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Peaking Global Oil Production & the Environment

Peaking Global Oil Production & the Environment. National Center for Environmental Economics (OPEI/NCEE) John Davidson & Keith Sargent (May 2005). Preview. Conventional oil production is expected to peak before 2050 & may peak in the next decade. Oil sand / shale production will increase.

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Peaking Global Oil Production & the Environment

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  1. Peaking Global Oil Production & the Environment National Center for Environmental Economics (OPEI/NCEE) John Davidson & Keith Sargent (May 2005)

  2. Preview • Conventional oil production is expected to peak before 2050 & may peak in the next decade. • Oil sand / shale production will increase. • Synfuel production from coal will increase. • Biofuel production will likely increase. • Oil prices will continue to rise (acting like a US energy tax) reducing GDP growth rates. • Transportation sector will be most affected. • Environmental effects are difficult to predict • Oil shale and synfuel production have environmental effects but increased efficiency and slower economic growth (due to more costly oil) could limit pollution.

  3. Background

  4. Draining the Tank

  5. Two Views of World Oil Production Conventional & Unconventional Resources

  6. Big Picture Observations (from ORNL 2003 Report) • World conventional oil production slows substantially or declines after 2020. • Non-Mideast conventional oil is likely to peak between 2010 and 2030. • OPEC market dominance is robust under a wide range of scenarios.

  7. ORNL Observations (cont.) • A major transition from conventional to unconventional oil is likely to begin before 2030 to meet increasing energy demand. • Without dramatic efficiency improvements: • US oil imports are likely to increase until shale oil becomes an important source. • US oil dependence appears to be a long-run problem without major changes in transportation technology and/or energy sources.

  8. Proved Oil Reserves in 2003

  9. When Will the Oil Peak Occur?(Non-Mideast Oil Production)

  10. When Will the Oil Peak Occur?(World Production)

  11. What happens after the peak? • Will oil production fall so quickly that alternatives will be inadequate to meet demand? • Will the price of backstop technologies be above or below the peak oil price? • How will the market respond?

  12. The Transition to Alternatives (from ORNL 2003 Report) • Transition to unconventional oil will be rapid if EIA growth rates of 1.7% in oil consumption continue thru 2020. • 7 to 9% annual growth rates in unconventional oil production appear necessary as peak in non-Mideast oil is approached. • If the demand for oil consumption could be slowed, the transition would correspondingly be slowed

  13. The Transition (cont.) (from ORNL 2003 Report + new info) • Unconventional oil first comes from Canadian oil sands [2004 Production: about 1Million B/Day] • Followed by Venezuelan and Russian unconventional resources • US shale oil is likely to be developed at a rapid pace following peaking of non-Mideast oil • The US is likely to supply nearly all of the shale oil due to its enormous resources • US DOD has earmarked funds starting in 2009 for shale oil and other unconventional domestic resources

  14. Alternatives • Increased Fuel Efficiency–Hybrid Vehicles • Improved Oil Recovery • Heavy Oil & Oil Sands • Gas-to-Liquids • Coal Liquification • Oil Shale Production • Biomass / Biodiesel • Hydrogen & Electric Vehicles (Source: “Peaking of World Oil Production.” R. Hirsch, et al.)

  15. US Oil Shale Resources

  16. Oil Sand & Oil Shale Depletion Curves

  17. Future World Oil Production Oil Sands and Oil Shale

  18. U.S. Economic Effects • A global disruption of 1 million barrels per day results in a $3 - $5 increase per barrel of oil • Transportation sector will be hardest hit • Higher energy prices will act like an energy tax • Each 10% increase in oil prices results in a 0.05 to 0.1 percent decline in the U.S. GDP growth rate • A shift to oil shale production will allow oil revenue to be “recycled,” offsetting some of the fall in U.S. GDP growth rates • Oil prices may become more volatile

  19. U.S. Environmental Effects • Increased domestic oil drilling • Increased coal mining for synfuel production • Mining of U.S. oil shale deposits • Open pit mining - Aquifer depletion • Water leaching - Increased CO2 emissions • Political pressure to weaken pollution regulations • Lower GDP growth may moderate pollution increases • Alternatives will become more cost-competitive (fuel cells, hydrogen, natural gas & electric power)

  20. End of Presentation

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