Letter to the Editor

BLACK GOLD

Dear Letters-to-the-Editor:

This past summer, gas prices rose to unprecedented levels in Southern California. For a brief time a gallon of gas exceeded the price of a half-gallon of bottled water! What's this world coming to? It was awful! But it got me to thinking.

A Tale of Buried Treasure — Black Gold

Use your imagination. Fancy yourself living in Florida. You've a nice home on a secluded beach. You're walking one evening when you spy something glinting in the sand — a gold coin. You retrieve it and think to yourself, "My God, maybe a treasure ship foundered — right here." You begin looking about more carefully. You spot another coin, and then another.

But the tide is coming in and it's getting dark.

The next day you're back — pretty early. You discover and gather up some more coins. You enlist the help of your wife. You get your brother involved.

You buy a metal detector. Using the detector, you're now locating coins faster than your wife and brother, your "production crew," can dig them up. Your discovery rate is so high, you quit retrieving and begin merely flagging sites for recovery.

You enlist the help of more family members. But you continue to locate coins faster than they can dig them up.

After a week your discovery rate begins to decline. You've defined the limits of the productive area. You're still finding lots of coins. But it's obvious: the end is in sight.

In the meantime the production crew is getting efficient and is bringing in coins faster than ever — a lot faster than your finder's rate. It took them a while to gear up. But with good tools, they're really producing!

But soon they too begin to see the end. They keep working; but as the area becomes over-exploited they're finding that many of the marked sites are false positives — dry holes. Discovery has dropped almost to zero. Production too begins to fall. Squabbling begins.

Interestingly, but not surprisingly, the maximum rate of production was well after the peak discovery period.

Petroleum Production in America

In a like manner oil discovery and its production followed the same pattern in America. The peak period of discovery was in the 1950s. But the most productive year was a decade and a half later — in 1970. America's annual oil production was never again so high as in 1970.

An oil geologist, M. King Hubbert, worked out this phase-shifted discovery/production relationship in 1956. He predicted that production would peak in 1969. He was mostly ignored and even ridiculed for his prediction. But it proved to be remarkably prescient. In 1973 Americans were standing by (and fighting over) empty gas pumps because we as a nation were unprepared for the decline of supplies after 1970.

Detroit was unprepared as well. In 1974 big car sales plummeted. They didn't recover until the 1990s.

But while the US had reached its oil production peak in 1970, world oil production continued to climb and the US became a major importer. (The US now imports over half its petroleum.) Political problems sometimes dogged the process. OPEC precipitated another shortage in 1979. But since 1979 petroleum products have been relatively plentiful and cheap.

Recently oil analysts have begun applying Hubbert principles to global oil production. More powerful computers help. Also, there's simply more data about the world's oil fields. And the locations and production potential of the world's present and future oil fields are now fairly well understood.

The analysts have concluded that some huge undiscovered and unexploited reservoirs remain in known areas of the world. Many more surely exist in parts of the world which have only recently become available for exploration.

But the discovery of global oil has peaked. It probably did so somewhere around 1960. (Hindsight makes this "prediction" easier.) From Hubbert we now know that this peak occurs when about half the supply has been discovered. (Plotting an oilfield's production yields a bell curve.) This fact allows one to calculate the total quantity of petroleum available for exploitation. Knowing this quantity allows one to predict when the production of the resource will peak, and when the supply will be exhausted.

From these recent analyses, it appears that global oil production will reach a maximum around 2010. That's the supply side of the equation. Unfortunately demand will continue to rise exponentially after 2010.

Thus, a collision between supply and demand is not far off. We got a taste of what such a collision is like in 1973 and again in 1979.

But this time there'll be no foreign oil to fill the void. The 2010 shortages will be worldwide and they will be permanent.

Economists tell us not to worry. The inevitable price increases associated with such a shortage will bring on new production. Up to a point, this is true. But energy production behaves differently from other resources. Energy production requires energy. If it takes a gallon of diesel to produce a gallon of petroleum, then production of that gallon of petroleum is pointless and will not happen, regardless of the price.

In places like Kuwait one merely needs to drill a hole in the ground and oil gushes out. The energy price of production is low. But in Alaska where the oil is thick, the oil must be steam heated and pumped out of the ground, then heated again and pumped hundreds of miles to Valdez. From there it must be transported hundreds, even thousands of miles. All this before refinery processing even begins.

All of these processes are energy intensive and the problem will become worse as the "easy" sites are depleted. But this energy price is trivial compared to what it will be when we need to begin exploiting coal, tar sands and oil shales for making motor fuels.

As petroleum supplies dwindle, competition for them will become intense. A case can be made that we're already seeing such competition. The competitive pressures will surely lead to some ugliness — as we've seen in Iraq. Just as the playground bully gets his way, so too will the more aggressive and ruthless nations win out in the competition for global oil supplies. Military might will be increasingly important. I think it was Ty Cobb who said, "Nice guys finish last." The United States has never finished last.

Further Reading

The above analysis is not good news. And not everyone agrees with the conclusions. In addition, I've reduced the problem to its simplest form for brevity. Perhaps I've over-simplified. But some bright people have contributed to these analyses. For those who want additional information, I suggest the following:

Donella H. Meadows' book The Limits to Growth, 1972. This was the first inkling I had of this problem. A copy of this book should be available through your local library.

There's an article, "The End of Cheap Oil," in the March 1998 issue of the Scientific American magazine. Most libraries can get a copy of this magazine. I found a copy of the article on the Internet.

Do an Internet search for the above article title and its authors. Or search for information about M. King Hubbert — the geologist who started this revolution. Such searches will yield leads to other sources. There's a wealth of information for the curious.

Alternatively, you can listen to those intellectual giants of the oil industry, George Bush and Dick Cheney. Read their speeches. They've been very generous, sharing with us their thoughtful perspectives on America's energy future. Unfortunately, they haven't written much.

Best regards,
Bart Boyer
San Diego