When a new cache of oil is found, its production capacity is said to increase exponentially over time as more wells are drilled into that reserve and efficiencies improve. When maximum output is reached from a particular reserve, production capacity may level out or plateau temporarily, followed by an exponential drop over time as the desired resource becomes less abundant.

Contrary to what may be common public inference about "green" fuels squeezing out petroleum-based fuels, leading experts say reducing carbon and other greenhouse gas emissions, while important, will likely occur naturally as oil becomes more costly and scarce, and pure economic necessity reduces its use.

In the United States, the so-called "drivers" (i.e., the bases) of renewable fuels production and use are numerous and wide-ranging. One of the most notable thrust factors, in fact, is that biofuels give the nation an ability to slightly reduce its heavy dependence on foreign oil. That's nothing to overlook, experts say, but it's a politically charged domestic purpose for renewable fuels that may neglect the greater implications of an imminent peak and subsequent decline in global oil production. In fact, it is not an understatement to say the brink of unparalleled change has arrived, which is certain to affect economic, social and political relationships worldwide, some experts say.

Even though the modern U.S. ethanol industry has been developing for more than a quarter of a century, and now leads even Brazil in its capacity to produce and consume the renewable fuel, some say it may still be too little too late. However, most experts agree that until a true "silver bullet" solution arrives, the world's liquid transportation energy needs will be met by a mosaic of fossil fuel and biomass-derived fuels, of which the ethanol industry stands to be a growingly important part.

‘Peak' Positioning
Nuclear Energy and the Fossil Fuels, published in 1956 and written by Marion King Hubbert, a geophysicist then employed by Shell Development Co., proved to include a pivotal prediction. Hubbert projected that the United States would reach peak oil production capacity in 1970. U.S. oil production actually peaked in 1971. His simple but avant-garde prediction rang true within the tolerance of a year's time.

In 1969, his prediction was extended to global oil production, ultimately determining that peak oil production on Earth would be reached in 1995. Since that date was off the mark, some analysts have proclaimed that "Hubbert's Peak"—as the theory is now commonly called—may not hold water. After all, more than a decade has past since the famed geophysicist's envisaged moment was to have occurred. For example, Michael Lynch of Strategic Energy & Economic Research Inc. has said Hubbert-influenced claims about depleting world oil reserves are akin to crying wolf. Multiple attempts by EPM to contact Lynch for this article were unsuccessful.

On the other hand, some simply point to intervening geopolitical and economic events that have postponed the inevitable. They say arguing about when the peak will occur is not as important as being ready to react after it does. Seasoned petroleum geologist Colin Campbell, founder of the Association for the Study of Peak Oil & Gas (ASPO) and author of the recently updated Oil Crisis (the book's previous edition is titled, The Coming Oil Crisis), says it's rather futile to quibble over exact dates. "The debate on the date of ‘peak' rather misses the point," he relayed to EPM via e-mail. "What matters is the view of the long, remorseless decline on the other side of it."

Nevertheless, Campbell asserts that conventional oil peaked globally in 2004. "Public data on reserves are grossly unreliable," he says. "But I have analyzed all available information, some very confidential." The implication here is, the more confidential the data, the more accurate the account.

Conventional crude oil doesn't include heavy, deepwater, polar and gas-plant liquids, Campbell notes. He does say, however, that all petroleum liquids production will peak by 2010. "I stress, however, that it is not a high or isolated peak, but simply the maximum value on a gentle curve," he tells EPM. "Small changes in input or modeling can shift it a few years."

Production, Discovery Trending Downward
Campbell attributes today's high gas prices to the lack of spare productive capacity among the world's oil producing countries, in conjunction with heavy demand from places like China and India.

In the 2005 book Beyond Oil: The View from Hubbert's Peak, author Kenneth Deffeyes, a Princeton University professor, writes, "As of 2003, no significant under-utilized oil production capacity existed anywhere in the world."

In this book, Deffeyes says global oil production peaked in late 2005. He explains why he nominated Thanksgiving Day 2005 as the date on which global peak oil occurred. "There is a reason for selecting Thanksgiving," he writes. "We can pause and give thanks for the years 1901 to 2005 when abundant oil and natural gas fueled enormous changes in our society. At the same time, we have to face up to reality: World oil production is going to decline, slowly at first and then more rapidly."

Deffeyes says throughout the 1990s, the 13 members of the Organization of Petroleum Exporting Countries (OPEC) exhausted surplus production capacities "one by one," he writes, until Saudi Arabia alone carried the flame as the only OPEC member remaining with surplus capacity. Incidentally, Saudi Arabia owns approximately one-fourth of the world's remaining oil, according to Campbell.

In a short yet powerful footnoted statement, Deffeyes brings to light a profound event he says went relatively unnoticed: Saudi Arabia reached peak oil production capacity in 2003, at a figure between 9.2 million barrels per day (MMbd) and 9.5 MMbd. The news came by way of a Dow Jones Newswire report issued March 6, 2003, one-and-a-half weeks before the United States invaded Iraq. "To many, it appears that the [U.S.] government's plan is to try to take control of what [oil] is left by military means," Campbell tells EPM.

Deffeyes concludes that 94 percent of the "hits"—defined as the initial well of an oilfield—ever to be struck already have been. Discovered oil, recognized today as reserves, constitute 82 percent of all the oil ever to be discovered.
What Campbell tells EPM corroborates these assertions. "Discovery [of new reserves] has been in relentless decline since the 1960s despite an intensive search always aimed at the best and biggest prospects, despite all the advances in technology and knowledge, and despite a happy economic environment whereby most of the cost of exploration is written off against tax," he says. "There is no reason to expect this long-downward discovery trend to change direction. … The peak and decline of discovery has to be mirrored in production after a time lapse."

A ‘Daunting Challenge' Ahead
Two-thirds of Deffeyes' Beyond Oil covers various oil alternatives to drive the global economy: The options include natural gas, which is in a similar, albeit deferred, position to oil in terms of reaching peak production; coal, from which liquid fuels can be processed using such methods as Fischer-Tropsch catalysis, etc.; tar sands, heavy oils and oil shale; uranium; and hydrogen. Deffeyes effectively dismisses biofuels in his book of alternatives, mentioning the word "ethanol" only once by calling it a "net loser"—a technology that consumes more energy than it produces. Hydrogen, in his view, is also a net loser.

"I'm not a fan of ethanol from corn, although Brazilian sugarcane seems to be working," Deffeyes wrote in an e-mail to EPM, indicating that he is either unaware of, or in disagreement with, the USDA's most recent published conclusion that corn-based ethanol has a 1.67 net energy gain. That means the United States government believes that for every one unit of energy consumed in the production of ethanol, 1.67 units of energy are generated.

University of Minnesota researchers recently published a study on ethanol and biodiesel, titled, "Environmental and Economic Costs and Benefits of Biodiesel and Ethanol Biofuels" in the Proceedings of the National Academy of Sciences of the United States of America. The study says that even if all corn grown in the United States were made into ethanol, it could only satisfy 12 percent of the nation's gasoline demand. Media outlets rushed to decipher that, because ethanol wasn't able to provide 20 percent, 50 percent or 100 percent of national gasoline demand, it is a waste of time, and efforts would be better spent in a different direction. That extrapolation, however, appears to be imprudent. If corn-based ethanol can substitute 3 percent to 5 percent of our current gasoline consumption without severely impinging on corn needed for other applications, like feed, many energy experts believe it is a significant part of an overall energy solution. The Renewable Fuels Association, for example, has long touted ethanol as a "gasoline extender" that makes up a very small but growing share of the U.S. gasoline market. Recent proof that even small-percentage liquid transportation fuel feedstock sources can have a major impact on gasoline pricing was seen in the aftermath of BP's announcement that it would repair feeder pipelines at the Prudhoe Bay field in Alaska that account for 8 percent of U.S. oil output. The market speculation created by that news pushed crude oil markets sharply higher and prompted many analysts to predict higher prices at the pump. With examples like that in mind, it's increasingly easier to view ethanol as just one component of a developing multilateral domestic fuel strategy.

Furthermore, the USDA and U.S. DOE released a collaborative feedstock study in 2005 concluding that a 1 billion-ton annual supply of biomass exists in the United States. That amount of biomass, the study proclaimed, is enough feedstock to produce cellulosic ethanol in amounts adequate to displace the equivalent of half the oil imported into the United States. What that essentially means is that corn-based ethanol and cellulosic ethanol, together, are real, partial alternatives to petroleum. The continued presence of the former and the future presence of the latter, in the world's liquid transportation fuel markets is continuously reassured by ongoing gains in production efficiencies.

Ultimately, however, conservation is the first step toward a more sustainable future. "As we progressively use up the concentrated energy of the past, provided by fossil fuels, things will have to slow down and become more sustainable," Campbell says. "This represents a daunting change of direction, which will likely be accompanied by great tension."

This "great tension" runs the gamut of possibilities, from wars and political breakdowns over oil to a widening disparity between the "haves" and the "have-nots." In any case, Campbell and other experts say the outcome is overwhelmingly expected to be a veritable systemic shift in how business, and the transportation necessary to conduct business, operates. The Rimini Protocol is Campbell's offering to the nations of the world to help them face the issue of peak oil. In it, oil importers are called to reduce imports matching the world depletion rates. "It would reduce world prices by putting demand into balance with supply, meaning it would stop the massive current profiteering from [the oil] shortage, primarily by Middle East governments, which threatens the world's financial system," he tells EPM. "It would allow poor countries to afford minimal needs and, most important, it would force the consumers to face reality."

As the limits of a finite planet manifest themselves, economics as we know it will become outdated, Campbell asserts. "Global market economics will cease to work well," he says. "Regional communities will emerge and be better empowered to do whatever is necessary to support their needs."

Campbell says the industrialized world's food production and distribution practices use seven times more energy than that found in the food itself—surely an unsustainable way of life, indeed. The fundamental structure in which transportation fuels are deemed essential today must change out of necessity. Campbell says that it remains to be seen whether a well-ordered decline in the consumption of oil (in conjunction with its rate of depletion as put forth in his Rimini Protocol) will occur.

"I fear it more likely that we will fight over the last barrel," he says. "The population of the world increased six-fold in parallel with oil, suggesting that it will have to also decline in parallel with oil. But it might well be a more benign world for the survivors." EP

Ron Kotrba is an Ethanol Producer Magazine staff writer. Reach him at rkotrba@bbibiofuels.com or (701) 746-8385.