Peak Oil: What is in a definition?

There are lots of definitions of Peak Oil floating around in the literature.

One of those definitions in particular does the Peak Oil movement a disservice in my opinion. This definition states:

Peak Oil occurs when the world has used up half the available oil.

This definition of Peak Oil inadvertantly connects what is really a rate of production squeeze phenomena with the available oil (or the ultimately producable reserves).

This connection is problematic for a number of reasons.

Firstly, the ultimately producable reserves is a very nebulous quantity. It is fundamentally impossible to assess how much oil any given reservoir can produce because it depends entirely on how much energy someone is willing to expend to get at it.

How many times have we heard the argument made:

Peak Oil can't be correct because with improved technologies we are continuing to find more and more extractable oil. ie. with each increase in price the world can afford to access huge previously untapped oil reserves like the Canadian tar sands.

The world's oil reserves are a moving quantity. On one hand they go down as oil is produced and consumed. On the other hand the reserves are expanded as exploration brings new discoveries to light or as technology allows for better exploitation of known resources.

Another difficulty with the reserves discussion is the there is always a lag time between when a discovery well is successfully drilled and when the first barrels of production go to market. Often time this lag can be years or even decades. It more often than not takes a sizable investment in infrastructure to bring new oil discoveries to market.

This leads me to the first trivial concept in our quest for a better Peak Oil definition:

You have to find new oil before you can consume it and after you find it takes time to bring new oil to market.

Another problem I have with the half oil gone definition is that it is direct consequence of a particular set of mathematical equations that have been used to curve fit oil field production profiles. In other words it isn't a scientific fact but rather a figment of a set of mathematical equations. While technical people can understand and appreciate this, the general public and most political decision makers can't.

Furthermore basing a definition on a curve fit equation exposes Peak Oil to problems with the quality of the data used to perform that curve fit.

It is the old truism garbage in = garbage out.

Unfortunately, many in the Peak Oil movement do themselves a disservice by believing in the predictive capabilities of this simple model when the underlying data quality being fed into the equations is poor at best.

Peak Oil is a phenomena which can be explained without resorting to mathematics.

Another example of the confusion this half depleted definition yields comes from discussion of our Canadian tar sands. The consensus out there among experts is that the Canadian tar sands contains oil reserves second only to those in Saudia Arabia. To the general public and the politicians this fact immediately extrapolates to mean that given enough investment the tar sands will yield extraction rates comparable to Saudia Arabia.

Nothing could be further from the truth.

In Saudia Arabia the oil extraction is done by drilling a hole in to what amounts to a presurized reservoir. Oil flows out on its own cheaply and easily with modest energy inputs. Processing the tar sands on the other hand is an energy intensive mining and upgrading operation. Tne fact is that we don't have enough water or natural gas (both critical inputs into the tar sands operations) to scale the tar sands operation to anywhere close to the flow rate of Saudia Arabia even if we could muster the investment required to acquire the steel, concrete, manpower etc..

So the second important point to understand in our quest for a better Peak Oil definition is:

Large reserves does not automatically equate to large flow rates.

The tar sands example also gives us some insight into another important aspect of oil production which is essential to a full understanding of Peak Oil: the concept of an energy return on investment or EROI.

Simply put the more energy you need to expend to extract a given quantity of energy in your fuel, the lower will be your EROI.

If you are talking about fossil fuels as inputs the lowest EROI that makes any economic sense
is EROI=1.

When measured this way the Saudia reservoirs have an EROI ~ 20 while the Canadian tar sands have an EROI ~ 3. ie. it takes far more input fossil fuel energy to extract a litre of gasoline from the tar sands than it does from Saudia light sweet crude oil.

EROI calculations don't just apply to the production of oil. They also apply to the exploration for new oil reserves. What we find is that the oil industry does the sensible thing in that they focus on exploring for the high EROI resources first. When those are exausted they begin to look to resources with higher and higher exploration energy inputs: eg. oil in deep ocean waters.

So our third important point is:

Not all oil reservoirs are equal when it comes to the energy required to extract that resource.

Finally we are often guilty of speaking about oil as if it is a homogenous quantity like fresh water. In fact there are many grades of crude oil out there which span from light sweet crude to heavy sour crude. They can be as different from each other as cooking oil is to ashphalt. Each of these grades of oil have there own unique refining characteristics along with their own unique environmental impacts associated with that refining step.

This leads to another observation along the better definition quest:

As consumers we don't consume crude oil, refineries do. What we consume are the output products from those refineries.

Rate Depletion versus Rate of Depletion

The final important piece of information we need to integrate into our improved definition of Peak Oil is the concept of depletion.

On one level depletion is easy to understand. If you have a glass of soda which you are drinking through a straw: the more you drink the less remains in the glass. This is the reservoir definition of depletion or the Rate of Depletion.

Peak Oil is about the rate of extraction so the depletion we need to understand is that which talks to a decline in the rate of extraction as opposed to the decline in the amount left in the glass.

Imagine a glass of soda with lots of ice cream mixed in. Initially as you sucked on that straw you'd get a decent flow into your mouth. As soon as you began to bring ice cream into the straw it would get so you'd have to suck harder to get that same decent flow.

Another way you could combat this ice cream flow reduction is to put another straw into your drink.
With two straws you'd be able to maintain the flow for longer.

Oil reservoirs behave like this. Initially flow rates can actually increase as more straws are drilled into the reservoir. As the oil is extracted there comes a point when this extra drilling fails to increase the overall flow rate any more and the overall flow of oil from all the straws combined begins to decrease.

This overall decrease in flow rate is what I'm calling Rate Depletion.

The best analogy for Rate Depletion I've heard is that it is like trying to walk up an escalator which is going down.

In this analogy, the downward moving steps are analogous to oil consumption. Your net forward movement as measured by an observer not on the escalator is analogous to oil production.

Initially you are full of energy and it is easy to keep ahead of the downward moving steps and move upwards. As you tire this net forward progress slows, stops and eventually reverses.

Notice that when your net forward progress peaks, you are walking your hardest. Even as you start your net backward movement you are still exerting leg muscle energy against the downward moving steps.

Peak Oil happens when the largest flow rate is achieved. Even as the flow rate declines you are still seeing oil being produced.

Along with Rate Depletion, we need to add the concept of consumption growth to round out our understanding of Peak Oil.

Sticking with our escalator analogy consumption growth behaves like an increase in the speed of the downward escalator. If Rate Depletion is our tiring then all things being equal we will cease to move upwards sooner the faster our downward escalator is moving. ie. the larger the growth in consumption the sooner we hit Peak Oil.

The better Peak Oil definition

  1. You have to find new oil before you can extract it and there is a time lag between when oil is discovered and when it can be extracted.
  2. Large reserves doesn't necessarily equate to large potential flow rates.
  3. Not all oil reservoirs are equal when it comes to the energy required to extract that resource
  4. Peak Oil is the point in time when new oil discoveries->production can no longer keep up with the rate depletion of aging oil fields and growth in the marketplace.

bob findlay

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