Peak Oil News: Peak Oil: An Idea Whose Time Is Up

Saturday, May 31, 2008

Peak Oil: An Idea Whose Time Is Up

Energy: Analysts have found that investors spooked by the peak oil theory — the belief that crude production has topped out and is in decline — are partly behind the soaring oil prices. Someone should set them straight.

Blame part of $135-a-barrel oil on the increased demand in China and India, where the populations and economies are growing rapidly.

But the impact of those nations on crude prices in recent months is suspect. Global oil consumption grew 2% in the first quarter of this year over the first quarter of 2007, while production increased 2.5% over the same period. On a daily basis, roughly 85 million barrels of oil are consumed across the world, almost exactly matching the amount produced each day.

Production over the next two quarters is projected to continue rising (3.3% and 4.1%, according to estimates from Citigroup), while demand is expected to grow at a slower 1.6% pace over the next six months.

These data don't indicate higher prices, so something else is at work. Some analysts believe that investors who have swallowed the peak oil theory are pricing oil higher because they fear the world is running out of crude and permanent shortages are nigh. They shouldn't believe it.

The peak oil theory was popularized by Shell Oil geophysicist M. King Hubbert. He predicted in a 1956 paper that U.S. oil production would peak by the early 1970s and then decline sharply. The peak oilers — many of whom quietly want the world to run out of oil — say he was right. But they're missing some key points.

Yes, domestic output has peaked. But it peaked at a level 13% above what Hubbert predicted. And the peak wasn't followed by a falling-off-the-table decline. Output rose after a temporary slide.

U.S. production is trending down again, but it's not because there's no oil. It's due to shortsighted policies that prevent the industry from drilling for the almost 100 billion barrels of crude known to be under Alaska's Arctic National Wildlife Refuge and beneath the oceans just off of America's coasts. It's because politics and political correctness block the development of Big Sky state oil shale fields, where as much as 2 trillion barrels of crude, by some estimates, sit idle.

It's possible that rather than falling for the peak oil theory, investors simply are considering the reality that Congress has done nothing to increase crude output, and that continuing on that foolish path will indeed bring shortages.

The U.S., though, is not the only nation that pumps oil. World output is expected to rise from 85 million barrels a day today to 110 million barrels by 2015, according to the International Energy Agency.

Cambridge Energy Research Associates argues that the remaining global oil resource base is 3.74 trillion barrels. That's more than triple the peak oil estimate of 1.2 trillion barrels. CERA also has noted that output will not fall as quickly as peak oil alarmists think. Many studies put the decline rate at 8% a year, but after studying 811 separate oil fields, CERA believes the rate to be about half that — 4.5%.

By the way, this estimate doesn't even consider undiscovered and untapped oil fields. Nor are unconventional sources, such as shale oil, part of the equation.

As if he had peered into the spring of 2008 and seen the run-up in oil prices, Peter M. Jackson, CERA's director of oil industry activity, warned in 2006 that listening to the wrong voices would have consequences.

"The 'peak oil' argument is based on faulty analysis which could, if accepted, distort critical policy and investment decisions and cloud the debate over the energy future," he said.

The "theory causes confusion and can lead to inappropriate actions and turn attention away from the real issues," Jackson continued. "Oil is too critical to the global economy to allow fear to replace careful analysis about the very real challenges with delivering liquid fuels to meet the needs of growing economies."

So far, all five previous predictions that we were running out of oil have been wrong.

But one day the crude supply will effectively dry up. When it does, it won't happen overnight.

It will happen slowly enough, though, for consumers to adapt (through voluntary lifestyle changes) and markets to respond (with improved fuel efficiency, technological advances in extracting crude and new energy sources). There's no reason for investors to act as if the world is running out of oil. It isn't.


At 8:48 AM, June 01, 2008, Anonymous Anonymous said...

Peak oil is real. The article is thick with misinformation. IBDeditorials is a right-wing spout for propaganda. There is no way to post a comment on their site. I wont waste any more time on such a weak and ignorant publication.

At 1:34 PM, June 01, 2008, Blogger Robert said...

I wonder why the editor of this blog spot would allow such trash as this right wing, head in the sand garbage to be published.

At 3:03 PM, June 01, 2008, Anonymous yogamom2006 said...

At the very beginning (third paragraph I think) this article sites that Global oil demand rose by 2% while production increased by 2.5%. I have never seen ANYTHING to promote that. That is a false believe and a blatant lie. From that first bit of misinformation it just continues it's slide. These are the kind of people that deserve evrything they get. Geez...there are just SO MANY problems with this paper. Unconventional oil is not considered for many reasons, namely the EIOER. And peak oil is NOT ABOUT RUNNING OUT OF OIL! It's the convergence of the oil production bell curve, global climate change, global population, unstable markets, decerasing fresh water, less coal, uranium, steel, ect. These combined are more easily coined, for the sake of a common workable language, "peak oil". But, come on. One first has to know how to speak the language before writing an article.

At 5:21 PM, June 01, 2008, Anonymous Anonymous said...

Let's see. There are ONE TRILLION barrels of oil in the Green River Basin Deposit in Colorado and Wyoming, locked up in oil shale. Shell Oil (you know, one of those evil oil companies) has spent 30 years and billions of dollars developing a technique called the "In situ Conversion Process" that can extract that oil with ZERO enviromental damage to the extraction site. And they can do it profitably at $30 a barrel. Exactly how much is ONE TRILLION barrels of oil? About the same amount that has been used since the beginning of the industrial revolution. So much for the goofy notion of "peak oil", yet another marxist, socialist fantasy dreamed up by the America-hating, Luddite left. Speaking of liberal fantasies, what say you all to the recent letter, delivered at the National Press Club, signed by 31,000 scientists worldwide, stating that the idea of man-induced global warming (or climate change, or whatever the hell you fools are calling it these days) is a FRAUD! Which, of course, it is! Silly little lefties! Don't cry to me about $4.00 gas or $150 a barrel oil. These are self-inflicted wounds. Every other country on earth is exploring and drilling for oil. The Chinese and Cubans are going to drill 40 miles off the coast of Florida. Where's Greenpeace? Friends of the Earth? Where are all the lefty eco-nuts on this one? Why aren't they protesting at the Chinese embassy? Because they're hypocrites! No, its only when America tries to do anything that they cry. I noticed the previous comments: no facts, just "well, IBD is right-wing, so they don't count!" How intellectually vapid and cowardly.

At 7:57 PM, June 01, 2008, Anonymous Anonymous said...

It was George W. Bush, while Jeb Bush was running for re-election in 2002, who signed the moratorium preventing any further oil and gas exploration off of the Florida coast.

At 8:59 PM, June 01, 2008, Anonymous Anonymous said...

So what? typical liberal drivel: look to the past, reactionary claptrap. Bush ain't running again, stupid. I know, I know, "It's all Bush's fault". What are we going to do RIGHT NOW, dimwit? What have your pals in the Dumocrat party in Congress done lately? At least Bush tried to open ANWR. But the Dimocrat Senate dipwads blocked it. We could be getting 1-1.5 million barrels a day from that alone. All the Dipocrats want to do is solar, wind, maybe gerbil power. Try running an industrial country on that. Idiots!

At 9:58 PM, June 01, 2008, Anonymous yogamom2006 said...

Wake up you guys. This is not a liberal/conservative issue. This is a scientific/mathmatical equation. You are welcome to your opinions and beliefs, but the reality is very different. Oil Shale? Are you serious? Look at what it takes to convert that into something you can use. And good luck with trillion barrels.
That's the point, "anonymous", we CAN'T run an industrial society like this anymore- or not much longer anyway. Listen, all natural resources are either finite or infinite. And there is NO debate or discussion in any respected scientific community as to the nature of oil. It's finite. And extraction follows a bell curve.
Not the repubs fault, not the dems fault, not the oil companies fault- just the fact of life on earth.
Not an economic issue- it's a resource issue.

At 10:32 PM, June 01, 2008, Anonymous Anonymous said...

Nice to see that you won't let facts stand in your way. Shale oil? Yeah, damn right! Maybe you should do a little research before you go popping off about something you obviously know nothing about. Do you even know what the In situ Conversion Process is? Of course not. You're a liberal, and liberals never allow facts to get in the way of a good, self-righteous, doomsday rant. Let me help you out, dummy. I'll refer you to an article in the Rocky Mountain News, September 3rd ,2005, written by Linda Seebach. Find it, read it, and then come back and see if you can refute even ONE point that I made in my original post. Then go to Shell's website and search "Mahogany Research Project". Maybe you'll learn something, but I doubt it. I realize you libs have an especially steep learning curve. Uh, that means you're stupid. Oh, and by the way, Dr. Doom, you're right: it's not ONE TRILLION, it may be as much as TWO TRILLION barrels! I get tired of you lefties thinking that you're the smartest people in the room. Truth is, you've had your heads up your arses since before Teddy Roosevelt went up San Juan Hill with the Roughriders. And don't give me that "no debate or discussion, the science is settled" crap, either. I don't believe that nitwit Al Gore when he says it, so why should I listen to you? Who cares what you think?

At 5:30 AM, June 02, 2008, Blogger Robert said...

if a gene analysis could be performed on mr brave "anonymous", i'm sure it would show his ancestors burned people at the stake.

At 7:06 PM, June 02, 2008, Anonymous Anonymous said...

Well, Robert, aren't you the clever little boy? Got any facts to add to this or is argumentum ad hominem the best you can manage? All you liberals think that we conservatives are knuckle-dragging Neanderthals, which is convenient for you since it permits you to avoid the one thing you can't win: a cogent argument. By the way, quiz kid, I checked The Rocky Mountain News website, and the article by Linda Seebach that I referred to is still there. Couldn't find it, or don't want to? I'm waiting for just one of you to make a logical argument instead of holding your breath and whining like babies. The fact is this: we are literally swimming on an ocean of oil that's there for the taking. Do you have any clue as to the amount of wealth this could add to the national economy? Do you have even the foggiest notion what it would mean for this country to be TOTALLY energy independent and not have to rely on international despots and criminals for our oil supply? That instead of sending our money overseas, we could keep it here to build our country and help our people? And not only that, but in ten years, America could be a net exporter of oil. Think of the incredible jolt this would be for our economy. But, of course, you're all liberals, so trying to explain economics to you is a waste of time. Besides, all of this goes against your religion: The Church of Sustainability, whose messiah and high priest is Al Gore, and whose tenents include carbon credits, higher taxes, more shortages, shared misery, and ever more government control. Sounds a lot like the old Soviet Union, and I'm sure that's no coincedence.

At 5:21 PM, June 03, 2008, Blogger Robert said...

well if u are still around "anonymous", i did enjoy checking out the debate term "argumentum ad hominem". always like learning something new. i cannot believe you totally dismiss the term "peak oil". it happens with every well drilled, every field found. there is only so much recoverable oil to be pumped out and at a point, production starts to decline. how can you dispute this? the lower 48 peaked in the early 70s. right? do you dispute that? -----i read the linda seebach article. go for it, if processing the oil can be economical to enter the market. i read it has to be heated to 900 degrees F. that is a lot of heat. anyway we do agree that anwr should be drilled now. i have no problem with that.


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