Monday, October 20, 2014

Peak Oil

by Antonio C. Antonio
October 11, 2014

There are those who still believe that fossil fuel is here to stay… forever!  On the other hand, there are those who say that sooner or later it will be gone.  With this, two terms have become popular --- “oil depletion” and “peak oil” --- which are terms that are interchangeably but confusedly used.  “Oil depletion” is quite easy to understand… but what is “peak oil”?

Peak oil is a theory popularized by M. King Hubbert.  The peak oil theory was postulated out of statistical modelling approaches.  This theory states that at some point in time the maximum rate of extraction of petroleum will be reached, if it has not been reached already, after which the rate of production is expected to enter terminal decline.  Peak oil, therefore, is the highest point of production to be followed by a steady decline in the volume of fossil fuel that can possibly be extracted from all the oil fields at present.

Post peak oil scenarios or the oil depletion stage are quite discouraging.  The Law of Demand and Supply dictates that as supply goes down demand will increase together with prices… and this increase in prices will be progressive and directly proportional to the dwindling fossil fuel production.  The highly industrialized countries that are most dependent on fossil fuel as their main energy source, will be most affected by oil depletion.  Traditional farming nations, however, will experience a greater demand for their produce and (most likely) better prices as well.

There are several post peak oil scenarios which vary greatly on the exact effect it will have on both oil-producing and oil-dependent countries, rich and poor nations, and industrialized and agricultural economies.  Perhaps until the effects of oil depletion are actually felt, we really would not understand and realize what this term means; what really is peak oil.

Just my little thoughts…

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