"The global peak in oil production will be the single greatest event of our generation. And I'm still surprised to find that some people fail to believe that peak oil is right around the corner."
That's what I told my readers in 2007.
Geophysicist M. King Hubbert delivered an infamous speech in 1956 shedding light on Peak Oil, or the point at which global oil production reaches a peak.
Let's be clear: Peak Oil isn't about the world running out of oil. There's plenty of oil left...
The world has consumed a little more than a trillion barrels of the estimated three trillion barrels believed to be in the ground.
Peak Oil refers to the amount of oil that can still be extracted.
The more oil we pull out the ground, the harder (and more expensive) extraction becomes.
In other words, we're running out of cheap, easy-to-get oil.
Take your average oil field: Production increases as the number of oil wells in the field increase. As time passes, older wells require more pressure. Eventually, the cost of operating those wells becomes too expensive...
We're running out of those "easy-to-get" oil fields. Nine out the ten largest oil fields in the world have already entered into depletion.
Not only do we have to add new production to compensate for growing demand, but also to offset depletion rates.
A few weeks ago, I brought up the subject of depletion rates in my weekly spot in Energy and Capital.
Accepting the International Energy Agency's (IEA) 4% depletion rate means the world needs to add more than three million barrels per day to its production capacity. Add to that the world's consumption growth, and it tacks on another two million barrels of oil.
Assuming production at the world's largest oil field, Ghawar, is about five million barrels per day, that means we need to find the equivalent of one Ghawar every year!
The cold, hard truth is that fossil fuels account for over 84% of our energy demand.
With Peak Oil a reality, the party seems to be over... or is it?
When the International Energy Agency released its World Energy Outlook in 2007, the looming crisis became more apparent.
According to that report: "Some $22 trillion of investment in supply infrastructure is needed to meet projected global demand."
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