Viewpoint-30 April 2004



Michael Lardelli*: Does an Approaching Peak of Oil and Gas Production Presage a National Emergency?



Could there be a greater, more immediate threat to our technological civilisation than global warming? There is, and it is known to its proponents as the “oil peak” or “peak oil”. Ironically, just as the burning of fossil fuels threatens to change our climate, an insufficient supply of oil and gas may be the Achilles’ heel of our technological way of life.


More than half of the energy use attributable to a car is consumed during its manufacture.

Our technological civilisation uses enormous amounts of energy. Consider the energy inputs required in the building of a new car. Ore must be mined and transported to smelters where metal is generated. After further transport, probably around the globe, it will be formed into parts of the car and combined with a myriad of plastic items (synthesised using oil) that have also been sourced from factories anywhere in the world. The car will then be transported to the point of sale. Oil provides much of the energy required at almost every step of this process. In fact, more than half of the energy use attributable to a car is consumed during its manufacture. (See Heinberg below.) Therefore, in most cases the best way for a car owner to reduce greenhouse gas emissions is simply not to buy a new vehicle, no matter how energy efficient it is! Oil is also central to modern agriculture that allows the world to support a population now exceeding 6 billion. Not only does it drive farming machinery, food processing and packaging, transport and refrigerated/frozen storage, but natural gas is also used to produce the hydrogen required by the Haber-Bosch process that is used to make most of the world’s nitrogenous fertilizer. Most of the protein in our bodies owes its existence to the Haber-Bosch process of nitrogen fixation.


Worldwide, almost 65% of primary energy is generated using oil and gas (British Petroleum, 2003). Crucially, 90% of fuel for transport is generated using oil (Aleklett and Campbell, 2003). Most of us are aware that the world’s reserves of oil and gas are limited and that substitute energy sources need to be found and developed.  However, in the back of our minds we have a vague idea that the oil reserves will probably last until sometime around the middle of this century. We have also been fascinated and/or encouraged by the progress of fusion research, the development of fuel cells, solar energy capture, geothermal, wind and tidal energy and more. We are comfortable in our assumption that there will always be sufficient energy for our needs and our children’s needs. Unfortunately, this assumption is almost certainly wrong and a group of European scientists have formed the Association for the Study of Peak Oil and Gas (ASPO, to warn of this fact.


The idea of “peak oil” is that the crucial moment for oil availability is not when the supply ends but when it begins to decrease while demand is still increasing. Unless appropriate countermeasures are in place before the peak, the price of oil will then rise inexorably causing sustained increasing pressure on the world economy. The predicted probable effects of increased oil prices for Australia include depressed tourism (especially tourism dependent upon air travel) and a decrease in the number of foreign students we could attract. Food prices would rise and other economic activity would slow as transport becomes more expensive. Unemployment would increase in almost all sectors of the economy and many of the newly jobless might default on their loans causing  marked repercussions in banking. Simultaneously, the government’s tax receipts would decrease making payment of unemployment benefits, pensions, research grants and the maintenance of essential services increasingly difficult. The result would not be merely a difficult recession but, rather, an extended economic collapse exceeding the Great Depression of the 1930s.


The critical questions are when will the supply of oil and gas peak and can alternative energy sources fill the gap? According to information from the Uppsala Hydrocarbon Depletion Study Group in Sweden (UHDSG,, see Figure 1) the peak will probably occur sometime around 2010 (±4 years). We would probably only know that the peak had passed 3 to 4 years after the fact when the inexorable rise in the price of oil and gas had begun.



Why has so little attention been given to the oil peak to date? Two reasons are commonly cited by proponents of an imminent oil peak. One is that many economists appear to believe that increased demand for oil will lead to

 increased efforts to find new reserves or to develop alternatives, ignoring the physical reality that most of the world’s reserves of recoverable oil have been identified. The second reason is that reliable estimates of reserve volumes have been very difficult to obtain since the “quota wars” of the 1980s when most OPEC nations inflated their estimates to permit higher production quotas (Sivertsson, 2003). Middle East reserves have been markedly exaggerated by the governments of the region. Unfortunately, even optimistic extrapolations using the pre-inflated reserve figures (including consideration for improved extraction technologies) give reserve estimates that are dramatically lower than the official amounts (ASPO Newsletter 39).


More troubling than the rapidly approaching peak in oil and gas production is the apparent inability of other energy sources to substitute for them. The reasons for this are clearly laid out in a recently published book by Richard

In the 1940s one unit of energy was needed to access the over 100 units of energy then released from oil by burning it. By the 1970s this efficiency ratio had dropped to one energy unit invested for 23 produced.

 Heinberg, “The Party’s Over: Oil, War and the Fate of Industrial Societies” (New Society Publishers, ISBN 0-86571-482-7). Heinberg (citing Cleveland et al. 1984 and Odum 1996) shows that oil is a uniquely energy-dense and versatile source of chemical energy. In the 1940s when the most easily accessible oil was being tapped, only one unit of energy was needed to access the over 100 units of energy then released by burning it. By the 1970s this efficiency ratio had dropped to one energy unit invested for 23 produced as it became more difficult to bring up the oil. In contrast, the most efficient production of ethanol releases only 1.34 units of energy for every unit of energy invested in growing the fermentation feedstock and in the production process. Heinberg estimates that if all the cars in the USA were to be run on ethanol this would require nearly the entire continental USA to be turned over to feedstock production. Distressingly, hydrogen is also not the straightforward oil substitute it is commonly made out to be. Many of those proposing a hydrogen economy are assuming a transition phase when hydrogen will be produced from natural gas before eventual large-scale production by electrolysis from water using electricity generated from renewable sources. In any case, with the oil peak likely to occur soon, there may be little time for the technological development and infrastructure construction required for the hydrogen economy.


Oil sands have recently been acclaimed as a promising new source for oil (Lawson 2004). However, the scale of the infrastructure required to develop this source so that it could substitute for coming shortfalls would probably be very extensive. The world still has large reserves of coal and this may maintain reduced electricity production as oil becomes scarce. (However, note that oil is required for the mining and transport of coal). Also, liquefaction of coal may substitute for a lesser fraction of the oil now used for transport and coal can also be used to generate hydrogen. Again, the infrastructure investment required for these uses would be extensive and critical, and immediate modelling needs to be done. The same would apply to the increased use of nuclear energy to generate the electricity currently generated using oil and natural gas. The use of wind and solar power to produce electricity is slowly increasing from a very low base. However, their use is complicated by their variable energy output and they are not well suited to providing energy for transport other than in a (as yet hypothetical) hydrogen economy. A crucial question is whether the impetus to invest heavily in these alternatives will occur before the peak is passed since it will be more difficult to find the money for these investments once rising oil prices cause economic depression.


If practical alternatives or the will to invest do not exist, can we find more oil instead? According to Heinberg most of the truly large fields have probably already been identified and even the discovery of a new large field (~50 Gigabarrels) would only push back the date of the peak by a few of years. The remaining oil in the world is becoming more difficult to extract (i.e. more energy needs to be invested in extracting it thus reducing the net energy gain). On the day oil extraction ends large amounts of untapped oil will still exist, it will just not be energetically profitable to access it.



The almost inescapable conclusion of the oil peak is, therefore, that technologically advanced economies may soon enter a period of very painful transition. Just how they emerge from that transition will depend on the policies they adopt before and during the crisis. It may also depend somewhat on the natural and industrial resources that these economies possess when they enter the transition.  For Australia it is significant that our cities and rural landscapes are structured around petroleum-driven vehicle transport. Therefore, it is foreseeable that, even if we do manage to make a massive investment in alternative sources of energy, these landscapes will undergo enormous changes. As transport costs increase, large cities may fragment and coalesce around multiple centres. A large segment of the nation’s population may move into rural areas close to these centres as human labour regains its historical importance in agriculture. Open areas within our cities will probably also be turned over to food production. Globally, the far greater cost of international transport, and the chaos that may occur in nations as unemployment rises and food production and supply is restricted, may seriously disrupt the world economy. This would restrict our access to technology such as computers, communications equipment etc. Since most markets and manufacturing supply chains are now global, Australia’s manufacturing industries would also be seriously affected.


What might the future hold for us and our children? If we can survive the painful transition to a lower energy culture

One thing is certain – the more public awareness exists of the consequences of an imminent oil peak the greater the likelihood that the political will can be found to take action to ameliorate its effects.

 while avoiding the chaos that comes if large numbers of people begin to starve, then life will probably be a simpler affair than today. Many of us may be involved in manual labour for food production. Long distance communication may be predominantly by public transport with international air travel being rare. With an informed and committed population and a political leadership willing to make necessary investments and sacrifices in a time of crisis, we might expect to maintain production of some of the basics required for a self-sufficient but less brutal future – antibiotics, contraceptives, vaccines, anaesthetics, telephony, radios, books, etc. In particular, this will require that Australia becomes self-sufficient in manufacturing most of the components required for production of these products/technologies.


What might be the consequences for education and research?  The probable changes in population distribution and lower tech future will require commensurate changes in education delivery. If current levels of tertiary education are to be maintained, then tertiary institutions may need to scale down and multiply to service the new population centres. Alternatively, if telecommunications are not seriously degraded, a fewer number of tertiary centres may dominate the sector using distance learning strategies. In either case, a strong education system will be vital as we struggle to maintain democratic principles and to educate the population in what is required to live sustainably in an environment with limited energy. With regard to research, government and corporate budget limitations in the immediate aftermath of the peak would probably see concentration on finding solutions to urgent problems regarding transport, food production and provision of basic services to the population.


What should Australia be doing to lessen the impact if an oil peak is imminent? Anything that reduces our dependence on oil and natural gas will lessen the impact of rising oil prices on our economy. Thus, investment in public transport, promotion of smaller, more efficient vehicles (including electric vehicles) and even reduction of speed limits will have a positive effect. Policies must also be put in place to stop continued sprawling of our larger cities and to shift unemployed population into rural areas to engage in food production. While our dependence on coal to produce electricity may increase in the short term, we should not ignore the danger of greenhouse gasses and global warming. Therefore, we should do everything possible to encourage investment in renewable sources of energy. For new housing, better insulation/energy efficient design, solar hot water and photovoltaic electricity generation should be compulsory. Government-sponsored programmes should also encourage modification of existing buildings to increase their energy efficiency. Since increased oil and gas prices will lead to high levels of inflation, Australians should be encouraged to reduce their debt levels as rapidly as possible. Our government should also begin emergency planning for the feeding of large numbers of unemployed people, diversion/subsidy of fuel for agriculture and food transport and reduction of the dependence of our manufacturing industries on foreign-sourced plant and components. We should also develop the capacity to initiate manufacture of essential technologies in case their supply by other countries is disrupted. Our government must educate the population in the consequences of the oil and gas peak and promote education in the behaviour and technologies required for the future such as energy conservation and local sustainable agriculture.


One thing is certain – the more public awareness exists of the consequences of an imminent oil peak the greater the likelihood that the political will can be found to take action to ameliorate its effects before or during the early increases in the prices of oil and gas. As educators and researchers, it falls to us to be prime movers in the response to this crisis. Inform yourself further and then tell your family, friends, local community and politicians about the consequences of the peak of oil and gas production. Complacency is not an option.


*Michael Lardelli is Senior Lecturer in Genetics at The University of Adelaide



Further notes and references


Primary energy is energy embodied in natural resources (e.g. coal, crude oil, sunlight, uranium) that has not undergone any anthropogenic conversion or transformation.


For an internet-accessible summary of many of the ideas applicable to peak oil, visit Matt Savinar’s website, . See especially the book excerpts. However, be aware that his USA-based perspective is particularly dark and assumes that the peak occurred in 2000. Note that Savinar quotes a 1999 speech by Dick Cheney (now US vice-president), “By some estimates, there will be an average of two percent annual growth in global oil demand over the years ahead, along with, conservatively, a three-percent natural decline in production from existing reserves….That means by 2010 we will need on the order of an additional 50 million barrels a day.” Savinar notes that this is six times the current daily production of Saudi Arabia.


British Petroleum (2003) BP Statistical Review of World Energy June 2003


Aleklett, K. and Campbell, C.J. (2003) The Peak and Decline of World Oil and

Gas Production; Minerals and Energy, no 1; Taylor and Francis Group.


Anders Sivertsson (2003) The Study of World Oil Resources and the Impact on IPCC Emissions Scenarios. M.Sc. thesis. Uppsala Hydrocarbon Depeltion Study Group, Uppsala University, Sweden,


Odum, H.T. (1996) Environmental Accounting, Energy, and Decision Making (John Wiley)


Cleveland, C.J., Costanza, R. Hall, C.A.S. and Kaufman, R. (1984) Energy and the U.S. Economy: A Biophysical Perspective. Science 225: 890-7.


Lawson, M. (2004) The only thing certain is that the world’s oil reserves won’t last forever. 5 January 2004.