The Oil Dilemma

The Eminence of Oil

Long before oil's rise to prominence in energy production, its entry into daily use was brought by peoples need for a cheaper and more flexible source of illumination. Petroleum derivatives have been exploited since the beginning of human civilization, particularly in ancient Mesopotamia and elsewhere in the Middle East, where a primitive oil industry supplied asphalt for building roads, mastic for waterproofing ships, architecture, hydraulics, and essential components for many medicines and treatments. Oil production slowed down and reemerged in the mid 1850's, when parallel experiments by chemists were undertaken in Europe and the United States to refine oil (Maugeri 24). The famous Canadian scientist, Abraham Gesner, was responsible for the discovery of modern oil distillation. He patented a new oil product, kerosene, to be used for "illumination or other purposes," in the United States in 1854 (Maugeri 66). Since it was cheaper, safer, and better than whale oil, which was quickly running out as a result of intensive over fishing, it was quickly adopted by western civilization (Maugeri 72). However, because modern society runs on oil, misconceptions and fallacies have been accepted as truth on oil depletion.

In the twentieth century there have been at least three major cycles of oil catastrophe: the fist one started during World War I and ended with the tremendous oil glut of 1930, the second one erupted in the U.S. during World War II, and was a few years later denied by the growing petroleum overproduction up to the end of the 1960's; the final cycle came with the beginning of the 1970's, terminating in the two oil shocks, and was dramatically reverted by the oil countershock in 1986 (Maugeri 15). However past experience has failed to warn against such fears of apparent scarcity. The Medias amplification of any voice predicting the earth's oil supply has swept away any reasoned opposition. Today, petroleum doomsday visions have been made much more suitable and credible for the general public through the use statistical and probability models. However, there has been no accepted method to asses or calculate the extent of future oil reservoirs. Searching for the ultimate figure about earths oil reserve is like searching for the holy grail, a never ending rush with several people claiming to have discovered what in fact remains a mystery (Burnham 25).

The most famous of all doomsayers came about in 1956. Marion King Hubbert, who observed the production curve over time of a known oil province from the start up of the oil fields discovered in the area. He concluded that production grows over time until it peaks when half of the existing recourses have been extracted, mid point depletion. At this stage production tends to decline at the same rate at which it grew. Hubbert developed the idea of the Hubbert curve. This bell shaped curve represents the symmetrical rise and fall behavior of oil production. Hubbert believed that if an oil basin has been sufficiently explored, it is possible to reasonably forecast when it will achieve peak production and run out of oil (Burnham 22). From his findings, Hubbert created a series of followers that further explored the dilemma.

These new followers had a similar set of beliefs. The first was that the geological structure of earth is already well known and thoroughly explored, so it is highly improbable that there are any completely unknown oil deposits left (Burnham 52). However, unlike Hubbert, the followers resorted to a more mathematical approach. They based their results on the "Central Limit Theorem," which states that the sum of a large number of erratic variables tends to follow a normal distribution, assuming a bell curved shape (Burnham 52). The Hubbert model estimates when peak production will be achieved and when the exhaustion of existing oil reserves will follow. However, forecasting the future oil stocks of the world is complicated by the unpredictable distribution of thousands of oilfields, by more recent discoveries, and by possible future findings. Hubbert followers did not take these problems into consideration, and therefore they did not consider all variables in the experiment which altered the results (Burnham 53).

In consequence to the model, in 1956 Hubbert succeeded in precisely predicting the peak oil production point of the United States (excluding Alaska and Hawaii); indicating that the critical year would be 1965 or 1972. In fact, the year turned out to be 1970 (Burnham 23). Such a success is relatively easy to explain. Simply put, the US was by far the oldest and most intensively known, explored, and exploited area in the world. The knowledge of its subsurface outpaces any region of the world except Western Europe by a factor of 100 (Markus 3). Consider, for example, that in Texas alone nearly 1 million wells have been drilled, against 2,300 in all of Iraq, and that today there are more than 560,000 producing wells in the U.S., compared to the 1,500 in Saudi Arabia (Markus 3). Nonetheless, contrary to Hubbert's decision, "the U.S. would have effectively reached a maximum not in 1970 but in 1957 (Burnham 26)." In fact, one of the major problems of the Hubbert model and of the entire forecasting is the incapability of predicting political decisions affecting production and change of habits affecting consumption. Furthermore, resource estimates are totally uncertain because there is no method determining their magnitude.

In sum, Hubbert's success with the United States was partially luck. As one of Hubbert's disciples stated, "Hubbert followed one of the oldest traditions in science, the one based on the so-called Ocaam's Razor: 'try the simplest explanations first (Burnham 28).'" This method worked in this case, but only because of the extensive knowledge the area. The American geologist initially did not realize what he had created, as he pointed out:

"In my figure of 1965, showing two complete cycles for U.S. crude oil production, these curves were not derived from any mathematical equation. They were simply tailored by hand subject to the constraints of a negative-exponential decline and a subtended area defined by the prior estimates for the ultimate production (Burnham 29)."

Only after his forecast of the United States proved correct, did he become some kind of hero. This kind of gratification led him to the assumption that he had devised a method applicable to the entire world. In fact, the Hubbert curve has been partially validated only for mature and intensively developed areas where knowledge of the subsoil is the highest and available technologies have been fully exploited (Burnham 30). But the increase in subsoil knowledge, the spread of technological progress, and the advancement