The Oil Crisis

By Mahbubul Karim (Sohel)
March 17, 2004


Whether we like it or not, oil plays a large role in economic up and down swings around the world. The feasible applications of alternative energy seem to be still far away from achieving any noticeable dent in energy market. Now that the oil price has hit the 14-year high, many heads have begun rolling.

Twice a year oil and gas evaluation consultants provide a composite price forecast for crude oil. In more likelihood than not, these forecasts resemble astrologer’s horoscope predictions, like the entertaining crystal ball. In the last 30 years, the volatile energy market had shown wild behavior in the face of wars, natural disasters, political instability, terrorism and other man made follies. Price is indeed relative to demand, however, when we add vices of men into this simple economic model, convoluted picture arises. OPEC boasts biggest control on world’s largest provable reserves, and from time to time, tinkering of oil productions by OPEC causes price fluctuations.

Seven years ago, a prominent geologist, Dr. Colin Campbell published a book, titled “The Coming Oil Crisis”. Dr. Campbell has a distinguished career in the oil industry, worked as a consultant to the International Energy Agency based in France. Though his book was published in 1997 with no mention on recent developments of tar sands and heavy oil in Canada and Venezuela, still the book provides a striking imagery for the last three decades’ volatile and increasingly unpredictable price of crude oil.

Dr. Campbell also published an article, “End of Cheap Oil” for the Scientific American’s March 1998 issue. In his book and article Dr. Campbell painstakingly showed that the distribution of global oil reserves is finite. This is a known fact for the engineers, geologists, geophysicists and anyone working in the energy industry, but this issue never gets much attention that it deserves in the wider public arena. Even the financial analysts play safe in muting down the very finiteness of global oil reserves to their clients, the world traders.

Dr. Campbell also gives a timely warning, that “a peaking of oil production is imminent and there will be a rapid decline and a profound situation of demand exceeding supply.”

For his analysis, Dr. Campbell used a mathematical procedure, Fractal Analysis in analyzing and processing conventional reserves predictions and production decline curves that the engineers regularly use for the reservoir and production analysis. There are uncertainties involve in all predictive methods, this is the reason Dr. Campbell provided three scenarios, “a base case, a middle case and a high case providing a range of peaking of world oil production supplanted between 2005 and 2013 and declining thereafter.”

There are 131 illustrations in Dr. Campbell’s book that contains “significant tables and graphs on the reserves and depletion rates of global oil reserves.” In one plot Dr. Campbell showed that world oil production as far back as 1930 was at 3,724,000 barrels per day, climbing to a “maximum prediction of 66,725,000 in 2001 and declining at 3.25% thereafter.”

In his Scientific American article Dr. Campbell raised question on six OPEC members’ “suspiciously and cumulatively adding 300 billion barrels of oil to the official tallies despite no major discovery of new fields in their respective countries.”

Just imagine what would happen to our world if suddenly there is a sharp decline of oil supply, “provable” but undeveloped oil and gas reserves turn out to be murky Enron like shams, there would be unimaginable economic wrecks, millions and millions of layoffs, rampant bankruptcies filed by the giant energy and other related companies would be abundant, stalled transportation systems, endless lines for the scarce oil in gas pumping stations, and there would be chaos, eventual starvations, violent crimes, riots and wars among the nations and political rivals fighting for the remaining but diminishing leftover of the lucrative energy pie.

Is this too pessimistic scenario for our world? Has this ruined your luncheon or dinner appetite? Perhaps heavy oil and tar sands will provide a few extra years with the possibility of heavy degradation of environment since heavy oil is not like the sweet Texas crude, its sulfur content is high, and when the energy crunch time arises, nothing will be left unturned. All the sacred environmental and ecological refuge for the birds, fish, polar bears, concerns for human health and longevity, the arctic, and panoramic sea costs, will be thumped and new drilling sites will surely appear.

But the end of fossil fuel’s reign is approaching fast. Unless alternative energy speeds up in energy race, that appetite-ruining end is a frightening possibility.


References

1. Dr. Colin Campbell, “The Coming Oil Crisis”, Petro-Consultants, SA, 1997.

2. "Oil Prices Push Past $38 a Barrel", Yahoo News, March 17, 2004.


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Mahbubul Karim (Sohel) is a freelance writer. His email address is: sohelkarim@yahoo.com.

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