Do you believe in 'peak oil'?
By Jonathan Eley
Debate has raged about 'peak oil' ever since Shell geologist M. King Hubbert first outlined the theory in 1956. It's the idea that once around half the world's reserves of oil have been extracted, production enters a slow and inevitable decline that no amount of investment can reverse. Believers in peak oil argue that once it becomes apparent that the peak is near, or even past, prices will rise sharply, and permanently. Detractors say the theory ignores geology and technological progress.
YES, says Matthew R. Simmons, founder of Simmons International:
"Many supposed energy experts refute peak oil, and mistakenly think the term means that we are running out of oil. Peak Oil does not mean "running out of oil". The world will likely never run out of oil, but the flow of usable oil has almost certainly already passed its high-water mark. Over the next five to ten years, our current oil supply will likely decline by as much as 15 to 25 per cent. In the meantime, despite the recent recession fears, the world's planned use of more oil is staggering.
The factors propelling growth in world demand for oil are simple. We have an expanding global population. There is no logical reason to assume that oil demand has peaked, or is even slowing down.
Oil consumption can never exceed available supply. So if supply dwindles, then demand must also stop growing, a task not easy to even contemplate. If demand grows while supply shrinks, shortages will occur. Human nature will create hoarding and oil consumers will begin "topping off their tanks". The risk of this occurring is far higher than most think.
The data proving that oil supply peaked in 2005 is not perfect, but it is solid enough for a jury to "convict with reasonable certainty." Just look at just the production declines from key producing countries like Mexico, Norway, the UK, Indonesia, Argentina, and many others in the past four years.
All that is needed to end the Peak Oil debate once and for all is an independent audit of the world's 300 largest producing oil fields. Sadly, too many of these fields, owned primarily by Opec countries, still guard their production and reserve numbers as "state secret." But the time is fast approaching when world leaders will demand honest facts about the flow rates of these key fields. When this happens, the proof that oil has already peaked will be air-tight. "
Simmons is an US investment bank specialising in services to energy companies. www.simmonsco-intl.com
NO, says Peter Odell, professor-emeritus of international energy studies, Erasmus University:
"Claimants for a near future peak in global oil production fail to recognise the processes whereby reserves and production evolve. They equally avoid the central role played by both economics and politics in equilibriating the markets.
The world's currently proven and potential reserves of oil - both conventional and non-conventional - eliminate any significant up-side restraints on the growth of production . On the contrary, near future constraints on oil supplies will be imposed by slow demand growth (of no more than 1.5% per annum).Thereafter, the eventual continuation of a steadily increasing supply of oil for global use will be based on the present creation and future maintenance of a 40-plus years' reserves-to-production ratio.
Peak-oilers, however, argue that annual additions to reserves which comprise both new discoveries and reserves' appreciation in previously-discovered fields should not be taken to indicate the replacement or replenishment of reserves' stock. Additions to reserves in previously found fields must be dated back to the year of initial discovery.
Backdating reserves with hindsight - in the context of newly developed technologies of reserves' assessments and recoverability - is simply inappropriate to the continuing economic evaluation of oil exploitation. It makes the past look more attractive than it really was, while the present is unjustly made to appear inadequate.
The current declaration of proven reserves of 1400 billion barrels will likely rise to 1750 billion barrels or more by 2020 so providing continuity for the future of the oil industry for decades ahead.
Even without any further discoveries peak oil production will not occur over this period. Unless, that is, the price of oil collapses so undermining profitable investments in the industry. Or as a consequence of a consistent fall in demand because of renewable energies' expansion. Only then, will peak global oil production necessarily occur."