources only help to generate
electricity - the problem of transportation remains
The world is talking about Peak Oil
So why not India?
 Indian politicians, officials and experts either don’t
know or don’t admit there’s a problem
 Mainstream media is either ignores it because its
‘negative’, or is ignorant itself
 Powerful corporations have a stake in existing
energy/transportation model - eg Tata Group in
automobiles and Reliance in petrochemicals
 Also, when a problem is huge/collective/insoluble,
most people deny it exists
“Leave oil before it leaves us”
“We are on the brink of a
new energy order. Our
reserves of oil will start to
run out and it is imperative
to prepare for that time.
We are not yet running out
of oil, we are running out of
time. We should leave oil
before it leaves us. That
means new approaches
must be found soon.”
Fatih Birol,
International Energy Agency