Peaking Global Oil Production

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Peaking Global Oil Production the Environment

• National Center for Environmental Economics
• (OPEI/NCEE)
• John Davidson Keith Sargent
• (May 2005)

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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.

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Background
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Draining the Tank
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Two Views of World Oil Production Conventional
Unconventional Resources
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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.

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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.

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Proved Oil Reserves in 2003
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When Will the Oil Peak Occur?(Non-Mideast Oil
Production)
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When Will the Oil Peak Occur?(World Production)
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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?

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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

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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

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Alternatives

• Increased Fuel EfficiencyHybrid 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.)

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US Oil Shale Resources
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Oil Sand Oil Shale Depletion Curves
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Future World Oil Production Oil Sands and Oil
Shale
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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

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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)

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End of Presentation