Peak Oil: Fact or Fiction?

Projection of oil and gas production by region. Source: peakoil.net

On October 31st, the Zone published a short and simple explanation of peak oil theory.  To refresh: peak oil theory is the belief that there is a point in time at which worldwide crude oil production will peak and begin a decline that ends when the world’s oil supply effectively runs out.  Most proponents believe that the peak will be reached in the next 40 years, if it has not been reached already.

The October 31st post’s reference to peak oil as a “much-debated” theory is a bit of an understatement.  People that accept the peak oil theory as truth are locked in a heated war of words with people who dismiss it as alarmist foolishness.  This war plays out online, in academic papers and presentations, and even on television.  Without taking one side or the other, we at the Zone would like to present the basic arguments and encourage our readers to decide for themselves.

Peak oil as fact. Peak oil theory was introduced by geologist M. King Hubbert to determine when the U.S. would run out of oil, and later applied to the world’s oil supply.  Although his prediction of world peak oil in 1970 is now considered by both sides of the peak oil debate to be inaccurate, the fact that oil production in the U.S., the world’s largest oil producer from the late 1800s until 1971, clearly did peak (U.S. crude production in 1971 was at 10 million barrels per day and is currently at about 5 million barrels per day), is a boon for the argument in favor of world peak oil.  “In any geographic area, it’s a natural phenomenon for oil to peak at some point,” said Tim Considine, a former professor of natural resource economics at Penn State.  Leading Peak Oil proponent Matthew Simmons, president of Simmons and Company International, asserts that world production reached a recent peak in May of 2005 and has “flattened” since then.  Simmons also argues that oil production data is hugely off-base, claiming that OPEC nations intentionally exaggerated their estimates of proven oil reserves that they released in 1982-1988.  When their estimates did not change for 20 years, he says, they were seen as conservative and generally accepted to be accurate.   The vast majority of wells in the Middle East are not equipped with gauges that accurately measure daily output of oil, and the world is therefore forced to accept the estimates of oil companies and oil-producing nations that have financial incentive to convince the oil market that supplies are plentiful.  The rapid increase in worldwide oil demand from 1994 to 2008 far outpaced any predictions and used up nearly all of the world’s spare production capacity, paving the way for a major supply crunch in the next few years.  Although the global recession has significantly reduced demand and consequently pulled down prices, the fact that demand continued to rise through the price spike of this summer shows that when the global economy recovers, demand will be as high as ever, spiking much faster than supply could increase and causing political conflict as nations fight over remaining oil.  Simmons points to the deterioration of the world’s oil infrastructure as a major impediment to supply increases meeting spiking demand.  Rust and other wear and tear on huge and expensive rigs around the world have worn them out to the point where 80% of the world’s production infrastructure needs to be rebuilt to function at full capacity.  While many argue that relatively new technologies like horizontal drilling have made previously-unreachable oil reservoirs accessible, Simmons and others counter that new technology has only increased rate of extraction from existing reservoirs, speeding our approach to peak oil.  Those who see peak oil as fact steadfastly assert that, whether peak oil production is reached in 2009 or 2050, inadequate preparation for the related supply crunch could result in catastrophic events around the globe.  Reliance on oil as the main energy resource on earth much be reduced, and development and utilization of alternative energy sources much take place as quickly as possible in order to avoid disaster.

Peak oil as fiction. The theory of peak oil was introduced by a geologist, and continues to be defended by geologists who insist that it is a “fossil fuel”–a finite resource that will run out at some undetermined point in the future.   These geologists do not give due credit to the power of human ingenuity and technology, which have managed to overcome incredible obstacles to harvest the vast resources the earth has to offer.  In 2000, Cambridge Energy Research Associates (CERA) disputed the figure of 1.2 trillion barrels of total world oil reserves put forth by many peak oil proponents, estimating 4.82 trillion barrels in conventional and unconventional oil reserves worldwide.  Peak oil theorists have predicted imminent decline in oil availability and production at several points during the 20th and 21st centuries, and have been proven wrong each time.  Technology and innovation will continue to expand the quantity of “accessible” oil–a point of view held by the International Energy Agency, who in 2005 stated that “in principle, [there is] no shortage of hydrocarbons,” and the only limits on oil production are will power and the sophistication of applicable technologies.  Furthermore, the IEA noted that known unconventional oil reserves (such as the tar sands of Canada and oil shale deposits of the United States and Venezuela) far surpass conventional oil fields in the quantity of present oil.  The agency noted that technology for extracting both conventional and unconventional oil deposits will have to develop quickly enough in order to meet an expected 50 percent increase in worldwide oil demand from 2005 to 2050–a challenging but attainable goal.  Another weak spot in the argument in favor of peak oil theory is the presumption that crude oil is in fact a “fossil fuel,” a product of the decomposition of fossils and other organic material hundreds of thousands or even millions of years old.  Although that explanation has been widely accepted for decades, findings originally published by the physicist Thomas Gold in 1992 posit that oil and other “fossil” fuels are actually not products of biological materials at all.  This “abiotic” hypothesis on the origin of oil asserts that hydrocarbons were present at the early formation stages of our solar system, and that bacteria in the earth’s mantle feed on gas flows caused by tectonic movements to continuously replenish shallower oil reservoirs, making oil an infinite resource.  In Gold’s own words, abiotic oil means that “Hydrocarbons are not biology reworked by geology (as the traditional view would hold) but rather geology reworked by biology.”  Evidence such as the discovery of oil 30,000 feet below the earth’s surface (well below the depth at which organic matter is no longer found) and dry oil wells later replenishing themselves lend support to the abiotic theory.  Although the abiotic origin of oil has not been proven beyond a doubt, it is a possible explanation that one must consider when contemplating future oil resources.  Although oil resources have become more difficult to extract since oil was first utilized as fuel, human ingenuity and technology have managed to keep extracting and producing oil to meet growing demand, and will continue to do so for decades, if not centuries, into the future.

Conclusion. So there are the basic tenets of the arguments for and against the validity of peak oil theory.  An interesting debate that will no doubt continue for years–at least until major discoveries or geopolitical events prove one side or the other.   In any event, the Zone encourages you to explore additional resources and make your own determinations about peak oil theory.

Resources.
A 2005 segment on the future of oil and peak oil theory CNBC’s Squawk Box, “Peak vs. Deep Oil.” Featuring Matt Simmons and Jerome R. Corsi:

Peak Oil as Fact
http://www.simmonsco-intl.com/
http://www.rps.psu.edu/probing/peakoil.html
http://www.postcarbon.org/say_goodbye_peak_oil
http://members.home.nl/peakoil/facts.html

Peak Oil as Fiction
http://centerblue.org/2006/07/07/the-case-against-peak-oil-gloom-and-doom/
http://www.cera.com/aspx/cda/public1/home/home.aspx
http://internationalaffairs.suite101.com/article.cfm/the_peak_oil_debate
http://www.freeenergynews.com/Directory/Theory/SustainableOil/