ACT Peak Oil

Prepare for oil's decline

The Iranian navy has warned it could close the strait of Hormuz, through which a fifth of the world's traded oil passes (Iran: We'll close the strait of Hormuz, GW, 13-19 January 2012).

This would not be good for anyone, least of all the Iranians, but it may help us to prepare for what is to come as global oil supplies begin to decline, perhaps as early as 2015.

All nations should be preparing for for this. Last week, Olivier Rech, a French economist who developed scenarios for the International Energy Agency for three years until 2009, warned that this inevitable decline will occur "somewhere between 2015 and 2020".

Rech noted that the production of oil has been on a plateau since 2005 at around 82 million barrels a day(mb/d) with an additional 6 mb/d from biofuels and coal-to-liquid. He believes it is "impossible to go much higher". Meanwhile, demand is still on an increasing trajectory.

Given that oil is still so inextricably tied up with economic development and agriculture, declining oil supplies will have huge implications for national economies and food security. We currently use 32 billion barrels of oil a year globally. There are around 900 billion barrels left, thus, at current usage, it will be gone in less than 30 years.

Because of rising demand and given that available reserves are increasingly difficult to extract, we can expect ever higher prices. While oil has hovered around $100/barrel for the past year, a 50 per cent increase may well set off another 2008-style Global Financial Crisis, one from which we are unlikely to recover.

The international president for the Association for the Study Peak Oil and Gas, Kjell Aleklett, once suggested that nations adopt an oil depeletion protocol so that remaining supplies are shared out rationally. The alternative is hardly pleasant.There are many precedents for countries going to war over diminishing resources. Until we develop alternatives, if indeed there are any, oil remains a critical resource.

Jenny Goldie
Michelago NSW Australia