From The Independent:
Scientists have criticised a major review of the world’s remaining oil reserves, warning that the end of oil is coming sooner than governments and oil companies are prepared to admit.
BP’s Statistical Review of World Energy, published yesterday, appears to show that the world still has enough “proven” reserves to provide 40 years of consumption at current rates. The assessment, based on officially reported figures, has once again pushed back the estimate of when the world will run dry.
However, scientists led by the London-based Oil Depletion Analysis Centre, say that global production of oil is set to peak in the next four years before entering a steepening decline which will have massive consequences for the world economy and the way that we live our lives.
According to “peak oil” theory our consumption of oil will catch, then outstrip our discovery of new reserves and we will begin to deplete known reserves.
Colin Campbell, the head of the depletion centre, said: “It’s quite a simple theory and one that any beer drinker understands. The glass starts full and ends empty and the faster you drink it the quicker it’s gone.”
Dr Campbell, is a former chief geologist and vice-president at a string of oil majors including BP, Shell, Fina, Exxon and ChevronTexaco. He explains that the peak of regular oil – the cheap and easy to extract stuff – has already come and gone in 2005. Even when you factor in the more difficult to extract heavy oil, deep sea reserves, polar regions and liquid taken from gas, the peak will come as soon as 2011, he says.
This scenario is flatly denied by BP, whose chief economist Peter Davies has dismissed the arguments of “peak oil” theorists.
“We don’t believe there is an absolute resource constraint. When peak oil comes, it is just as likely to come from consumption peaking, perhaps because of climate change policies as from production peaking.”
This is shoddy economics. The peak oil theory, in which a peak is followed by a precipitous decline, is crass populism that the vast majority of trained economists would laugh at. The basic problem with this is that the owners of oil reserves have a strong incentive to withhold oil from the market if they can predict that the oil supply will drop and the price will rise in the future. I mean, the best way to become the richest person in the world, under the peak oil view, is simply to buy as much oil reserve rights as one can muster and just wait about 20 years, then sell all the oil for whatever astronomical price it reaches.
Oil, as with any commodity, will have its price rise at approximately the rate of what are called “normal returns.” Somewhere around 5% is a good rule of thumb. Its price can be expected to steadily but slowly rise just like it has in the past, but not precipitously skyrocket and put everyone suddenly out of business. As the price rises, alternative fuel sources will become more profitable and we’ll use those.
Oh, really.
This is a story which I first heard back in 1956, when I was in high school. I had a text showing the proven oil resources in the world, the estimated increase of usage, and the prediction that oil would run out by 2000.
So the story is not a new one.
I will tell you that the most significant opposition to expanding proven oil reserves is the United States Congress. We cannot explore the use of oil shale. We cannot drill in ANWAR. We cannot drill off the Pacific coast, we cannot drill in the Caribbean, we cannot drill off the Florida coast, etc. We cannot build new oil refineries. We cannot build nuclear power plants. We cannot build wind farms. We must tear down all the dams, in order to save the salmon. I could go on, but you get the idea. Oh, yes. We cannot put solar cell farms in the desert, for ecological reasons.
Instead we must continue to fund our Islamic fundamentalist enemies in Saudi Arabia by buying their oil, because they are very generous in assisting politicians to be re-elected.
I am not sure that many serious “peak oil” people predict a “precipitous” decline. The essence of the argument, which is hard to deny, is that (1) there is only a limited quantity of oil, (2) therefore ‘production’ cannot continue indefinitely and must peak and decline, (3) this peak will be reached within our lifetime, and (4) it will induce huge societal change, some of which is likely to be quite unpleasant.
I put ‘production’ in quotemarks because it is a total misnomer.
You are absolutely right in pointing out that market forces will tend to smooth out the peak and decline. The increased economic viability of new oil winning methods as prices rise will do the same. The key question is however how society and economy, which are currently much more dependent on the unrestricted flow of oil than most people seem to realise, will respond. It is in the response of the economic system and societal structures rather than in the supply side of things that problems and singularities might emerge. Unfortunately, this is well nigh impossible to model and we find various experts venting almost diametrically opposite opinions.
I would personally not want to dismiss any of the alternatives presented out of hand, neither the doom scenarios nor the predictions of relatively smooth adaptation. This is not a simple problem. No one has pat answers. Need we be worried? Heck, yes.
Please note that no one disagrees that it will happen, only when precisely it will happen, and what the consequences will be. There is no room for complacency whatever your answers are, unless you’re convinced it will only happen after your death and you don’t have any children to worry about… and even then God might query the way you managed his creation.
Regardless if oil peak theory is true or not, there is a finite amount of this stuff, we consume way more than we produce locally, oil happens to be found in volatile nations, it a large factor in our foreign policy, China is also increasing in it’s demand so we now have two powerhouses with demand. If we find a way to ween ourselves off this stuff and invent a means to have individual transport with the same quality of life as we do today, it’s better all the way around for the US.
“We don’t believe there is an absolute resource constraint. When peak oil comes, it is just as likely to come from consumption peaking, perhaps because of climate change policies as from production peaking.”
I have absolutely no qualifications with which to enter this discussion, having not studied any of the literature pro or con re: the peak oil debate. But I have to just comment in spite of myself about how interesting it is to read the statement I quoted above on a blog which is so focused on the Anglican / Episcopal world. This guy sounds like he’d make an excellent presiding bishop. Brought to mind all the recent statements about how ECUSA is vital and thriving. Sounds a bit newspeak-ish. Decline=growth. A finite non-renewable resource is actually unlimited, etc. etc.
But of course, he may be totally right. I haven’t studied either side’s claims. Just that reading so much Anglican news, the above statement set off my “BS-alert” radar…!
Ok you can go back to your serious discussion now. Sorry to be so disruptive!! 😉
The “precipitous” decline was in fact right in the article. See the beer drinker analogy. Apocalyptic visions are always fascinating and capture our imaginations, even if they have little basis in reality.
Concern is always welcome, but it needs to be rational concern. While we can know that the price of oil will most likely slowly rise and at some point way in the distant future oil will run out, we can also expect that the energy-producing technologies that we have in hand today will slowly and naturally take its place through market forces.
In fact, we have a clean and cheaper energy source available to us right now: nuclear power. Given that alone, there is not a strong basis for alarmism.
Will it be all that slow, though? It seems to me that oil is rather underpriced at the moment. At some point the market will wake up and price oil commensurate to its real value, availability, and finitude. Not to mention the much higher cost of winning oil from more difficult to exploit sources such as shales.
It will be a long time before it runs out in absolute terms. But is that really the issue? Long before it actually runs out, we will have begun to regard the idea of simply burning the stuff to get to the supermarket as the epitome of madness. When will we start to feel the squeeze, and how much time will we get to adapt to that, these are the real questions.
This optimism is not universally shared. Apart from nuclear energy, we have no well developed alternatives that can be deployed on the required scale. We might not have enough time to develop other alternatives even when you accept fairly optimistic estimates of remaining oil reserves. Last but not least, energy ‘generation’ is only one of the many uses we put oil to (This is what I meant when I said that most people seem to underestimate how dependent we are on a free flow of oil).
More basis than you seem to indicate. Depends also on what constitutes ‘alarmism’ for you. If saying that the world is not getting its act together quickly enough to cope with the oil peak without serious economic and social cost, and probably loss of life – if saying that is alarmist, then there is a solid basis for alarmism. On the other hand, shouting that “the end of the world is nigh” is totally untrue and unhelpful.
I said “we have no well developed alternatives that can be deployed on the required scale”. This is actually not true – think of coal, for instance – but most alternatives other than nuclear energy either do not scale well or have unpleasant problems of their own. Like coal.
#7 In our economy, oil is transport, coal for electric power. Nuclear not a direct comparison, it will go on the coal side (of which there is an estimated 400 years of supply, unless carbon issues are the determining factor). Oil will run out at some point in the nearer future, having technologies invested today will make the transition smoother.
The problem with oil is it’s a powerhouse. There is 15 megawatts of energy at the end of that hose in the gas station [source for wild claims]. Where currently the technologies of fuel cells is not coming anywhere near that (H2O is actually a weak bond and the petroleum is a strong bond molecularly).
#6 No disruption! We all need a break from the Anglican mess from time to time, ‘burning energy 😛 ‘ on this temporal stuff can be good way to blow off steam. (If only we could tap & that turn it into electricity)
It is not just about when world oil supplies will be insufficient.
It also has to do with the destabilization of world affairs, economic, political and military, when the cost and availability of oil begins to flucuate erratically.
If you think that the Muslim fundementalist attack on industrialized society has caused problems, then you will very very impressed by the world instability that we will see when the industrialized nations start ‘running on 1/4 tank.’
As a historical note, one motivating factor for Japan’s entry into WWII was its need for a reliable oil supply, Indonesia.
Japan’s industrial war making capacity and the its Navy were crippled by the U.S. Navy’s attack on its oil pipeline. Similarly the U.S. Army Air Force’s attacks on Germany’s oil supplies severely impeded the NAZI war effort.
We, the United States, are at a Clausewitzian “schwerzeitpunkt,” that is, a critical decision making point in time that must be seized or political-military consequences will result from our lack of decisiveness.
The decision to make ourselves much less dependent on foreign oil resources will be very costly, but if that decision is not whole heartedly made, then the consequences of foreign oil dependence will severely impact our economy and society and will ultimately lead us into large scale warfare with a world starving for oil.
Here is a countervailing viewpoint from CERA, which is headed by Daniel Yergin, author of The Prize.
Peter dH,
You wrote, “Need we be worried? Heck, yes.” Interesting use of words here, for a Christian. Remember the lilies of the field? They neither toil nor spin … uh, what was Jesus’ message there? So, I’m picking nits, but I do believe the word “concerned” might be more appropriate; it’s more inducive to action. Yes, we should be good stewards of all that He created. We all know what we can do individually, e.g. cut back on our personal usage; what do you suggest we do collectively?
Mathman, I too remember the predictions of oil depletion early on, and, of course, the “oil shortage problem” resulting in closed gas stations and endless lines at others. The message is currently being given in universities across the nation, as I have personally observed … we are past our peak and will run out very soon!!!! Wring your hands and quickly purchase a hybrid automobile!
T
PS – We were also warned of an impending ice age when I was young … fancy that.
T
The good thing about running out of oil is that it will probably help solve a good deal of the health crisis. People will start walking more, there will be less food available, and fertilizers/ pesticides will become to expensive for farmers. We will all lose wieght. Couldn’t hurt….
Steven in Falls Church, thank you for that CERA article … so, science isn’t God after all!
T
http://www.csun.edu/~vcgeo005/Energy.html
Oil running out? Read this article!
Barry–That article presumes abiogenesis of petroleum, that is, petroleum deposits were formed in the Earth’s interior from creation and were not the result of the organic breakdown of plant and animal matter (biogenesis). The weight of evidence supports oil as a fossil fuel, that is, it was formed through biotic, not abiotic, processes.
Though I have yet to read it, a publication was recently referred to me, “Black Gold Stranglehold: The Myth of Scarcity and the Politics of Oil,” by Jerome R. Corsi and Craig R. Smith. We might want to look into it. After all, science and politics have led us off-course before, whose to say they haven’t again?
T
Response to #18.
Yes, I have read of the thoery of abiotic oil production deep within the earth.
But, so what. If we don’t investigate the domestic availabilty of that source of oil within our own borders, then we will still dependent upon oil beneath the ground in some other country.
Investigating that theory and devising an effective means of accessing and extracting “abiotic oil” will require a huge front-end investment of money and time. Private industry won’t do that because, first its a lot of money with no sure payoff and second the pay back on investment will be too slow. However if we wait for the crisis caused by a shortage, then prices will rise and the ‘economics’ will be attractive and private industry will respond.
By that time, there may be wide spread world tension and conflict over a large-scale shortage of oil.
Normally, I prefer that free-market forces stimulate necessary investments, but in the case of oil and oil substitutes the stakes are just too high.
Therefore, our Congress had better start worrying about our country’s future and stop worrying about the two, four and six year election cycles.
I read not too long ago that Cuba is to begin exploratory drilling for oil in the Gulf of Mexico. This is a case of if we don’t go for it, someone else will, and not with our regulatory policies.
Is it wrong to suppose that just as oil reserves are about to be depleted, someone will step out from behind the curtain with an alternative fuel source that will solve the crisis and set everyone’s minds at ease? At a fair price, of course.
DaveW,
It won’t happen “just as oil reserves are about to be depleted.” Assuming Peak Oil is true, the increasing scarcity will drive up the price to the point that alternatives to oil are more competitive. Entrepeneurs will enter the field and over time, competition will drive down cost. This is how markets work and there is not a commodity on earth where it has not happened. But if you really want to throw a wrench in the whole affair, involve government so we get products like ethanol that actually consume more energy in their production.
Personally, I hope and pray that Peak Oil is right. More people will telecommute, less green area will be paved under, and the Middle East can go back to being a desert backwater that nobody much cares about.
Ah, Malthus lives! I have read that extraction from oil shale technology is advancing rapidly, and there is a lot of oil shale. I have read that older oil fields can now be retapped as the technology for extraction there has improved as well. And perhaps those old fields have refilled somewhat. The big problem in much of the US is lack of refineries. Note that the date of decline keeps getting pushed further and further into the future, like the date of running out of arable land, and the date of (fill in crisis of choice). New fields are yet being discovered. Technology improves. Some folks just have to produce a crisis mentality.
And some just have to produce a head in the sand mentality. The rate of discovery of new fields is dropping and shows no sign of keeping up with demand. Shale exploitation and squeezing the last drop out of old fields is intensive, sometimes has huge environmental impact, and last but not least is costly. It will also merely postpone the inevitable. Abiotic oil production is a red herring; if it happens at all, it is on too small a scale to matter.
Not that postponing the inevitable is a bad thing. It will give the market forces touted above a chance to react. The supposition that a knight in white armor will step up with a fully fledged alternative energy source is, I am sorry to say, naive. There are great ideas bouncing around, and probably many more we don’t know of, but it takes time to test them and develop them to the point where they can be deployed on the massive scale required. It takes time for society as a whole to wean itself off oil dependency which goes far beyond power generation and transport (please take note of this, it is too easily forgotten).
And Tikvah, please. The flowers of the field come from a sequence of teaching on faith and discipleship. Are you really saying it should be applied to statesmanship without further reflection (in the light of, say, Pr 30:25)? Not my idea of sound theology. What I would have us do collectively is a good question, and I do not claim to be the creative equivalent of a government and a couple of squads of scientists and engineers – but things that might be done are (a) damping demand, if need be by (horror) temporarily taxing the stuff to make the price reflect its real value and the market can do its work (b) taking every opportunity to buy time, i.e., smooth out and delay the peak, so the economy and society can respond and (c) think seriously about what a post-oil society looks like, and start shaping it. In short, engineer a soft landing.
Many might bristle at these ideas. But think about this. I can’t speak for the American situation, but in Europe, what is the reason that you can hardly do without a car? Town planning in the first few decades after WWII.
Peter,
Standing in faith is always the opposite of standing in fear, no matter the situation.
T