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Peak Oil - The Coming Crisis

Understanding Peak OilPeak Oil - The Big PictureImpact of Peak OilPeak Oil and India

1. Understanding Peak Oil

22What are fossil fuels?Formed by decomposition of organic matter

Most common types - coal, petroleum, gas

Industrial Revolution was powered by coal

Fossil fuels provide the bulk of the energy used by modern societies

Not just petrol and dieselIndustry: electronics, plastics, chemicals, textilesAgriculture: machinery fuel, fertilisers, pesticidesHealth: pharmaceuticals Household: LPG and KeroseneElectricity generation: Coal Defining Peak OilLabel for peak global oil productionAt peak, we would have used half of all the oil that can be extractedPost-peak, oil production begins to decline, permanentlyPost-peak, supply of oil cant match demand, and will lead to massive price risesWorld oil discovery & production

Courtesy: Energybulletin.netPeak Oil - the end of cheap oil Best and accessible oil extracted firstBest - low in sulphur content, easiest to refine; Accessible- on land, near the surfaceThis is also the cheapest - oil that takes least money and energy to extract and refineOil that remains is less accessible, of lesser quality and more expensive to produceConstraints on oil productionEconomic extraction from a particular reserve is viable only at a certain price levelTechnology - viable only if technology exists/is adequate Energy - viable only if energy spent on extraction is lesser than energy extracted

All oil fields eventually become unviable Peak Oil is when entire planet enters this stageIs Peak Oil when we run out of oil?No, it is when oil production reaches its maximum Post-peak, production levels off, starts to decline As demand outstrips supply, prices shoot up we switch from a buyers to sellers marketRising fuel prices have cascading effect on economic growth, food security, social order 2. Peak Oil - The Big Picture

Courtesy: Polyp.org.ukRapidly declining oil fieldsThe first ever detailed assessment of the 800 largest oil fields in the world, covering three quarters of global reserves, found the bigger ones among them to be already in decline. Those that had begun to decline were doing so at a staggering rate of 6%. The study was conducted by Fatih Birol, the worlds top energy economist.

We dont really know how much oil is left80% of the worlds oil reserves are in OPEC countries In most OPEC countries, crucial data on oil reserves is a state secretOPEC works on a quota system - members can export only in proportion to reservesMembers may have exaggerated reserves to increase exports (and thus, revenue)Saudi Arabia exaggerated reservesSaudi geologist Sadad al-Husseini told American officials that the worlds biggest oil producer Saudi Arabias oil reserves are 40% lower than stated. Husseini is former vice-president of state-owned Saudi Aramco, the worlds biggest oil company. This was revealed in 2011, when Wikileaks exposed a secret US diplomatic cable.

When will oil peak?54 of the worlds 65 top oil producing countries have passed their peak of productionExperts* have stated that the global oil peak may have occurred in 2005 The International Energy Agency** too says we might have passed the peak in 2006Others disagree, pointing to new oil discoveries and improved technologies But the fact is, for every single barrel of new oil that is discovered, we use up three***

*Colin Campbell **Chief economist Fatih Birol ***Transitiontowntotnes.org

Are price hikes connected to Peak Oil?World oil prices started rising in 2003 (40 USD per barrel), peaking in July 2008 (USD 147)Global price rise is partly because supply cant keep up with demandOil production has almost plateaued since 2005Inability to increase production despite demand could be because of Peak OilPeak Oil could be behind other price factors - speculative trading, increasingly heavier crude etc 3. Impact of Peak Oil

Oil - lifeblood of modern societies We are highly dependent on oil-intensive industry and transportation system Modern agriculture, manufacturing, medicine all directly depend on oil and byproductsGlobalised hi-tech world that relies on worldwide movement of goods and peopleIncreasingly urbanised society that is more dependent on oil and byproducts than a rural oneDirect impact of Peak OilRising oil prices will impact cost of living Impacts food security - cost of transportation, fertilisers, pesticides all increase Impact on manufacturing & industry - transportation, raw material costs increaseImpact on economy - growth slows down as production & consumption shrinks Indirect impact of Peak OilSocial and political unrest due to increase in cost of livingShortages of food and essential goods as production and distribution shrinksEconomic growth slows down, and eventually reverses - with severe social impactGeopolitical conflict as countries compete for shrinking energy resources a major economic shock In the longer run, unless we take serious steps to prepare for the day that we can no longer increase production of oil, we are faced with the possibility of a major economic shockand the political unrest that would ensue.

James Schlesinger former US Energy Secretary

4. Peak Oil and India

Courtesy: MSNBC India

Oil consumption in IndiaOil provides 98% of energy used for transportation in India - mainly diesel and petrolFood security is highly dependent on oil - for irrigation, food production & distributionNearly 20% (58% of urban and 9% of rural) of Indian households use LPG for cookingKerosene - 43% rural households use it for lighting, 22%* urban households for cooking

*figure for year 2000Why India is more vulnerable - 1India is completely dependent on oil importsIndia consumes 3.2 million barrels of oil per day76% of Indias oil is imported, in crude form, mostly from Middle EastIndia is worlds fourth largest importer of oil

*2010 statisticsWhy India is more vulnerable - 2Mimicking a bankrupt economic modelIt is cheap fossil-fuel inputs that powered modern economic growth [coal in 18th century England,oilin 20th century America]. Countries like India and China assume that they too can do the same, and have opted for a similar, energy-intensive economic model. Consequently, India is changing from a localised, low-energy-input economy to a globalised, high-energy-input one.Why India is more vulnerable - 3Flawed assumptions, upside down prioritiesWe are remaking our transportation [investing in highways rather than railways], urban planning [car-dependent suburban sprawl], agriculture [industrial agriculture and agribusiness] - in fact, our whole economic system - based on the assumption that oilwill continue to be cheap and abundant, which will in turn fuel perpetual economic growth.Why India is more vulnerable - 4Bad policies, worse timing The age of cheap, abundant oil is over. Cheap oil has powered western industrial advancement. It is one thing to do it a hundred years ago, when all the oil on earth lay buried underground. But to do it now, in the age of Peak Oil, is suicidal, especially for the worlds fourth largestoilimporter.Why India is more vulnerable - 5Zero awarenessPeak oil is being debated in the West, but even the term is unfamiliar to most ordinary people in India. We have few experts/institutions that study energy issues - so the government itself is largely unaware. Lack of awareness of the actual problem means well be unable to initiate effective action. Above all, lack of awareness means lack of preparation.Why India is more vulnerable - 6Alternative energy is not enoughNuclear - supplies 1% of energy (or 3% of electricity), facing opposition due to safety concernsWind and solar energy - only 2%, yet to prove themselves on a large scaleBiofuels - doubts about viability, especially its impact on food securityMost alternatives sources only help to generate electricity - the problem of transportation remainsThe world is talking about Peak Oil

So why not India?Indian politicians, officials and experts either dont know or dont admit theres a problem Mainstream media is either ignores it because its negative, or is ignorant itselfPowerful corporations have a stake in existing energy/transportation model - eg Tata Group in automobiles and Reliance in petrochemicalsAlso, when a problem is huge/collective/insoluble, most people deny it exists Leave oil before it leaves usWe are on the brink of a new energy order. Our reserves of oil will start to run out and it is imperative to prepare for that time. We are not yet running out of oil, we are running out of time. We should leave oil before it leaves us. That means new approaches must be found soon.

Fatih Birol, International Energy Agency