Published on 21 Apr 2005 by The Guardian. Archived on 21 Apr 2005.

The end of oil is closer than you think
by John Vidal

The one thing that international bankers don't want to hear is that the second Great Depression may be round the corner. But last week, a group of ultra-conservative Swiss financiers asked a retired English petroleum geologist living in Ireland to tell them about the beginning of the end of the oil age.

They called Colin Campbell, who helped to found the London-based Oil Depletion Analysis Centre because he is an industry man through and through, has no financial agenda and has spent most of a lifetime on the front line of oil exploration on three continents. He was chief geologist for Amoco, a vice-president of Fina, and has worked for BP, Texaco, Shell, ChevronTexaco and Exxon in a dozen different countries.

"Don't worry about oil running out; it won't for very many years," the Oxford PhD told the bankers in a message that he will repeat to businessmen, academics and investment analysts at a conference in Edinburgh next week. "The issue is the long downward slope that opens on the other side of peak production. Oil and gas dominate our lives, and their decline will change the world in radical and unpredictable ways," he says.

Campbell reckons global peak production of conventional oil - the kind associated with gushing oil wells - is approaching fast, perhaps even next year. His calculations are based on historical and present production data, published reserves and discoveries of companies and governments, estimates of reserves lodged with the US Securities and Exchange Commission, speeches by oil chiefs and a deep knowledge of how the industry works.

"About 944bn barrels of oil has so far been extracted, some 764bn remains extractable in known fields, or reserves, and a further 142bn of reserves are classed as 'yet-to-find', meaning what oil is expected to be discovered. If this is so, then the overall oil peak arrives next year," he says.

If he is correct, then global oil production can be expected to decline steadily at about 2-3% a year, the cost of everything from travel, heating, agriculture, trade, and anything made of plastic rises. And the scramble to control oil resources intensifies. As one US analyst said this week: "Just kiss your lifestyle goodbye."

But the Campbell analysis is way off the much more optimistic official figures. The US Geological Survey (USGS) states that reserves in 2000 (its latest figures) of recoverable oil were about three trillion barrels and that peak production will not come for about 30 years. The International Energy Agency (IEA) believes that oil will peak between "2013 and 2037" and Saudi Arabia, Kuwait, Iraq and Iran, four countries with much of the world's known reserves, report little if any depletion of reserves. Meanwhile, the oil companies - which do not make public estimates of their own "peak oil" - say there is no shortage of oil and gas for the long term. "The world holds enough proved reserves for 40 years of supply and at least 60 years of gas supply at current consumption rates," said BP this week.

Indeed, almost every year for 150 years, the oil industry has produced more than it did the year before, and predictions of oil running out or peaking have always been proved wrong. Today, the industry is producing about 83m barrels a day, with big new fields in Azerbaijan, Angola, Algeria, the deep waters of the Gulf of Mexico and elsewhere soon expected on stream.

But the business of estimating oil reserves is contentious and political. According to Campbell, companies seldom report their true findings for commercial reasons, and governments - which own 90% of the reserves - often lie. Most official figures, he says, are grossly unreliable: "Estimating reserves is a scientific business. There is a range of uncertainty but it is not impossible to get a good idea of what a field contains. Reporting [reserves], however, is a political act."

According to Campbell and other oil industry sources, the two most widely used estimates of world oil reserves, drawn up by the Oil and Gas Journal and the BP Statistical Review, both rely on reserve estimates provided to them by governments and industry and do not question their accuracy.

Companies, says Campbell, "under-report their new discoveries to comply with strict US stock exchange rules, but then revise them upwards over time", partly to boost their share prices with "good news" results. "I do not think that I ever told the truth about the size of a prospect. That was not the game we were in," he says. "As we were competing for funds with other subsidiaries around the world, we had to exaggerate."

Most serious of all, he and other oil depletion analysts and petroleum geologists, most of whom have been in the industry for years, accuse the US of using questionable statistical probability models to calculate global reserves and Opec countries of