Peak Oil - The Coming Crisis

1. Understanding Peak Oil2. Peak Oil - The Big Picture

3. Impact of Peak Oil4. Peak Oil and India

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1. Understanding Peak Oil

What 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 diesel

Industry: electronics, plastics, chemicals, textiles

Agriculture: machinery fuel, fertilisers, pesticides

Health: pharmaceuticals

Household: LPG and Kerosene

Electricity generation: Coal

Defining Peak Oil

Label for peak global oil production At peak, we would have used half of all the oil

that can be extracted Post-peak, oil production begins to decline,

permanently Post-peak, supply of oil can’t match demand, and

will lead to massive price rises

World oil discovery & production

Courtesy: Energybulletin.net

Peak Oil - the end of cheap oil

‘Best’ and ‘accessible’ oil extracted first Best - low in sulphur content, easiest to refine;

Accessible- on land, near the surface This is also the cheapest - oil that takes least

money and energy to extract and refine Oil that remains is less accessible, of lesser

quality and more expensive to produce

Constraints on oil production• Economic – extraction from a particular

reserve is viable only at a certain price level• Technology - 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 stage

Is 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’ market Rising fuel prices have cascading effect on

economic growth, food security, social order

2. Peak Oil - The Big Picture

Courtesy: Polyp.org.uk

Rapidly declining oil fields

The 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 world’s top energy economist.

We don’t really know how much oil is left

80% of the world’s oil reserves are in OPEC countries

In most OPEC countries, crucial data on oil reserves is a state secret

OPEC works on a quota system - members can export only in proportion to reserves

Members may have exaggerated reserves to increase exports (and thus, revenue)

Saudi Arabia exaggerated reserves

Saudi geologist Sadad al-Husseini told American officials that the world’s biggest oil producer Saudi Arabia’s oil reserves are 40% lower than stated. Husseini is former vice-president of state-owned Saudi Aramco, the world’s biggest oil company. This was revealed in 2011, when Wikileaks exposed a secret US diplomatic cable.

When will oil peak? 54 of the world’s 65 top oil producing countries have

passed their peak of production Experts* 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 2006 Others 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 can’t keep up with demand

Oil production has almost plateaued since 2005 Inability to increase production despite demand

could be because of Peak Oil Peak 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 byproducts

Globalised hi-tech world that relies on worldwide movement of goods and people

Increasingly urbanised society that is more dependent on oil and byproducts than a rural one

Direct impact of Peak Oil

Rising 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 increase Impact on economy - growth slows down as

production & consumption shrinks

Indirect impact of Peak Oil

Social and political unrest due to increase in cost of living

Shortages of food and essential goods as production and distribution shrinks

Economic growth slows down, and eventually reverses - with severe social impact

Geopolitical 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 shock—and the political unrest that would ensue.”

James Schlesinger former US Energy Secretary

4. Peak Oil and India

Courtesy: MSNBC India

Oil consumption in India

Oil provides 98% of energy used for transportation in India - mainly diesel and petrol

Food security is highly dependent on oil - for irrigation, food production & distribution

Nearly 20% (58% of urban and 9% of rural) of Indian households use LPG for cooking

Kerosene - 43% rural households use it for lighting, 22%* urban households for cooking

*figure for year 2000

Why India is more vulnerable - 1

India is completely dependent on oil imports India consumes 3.2 million barrels of oil per day 76% of India’s oil is imported, in crude form,

mostly from Middle East India is world’s fourth largest importer of oil

*2010 statistics

Why India is more vulnerable - 2

Mimicking a bankrupt economic model It is cheap fossil-fuel inputs that powered modern

economic growth [coal in 18th century England, oil in 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 - 3

Flawed 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 oil will continue to be cheap and abundant, which will in turn fuel perpetual economic growth.

Why India is more vulnerable - 4

Bad 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 world’s fourth largest oil importer.

Why India is more vulnerable - 5

Zero awareness Peak 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 we’ll

be unable to initiate effective action. Above all, lack of awareness means lack of

preparation.

Why India is more vulnerable - 6

Alternative energy is not enough• Nuclear - supplies 1% of energy (or 3% of electricity),

facing opposition due to safety concerns• Wind and solar energy - only 2%, yet to prove

themselves on a large scale• Biofuels - doubts about viability, especially its impact

on food security• Most alternatives sources only help to generate

electricity - the problem of transportation remains

The world is talking about Peak Oil

So why not India?

Indian politicians, officials and experts either don’t know or don’t admit there’s a problem

Mainstream media is either ignores it because its ‘negative’, or is ignorant itself

Powerful corporations have a stake in existing energy/transportation model - eg Tata Group in automobiles and Reliance in petrochemicals

Also, when a problem is huge/collective/insoluble, most people deny it exists

“Leave oil before it leaves us”“We 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