What does the term “Peak Oil” mean?

“Peak Oil” is a worldwide concern. Chief Geologist Dr. King Hubbert discovered in 1959 that once any oil well, oil field or oil producing country crested the quantity of its oil production output the amount of oil which can be drilled and recovered falls at a dramatic rate. This scientific discovery has now been considered for oil production at a worldwide level. In another words, once the world oil recovery rate begins to crest beyond peak levels, the world will produce less and less oil with each successive year. *

*Note: Our first issue of The Mammoth Advantage discusses this topic in detail. Click here to read it »

Do we know for sure that the worldwide production levels have reached peak levels?

No, but great warning signs are here. We now know that major oil fields like the Ghawar Field in Saudi Arabia has had huge amounts of seawater injected into it for several years. The purpose is to float the remaining oil in the field to the surface to aid in extraction. The Ghawar Field, discovered in the early 1960's was once home to one-eighth of our total known oil reserves. Although a total loss of a field of this size will take more time, oil experts know that injecting water into an oil field is one of the last stages of the petroleum life of this region. Signs such as these, which are being reported throughout the world, lead some scientists to conclude that our planet may soon be on the downward side of our oil production capability.*

*Note: Our second issue of The Mammoth Advantage discusses this topic in detail. Click here to read it »

But can't we just cut back on our oil usage in this country and build back up our oil reserves?

Yes and no. Certainly if this country were to aggressively begin to conserve its use of petroleum and related products we would stave off the effects of “Peak Oil”. But oil is a worldwide issue. First, to this date there appears to be no real conservation movement underway. We in the United States are still buying trucks and SUV's getting ridiculously low miles per gallon. The U.S. leads the world in the use of fuel.

Secondly, oil is a worldwide product. The emergence of China and India is sucking up more and more oil in order for their country's business sectors to operate. Each year, it is more and more evident that the huge machine that we have built cannot sustain itself in its present form. Europe and Japan are completely oil dependent as they are on the large list of countries that are considered “net importers” (meaning they use more oil that they produce). The list of countries that are now considered “net exporters” (they use less oil than they produce) is very short.

Lastly, even if we could find a miracle “cure” for our lessening oil supplies and we could offer it to the world to eliminate our dependence on crude oil, the result would be a cataclysmic worldwide depression that might change the planet forever. The oil industry is a multi-trillion dollar business of refineries and transmission lines including multiple lines of transportation. How could our planet sustain such an economic loss?

In short, the world has been consuming more oil while it is drilling and extracting less oil for a long time. These two trends cannot last long. The supply and demand curves will collide leading to *huge increases in the price of oil and oil related petroleum products. It is these basic macro-economic trends that have caused some experts to realize that we must maintain our oil dependence while realizing that the price we may pay could be costly.*

*Note: Take a look at our Oil Crisis Section and our Oil Crisis News Archive to see exactly what we mean. The archive has over 2,100 links to various news reports dating back to the year 2000.

What other products require oil to create?

Petroleum is used to manufacture an enormous number of products for your life. Less than 20% of all recovered oil is used for any type of fuel. Over 30% is used for the creation of food via fertilizers. Nearly the same amount is used to manufacture plastics. If you were to walk through your home and office, you would become shortly overwhelmed by the thousands of items you use everyday that would not be available to you without our access to oil. In fact, everything we now buy today represents a measurement of energy in order to create and then for us to consume. Below is a short list of a few everyday items made from oil. How many could you do without?

Clothing Ink Heart Valves Crayons Parachutes Telephones Enamel Transparent tape Antiseptics Vacuum bottles Deodorant Pantyhose Rubbing Alcohol Carpets Epoxy paint Oil filters Upholstery Hearing Aids Car sound insulation Cassettes Motorcycle helmets Pillows Shower doors Shoes Refrigerator linings Electrical tape Safety glass Awnings Salad bowl Rubber cement Nylon rope Ice buckets Fertilizers Hair coloring Toilet seats Denture adhesive Loudspeakers Movie film Fishing boots Candles LP records Solvents Roofing Food preservatives

Floor wax Sports car bodies Tires Dishwashing liquids Unbreakable dishes Toothbrushes Toothpaste Combs Tents Hair curlers Lipstick Ice cube trays Electric blankets Tennis rackets Drinking cups House paint Rollerskate wheels Guitar strings Ammonia Eyeglasses Ice chests Life jackets TV cabinets Car battery cases Insect repellent Refrigerants Typewriter ribbons Cold cream Glycerin Plywood adhesive Cameras Anesthetics Artificial turf Artificial Limbs Bandages Dentures Mops Beach Umbrellas Ballpoint pens Antihistamines Cortisone Dyes

Water pipes Car enamel Shower curtains Credit cards Aspirin Golf balls Detergents Sunglasses Glue Fishing rods Linoleum Plastic wood Soft contact lenses Trash bags Hand lotion Shampoo Shaving cream Footballs Paint brushes Balloons Fan belts Umbrellas Paint Rollers Luggage Antifreeze Model cars Boats Nail polish Golf bags Caulking Tape recorders Curtains Vitamin capsules Dashboards Putty Percolators Skis Insecticides Fishing lures Perfumes Shoe polish Petroleum jelly Faucet washers

Won't the world market solve this problem by coming up with a replacement for oil?

No. This is a very tough question for most people to come to grips with. There is no known viable source of energy harnessing creation that comes close to the combustible engine that was invented just a century ago. There are many ways to create energy but all of them ultimately require more energy to create than is returned.

I have heard about the advancement of hydrogen fuel cells as an energy replacement for oil. Does it work?

No, at least it does not right now. The idea of creating a kind of battery that never needs recharging by mixing hydrogen and oxygen in a fuel cell to produce an electric current is certainly not new. Scientists have been working on this capacity since the 1980's and while we know more now than back then about this type of energy system, the largest companies in the world involved with the research and development of hydrogen fuel cells have scaled back their staffs dramatically and have seen their stock prices crash. This method has a long way to go. There simply is no replacement for the combustible engine and the need for petroleum to be used for its operation.

Many of your articles focus on the price of oil and the effects of peak oil, yet most of your projects are natural gas-related. What is the relationship between the two, because on some days when oil is up, gas is down, and vice-versa.

While it is true that oil and gas prices do not always track each other on a day-to-day basis, over the long term, they tend to trend together. Over the past year, oil futures were up 385% while natural gas futures were up over 300%. So, both markets have appreciated considerably long-term.

Since direct gas investments (as opposed, say, to futures speculation) are a long-term play, our focus with regard to peak energy is long-term as well. Natural gas plays are known to deliver returns for years, if not decades, to come, and the long-term price trend in gas is clearly higher.

The reasons behind the continuing strength in the gas market due is in part to the ever-increasing amount of natural gas which is being consumed for electrical generation. Reportedly, more than 25% of the electricity generated in the U.S. is now fired by natural gas, and that number is rising every year.

We expect this trend to continue as few new nuclear power plants are being planned in the U.S. and gas remains the cleanest burning fossil fuel alternative.
  
One final thing to keep in mind: Middle Eastern terrorists have clearly stated their desire to attack oil installations in their homeland in order to hurt Western commerce. Natural gas produced in North America bears less risk of attack. This has given rise to a “terror premium” in the crude oil market which explains much, if not all, of the extra 85% advance in the price of oil vs. gas over the last decade.