Nothing to Worry About

With the recent discovery of deepwater oil in the Gulf of Mexico and the falling of oil prices below the $70 mark, critics of peak oil have been leaping from the woodwork to proclaim that “peak oil theory is garbage as far as we’re concerned.”

An editorial at Investor’s Business Daily gave the tenor of the message:

“This isn’t magic. It’s how supply and demand work. When demand rises, prices go higher. Suppliers step in to bring more to the market at higher prices. Only two years ago, our government estimated total recoverable U.S. oil reserves at 22 billion barrels. Today, the estimate is 29 billion — and rising. How can this be? Just look at Alaska's Prudhoe Bay. When it first opened in the 1970s, it was estimated to hold 9.6 billion barrels. Well, it's already pumped 11.7 billion, and it's still going strong. This puts the lie to prognostications of ‘peak oil’ — the idea that output will soon enter an irreversible decline. The idea is based on little more than conjecture and defies what we actually know.”

Never mind that whatever reserve estimates might be at any given point, it is not reserves, but the rate of production that matters, and rate of production has been falling steadily for Prudhoe Bay since 1988 and for the U.S. as a whole since 1970—exactly as predicted by Hubbert theory.

Never mind the fact that the 15 billion barrels of oil “Jack-2” (the name of the Gulf of Mexico field) is said to hold on the high end (the low is 3 billion) provides the world with about six months of oil at current rates of consumption. Never mind that by contrast 8 of the top 20 oil producing fields in the world are in confirmed decline at anywhere from 8 to 64 percent per year (that includes at least 2 of the top 5).

Never mind also that peak oil theory has never said that oil will suddenly run out or that there will never be any more new finds, only that new finds will not be able to replace the declines of old fields, and that new oil will be increasingly difficult and expensive to produce—an observation which certainly holds true in the case of Jack-2.

Forget all of that—even if Jack-2 were everything its boosters imply, does that really mean that “you can tune out all the scare talk about Peak Oil for a while—probably a long while” as a Business Week commentator said? After all, isn’t “tuning out” our energy problem the very attitude that got us into this problem to begin with?

Is “peak oil” really “little more than conjecture”? It’s difficult to understand what such a statement really means. Is the author trying to say that oil is actually infinite, that oil fields do not peak and decline, and that the world will never stop increasing it’s production of oil? More likely what he means is that the global oil peak is not imminent—which begs the question of what “imminent” means and brings up another point.

Let’s suppose the cornucopians are correct, that oil will not peak for another couple of decades. That still means that 1) We will be indefinitely dependent on foreign oil suppliers from unstable regions; 2) We still have a major problem with global warming; 3) Increasing demand from India and China and that fact that any new supply comes from unconventional sources means that the price will likely not come down; and 4) We will have to deal with this problem within a generation anyway. So why are these commentators urging us to “tune out the scare talk”?

These arguments are akin to telling someone to go ahead and keep smoking, because it won’t kill you tomorrow; an argument certainly beneficial to the tobacco company, but ill advised for the overall health of the patient.

Comments

[Anonymous]

I don't think the author's point is that oil will not peak now, but will do so later. It's clear he says peak oil theory may be wrong:
"...the capability to find and recover petroleum at extreme depths, temperatures, and pressures, as demonstrated by the Chevron team, may indeed tip the balance of supply and demand in the long term."
or in other words "There's plenty of oil, just drill deeper".

[Lakis]

I assume you are referring to the so-called abiotic theory of oil, which posits that it does not come from organic matter, but is continuously generated under the earth. As far as I understand it, this is not a theory accepted by any credible petroleum geologist. Even if it were true, however, it still wouldn't answer the issue of peak oil, unless the earth is actually generating oil faster than we can burn it (but if that were true, wouldn't the earth be covered in oil by now?). I am not a petroleum geologist, but the whole idea strikes me as self-deluded wishful thinking. Surely, there are limits. The question is when we will reach them.

In any case, I'm pretty sure that the authors of the articles I quote don't subscribe to that theory. CERA certainly doesn't (at least not publicly). So when the director of CERA says peak oil is garbage, it is not self-evident what he means. The stated position of CERA is that oil will plateau between 2030 and 2040 -- and then, presumably decline.

[thebizofknowledge]

I'm in the "surely there are limits" category. We are doing everything we can to think of the future...with limited oil and high costs being the outlook. Though Jack 2 is a hopeful sign for us, I'm not sure it's that hopeful. Resources do deplete or they get more and more bizarre to get them. Oil on the moon anyone?

[Anonymous]

I wasn't adopting any crazey theory. Just trying to shed light on the author's position, since you seemed perplexed by his arguments. I am actually agnostic.
This guy isn't though (see link below). He is firmly on your side. Given that this was government funded research, I am STUNNED it hasn't received more press. Or did I just miss all the "breaking news" reporting?

http://www.chron.com/cs/CDA/printstory.mpl/editorial/4208727

[Lakis]

I wasn't actually perplexed by the arguments -- just pointing out the disconnect between the "don't worry be happy" rhetoric and what the peak oil critics (specifically CERA) really say they believe. Thanks for your clarification though.

Your point about the most recent Hirsch report is interesting. I’m not sure if there was an updated version the Chronicle, but the original report actually came out in 2005. Peak oil is actually a subject that has been widely discussed in the media; President Bush has been briefed on it (by Matthew Simmons among others), President Clinton and Vice President Gore have each mentioned the topic in interviews, Texas oil billionaire Richard Rainwater has said he is very concerned about it (as has T. Boone Pickens), the cities of San Francisco and Portland have passed resolutions to study the matter, there is a “Peak Oil caucus” in the House of Representatives (Representative Roscoe Bartlett has been a leading advocate for the theory), there have been editorials in the New York Times and Washington Post, there was a long, very well-done piece on the topic for the Chicago Tribune—and yet, paradoxically, the topic is still unknown to most otherwise intelligent, informed Americans. I wish I could explain this mystery.