Technology will defeat the oil dilemma Tuesday, December 23, 2008 3:17 AM By Gwynne Dyer

Worried about peak oil? The International Energy Agency’s annual report, "The World Energy Outlook 2008," admits for the first time that "although global oil production in total is not expected to peak before 2030, production of conventional oil . . . is projected to level off towards the end of the projection period." When The Guardian’s environmental columnist, George Monbiot, pressed IEA director Fatih Birol on that opaque phrase, the actual date turned out to be 2020.

The IEA’s previous reports, which assured everyone that there was plenty of oil until 2030, were based on what Birol called "a global assumption about the world’s oil fields" -- that the rate of decline in the output of existing fields was 3.7 percent a year. It turns out that the rate is at 6.7 percent a year.

Some new fields are coming into production, but this number means that the production of conventional oil -- oil that you pump in the good old-fashioned way -- will peak in 2020. Birol assumes, or rather pretends, that new production of so-called unconventional oil will allow total production to match demand for another decade until 2030, but this is sheer fantasy.

Unconventional oil is extracted, at great expense and environmental cost, from tar sands or oil shales. But nobody is working the oil shales, and only 1 million barrels per day are being taken out of tar sands, all in Alberta, Canada.

The most optimistic forecast for the tar sands in the 2020-2030 period is 5 million barrels per day, half of which would merely replace declining Canadian production of conventional oil.

So what are we to make of this news? Monbiot uses Birol’s admission to launch an impassioned appeal for the rapid development of alternative sources of energy. That is obviously urgent if we are close to peak oil, but this might not be as great a crisis as it seems. It might not be a bonanza for the oil-producing countries, either.

The IEA presumes that demand for oil will rise indefinitely, so the price of oil only gets higher after peak oil, but in technology nothing is forever. Set into the front doorstep of my house (and most other 19th-century houses in London) is an iron contrivance called a boot-scraper. It is for scraping horse manure off your boots, and the blade is worn into a shallow curve by a half-century of use.

London in the 1890s had 11,000 horse-drawn taxis and several thousand buses, each of which required 12 horses a day. Add all the private carriages and the tens of thousands of horse-drawn carts, wagons and drays delivering goods, and at least 100,000 horses were on the streets of London every day -- each producing an average of 25 pounds of manure -- 2,000 tons a day.

Flies were everywhere, and if you didn’t shovel the manure up quickly, it dried up and blew into your eyes, your hair, your nose and your clothes. One writer in The Times in 1894 estimated that in 50 years London’s streets would be buried under 9 feet of manure.

In fact, within 35 years the streets were almost free of horses, and filled with automobiles. They created a different kind of pollution, but at least you didn’t step in it. The same fate is likely to overtake oil-fueled vehicles in the next 35 years.

The shift will be driven by concerns about foreign-exchange costs and energy independence, and increasingly by the need to curb greenhouse-gas emissions. It is starting with ever-tightening standards of fuel efficiency. That will be followed by the first mass-market generation of electric vehicles, due in the next two or three years. The coup de grace will be delivered by third-generation biofuels, probably from algae that do not use agricultural land, that are fully competitive with oil in price and energy content.

Indeed, it is a safe bet that the demand for oil is going to fall faster than the supply over the next dozen or so years, even if we are at or near peak oil, for the annual decline in oil production just after the peak is actually quite shallow -- about 2 percent -- in the classic Hubbert curve. And if demand falls faster than supply, the price will also collapse.

Ladies and gentlemen, place your bets.

Gwynne Dyer is a London-based independent journalist whose articles are published in 45 countries.