EconoMonitor

What Happened to Peak Oil?

Fears that the world is running short of oil aren’t going away, but judging by the latest figures on global oil production there’s no sign that the peak oil factor is an imminent threat. Global output rose to a new all-time high last December, according to data from the U.S. Energy Information Administration (EIA): 75.384 million barrels per day, or just ahead of the previous peak of 75.170 million barrels a day in January 2011.

A new high may ease anxiety over oil supplies for the moment, but it’s sure to be a temporary respite. All the challenges that have weighed on the outlook for raising production over the past decade are still with us. Discoveries of big, easily recoverable supplies are dwindling. Yes, U.S. consumption of oil has reportedly fallen 10% since 2005, but world demand keeps rising, mostly because of increasing growth from China, India, and other emerging markets that are rapidly industrializing and using ever larger quantities of fossil fuels.

Yet the peak oil theorists, if not wrong in the long term, seem to have been premature in warning that the summit for production was upon us. In 2009, for instance, one forecast for global oil production via The Oil Drum warned that output was set to fall by more than two million barrels a year. A decade ago, geologist Ken Deffeyes’ widely read book Hubbert’s Peak: The Impending World Oil Shortage opened by stating that “global oil production will probably reach a peak sometime during this decade.” The 2009 edition of the book makes the same forecast.

Deffeyes is hardly alone in warning that the end is near for raising global oil production, as a sampling of the many book titles in recent years on the peak oil subject remind: The Party’s Over, The End of Oil, and Profit from the Peak, for instance.

There is a peak out there somewhere, of course. Production for every commodity with a finite supply inevitably reaches a crest. The question, of course, is when? Estimating the date of the apex is problematic for several reasons. Technology, for instance, can change the analysis. If you can make cars more energy efficient, that’s the equivalent of finding more oil, all else equal. That leaves us with the troublesome task of predicting what technology will bring in terms of energy savings in the years ahead.

Meanwhile, new and unexpected supply sources are increasingly rare, but they do pop up from time to time, such as the huge discovery in Brazil a few years ago. New finds require new estimates for the peak. Once again, technology must be factored into the analysis. History suggests that a given field’s recoverable supply rises with improved technology through time.

Let’s not forget that there’s always doubt about the data, which further complicates the forecast of the peak. To cite just one example that illustrates the problem: Iran, one of the largest sources of crude oil on the planet. Anyone want to bet a year’s salary that the official numbers from Tehran have been accurate over the last 20 years?

In fact, all analytical roads lead back to the Middle East, starting with Saudi Arabia, which holds the title of the world’s large supplier of easily recoverable crude oil and the repository for most of the world’s spare production capacity. The kingdom, in other words, is the world’s great swing producer, allowing the country to effectively raise output relatively quickly. The late Matthew Simmons, a widely quoted oil analyst in his day, warned in his 2005 book Twilight in the Desert that Saudi Arabia’s production was nearing a peak. The forecast appeared to be accurate for several years, although the latest data reveals that it was premature after all. The kingdom’s crude oil output reached an all-time high at the end of 2011, according to EIA. In fact, one of the key reasons why global production is up is because of the chart below:

As always, there’s the enduring question: Will it last? Can the world continue to increase oil production? Yes, according to the BP Energy Outlook 2030 published earlier this year. Good thing too, since total global consumption of crude is expected to rise in the decades ahead as well. How will the oil industry satisfy this thirst? “Rising supply to meet expected demand growth should come primarily from OPEC, where output is projected to rise by nearly 12 [million barrels per day]. The largest increments of new OPEC supply will come from [natural gas liquids] as well as conventional crude in Iraq and Saudi Arabia.”

EIA also expects global production to continue rising as far as the eye can see, for both OPEC and non-OPEC sources.

None of this deters the peak oil crowd. “Peak oil is a fact, not a theory,” asserts PeakOil.com

From US conventional oil production peaking in 1970 to global conventional oil production peaking in 2006 the figures are indisputable. Even institutions such as the International Energy Agency (IEA) and publications like The Economist that are not known for alarmism have admitted that oil production from conventional sources has peaked. So why are there still commentators out there that refuse to believe peak oil?

Rising production numbers are probably part of the answer.

This post originally appeared at The Capital Spectator and is posted with permission.

13 Responses to “What Happened to Peak Oil?”

princess1960April 24th, 2012 at 3:29 pm

i have to be geniuse to make a comment in this post… because you are sure about the fact .''.io non sono dacordo'' every product have one category cheap oil is 3 category.. thank you

AmarApril 24th, 2012 at 9:27 pm

So True. This peak oil debate starts to hot up as soon as prices started rising.

My analysis showed that the 2008/09 highs in oil seem to be driven more by speculation than real demand. Also, there was no real bubble burst after the highs, in fact prices came down in a pretty stable way.

I wonder what kind of speculator has this kind of power and influence. Is OPEC itself speculating covertly?

What I am starting to wonder is, is there a relationship between oil price speculation, peak oil debate and oil prices

Regards
Amar Harolikar http://www.unknowninsights.com

John CardilloApril 25th, 2012 at 11:00 am

I don't think prices have anything to do with Peak Oil. Since the paper market is about 10 times the size of the real market, the price depends mostly on how much the next speculator is willing bet. There is no limit to how much paper bets can be made so there is no supply proplem when it comes to speculation. Three years ago oil prices peaked at $150 before the financial collapse and great recession. Then prices retreated back to $60 rather quickly. I would speculate that the speculators will hang onto oil until it gets closer to the $140-$150 range again.

Göran NilssonApril 25th, 2012 at 12:24 pm

Sometimes when I fly around the world and the weather is clear and sunny up on 10.000 meters and we pass a big known city like Beijing, New York or some other place I hold up my thumb 5 to 10 inches from my eye and suddenly I can`t see the city down below, it disapears behind my thumb.
Is there any one with all the braincells in the right place who belives that we have found all oil on the earth, belives that man has anything to do with global warming…. it`s all lies just to get people to spend money on a huge bubble so a very small group of people can earn more money and on it goes with new idiotic ideas that are planted in peoples uneducated minds…The most dangerous disease, in these times, is running stupidness!

Helen MountfortMay 1st, 2012 at 12:30 am

So you really believe that Saudi can generate 12 billion more barrels a day? Are you joking? Not even the Saudi oil minister would claim that. Their output is declining, not rising. I wonder where you get your figures from. Futhermore, living in the Middles East , I would say that you do not believe anything from their official figures. It's all smoke and mirrors. Besides even the EIA said that world oil production peaked in 2005.

John CardilloMay 1st, 2012 at 10:56 am

There are no shortages or lines for fuel. Reserves are at an all time high. If production peaked in 2005 and output is declining, perhaps its because people would rather walk barefoot in the snow up hill both ways than spend half their paycheck on gas.

CharlesMay 1st, 2012 at 11:05 am

In the 1976 video below, M. King Hubbert shows the "Washington Monument" like spike, the episode of oil, gas and coal that lasts from four to perhaps six or seven hundred years. He suggests that it is the "most disturbing thing in human history." He's right. Instead of using these resources to prepare an economy for what happens after Peak Oil, we just want to consume more and more and more, plus still MORE!

Suppose we do not hit Peak Oil till 2030 or even 2050 – that's not the point. We are using these hydrocarbons from conventional sources and now via the tar sands, via fracking, and soon from the two poles – resources it took nature from 150 to 300 million years to package and prepare at a rate that will likely leave much less for our grandchildren, their grandchildren and many generations of grandchildren to come. In other words, we are stealing the future from these future generations. Is this the legacy we want to leave them?

Why is it that few ask, "How long could humans reside on our tiny planet?" We know the sun will become a red giant in about 5 billion years, so do we have 5 billion years to go? Hardly, as the sun increases in heat by 10% every 1.1 billion years.

There are not many estimates, but as best I can tell, we could reside on our planet for the next 500 to 800 million years or a few years beyond that. Are we building our dwellings, our cities and more for the long haul – you and I know we are not, but why not? We could and should – but do we have the cancer of self-interested selfishness that we are willing to put the whole human experiment into questions. Seems so.

James, thanks for bringing up this topic, but please let's use this time to prepare for a wiser future.

M. King Hubbert – 1976 http://www.youtube.com/watch?v=ImV1voi41YY

Ride the Slide http://www.youtube.com/watch?v=Ulxe1ie-vEY

cold sore treatmentMay 16th, 2012 at 12:48 pm

There is a peak out there somewhere, of course. Production for every commodity with a finite supply inevitably reaches a crest. The question, of course, is when? Estimating the date of the apex is problematic for several reasons. Technology, for instance, can change the analysis. If you can make cars more energy efficient, that’s the equivalent of finding more oil, all else equal. That leaves us with the troublesome task of predicting what technology will bring in terms of energy savings in the years ahead.

Alec SevinsJune 1st, 2012 at 10:43 pm

That's just typical Cornucopianism. The evidence shows that oil has already peaked in most parts of the world. "Peak" means that the remaining oil has declining EROEI, no matter how much of it you hope is left. Nobody is born knowing anything about oil supplies, so pay attention to what the production curves are telling you.

Also, do some research on total human land-use, like farm acreage and the "ecological footprint" of people. City acreage represent only a small fraction of the resources people use. High population density is only possible with vast tracts of external to support it. See "The Netherlands Fallacy."

Look at all the damage we're doing to wildlife on land and in the sea. Over-fishing is a huge problem. Have you ever bothered to investigate that? The idea that a species which can fundamentally alter so many natural systems is incapable of causing (relatively subtle) warming is ludicrous. Speaking of Beijing, do you also deny that people cause smog?

Alec SevinsJune 1st, 2012 at 11:00 pm

This is a shortsighted article that contradicts the initial groundwork it lays out. The author writes in the final sentence: "Rising production numbers are probably part of the answer."

Rising, yes, but context means everything. America is full of ghost towns built around resources that people thought would keep them in wealth indefinitely. Oil is NO different. With so much evidence for Peak Oil, acting like we've dodged it is like a day -trader confusing a short-term stock spike with a long term trend. Most day traders lose money.

The Bakken shale in North Dakota is a perfect example. Bakken has created a noticeable uptick on the U.S. oil production graph but it's not a trend. It may yield 5 billion barrels of recoverable oil if we're lucky, but that's less than a year of total U.S. consumption, at flow rates that can never match said consumption. That math is rarely mentioned on Fox News, etc. They just see "rising production" and morph it into infinity.

Dry kerogen shale (which can't be fracked like the Bakken) comprises the bulk of U.S. shale deposits and has significantly less EROEI than the unique wet shale in the Bakken formation. But kerogen shale is being called our "new Saudi Arabia" by naive optimists (and con men). They ignore the fact that ALL U.S. shale was already included in the 1970 U.S. peak curve.

Alec SevinsJune 1st, 2012 at 11:15 pm

The U.S. already peaked in 1970 and other notable peaks are the North Sea (1999), Mexico (2004) and Russia (2010). According to the IEA, and basic examination of graphs, world oil production peaked in 2006. We are living in the peak right now. It's not a can you can keep kicking into the future.

Those peaks refer to conventional, free-flowing crude, which is the cheapest, easiest oil. There's ongoing confusion about what "peak oil" actually means, with people assuming that we're not past peak as long as recoverable oil remains (they don't get the concept). The price of oil is sending a strong signal of reality, yet people choose to deny it or blame it on speculators. If prices and stuttering flow-rates aren't telling the truth, what exactly would be?

The reason the peak isn't more sharply evident is because people have been forced to conserve, which tempers the peak curve profile. It's more like a bumpy plateau, but that's the same thing as a peak, pragmatically.

Alec SevinsJune 1st, 2012 at 11:29 pm

You seem to understand Peak Oil, yet you put it off until 2030 or 2050. That amazes me, given the current data. Just look at the graphs. Peaks are evident everywhere, and they add up to a global peak. Saudi Arabia has been devious with its unchanging reserves figure, as if the oil magically replenishes itself (abiotic oil is unproven).

World oil production has been mostly flat since 2005, and the IEA says global crude peaked in 2006. Just because it's not a classic bell profile (it's more like a plateau) doesn't mean it's not happening already. The unexpected ways people react to oil prices are skewing the shape of the curve. There has been more conservation than was expected. People are apparently not complete lemmings!

The global peak will probably continue to look like a mesa vs. a volcano-profile, UNTIL the global economy can't function without a critical flow rate, at which point the drop-off could get steep in a hurry.

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