Peak Oil

Opportunities and Challenge

at the end of Cheap Petroleum

Richard Heinberg
Scripps College
September 18, 2006

The Oil
Depletion
Protocol
Richard Heinberg
Yellow Springs, Ohio
September 23, 2006

Chevron: Will You J oin Us?
Oil production is in decline in 33
of the 48 largest oil producing
countries, yet energy demand is
increasing around the globe as
economies grow and nations
develop. www.willyoujoinus.com

New Capacity Needed Over 2005
0
5
10
15
20
25
30
35
40
2005 2006 2007 2008 2009 2010 2011 2012
Year
m
b
p
d
current Russia total
current Saudi total
new global demand
global depletion makeup
Chris Skrebowski, Editor of Petroleum
Review (London), in conversation
regarding his April, 2006 study, Oil Field
Megaprojects, said the following:
At the moment roughly 28% of world
production is coming from countries in
outright decline and going down at roughly
5%/year. By 2010 this will rise to 40% of
world production. There is the possibility
that things could deteriorate much more
quickly.

My latest calculations show the world will
develop 18.8 million b/d of new capacity in the
2006-2010 period. Depletion will offset 9.5
Mb/d of this over the same period. This means
if all goes fully according to plan there will be
9.3 Mb/d of new capacity or just over 1.8 Mb/d
each year to meet new demand. So up to 2010
we can probably muddle through with high
prices and restrained demand.
Faster depletion and project delays would
obviously make the situation worse.
After 2010, however, the situation
deteriorates rapidly with negative supply
growth in 2011 and 2012. We dont have
any reliable data beyond 2012 but all the
indications are that the situation would be
getting worse quite quickly.

Chris added, when pressed:
I feel it is my duty, given the social and
economic chaos Peak Oil will undoubtedly
produce, to stick very closely to defensible
assumptions. If you ask me do I personally
think we'll make it to 2010 my answer is
probably not. Random factors and Murphys
law more or less rule out everything running
smoothly. This however is not analysis but
gut feel and hunch. On the hunch basis 2008
would probably be my answer but 2010 my
analysis.
Why have prices fallen?
Easing of tensions between US and
Iran
No Gulf hurricanes
Speculators and hedge funds have
placed their bets elsewhere
Lowered demand due to high prices
Election season
What about J ack No. 2?
Will come on line after the peak (2012)
Appears big because recent discoveries
have been so piddling
Expected to produce (perhaps) 400,000
barrels per day; the US uses 21,000,000
barrels per day and its indigenous
production is declining by 5-7% per year
over the long haul
Fifteen years from now, even with Jack 2
at full flow, the US will still be importing
much more oil than it is importing today
Jack 2 merely illustrates the problem: the
worlds easy oil has already been found.
One of the most technically challenging oil
production environments (if not the most)
the industry has ever had to confront:
Over a mile of sea water, then four miles
of rock
Unless the oil is of high quality, it may not
be worthwhile to extract all or even most of
the resource in place, given the effort and
expense entailed

What about past predictions?
Exxon: Peak oil theory is garbage.
People have been predicting the end
of oil since the 1920s.
The Prediction
U.S. DOE/EIAs International Energy
Outlook 2001 stated the following
concerning future U.K. oil production:
The United Kingdom is expected to
produce about 3.1 million barrels/day by
the middle of this decade (~2005),
followed by a decline to 2.7 mb/d by
2020.
The Reality
U.K. oil production (crude oil +
condensate) achieved peak production in
1999 at 2.684 mb/d. The average
production rate for the first 11 months of
2005 was 1.649 mb/d or 1.035 mb/d
(38.6%) less than the 1999 average.
Is Peak Oil theory a ploy by the
oil companies to raise prices?
Most reserves and production are in the
hands of national oil companies, not
multinational corporations
Most of the oil companies are officially
dismissive of Peak Oil
Most oil depletion analysts are either
scientists retired from the industry or
independent researchers
Is Peak Oil
a fringe idea?
London Daily Telegraph, J une 6, 2006
Russia: Era of cheap fuel is over'

Viktor Khristenko, Russias energy
minister declared that motorists and
business would have to learn to live with
expensive fuel....
One can say with certainty that the era of
cheap hydrocarbons is over.
China forecasts Peak Oil
CNOOC Chief Economist Predicts $90 Oil
By Erik Dahl
06 Sep 2005 at 09:00 AM EDT
SHANGHAI (Interfax-China) -- CNOOC Dep. Chief
Economist Zhang Weiping said at a conference
discussing China's energy needs in Beijing on
Monday [that he expects] global oil
production to peak at 94-100 mb/day during
the next five years.
"High oil prices will have adverse effects on
China's economy," said Zhang.
Oil Companies at Peak
Business Week of May 15
th
:
Although major oil companies are making
record profits from high prices, their actual
production is close to peak and their
reserve replacement is slipping to
negative.
We may be at a point of peak oil
production. You may see $100 a
barrel oil in the next two or three
years.
Former US President Bill Clinton (March 28, 2006,
London Business School)
New York Times editorial
March 1, 2006
The concept of peak oil has not been
widely written about. But people are
talking about it now. It deserves a
careful looklargely because it is
almost certainly correct.
Summary
Oil and gasoline supply problems and high
prices are here to stay, and will likely
increase in severity as time goes on;
The economic, social, and political
consequences will be severe;
There are no easy or quick fixes.

2. Options and
Strategies:
The Oil Depletion
Protocol
History of the
Oil Depletion Protocol
Proposed by Dr. Colin Campbell in 1996,
presented in 2002 at first ASPO
conference in Uppsala, Sweden
Has been known as Uppsala Protocol
and Rimini Protocol
Initiation of the Oil Depletion Protocol
Project in July, 2006 by Post Carbon
Institute

Without a Protocol
Extreme price volatility will make planning
and investment difficult
Conflict over remaining oil reserves will
hinder their development and divert
resources from the energy transition
Lack of foresight, planning, and preparation
will leave societies vulnerable to economic
collapse
Efforts to produce oil at maximum rates will
damage reservoirs
The General Direction
We need an agreement to gradually
reduce oil consumption in order to
discourage competition, stabilize prices,
aid with planning and preparation, and
protect the resource base
The rate of reduction should be pegged to
some objective datum so as to avert
lengthy negotiations
The overwhelming thing we need is a
national plan to deal with oil
depletion.
Christine Milne, member of the
Australian Senate
Foreign oils undeniable ties to terror,
to global instability and to continued
environmental degradation make
immediate, decisive action to reduce
our petroleum consumption absolutely
critical.
George Pataki, Governor of New York
State
Weve got to wean ourselves off of
petroleum.
George W. Bush

The Oil Depletion Protocol
The world and every nation shall aim to
reduce oil consumption by at least the world
depletion rate.
No country shall produce oil at above its
present depletion rate.
No country shall import at above the world
depletion rate.

The depletion rate is defined as annual
production as a percentage of what is left
(reserves plus yet-to-find).
The preceding provisions refer to regular
conventional oilwhich category excludes
heavy oils with cut-off of 17.5 API, deepwater
oil with a cut-off of 500 meters, polar oil, gas
liquids from gas fields, tar sands, oil shale, oil
from coal, biofuels such as ethanol, etc.

The proposal to cut oil imports to match
depletion rate seems to be simple
common sense.
The Right Honourable Michael Meacher,
Member of Parliament, UK
Dealing with
Diminishing Oil:
Options and Strategies
A few suggestions
Substitution: Develop renewable sources
including wind, solar, and biomass
Conservation:
Efficiency and Curtailment
Like alternative energy sources,
conservation (efficiency) requires
investment
Investments yield diminishing returns
However, at least in the initial stages,
efficiency is almost always cheaper than
new supply options
Curtailment is the cheapest option of all,
but requires changes in habits and
expectations
Agriculture: transition from oil-based
industrial model to more labor-intensive,
localized, organic model

Transportation:
Rail and light
railthe best
long-term options
for motorized
transport of
freight and people
Short-term transport strategies
The Smart Jitney
(communitysolution.org)
Car co-ops, ride-share, and
carpooling
Community-supported hitchhiking
Domestic Implementation:
Rationing
Some form of rationing is inevitableby
price or by quota
Quota rationing works well in case of
shortages of essential goods
David Flemings proposal for Tradable
Energy Quotas (teqs.org)

Emissions-based and
Depletion-Based Protocols
How are they different?
Are they mutually reinforcing?

How Can the Oil
Depletion Protocol Be
Adopted?
Countries in full or partial de facto
compliance with the Protocol
Sweden
Iceland
Cuba
Kuwait (?)
Declining producers
(Indonesia, etc.)
Poor nations unable to afford
oil at $70+

Municipal Efforts
San Francisco, CA
Bloomington, IN
Sebastopol, CA
Denver, CO
Plymouth, NH
Portland, OR
Tompkins County, NY
Willits, CA

Municipal Efforts, Contd
Burnaby, BC, Canada
Hamilton, ON, Canada
Kinsale, Ireland
Brisbane, Australia

Personal Implementation of the
Oil Depletion Protocol
Assess current oil consumption: gasoline,
food, plastics
Plan to reduce the total by 3% per year
Reduce transportation energy
For most people in industrial countries, food
accounts for about 30% of petroleum
consumption; to reduce this, eat locally, buy
organic, and garden!
Publicize personal and group efforts





The very idea of accepting oil depletion
protocols and treaties to guard against
irresponsible levels of emissions may not be
popular or easily endorsable. Yet, in the
annals of history it is clear that epochal crises
must be faced. The question is whether they
are met with intelligence, resolve, and
sacrifice or whether decision makers
procrastinate to everyones eventual peril and
suffering.
The Rt. Hon. Edward Schreyer, former
Premier of Manitoba, Governor General of
Canada, and High Commissioner to Australia
and the South Western Pacific

oildepletionprotocol.org
richardheinberg.com