Op-Ed: Carpe Peak Oil
Energy crisis is a once-in-a-generation opportunity.
Rahm Emanuel's words -- "Never let a serious crisis go to waste - it's an opportunity to do things you couldn't do before" -- were ignored last summer, when oil prices reached $147 a barrel. An energy crisis is looming. Politicians and pundits will again claim astonishment when the price of oil soars. They will vilify oil companies like Exxon (XOM), Chevron (CVX) and BP (BP), OPEC - and the dreaded speculators.
When oil prices collapsed from $147 a barrel in the summer of 2008 to $35 a barrel in January, American drivers, Congress, government bureaucrats, and the mainstream media refocused on other, more pressing issues, like executive bonuses. Peak oil likely occurred between 2005 and 2009; oil production will now embark on a long slow decline. The world isn't prepared.
Matt Simmons, energy analyst and author of Twilight in the Desert, recently told Reuters,
"We are 3, 6, maybe 9 months away from a price shock... These prices now are dangerously low. The lower prices fall, the less oil will be produced and the greater the chance of an oil spike.... [And] unless oil demand falls by 10 or 15% per annum, which it is not going to do, then we don't need to wait for oil demand to come back before we have a supply crunch."
In this scenario, low oil prices will continue to take oil fields out of production and reduce exploration. Once prices recover, companies will have trouble gearing back up due to the credit crunch, resulting in production-increase delays.
This is on no one's radar.
Peak oil doesn't mean we're in imminent danger of running out of oil; it's the point in time when the maximum rate of global petroleum extraction was reached, after which the rate of production enters terminal decline. The aggregate production rate from an oil field over time usually grows exponentially until the rate peaks and then declines -- sometimes rapidly -- until the field is depleted.
This concept is derived from the Hubbert curve, and has been shown to be applicable to the sum of a nation's domestic production rate, and is similarly applied to the global rate of petroleum production. M. King Hubbert created and first used the models behind peak oil in 1956 to accurately predict that United States oil production would peak between 1965 and 1970. It peaked in 1972.
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