Source: SCIENTIFIC AMERICAN, Title; “The End of Cheap Oil,” Date: March 1998, Authors: Colin J. Campbell and Jean H. Laherrere
SSU Censored Researcher: Rick Krigstein and Diana Nouveaux
SSU Faculty Evaluator: Jim Burkland
Colin J. Campbell and Jean H. Laherrere, two independent oil-industry consultants, predict that global production of conventional oil will start to decline within the next 10 years, and be unable to keep up with demand. Their analysis contradicts oil-industry reports which suggest we have another 50 years worth of cheap oil to sustain us. As the independent report points out, economic and political motives cause oil-producing companies and countries to publish the inflated figure, and this affects all of us.
An estimate of existing oil reserves is one of the factors used to predict the ultimate recovery of oil, that is, all the cheap oil there is to be had. Even with modern technology, says Scientific American, estimating reserves is an inexact science. Petroleum engineers express reserves in terms of probability. Geologists may calculate that an oil field has a 90 percent chance of containing 700 million barrels of recoverable oil, but only a 10 percent chance of containing 2,000 million barrels of oil.. Many companies and countries, however, freely report their reserves using any figure between 10 and 90 percent depending on which figures serve them best. For example, exaggerated estimates can raise the price of an oil company’s stock. Also, a government may use inflated reserve estimates in order to enhance their political clout and their ability to obtain loans.
Member-nations of the Organization of Petroleum Exporting Countries (OPEC) have an even more tangible reason to inflate their reported reserve estimates: the higher their reserves, the more oil they are allowed to export. This rep-resents immediate income for those countries. During the 1980s, 6 of the 11 OPEC nations reported huge increases in their reserve amounts, ranging from 42 to 197 percent. There is good reason to suspect that this was done to increase their export quotas.
Many people believe that improved technology will get more oil out of the ground. It will, but oil companies routinely take improved technology into account when calculating reserve estimates. Current calculations already include improvements in recovery. Campbell and Laherrere’s analysis takes other factors into account. For instance, the rate of oil consumption has been rising at over 2 percent per year. The rate of discovery of new oil has been declining. Large reserves of unconventional oil such as heavy oil, tar sands, and shale oil exist, but it is not economically feasible to extract them. Also, to do so might cause extreme environmental, damage. Tar-sand oil has to be strip-mined, and heavy oils contain sulfur and heavy metals which must be removed.
Perhaps the biggest reason oil companies grossly inflate cheap oil estimates is that it removes a major motivation to develop alternative energy sources which would directly compete with oil as an energy source. The longer the oil companies (and countries) lull us into thinking there is plenty of cheap oil available, the longer we delay developing solar power, fuel cells and other technologies that could replace oil.
UPDATE BY THE AUTHOR C.J. CAMPBELL: “‘The End of Cheap Oil’ covered a subject of the utmost importance to our subspecies. Hydrocarbon Man is today virtually the sole surviving human subspecies. He was born 150 years ago and will have become extinct by the end of the next century. The peak of oil production within the next decade will be a turning point with immense political and economic consequences. With about half of the remaining conventional oil lying in five Middle East countries, world tensions are likely to erupt as the industrial countries vie with each other for access. Failure to understand that depletion is a natural phenomenon may lead to misguided military intervention.
“`The End of Cheap Oil’ emphasized the atrocious state of public data on production and reserves, which have been corrupted by vested interests. Accordingly, the study evolves all the time as new information on the status of depletion in different countries comes in. The interpretation of the data is, however, simply a case of solving the equation: Peak Discovery + Time = Peak Production.
“The article has been subject to comment in a wide range of serious journals in many countries, including the Observer newspaper of London, Barron’s Science, Science News, Geopolitique, and Die Stern. It has also led to lectures, seminars; and broadcasts. Even aircraft manufacturers and Walt Disney have reacted, seeing the impact on their businesses. But perhaps the most important response is the position of the International Energy Agency, the world’s premier authority on energy supply, which has advised the G8 of the impending peak.”