Peak Oil

There are many reasons why people install solar energy systems, either solar hot water or solar PV systems.

  1. Protect themselves from rising energy costs.
  2. To reduce their Carbon footprints.
  3. To go off grid
  4. Peak oil

Until you understand peak oil all discussion of what future energy prices are is a pointless exercise. Hopefully this article will give you a better understanding of why solar is THE most important technology for everyone.

What is Peak Oil?

In a nutshell, peak oil is the point at which approximately half the worlds oil supplies have been used up.

This mid point marks the point at which an oil field natural pressure in the reservoir will decline rapidly which makes it much harder and much slower to recover any oil left in the reservoir.

Peak oil is NOT running out of oil, it is we are running out of CHEAP oil. There will be oil left but the days of $70 or less a barrel oil are long gone. Look forward to the $150+ per barrel.

Where did Oil and Gas come from

Oil and Gas were created millions of years ago, at a specific period in time. This Oil and Gas has been used by us for thousands of years, however over the last 100+ years has been an unprecedented rise consumption. Output of Oil last year reached approx 85 Million barrels of oil PER DAY. Next time you read that somewhere in the world they have “discovered a huge oil and Gas field”. Think about how long that will last. Last year a field was announced offshore Brazil, supposedly 8 Billion barrels (Tupi Field).

How long will it last?

The Tupi field is realistically at least 5 – 10 year away from being in production, the size of this field is from estimates were based on data from ONE exploration well. This field lies 2500m below the sea, then a mile or more further down beneath the rock. The only way to estimate the size of the field is with several well, extended well test pressure data and seismic data. When you read an estimate for a size of field based on ONE exploration well, you can be sure this estimate is only to try and boost a companies share price!

Even assuming they have the size of the field correct, this would be the largest oil field discovered anywhere in the world in over 30 years!!!

How long would this field last us?

OK…8 billion barrels divided by 85 million barrels per day = 94 days.

Think about it, the largest field found anywhere on the planet in 25 years of oil companies drilling holes all over the planet, spending billions of dollars on exploration (funded by tax breaks) and they find a field that would supply the world for only THREE MONTHS. We are in deep trouble!
Then the Carioca field was also discovered off Brazil, reputed to hold 30 billion barrels (again a very optimistic figure) would only last 1 YEAR with current world demand (30 Billion divided by 85 Million barrels per day). If this field size estimate is correct, it would be the 3rd largest field EVER found on earth.

These fields lie under 2 1/2 Thousand meters of water, a technological challenge on par with putting someone on the moon, with costs to match! One exploration test well here cost approx. $250 million whereas extraction costs in the Middle east are in the range of $1 per barrel of oil. Compare this with the Saudi Arabian Fields where they drill shallow holes in the desert.

One thing to be clear here is that oil is not running out. It is just that we are running out of cheap oil.

How long do you think Oil will stay below the $147 / barrel Oil levels seen last year (2008)!

There is NO new oil and gas being made. With any substance that is finite in nature, when you use it you will eventually run out. There is no more being made.
This is what is known as PEAK OIL. See the Links Section for more information
A little video clip as a guide! “How will you ride the slide?”

The Drinking Straw

There is roughly the same amount of Oil and Gas left in the ground than there was 100 years ago. The problem is that we have reached the point what is known as Peak Oil.
Think of it like this, if you shake up a 1 liter bottle of Fizzy Drink, to make some pressure in it. Now make a small hole in it and watch the drink spray out. The drink will continue spraying out until the pressure is gone. At this point you will still have a lot of drink left in the bottle but no pressure to get it out. Now put a drinking straw into the hole, make sure the drinking straw is about 2000 meters long and try and suck out the drink!
This is basically the process by which all the worlds Oil and Gas wells work. Once the pressure is gone, there is still Oil and Gas left but no pressure to get it out of the ground in any where near the same rate you did before.
The world is more or less at Peak oil and Peak Gas is very close behind. When demand rises and production falls (i.e. the pressure is declining) then the prices will rise. This is what triggered the onset of the financial collapse last year in the USA. People started to review their decision to buy a house in the suburbs, 50 miles from work and drive their Hummers to work when Oil was $147 a barrel and Petrol prices were skyrocketing.

High Oil and Gas prices will be back. Oil and gas prices will climb again.

Oil & Gas prices are influenced daily by world politics. The world operates on a global market and gas supplies to any country are influenced heavily by any number of factors in any Oil & Gas producing country. Just because Canada also produces its own gas doesn't mean it controls the price.

The current Global Financial Crisis has wrecked demand for all products round the world, whether it is Cars, Televisions, Clothes, Watches or Oil and Gas. They are all being dragged down with it. Hence the collapse in Oil and Gas Prices and the dismal Christmas shopping season for the retailers.
The huge drop in Oil and Gas prices since mid 2008 have also had an negative effect on the Renewable Energy business. Last year, everyone was talking about renewable energy when Oil was $147 a barrel and Gas prices were over $13 a GJ. Even Texan Oil men were saying our addiction to Oil and Gas was dangerous.
Even GM, Ford and Chrysler finally realized (some say too late!) that the future lies in Renewable Energy.
Right now (March 2009) Gas prices are back to the level they were in 2002 but the general trend will not go away.

Data from 1993 shows the following trends
1993 to Feb. 2002 = 31% increase in price of gas. This is an average of 3.7 % per year
March 2002 to June 2008 = 253 % Increase in price of gas. This is an average of 40 % per year. This was the peak of the gas price in 2008.
March 2002 to March 2009 = 63 % Increase in price of gas. This is an average of 10 % per year. Even after the recent “collapse” of the gas price it still results in a 10% per year increase since 2002
Overall from 1993 to March 2009 the price of Natural gas Increased by 7% per year.
Global warming / Climate change is still a serious concern for everyone on the planet. One day, maybe 100 years from now, people will be talking about how “Crazy people back in 2008 actually used to burn Oil and Gas for Heat"

What is the future for Canada Natural Gas Reserves?

"Canada has continued to produce natural gas faster than it replenishes its reserves. Canada’s production/reserves ratio (the number of years of proven reserves remaining at existing production levels) has declined from 35 years in 1985 to 9 years in 2006. Along with falling production, demand for natural gas is expected to rise, driven by the oil sands industry and the power sector. According to Ziff Energy Group, natural gas demand by the oil sands industry could rise from 1 Bcf/d in 2007 to 2.8 Bcf/d in 2015. The combination of falling production and rising domestic consumption could impact Canadian natural gas exports to the United States: according to Ziff Energy Group, Canadian natural gas exports to the U.S. could fall to 5 Bcf/d by 2015, versus 9.9 Bcf/d in 2007". Source: EIA – Energy Information Administration.
This info was straight of the US government EIA site. They are worried that internal gas demand to run the Oil Sands will reduce the availability of gas to export from Canada. Never mind that you won't have any to heat your own house?

The point above regarding the Oil Sands production is a significant problem. Oil supplies worldwide are dwindling, hence the Oil Sands are politically very important. There is a huge supply of the oil sands, it is just very costly and production rates are very slow. It is a mining operation not an oil field. To produce the Oil sands a huge volume of Gas is needed to heat the oil sand. The Oil sand industry know there is a future problem with Gas supplies (i.e. declining production and rising prices).

Hence this is why they are pushing to build Nuclear Reactors to power the Oil extraction Process.


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