OIL

Many people may ask the question , ‘ what makes the world go round and tick’. In my opinion the answer is simply OIL. As everyone knows oil is a fossil fuel , that has been made over millions of years deep in the earths crust from the remains of dead animals and vegetation fused together due to immense heat and pressure. Like all fossil fuels oil is a finite resource and once it is gone it will be gone for good. In reality however oil is much more then that , oil is one of earths most important assists as it powers the machinery and technology used by humans every day. Without oil the world we live in today would be unrecognisable and unfortunately it may be a problem we will face sooner rather then later . In this essay I will try and look into the impact and consequences of global oil level depletion on an island like Ireland.

In relation to other countries Ireland’s level of oil usage pales in comparison mainly due to our size as a nation and our population. Statistics show Ireland has been consistently ranked between 58th and 61st according to the amount of oil used annually in the last decade. Although in comparison levels may be low , oil is still  hugely important to Ireland  as it is our primary energy source. According to statistics from the Sustainable Energy Authority of Ireland, over one third of Irelands energy is provided by oil imports.1. http://seai.ie/  The given figures are

  1. oil 37%
  2. coal 22%
  3. gas 20%
  4. renewable sources <15%
  5. nuclear energy 6%

It is clear to see from these results that oil is by far Irelands most important source of energy and unfortunately this does not bode well for the future. It does not take an expert to see that Ireland seems nearly over dependent on oil and changes will need to be made. If something is not done soon Ireland will soon find itself in deep water as there is a real fear nowadays in how much oil there actually is left.

According to 2. www.wikipedia.com greater than half the energy/oil levels consumed in the last two decades is greater then that since the beginning of The Industrial Revolution in the 18th century to the end of the 20th. This is in spite of the improvements in efficiency and technological advances. There are many reasons for this , including consistent population increases , advances in production equipment but also the emergences of such countries as Brazil and China. China in recent years has emerged as a huge economy with substantial advances in all areas and this has hugely increased their demand for oil. They are now second only to the US in oil consumption with estimated figures of almost 10% of global production and in 2009 demand rose by 12.8%.  http:en.wikipedia.org/wiki/Oil_depletion   The E.I.A. (Energy Information Administration) an American organisation forecast that total world oil consumption will grow by an average of  approx. 1.6 million bbl/d (barrels per day)  throughout 2012. It also estimated  that crude oil and liquid fuel consumption grew by 2.4 million bbl/d in 2010 to 86.7 million bbl/d. This information can be worrying for Ireland because if the current trend of crude oil consumption continues to spiral up the levels of relitavely cheap attainable oil will drop rapidly.

The fact of the matter is that there is a reduction in the global availability of oil and it will have big impacts on Ireland and the whole world. One major problem facing the world is that the rate at which new oil reserves are being discovered is simply not keeping up with the level of which existing fields are depleting or the remaining oil is becoming uneconomically viable to source due to cost or quality. Since the 1960’s very few major fields have been discovered and this is very worrying. The most recent major oil reserve discovered is The Sugar Loaf off the coast of Brazil. The Sugar Loaf is estimated to have between 25-40 billion barrels of oil that could be produced. The American Petroleum Institute estimated that the global supply of oil would be depleted between 2062 and 2094 although it is hard to say for certain how accurate these forecasts are , however in recent years it is clear to see that the once large difference between oil demand and oil availability has begun to narrow substantially.

PEAK OIL

 Unfortunately the lack of new fields discovered is adding strongly to the theory that we have surpassed or are soon to reach Peak Oil . www.wikipedia.com defines Peak Oil as ‘ the point in time when the maximum rate of global petroleum extraction is reached , after which the rate of production enters terminal decline’. They are many arguments and theories behind peak oil with some experts suggesting we have already passed it and simply some denying it exists.

3. www.independent.co.uk  A London based research group ODAC (Oil Depletion Analysis Centre) have spent years researching and trying to raise international public awareness on peak oil which they believe will be mid 2012. They suggest that crude oil consumption will outstrip the discovery of new reserves and will begin to deplete our known sources. Colin Campbell , head of the depletion centre uses a simple analogy to explain the basic idea of peak oil ‘it’s quite a simple theory any beer drinker would understand. The glass starts full and ends empty , the faster you drink the quicker it’s gone. The problem with peak oil is that once the maximum level of oil is obtained there is a rapid decline off it’s pinnacle. The oil that is left may not be of as high a quality and also may be much harder to reach. Many oil fields are left with large quantities of oil due to these problems and also the fact that it may be far too costly to source the oil.

www.independent.co.uk Even with all the disagreements with peak oil one theory that most experts agree on is that field depletion follows a predictable bell curve called the Hubbert Curve. In 1956 a Shell geologist by the name of M. King Hubbert derived a mathematical formula to predict what would happen in the future to US petroleum production levels. The curve showed a sharp rise in production at the beginning , which soon levelled out at a more constant rate , hit a pinnacle and then fell into rapid terminal decline , hence giving a bell shaped curve on a graphical image. According to the Sunday Independent online archives , Hubbert predicted that inland oil production would peak in the USA in 1969 but his estimates were ridiculed and labelled preposterous. It eventually peaked in 1970 and has been in decline every since. Throughout history oil fields in general have obeyed the Hubbert Curve.

Many organisations and people in high positions have their own opinions and statistics to disclose to the public

  • Tony Hayward (C.E.O. of British Petroleum)  13th June 2007 ” BP’s Statistical Review of World Energy finds that there is enough ‘proven’  reserves for the next forty years of consumption at current rates”

 

  • Sadad al Husseini (retired head of exploration and production for Saudi Aramco) interview with Steve Andrews 14th September 2005 ” oil capacity is not production but rather processing limited… I believe  the production outlook will be gradual production increases over the next ten years , limited by slow refining capacity expansions. Given the current outlook in terms of global expansion and development , the rate of investment in the oil value chain , I believe oil production will level off at around the 90-95 bbl/d by 2015. This plateau can be sustained beyond 2020 at continuously higher oil prices and with rapid improvements in overall energy efficiencies throughout the world”.

 

  • Faith Birol, Chief Economist of the International Energy Society Agency – 2010 The Sunday Independent ” According to our projections , even if we were to presume over the next twenty years global demand growth was flat , with no growth at all in order to compensate decline in the existing fields we have to increase the production by about 45million bbl/d just to stay where we are in 20 years , which means to find and develop four new Saudi Arabia’s , and this is a major challenge.

RISING OIL PRICES

So far I have mostly talked about how and why global oil resources are depleting and not the effect it will have on Ireland and it’s economy more directly. Of coarse one of the biggest effects that will surely effect Ireland is the rising oil prices that are inevitable. Unfortunately due to known levels of oil falling and the demand rising the only likely outcome is a rapid rise in prices verified by the IMF(International Monetary Fund)  on 4. www.ft.com that ‘ the global economy will have to weather higher oil prices for the forseeable future’.  The rising oil prices will have widespread consequences globally but especially on Ireland which is a small open economy who is so dependent on it’s oil imports and is subject to international energy prices. On 5. www.finfacts.ie the EFF (Electronic Frontier Foundation) confirmed that if ‘ if oil prices remain at $120 (as of early 2011) , Irelands GDP is forecast to fall by nearly 3%.  This could have a devastating effect on Ireland as the country is still struggling with the harsh economic recession that began with the price of properties falling late 2006. The problem with rising oil prices is that it has many knock-on affects both directly and indirectly. Of coarse if people have to pay more for their energy source of oil , they will have less disposable income. This means there will be less income generated , and it will be most likely the small business’ that will feel the largest hit.

According to 6. www.ey.com (Ersnt & Young.com) Diron commented ‘ The first and immediate impact is higher transport , heating costs , production , electricity  and trade costs. Energy and oil costs account for nearly 10% of households expenditure’. It is sometimes hard for people to realise that it won’t just be at the petrol pumps or our energy bills where we will feel the impact of rising prices. Everything will go up in price as people would be amazed at the amount of products dependent on oil. A very high percentage of production centres throughout Ireland are run on oil and once the prices rise , the price of production rises and sure enough the price of the goods are sure to rocket. On 7. www.independent.ie Michael Kellehen – for Boird Gais stated bluntly ‘ you can’t produce anything without energy and oil is that energy’.  If the price of oil was to rise rapidly it would have devastating effects on the already fragile  Irish economy, which could effect our level of import simply as the cost would be too high . This could have a negative backlash on Irelands international trade , and effect it’s exports which are essential to the countries income.

Although it is quite obtainable to predict short term oil price rises and falls , it is not so easy to predict long term prices, though an upward trend is the most likely outcome for the forseeable future. The main indicators that affect prices are                                                                                                                                                                                                                                                                        -supply                         -demand                          -market expectation                  -current affairs                                                                                               Essentially supply and demand are the most important factors as prices regularly rise and fall due to these., as is clear to see due to rising demand and falling supplies. Current affairs are more random and sporadic , one example is that of the Arab uprisings across North Africa. ( Although this isn’t essentially linked to falling oil levels) It to has a big effect as we have seen prices rise rapidly due to the unavailable oil supply from Libya due to the rebel garrisons fighting in the Sirte Basin region north of the county.

Experts are worried that sooner rather then later oil prices may return to an all time high of $140  as of 2008 .  .8 www.independent.ie/business had an article with Nouriel Roubini a New York University economist 11-3-2011 that have him quoted ‘ if you have the oil price going up to where it was in summer 2008 , at $140 per barrel some if not many of the advanced economies will have a double dip’. I believe his expression ‘double dip’ refers an extra large dip in economic circumstances and unfortunately this group of ‘ advanced economies’ includes Ireland as a developed country. During the summer of 2008 where in Ireland motorists were expected to pay approx.€1.30 for a litre of petrol. Conor Faughan , the Director of Policy with Automobiles Association says that if ‘ oil prices were to hit $150 per barrel and consistently stay at that level , drivers could easily be paying €1.50 on average for a litre’. If what Mr.Faughan says becomes true this could have a devastating effect on the Irish motor industry. It comes back in a full loop , if motorists have to pay this much for petrol their disposable income will dramatically drop and have harsh effects from low levels of communities to that of governmental  income.

ALTERNATIVES TO OIL

One of the most important questions that must be answered for Ireland is what WILL we do and WHEN will we implement a proposed solution because the time is upon us to find an alternative to oil and develop a sustainable future. There is one direction that seems the most likely and beneficial for Ireland to act against global oil level depletion and that is to invest and promote renewable energy and ‘green technology’. The Irish government are more then aware that we as a country are far too dependent on our oil imports. One may ask why , why should we rely so much on other countries when as an island have the potential to become one of the world leaders in many areas such as wave energy , wind energy , hydro-electricity (unfortunately probably not solar as this is still Ireland).

Under the Sustainable Act 2002 SEAI (Sustainable Energy Authority of Ireland) was established as Irelands national energy authority. 9. http://seai.ie/  The SEAI define their role as ‘to play a leading role in transforming Ireland into a society based on sustainable energy structures , technologies and practises. The SEAI will be very important to Ireland to develop as a green economy. According to their website http:www.seai.ie/’ SEAI actions will help advance Ireland to the vanguard of the global green technology movement , so Ireland is recognised as a pioneer in the move to decarbonised energy systems. The reason why SEAI was set up is simple , the government saw that Ireland has tremendous potential when it comes to renewable or alternative energy sources and needed a specific organisation to concentrate and galvinize this potential. Ireland can become a world leader in these innovative sectors due to organisations as SEAI and also a new emphasis on third level education to promote these potential commodities. SEAI have set out a new 5 year strategic plan that which ‘ hopes to transform Ireland into a society based on a sustainable energy structure and make Ireland a global leader in green economy’.  They hope to achieve this with the following strategic objectives

  • implementing energy efficiency actions that radically reduce energy intensity and usage
  • lower carbon energy sources , accelerating the development and adoption of of technologies to exploit renewable energy
  • innovation and and integration supporting evidence based that engage all actions.

With the continued help from organisations such as SEAI can help Ireland greatly to deal with the issue of global oil level depletion  and the effect it will have on us in the future. It is not just ourselves that see we have the potential it is common knowledge that because of our location Ireland has possibly the highest potential to harness both wind and ocean energy and other countries are aware of this. According to 1o. www.siemens.ie/contents/news/2009 Dr. Werner Knuckon (CEO of siemens LTD.)  travelled all over the world on a three month tour where he gave lectures in universities across the globe on potential energy opportunities and he cited Ireland as the goose with the golden egg ‘ the challenges ahead present Ireland with an opportunity to become a leading green economy’.

RENWABLE TECHNOLOGY

Unfortunately it is now time for a few statistics , according to the SEAI website in 2009 14.4% of Irelands energy use was renewable , which exceeds EU targets of 13.2% by 2010. Although this is positive for Ireland there is still a large dependence of oil at 37%. In many fields Ireland has began or is beginning to make progressive steps although there are still some issues. An example is that of heat energy which is now at 3.6% for renewable sources. This rose from 2.6% in 1990 to 3.4% in 2004  but has only rose .2% in last 6 years. According to the Eire Grid webpage by 2020 Ireland has a target of 40% renewable energy sources as they hope to be at the forefront of innovative renewable technology in Europe. The only way for Ireland to achieve these aims is to invest in such potential fields as wind energy , ocean energy , wave energy , bio-energy etc… That is what the government is currently trying to do.

Although the Irish government and many other organisations have looked into replacements for oil especially in the green sector such as , solar , wind , bio-fuels etc .. I believe Ireland has the potential to become the world leader in the wave/ocean-energy sector and this should be a primary focal point to develop to help solve the problem of oil levels depleting. . Peter Coyle chairman of MRIA (Marine Renewable Industry Association) says on 11. www.energyireland.com that ‘ ocean energy represents perhaps the greatest economic opportunity this island faces over the next 20 years. Due to our location as an island nation on the forefront of Europe our coastlines receive the full brunt of the Atlantic Ocean. According to 12. www.renewableenergyworld.com Ireland can receive up to 25 TWh of wave energy with 21TWh ‘accessible’ if harnessed correctly. This is a considerable amount seen as total consumption for electricity in 2006 was 27.8TWh. The problem with wave energy is that as of yet there has been no real break through solution on how to best harness it’s energy . Ireland is very hopeful of developing such equipment which could be the key to unlocking the oceans ability and also end Irelands dependence on imported oil.13.  www.newswhip.com promotes the idea that ‘Ireland is the Saudi Arabia of wave energy’. The website also says that SEI has set up a wave energy test site off the coast of Spiddel in Co. Galway. The site will be used for entrepreneurs and engineers to test proto-type ocean energy generators.

It is clear to see that in the future Ireland will most definately be affected by a reduction in the global availability of oil but through research , investement and development Ireland can combat these challenges if change is accepted now and implemented correctly.

REFERENCES

  1. http://seai.ie/
  2. www.wikipedia.com (oil depetion)
  3. www.independent.co.uk
  4. www.ft.com
  5. www.finfacts.com
  6. www.ey.com (Ernst & Young)
  7. www.independent.ie
  8. www.independent.ie/business
  9. http://seai.ie/
  10. www.siemens.ie/contents/news/2009
  11. www.energyireland.com
  12. www.renewableenergyworld.com
  13. www.newship.com

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