Hubbert's Peak Oil - 4th post

Still working on my first podcast. I was supposed to have my first interview yesterday but it didn't work out. I am happy to report that I will be interviewing the CEO of Sovna on Sunday so stay tuned.

I am going to try to be a bit shorter in my posts. This time, about Peak Oil.

It is thought by most that the drive behind renewable energy is global warming. This is only partially true. An additional major driver of the search for renewable and alternative energies is what is know as peak oil or the end of the cheap oil era.

The idea of Peak Oil was first put forward by M. King Hubbert, an American geologist. Hubbert's thesis is that for any given geographical area, from an individual oil-producing region to the planet as a whole, the rate of oil production tends to follow a bell-shaped curve.


The idea he put forward is simple, intuative and well proven and established in practice; and yet it has been contended by so many - particulary oil companies and producers. It basically says that oil is finite (no argument here - but I can expand this point if asked). That when extracting oil, we first extract the oil that is easiest to extract, i.e. close to the surface and close by (still pretty logical). It goes on to say that about half the oil, in any given area - small or global - is shallow, near and relatively easy (and therefore cheap) to extract while the other half is deep, located in remote areas (or very deep underground) and, as a result, difficult to extract (and expensive).

This has been supported by reality. Whereas the great oil wells of Saudi Arabi (Gawahr field which is actually dying) and Texas started off as very shallow, recent finds of very large petroleum deposits, as recently reported off the coast of Brazil by PetroBras, are 10 km deep and will cost an estimated $250 billion to extract.

For years, Hubbert's Peak Oil theory was completely ignored by decision makers. No real consideration was given to how OPEC members determined their oil reserves and the numbers they gave were rarely contended. This has just very recently changed. On the 10th of December, the Economist reports that the IEA now puts peak oil at 2020!!! This does not mean that oil will run out in 2020. It does mean, however, that the price of oil will start climbing at a growing pace. This will not be the same speculation driven rise in oil prices that we saw 3 years ago. This is going to be steady, sharp and rapid as more and more citizens in developing countries will want to drive cars.

2020, to remind us all, is only 10 years away(!) and just as good a reason as global warming to incentivize, pour billions of dollars and whatever else to produce renewable energy.

Now there are two strong argument for renewable energy incentives. What will the climate change conspiracy theorists say to that...