Why does “peak oil” whip up such strong emotions? And what the heck is the theory, anyway?
Here’s a primer on the peak-oil theory, written by Lionel Badal, Postgraduate Student, Department of Geography, King’s College London for The Oil Drum.
Click For Peak Oil 101 →
This was originally posted at The Oil Drum, and has been reprinted under the Creative Commons Attribution-Share Alike 3.0 United States licence. We broke it up into sections to make it easier to digest. You can read in on one page at The Oil Drum.
According to the 2009 BP Statistical Review, the world has precisely 42 years of oil left. Those numbers come from a very simple formula, the R/P ratio, which consists of dividing the official number of global oil reserves (R) by the level of today's production (P).
This methodology is dangerously defective on several key points as it ignores geological realities. For example, oil production does not consist of a plan level of production that brutally ends one day; it follows a bell-shaped curve.
Indeed, the important day occurs when production starts to decline, not when it ends. Even a small deficit in oil production can lead to a major price surge.
Finally, the R/P ratio does not acknowledge that production costs increase over the time; the first oil fields to be developed were logically the easy ones and so the most profitable. Remaining oil fields consist of either poor quality oil or remotely located fields which need high technologies and expensive investments. Therefore, relying on the R/P ratio gives a false impression of security.
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