A Summary of Facts on Energy and of the Impact of a Decline in Oil Supply on the Economy



(1) Food, water and energy are vital for all ecosystems, human societies or economies


(2) All modern societies and thus economies consume vast quantities of energy


(3) Economic growth is only possible with a growth in energy consumption


(4) Most of this energy comes from fossil fuels: Coal, Oil and Gas


(5) Out of the three fossil fuels, oil is the most important as it is currently irreplacable in its main use which is in modern transport.


(6) Modern economies rely totally on transport to function and especially to grow


(7) 70% of all oil is used in transport and 90% of all forms of transport use oil


(8) Fossil Fuels are Non-Renewable Resources, hence their extraction decreases the remaining resource base


(9) The finite nature of fossil fuels dictates that a maximum in their respective rates of extractions will be reached at some point in time.


(10) The typical production pattern for an oil field, for example, is that production starts at zero, increases to a maximum and declines gradually thereafter till the oil field is abandonned


(11) More than 80% of the oil consumed comes from conventional oil fields


(12) The discovery trends for new oil has been in decline since the sixties


(13) Since the eighties, the world is using more oil each year than it is discovering new oil


(14) Today, for each barrel of new oil discovered, 6 barrels are consumed


(15) Nearly half of the original endowment of conventional oil has been consumed


(16) This means that a peak in conventional oil production is imminent (less than 10 years, possibly in less than 5 years)


(17) Non-conventional oil (Tar sands, very heavy oil, deep sea or polar oil) or alternative liquid fuels (Coal To Liquids, Gas To Liquids, ethanol) cannot be ramped up fast enough to offsett declines


(18) Peak Oil creates a shortfall in liquid fuel for transportation


(19) Less transport fuel means lowered economic activity


(20) A shortfall in liquid fuel for transportation will push up oil prices due to unmet demand. It is not possible to tell how high oil prices can go


(21) High oil prices mean that a larger proportion of our exports goes into the Importation of Mineral Fuels and this is strongly associated with a decline in the savings rate in Mauritius.