The article "Peak Hour" (Nov 13) raises some interesting questions regarding the future of global oil supplies. The real issue is not whether we are running out of oil, but rather that we are running out of cheap oil ! {Note 1}

We need to differentiate between non-conventional and conventional oil. Non-conventional includes oil produced from coal, shale, bitumen and heavy crudes, plus oil found in deepwater, and polar regions. All of these sources have much more demanding technical requirements and return less net energy. In the case of tar sands, large amounts of fresh water and natural gas are required to produce a synthetic crude. Most oil geologists accept that approximately half of the easily extracted conventional oil has been extracted. The remainder is located in more difficult terrain or is harder to refine.

Many industry experts have expressed concern over the reliability of official reserve figures. OPEC reserves are believed to be overstated as they were abruptly revised upwards in the 1980's to get around production quotas. Shell was fined twice earlier this year for misleading investors over its reserves.{Note 2} On the other hand, ASPO's forecasts use the Petroconsultants database, widely regarded as the most accurate available. "Petroleum News" magazine recently carried an interview with Matt Simmons, a leading energy investment banker, where he expressed fears that the Saudis are near peak production and could start into rapid decline in as few as three years. More worryingly he says "somebody better have a 'Plan B' ready or there’s absolutely no way to avoid a world energy cataclysm." {Note 3}

The importance of the peak in oil is that once this happens, no amount of investment or new technology can increase production. Although not a difficult concept, and one which has been proven by past experience, it is not the message that the oil companies and governments want us to hear.

Indeed the International Energy Agency (IEA) now accepts that the peak in global oil production will occur and sooner than they had previously estimated. {Note 4} Their latest World Energy Outlook states that the peak could occur before 2015. Also the US Department of Energy has acknowledged adjusting supply estimates to fit demand projections. {Note 5} Dick Cheney privately admitted to peak oil concerns in 1999 shortly before becoming US vice president.{Note 6}

Closer to home, our own Ministry of Economic Development is hiding behind flawed IEA figures. Ignoring reality, their "NZ Energy Outlook to 2025" talks about oil prices rising from US$20 in 2004 to US$25 by 2020 and constant thereafter. {Note 7}

Another consideration is the contribution that oil makes to global energy supplies. Oil accounts for around 40% of OECD energy requirements and 90% of transport energy. {Note8} Our transport infrastructure will need to be rebuilt to take advantage of alternative energy sources. Air travel will be greatly curtailed with negative effects on a remote country like New Zealand. The much touted hydrogen economy has many technical challenges to be overcome and significantly, hydrogen is not a source of energy, merely an energy carrier like electricity. Some commentators are now questioning the contribution it can make to our energy needs. {Note 9}

The article closes with a quip about the end of oil a

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