Have we reached peak oil?

Peak Oil Theorists as Chicken Little

Oil fields, like this one in Azerbaijan in central Asia, may still remain undiscovered in different spots around the planet.
Oil fields, like this one in Azerbaijan in central Asia, may still remain undiscovered in different spots around the planet.
Mladen Antonov/AFP/Getty Images

In 2006, Cambridge Energy Research Associates (CERA) said that "the remaining global oil resource base is actually 3.74 trillion barrels -- three times as large as the 1.2 trillion barrels estimated by the [peak oil] theory's proponents" [source: CERA]. The organization went on to say that, rather than peak and decline, the world's oil supply will eventually resemble an "undulating plateau," with small peaks and valleys that will continue to meet the needs of global oil consumption for decades to come.

In CERA's opinion, one to which many of the peak-oil skeptics subscribe, the oil peak theory is just that -- a theory -- and one that it considers questionable. The organization instead believes the plateau will not occur until at least 2030, and by the time demand surpasses the supply plateau, other forms of energy will be sufficiently advanced enough to "fill in the gaps."

So how is CERA coming up with such a sunny forecast for oil? They believe we can rely on future discovery and full exploitation of the resources of which we're already aware.

There are many sources of petroleum that we already know exist. In the Arctic, oil fields, which could yield as much as 118 billion barrels, were identified in the 1950s. The deep sea is also a source for potentially billons more barrels of oil. And there are also unconventional sources as well. Canada is home to vast ­fields of oil shale -- a rock that when heated releases its oil -- and more fields have been discovered in the western United States in 2005. And future discoveries of "superfields" of conventional oil reservoirs could boost world production.

­Enhanced oil recovery (EOR) may also help find new petroleum sources. Oil production usually exists in three phases: primary, secondary and tertiary. Primary recovery is the easiest, with oil virtually (and sometimes actually) spurting out of the ground due to pressure from gases within. This was perhaps most famously displayed in the opening credits of each episode of "The Beverly Hillbillies," when Jed Clampett accidentally strikes oil with an old rifle.

Primary recovery usually draws about 10 percent of the oil in a reservoir. Secondary recovery can remove an additional 20 to 40 percent of the oil [source: Department of Energy]. In this process, water or gases are pumped into the reservoir to repressurize the oil. So after these two methods of drilling oil are exhausted, there is still as much as 50 percent of the oil left in the reservoir.

After the first two stages are spent, oil companies generally cap the reservoir, leaving the remaining oil in reserve. But why don't they just recover it all? The answer is simple economics. Tertiary recovery is expensive. With oil at its current price, it's simply not economically wise for oil companies to tap these harder-to-exploit resources. The price for oil hasn't reached the level where companies will make enough money exploiting resources in places like the Arctic and deep ocean, or to roll out the more expensive technology for enhanced oil recovery.

But when easily accessed oil dries up, the price of oil will increase, since there will be less of it. This may have already begun. On Jan. 2, 2008, the price per barrel of oil reached $100 for the first time, a landmark many peak-oil proponents have warned of. On July 11, 2008 it reached an all-time high of $147 [source: Jacobs]. When oil suppliers must spend more money to recover oil, the price will rise further. This is one of the possible problems that could face the world if oil peaks or if alternative energy sources aren't adopted more widely.

Read about more of the potential crises that could arise on the next page.