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Peak Oil - The Coming Crisis

Peak Oil - The Coming Crisis. Understanding Peak Oil Peak Oil - The Big Picture Impact of Peak Oil Peak Oil and India. 1. Understanding Peak Oil. What are fossil fuels?. Formed by decomposition of organic matter Most common types - coal, petroleum, gas

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Peak Oil - The Coming Crisis

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  1. Peak Oil - The Coming Crisis • Understanding Peak Oil • Peak Oil - The Big Picture • Impact of Peak Oil • Peak Oil and India

  2. 1. Understanding Peak Oil

  3. 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

  4. Not just petrol and diesel • Industry: electronics, plastics, chemicals, textiles • Agriculture: machinery fuel, fertilisers, pesticides • Health: pharmaceuticals • Household: LPG and Kerosene • Electricity generation: Coal

  5. 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

  6. World oil discovery & production Courtesy: Energybulletin.net

  7. 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

  8. 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

  9. 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

  10. 2. Peak Oil - The Big Picture Courtesy: Polyp.org.uk

  11. 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 FatihBirol, the world’s top energy economist.

  12. 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)

  13. 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.

  14. 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 FatihBirol ***Transitiontowntotnes.org

  15. 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

  16. 3. Impact of Peak Oil

  17. 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

  18. 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

  19. 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

  20. “… 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

  21. 4. Peak Oil and India Courtesy: MSNBC India

  22. 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

  23. 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

  24. 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.

  25. Why India is more vulnerable - 3 Flawed assumptions, upside down priorities We 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.

  26. 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. 

  27. 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.

  28. 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

  29. The world is talking about Peak Oil

  30. 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

  31. “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.” FatihBirol, International Energy Agency

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