You may have heard the term “peak oil”. It’s an important term to know. Here’s the definition from Wikipedia:
Peak oil is the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline. The concept is based on the observed production rates of individual oil wells, and the combined production rate of a field of related oil wells.
The aggregate production rate from an oil field over time appears to grow exponentially until the rate peaks and then declines, sometimes rapidly, until the field is depleted. It has been shown to be applicable to the sum of a nation’s domestic production rate, and is similarly applied to the global rate of petroleum production.
It is important to note that peak oil is not about running out of oil, but the peaking and subsequent decline of the production rate of oil.
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I’ve thought of this every now and then and realized that the rate of production is subject to demand, which can be manipulated by alternate fuel markets, fickle consumer interests, and new oil limiting technologies.
At present, total world raw petroleum resources are still unknown, though estimable to about twice what we’ve used in the last century. And, since new drilling techniques will need to be developed to get to the deepest, last sources of oil, the future remains uncertain, except that consumers are becoming more informed of their options and what the inevitable prices will yield in options for those consumers.
This last concept, of the informed consumer, will probably result in two oil markets, one hard in alternative fuel opportunities, and one following in tow. Ultimately, the world leaders in oil consumption will be able to manipulate their price by introducing these other technologies, and will divide the world, and create two rates of consumption, which will not necessarily be in synchronicity.
Then, after the decline, and after everything has been dug up, the same rate rule will apply to the remaining supplies in storage, such as the American Strategic Oil Reserve. The the last trade resources will become primary factors in obtaining oil; money, then brute force.
-=T=-
Comment by http://cooperati.livejournal.com/ — 8/18/2008 @ 4:24 am
I believe they’re accounting for all this in the equation, Tim.
Comment by Daniel Miessler — 8/19/2008 @ 1:41 pm
One more note of interest in establishing the concept of peak oil and it’s decline, of the varying rates and the lesser defining concepts is because of it’s complexity, the peak oil rate cannot be accurately observed, even until after it’s decline has manifested.
Your thoughts?
-=T=-
Comment by TIMM — 8/19/2008 @ 9:42 pm
Peak oil isn’t a particularly interesting or brave conjecture. In the form it’s stated production “appears to grow exponentially” - like GDP, population, share prices, and cpi appear to grow exponentially. The second statement is that production reaches a peak and then declines. This is obvious if you assume the total amount of oil in the world (area under the curve) is finite, and if you assume oil production (the curve) is smooth.
Of course, on a microscopic level, peak oil is completely false. During some picoseconds no oil molecules are extracted, during a few, thousands are. It’s a poisson process, and it would look nothing like Hubbert’s curve.
Overall though, high oil prices are a great thing. The market is forcing politicians, scientists and consumers to solve global warming, without even realising they’re doing it. That’s why the traders at the NYMEX earn so much.
Comment by Andrew — 8/19/2008 @ 10:22 pm