So… How About Peak Oil Now?

One of the interesting things about blogging is that it’s a public record of your thinking over a period of time.  Ever so often people find old posts while searching and then comment on them.   That happened to me again today, as someone posted a comment about a peak oil-related post from last summer.

Here’s the pertinent parts of the comment:

We are awash in oil. Supply currently far outstripping demand and we are in a mild recession, not a depression. Gasoline is down to $1.65 — what it was in 2004.

And if you follow the news, you will see more and more reserves are being found. Yes, we may run out of oil some day but it won’t be in my lifetime, my children’s lifetime, or even in the lifeime of my grandchildren. And by that time we will have moved on to other energy sources.

A few comments on this.  First, peak oil is not about the end of oil.  It’s about production flows.  Yes, there is plenty of oil available, and we are finding reserves all the time.   The issue is that we are finding smaller fields, usually of lesser quality, and they are harder to extract oil from.   Combine smaller, lower quality fields with the depletion of many of the larger, high-quality fields and it is obvious that there can be a supply problem at some point down the road.    We will be extracting oil from the ground hundreds of years from now… just not in large enough quantities to keep our current petroleum-driven way of life going.    People who have put way more research into this than I have disagree about when we will or maybe already have already reached the ‘peak’ of oil production.   We won’t know for sure until the peak is past, so for now we just watch and wait.

The dig about following the news goes both ways.   Yes, more reserves are being found.  At the same time several major producers are seeing their oil production drop… sometimes fast.    Will new production coming online be able to replace if not surpass depleting fields?

Gas prices have indeed dropped precipitously in the last few months, as have most commodities.   I personally wouldn’t associate this with a return to business as usual.   The global economic crisis will reduce demand for oil worldwide, which will have an effect both production and consumption for some time… extending the plateau for some time possibly.

As to whether we are in a mild recession or something worse, a lot of it depends on your personal perspective.   Like the old saw goes, when your friend loses his job, we’re in a recession; when you lose your job, it’s a depression.   I think we are still in the opening phase of a longer economic shakeout that is looking to be deflationary at least for now.   Prices on lots of things are dropping.  The question is how far will they drop, and how much economic damage will be done by the time this cycle ends?

Reasonable people can disagree.  If the commenter truly thinks that we are awash in oil, might I suggest posting his thesis on The Oil Drum and see how the statistical nerds, oil industry insiders and other knowledgeable folk respond.


5 Responses to So… How About Peak Oil Now?

  1. Stu says:

    Yes I actually remember reading that thread and I couldn’t disagree with you more. The fact is, that we are using 6 barrels of oil for every barrel discovered. Peak discovery was in 1964 and the trend has been slowely downwards ever since. You here about these gigantic oil finds, they are only gigantic by todays standards because the usual finds nowdays are so small. I I told the averge person that I just discovered an oil field somewhere and it had 5 billion barrels of oil they would probably say, WOW……..peak oil has just been killed forever, or at least for the forseeable future………..that’s how ignorant people are……..we are using 3 billion barrels a year……….and a 5 billion barrel find doesn’t mean 5 billion barrels available because you will never get 100% recovery rate………also……..the new find won’t start producing for a few years because it takes that long to ramp it up for production……..also…….a 5 billion barrel fiels will probably ony produce about 300 thousand barrels a day at peak……once we have put all the rigs and pipes and other infrastructure in place. By the time this field is producing peak flows………other fields have declined by more then the new flow added.

    Take tar sands. If we were really awash with oil……….why are we strip mining and moving and processing 4 tonnes of earth to get one barrel of low grade, hard to refrine…….crappy oil……….at very high cost……….and massive environmental damage. The fact that we are doing these things should be proof enough that there is not enough oil out there to replace declining field production, and as more and more of our toal world oil is made up of these very expensive alternate sources……..the prices will rise and rise and rise………the speed we can extract and process and refine these alternate sources at is slower also……….so we will peak out……….and will not be able to keep up with rising demand…….that is peak oil……….it is not about running out………it is about maximum flow……….and we are nearly there………if not there already.

  2. Terry says:

    Awash in oil? The US demand is down about 6% this much is true. Everyone knows that. However, supply destruction is also underway with 17 or more proposed projects shelved. Billions in plans in the Canadian oil sands are on hold and projects elsewhere. They can’t be done with oil in the 40s and 50s…The current surplus is an adoration but the gap in supply a few years from now will be structural. The commenter should read the IEA report and track Dr. Birol’s movements as he is briefing governments on what the report is expressing without the political cover contained in the written report. Peak Oil production is nearby and the current situation contrary to popular belief will make it worse.

  3. Jim says:

    For me the convincing evidence that we reached peak was when oil was $140+ and production failed to increase to take advantage of the all-time-high price.

    To the point the commenter was making, I would counter that it’s not reasonable to analyze the oil situation without integrating it into the larger economic framework. We have enough oil to last forever and it will always be cheap (relative to what it was last summer), assuming we get mired in a permanent economic depression and can’t afford to buy the stuff. If/when the economy turns around, it’s going to again face the reality of expensive energy. We’re at a point now where economic growth is capped by the amount of energy available.

  4. mike says:

    I have wavered a bit of late in regard to my peak oil loyalty. I am a
    regular reader of TOD, Kunstler, LATOC, etc, but I am beginning to wonder
    about it all. Granted, TOD did not go out on any limbs with predictions
    collectively, but perhaps their best known commenter, westexas, did on a
    few occasions and has only recently come around to the idea that prices
    might plummet.

    As a model, peak oil theory does outline price spikes (and infers price drops), but lack of exploration and development in the 90’s would explain it as well (and I am sure there are several other possible explanations).

    Maybe that was the peak (July 08), but I don’t think the point would be to “call peak” anyway. The point to me is to recognize we are in a time period in which growth of energy supplies will be more unpredictable. That unpredictability will lead to price fluctuations, which will lead to increased speculation.

    In other words, I see things as from the “bumpy plateau” perspective, and I believe that continued low prices will kill the oil boom of the past few years. The boom/bust cycle in the price of oil, if it indeed becomes more prevalent throughout the bumpy plateau period, will probably be the worst part of leaving the price point to be determined by the market, since it is so short sighted. We are seeing now that there are plenty of examples about projects that are getting shelved or being shut in since prices have plummeted. Another spike will be shortly followed by these projects either being dusted off or put back online, which surely will take a toll on infrastructure over a few cycles.

    The low prices have opened my eyes to other possibilities (I am checking peak oil debunked again), but the bumpy plateau still seems like the most intellectually satisfying explanation to me…

    Great post,

  5. Bart says:

    Thanks for your comment, Mike.

    The more I think about things, peak oil is a symptom of larger issues with the growth-based economy the world has chosen for itself. If economies don’t grow, bad things happen. If there is such a thing as a steady-state economy, I haven’t seen it yet.

    Well, we’re in a period of economic contraction, and economically at least, the shit is starting to hit the fan globally. Some people point to plummeting oil prices as signs of a ‘glut’ or vindication of the cornucopian viewpoint. If the global economy slows down, there will be less demand for oil, yet those countries that export oil and little else will continue to pump as fast as they can to keep their citizens fed, employed, and otherwise engaged in order to keep them from rioting or worse. Those of us who have good-paying jobs and can afford to keep buying products over the next few years will revel in the lower prices we have to pay for many things.

    The economy will probably give us both low prices and lower demand for a while. At some point, though, if the world economy picks up again, then we’ll be back where we were in 2007 & early 2008 if not worse, since lower oil prices will kill off discovery and production in many of the yet-untapped areas of the world.

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