9 Conclusion

The estimated time for this activity is 40 minutes.

While studying this course you have explored some important trends in oil production and consumption in the United States, China and the Middle East. For many commentators, these trends are not as important as the bigger question: is overall global oil production about to decline? Many argue that we are at, or very close to, the point when the world's production of oil will peak and start to fall (Section 5). This idea, known as the 'Peak Oil hypothesis', is a controversial one and in this activity you will explore the views of two commentators from opposite sides of the debate.

You will listen to short extracts from interviews with the two. You should bear in mind that these are extracts rather than the full interviews.

If you have time, you may wish to listen to the whole of each extract through once, and then read the questions before listening to the extract again. Use the pause button while noting down your answers to each question.

Part I

The first commentator is Dieter Helm, Professor of Energy Policy at the University of Oxford, who specialises in issues related to energy and the environment. He doubts the validity of what he calls 'Peak Oil' hypotheses.

Listen to the 5-minute extract of the interview and then answer the following questions.

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Dieter Helm

My name is Dieter Helm. I am Professor of Energy Policy at the University of Oxford, and I'm also a Fellow in Economics at New College.

Peak oil's become one of those slogans covering a multitude of sins, and there are a variety of different hypotheses competing for space around this term. First of all there are people who believe that the Earth's resources are in some physical sense limited. Then there are those people who think that whether they're limited or not, the resources that we need now, particularly oil, and to a lesser extent gas, are controlled by a small number of countries who can exert political pressure and will indeed throttle the consuming countries. Then there are people who believe that it's inevitable that the demand for these fuels will carry on going up, so whatever the supply, demand will outstrip supply and therefore the price will go up, and these are the price peak oilers.

If we unpack the various components of peak oil claims, the starting point is that there's somehow some sort of physical limitation. Now in some pure theoretical sense it's got to be roughly right that there is some physical limit, but that's not really an interesting question from an energy perspective, unless that physical limit is somehow imminent, and about to bear down upon us, and mean that supply can't keep up with demand.

Now a moments reflection of the nature of the Earth's crust will tell you that it's absolutely riddled with carbon. Past photosynthesis in geological history has taken a great deal of carbon out of the atmosphere and deposited it in our rock structures. A little bit of it has percolated up from those deposits laid down in estuaries and ancient seas, and so on, has percolated up to find holes, gaps in the rocks, and that's what we call oil and natural gas, in a conventional sense. And so far all our technologies have enabled us to do is drill holes into those reservoirs and take out, in the case of oil, less than 50% before we have abandoned deposits; that's all we've achieved

The unconventional resources, the stuff that's riddled throughout those rocks which haven't found those nice, neat reservoir deposits, we've hardly scratched the surface of that. So it's not right to say, from a physical point of view, within any reasonable and relevant time period, that we have limited resources. What we have is limited technologies to get those resources, and then the question is are we on the brink of, and will we in the future, get the technology to access more of those resources? And the answer to that question is yes, and particularly if the price is high enough. So as the price of oil goes up people explore all sorts of other alternatives and they push the technological boundaries.

So, first of all, can we get more out existing wells? Yes, that's about pressure, and one of the ironies of climate change is that if we were to use sequestrated carbon, and inject it into some of those holes, we might get even more carbon fuels out as a result. So, there's an enormous amount that we could get out of existing resources, which just isn't economic at the moment.

But then there are the shales. And the shale gas revolution, shale oil following on, has been one of the great events in the last several decades in the fossil fuel industries. This is big stuff, and it's big stuff not because of some scientific change, not because the resources have changed, they're physically just what they were, but simply because higher oil prices have pushed through these new technologies.

If for a moment you were to suspend belief in peak oil, and take seriously the claim that the Earth's crust is riddled with fossil fuels, and that technological breakthroughs are making those fossil fuels more and more accessible. You would then have to entertain the possibility that the price of oil and gas is not going to go north, but could possibly go south. In other words, contrary to many of the wilder claims, we're not on the verge of a doubling of the oil price. Alright it might happen temporarily if we have an explosion in Iran or whatever, but a fundamental shift upwards in the oil price, and the gas price. We may be in a world in which they're going to be low, and even possibly very low. Now, from a climate change point of view, this is potentially very bad news.

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Part II

Shaun Chamberlin is an environmental activist, author and policy advisor. He was a pioneer of the Transition Towns movement and sits on the council of the campaigning organisation World Development Movement. He has also served as an advisor to the UK Department of Energy and Climate Change and co-authored the All Party Parliamentary Group on Peak Oil's 2011 report into energy rationing. He argues that Peak Oil is a reality now.

Listen to the 5-minute extract of the interview and then answer the following questions.

Courtesy of Jonathan Helm.

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Shaun Chamberlin

I'm Shaun Chamberlin. I co-authored a report for the All Party Parliamentary Group on peak oil, and I run the campaign for TEQs, which is the energy rationing system being discussed around the world.

Peak oil is based on the discovery, from experience, that for any given oilfield the production from that oilfield will increase over time, and then eventually reach a peak, and decline from that point in terms of the flow rate that's coming out of that oilfield. And the same is true of a region of oilfields or a country or, indeed, global oil production. And so the term peak oil usually refers to that, that global peak in oil production. I think crucially one of the things that's often said about peak oil is that it's when, when half the oil's been extracted, but that isn't necessarily true. It was probably true more when conventional oil made up the bulk of oil production. But now if you look at things like, for example, oil shale there are vast reserves of this stuff but the extraction rate from oil shale is very low for other reasons so, for example, the amount of water that's required to produce that. It's the flow rate that determines what's actually available to society to use, and reserves are just one limiting factor on that. We often say in peak oil terms that it's not the size of the tank that matters, it's the size of the tap that matters.

I like to challenge people when they talk about peak oil theory or peak oil hypothesis, because in the present we can say it's not really a theory or hypothesis, it's an observable fact. I mean the US oil production peaked in 1971; UK oil production peaked in 1999; global oil production has sort of levelled off over the last six or seven years. And, fundamentally, oil is a finite resource clearly, and so it's obvious that there will come a time when production declines over time. But in terms of looking to future scenarios and future impacts of, of peak oil, one of the key things was in 2005 the US Department of Energy produced a report, led by a guy called Robert Hirsch, and he spoke about economic, social and political impacts that would be abrupt, revolutionary, and not temporary.

Now, there are many, many different scenarios as to how peak oil and its implications could play out, but there are some undeniably important facts. I mean energy is probably best thought of as our ability to do stuff; that's fundamentally what it is. And so you'll find some kind of energy supply in the supply chain of every company and every activity that goes on. It obviously has a huge impact on the economy. If, if energy prices are increasing dramatically, as they have, then there's a complex relationship, and an important relationship, between that and the strength of the global economy generally.

The one absolutely core fact that really emphasises peak oil and its importance is that if you look at the energy content of petrol then a fill-up of petrol for a car, say 40 litres of petrol, is equivalent to four years of manual labour by a person, in terms of its energy content, and other things you can do with it, and yet, you know, we're paying for that maybe fifty quid. You know, you see if you can find someone who'll do four years of manual labour for you for fifty pounds and it's very easy to see why we've industrialised everything we can and, and powered it with fossil fuels.

And it's also I think crucial to look at the interplay with climate change, because there's a sort of a debate around whether peak oil is, is a good thing or a bad thing in terms of climate change. Because some people say well, you know, if we don't have as many fossil fuels, great, you know, we're not going to burn as many fossil fuels so that improves the climate change situation. Whereas others would say, oh my God, you know just at the point where we've got this huge challenge of climate change, we've also got this problem that's going to limit our ability to act and limit our ability to adapt and, you know, it's going to undermine our society's ability to do things about it.

And this is where I think it's really important to recognise that peak oil is no longer a future issue. This is something that's already shaping our world. I mean when I first started looking into peak oil around, around the turn of the century, the oil price had never been over $40 a barrel, except for during the '70s oil crisis when it, when it shot up. But that was a short-term political situation whereby certain oil producing and exporting countries reduced their production, reduced their exports for political reasons. After that crisis, it dropped back down and remained around $15-30 a barrel until I think around 2003. And actually I remember at one point in 1999 the oil price was under $10 a barrel, that recently, and yet now the average price last year, the average price, not the peak, was over $100 a barrel. And I remember 10 years ago we were told we were absolute nutcases for talking about the possibility of $100 a barrel, where that would never happen, and now it's absolutely normal and it's absolutely what everyone expects to happen.

You've got the International Energy Agency, for example, which is the leading global authority on energy absolutely acknowledging that we're facing this huge problem here. Their chief economist said a couple of years ago that we, we absolutely need to leave oil before it leaves us, and we have sounded the warning; these were his exact words,

It's hard to find a credible observer who doesn't believe that we're going to peak by 2030, you know that's the, that's a real outlier. You know some of the big sort of oil companies who consider it in their best interest to deny that this is a problem, they talk about peak oil by 2030. But even if that were true, it would still be time to be doing something about it right now.

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Part III