The root of this problem is found in the areas of science and economics. We often treat these subjects separately, but as you will see soon enough, when it comes to the concept of peak oil, these two disciplines are equally important.
One of the fundamental concepts in economics is that of supply and demand. When there is an abundant supply of a resource or product, demand helps set the price — a higher price for high demand, a lower price for low demand. When supplies of a resource are limited or scarce, demand has a similar effect — high price for low demand, and an even higher price for high demand. Just think of Nintendo Wii’s and Hannah Montana tickets that were sold for many times their retail price in the recent past — examples of low supply paired with high demand. The principle of supply and demand drives our economy, and this also holds true when it comes to petroleum.
In decades past, production (or supply) of crude oil was able to keep up with demand. As the size of the world’s population grew, more and more reserves of crude oil were found, enabling us to keep up with increased demand. Economists would have us believe that oil will never run out. They say as supplies decrease, price will correspondingly increase to limit demand, eventually reaching astronomically high levels. The problem is that we don’t live in a bubble that fails to account for other factors. The other factor worthy of consideration is science.
As a science teacher for the past eight years, I have taught the topic of nonrenewable resources many times. In general, scientists agree that petroleum, or crude oil, is nonrenewable and will eventually run out, the question simply is when. Even if cost is prohibitively high to help curb demand, there is someone, somewhere who will pay for it. Eventually the last oil well will run dry, and herein lies the problem.
George Bush said it best in his 2006 State of the Union Address: “America is addicted to oil.” It is oil that drives our economy, fuels our cars, fertilizes our crops, and powers our airplanes. Try to go one day without touching an object made with plastic, which is petroleum-based. Or try to go a day without driving in a petroluem-fueled vehicle, on petroleum-made tires and roads (asphalt). In addition to the obvious, the following items are often made from crude oil: CDs & DVDs, antihistamines, food preservatives, perfume, insecticides, fertilizers, clothing (ex. polyester), carpet, home siding and flooring, paint, crayons, and candles.
Having established that our supply of petroleum is limited and a vital part of life as we know it, the next logical question is when will we run out? Experts have been trying to answer this question for decades and the numbers have been all over the board. Supply has increased over time as new discoveries have been made. Demand has increased over time as emerging economies like China and India want to pursue the American Dream. Since both supply and demand have stabilized in recent years, oil estimates are thought to be more accurate, with most experts estimating that our supply will run out in 45-50 years. Alarming as this is, a more important and more alarming question is, “When will the world reach peak oil?” The reason this question is important is because when global production has peaked, supply will no longer be able to meet demand, causing prices to increase until reserves are eventually exhausted. As oil costs increase, the costs of food (fertilized by petroleum) and products (delivered by petroleum) will also increase. Disposable income will in turn be reduced and other sectors of the economy (travel, entertainment) will suffer. Even more alarming is the timing of global peak oil. 33 of the largest 48 oil producing countries, have reached peak oil, and it is estimated that the world has either already reached peak oil or will over the next five to ten years.
Read on to see the implications of peak oil and some of the possible scenarios.
