Peak Oil Myth


We’ve heard about it since we known about it.  The idea that somehow, someway, the world is gonna run oughta oil.

And when we do, well, the end of the world as we know it will commence.  The illustration to the right just shows a tip of the hysteria that folks are spreading.

End of oil?  Beginning of anarchy.

And so they demand that we do something about it.

And we did.

But it isn’t what the folks had in mind.  See, the technique of scaring us using peak oil was meant to shock us into developing technology that would alleviate the need for oil completely.  Technology that would replace oil.

See, along with peak oil is the whole dependency on oil thing.  If they can scare us with the Middle East terrorism thang, then they can get us of oil even quicker.

Peak oil.  Terrorism.

The rub is that the folks that are trying to scare us from oil don’t CARE if we use the last drop of oil.  In fact, if they could, they’d wish hat oil away in a heart beat.  And terrorism?  The language over the last few years surrounding international and domestic terrorism leads me to believe that they don’t really mind that radical Islamic terrorism thing.

Anyway, my point?  My point is that we DID develop technology and we DID push back the threat of “peak oil” years and years from now:

A new drilling technique is opening up vast fields of previously out-of-reach oil in the western United States, helping reverse a two-decade decline in domestic production of crude.

But drillers learned how to increase the number of cracks in the rock and use different chemicals to free up oil at low-cost. “We’ve completely transformed the natural gas industry, and I wouldn’t be surprised if we transform the oil business in the next few years too,” says Aubrey McClendon, chief executive of Chesapeake Energy, which is using the technique.

Petroleum engineers first used the method in 2007 to unlock oil from a 25,000-square-mile formation under North Dakota and Montana known as the Bakken. Production there rose 50 percent in just the past year, to 458,000 barrels a day, according to Bentek Energy, an energy analysis firm.

It was first thought that the Bakken was unique. Then drillers tapped oil in a shale formation under South Texas called the Eagle Ford. Drilling permits in the region grew 11-fold last year.

Now newer fields are showing promise, including the Niobrara, which stretches under Wyoming, Colorado, Nebraska and Kansas; the Leonard, in New Mexico and Texas; and the Monterey, in California.

We’ll never drill the last drop of oil.  Long before that happens we’ll discover better and cheaper means to get a lot of it.  And as we get closer and closer to reach the point where the expense of drilling causes the cost of selling that oil to go higher, then we’ll invest in a different source of energy.

And not until then.

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11 comments
  1. Olaf said:

    You need an EROI of 1 to 5 to keep our society running. If you need 1 barrel of oil to extract 1 or 2 barrels because of the hight tech en high cost technique you employ its useless. The point is that it is not the amount of oil that is left in the world that matters but how much energy we have to put in to get it out.
    Look on the internet for the curves of discovery, extraction and money invested in a oilfield and you find three peaks seperated by decades. At last you are throwing a lot of money to prevent production from declining until also the money invested in the oilfield peaks…..

    • pino said:

      The point is that it is not the amount of oil that is left in the world that matters but how much energy we have to put in to get it out.

      I agree. My point is that technology is helping us take more and more of it out much more efficiently than before.

  2. You’re confusing peak oil with the end of oil.

    Peak oil implies that production will reach a peak, after which it will begin to decline. The problem is that when the world reaches peak oil, demand will exceed supply forcing the price of oil to rise markedly.

    The United States reached it peak production in 1970. Despite the innovations you discuss, the United States has still not produced as much oil as it did in 1970.

    We still produce oil, just not as much of it. We got out of part of this pickle by no longer using so much oil in electricity production. Now, about 66% of our liquid fuels are for transportation.

    Part of our economic malaise stems from high oil prices, which are in almost every single part of our economy. We may even be in an era of peak oil.

    I don’t mean to be an alarmist. I am a conservative and former military officer whose entire adult life has been negatively impacted by our reliance on foreign fuel.

    I just look at the data and think we are approaching a period of significant disruption and transition. I don’t think peak oil will be the end of the world, but it will be a rough period that it will be tough for many as we make a transition to non-fossil fuel energy.

    • pino said:

      Peak oil implies that production will reach a peak, after which it will begin to decline.

      Well…..that depends. We reached a peak of whale oil long ago. It wasn’t because we ran out of whales, it’s because we found a better energy source. I think that peak oil is the time at which we use more oil than we CAN produce.

      Despite the innovations you discuss, the United States has still not produced as much oil as it did in 1970.

      This isn’t ’cause we can’t get more oil. It’s ’cause the environmentalists passed laws preventing us from extracting it.

      I just look at the data and think we are approaching a period of significant disruption and transition.

      Do you think this is true because we are running out of oil or because the countries we get oil from are becoming increasingly unstable?

      I don’t think peak oil will be the end of the world, but it will be a rough period that it will be tough for many as we make a transition to non-fossil fuel energy.

      At the exact moment alternative energy is cheaper than oil, we’ll switch big time. And when THAT happens, we’ll make the technological strides that have brought us cell phones and OnDemand TV.

  3. I split my time between Canada and the U.S. and there is another major “boom” expected in the Canadian oilfields (particularly the oilsands). It is, by comparison, far more expensive to extract but there’s definitely a lot of it still up there and they’re planning to pull a whole bunch more of it out.

    http://en.wikipedia.org/wiki/Athabasca_oil_sands

    I think more of the fear (and rightly so) comes from our dependence on non-US-friendly foreign oil sources. The Canadian oilsands get some bad press but overall it’s the best value – money invested up there comes back to the US as its largest and best trading partner, and you don’t need militaries and regimes to defend it. This is where I think technology has an even greater impact as well. Stay friends with our neighbors to the north while we’re improving our technology and decreasing our reliance, and we should end up ok.

    • pino said:

      I think more of the fear (and rightly so) comes from our dependence on non-US-friendly foreign oil sources.

      I agree.

      This is where I think technology has an even greater impact as well.

      Yes. As investments begin to payoff, technology will make it cheaper, faster and more efficient.

  4. The reason the United States has still not produced as much oil as it did in 1970, is that it is no longer discovering the massive fields it discovered late in the nineteenth and early in the twentieth centuries.

    Sure, environmentalists are slowing us down, but we are also going further and further out to sea to find our oil. Even if we drilled in ANWR, one of our last remaining major untapped onshore oil fields (which we should), it only has something like 10 billion barrels of reserves, which is equivalent to only a little over a year of US consumption. The last three giant fields discovered outside the Middle East since 2004 were several hundred kilometers off the coast of Brazil. We can still, obviously get more oil, but it is becoming increasingly harder to get to and more expensive to extract, and unlike whales, it doesn’t reproduce. Once it is gone, it is gone forever.

    I don’t think we are running out of oil, but I do think that our rate of production will soon peak. I think future disruptions will effect us in many ways, including increased food prices (fuel is used to transport food and run agricultural machinery). As you pointed out, the countries we get our fuel from are for the most part, unstable (Canada is a key exception), which is obviously another problem. Then you have the two geostrategic choke points in the Strait of Hormuz and Strait of Malacca, where any major disruption could cause oil prices to spike far above $200 / barrel. Then there is China and their rapacious demand for energy resources, which could collide with our need for energy resources.

    The list goes on and on…But you see where I am going with this. Our economic fate is increasingly in the hands of people we don’t like.

    I do agree that the country will abruptly switch when alternative energy is cheaper than oil. I would rather ease into it rather than live in a tough transition period where people sleep at their desks during the week to avoid paying for fuel and the suburbs become slums because no one can afford to get there in a car.

    • pino said:

      We can still, obviously get more oil, but it is becoming increasingly harder to get to and more expensive to extract

      Without a doubt we’re using more and more oil and as you mentioned, it’s finite. No argument there.

      I would point out, however, that we are finding more and more gas.

      For good or bad, we’re gonna be using fossil fuel for awhile.

  5. Branden Pronk said:

    Declines in US production are not so much due to environmentalist policies (although I freely admit that they have contributed) as they are due to the US governments outright decision after WWII to limit domestic oil production with the mindset of keeping domestic oil in reserve and save it, and meanwhile use everyone else’s oil, waiting for the day that everyone else’s “runs out”. (You can read about this in Daniel Yergin’s book “The Prize”).

    The problem I have with peak oil is that, if you look at historical world reserve estimates, reserves never decline from one year to the next. World reserves are consistently on the rise, despite world oil consumption at roughly 80 million bbls/day. That means that every year world oil reserves should decline by ~30 billion bbls/year. But they don’t.

    I also understand the difference between Peak Oil and End of Oil. Peak oil has to do with supply and demand. History teaches us that technology consistently takes things that were expensive to produce, and makes them cheap to produce. This is happening in the Canadian Oilsands. I currently work for a large Oil & Gas company north of Fort McMurray, and our production costs are ~$30/bbl on a ~$100 bbl of oil. If you compare this to the late 1990’s, a bbl of oil would cost ~$12 to produce, with oil prices at ~$10/bbl. The only way the industry was making money was on the US/Canadian exchange rate.

    The case for the oil and gas industry is that as technology improves, things become cheaper.

    A good graph to look at is this graph from Wikipedia’s peak oil page. It shows oil prices from 1861-2007 in real (2008) dollars.

  6. Foster said:

    Too bad the near-debate happening on this site is not happening in meatspace (the non-cyber world).
    Fans of techno fix have little or no idea how large the global (internal combustion engine) fleet’s appetite is or how complicated any ‘switch’ would become logistically.
    Pretending we can grow (harvest, process and deliver) crops on the same scale indefinitely with whatever we hope some genius somewhere can devise is hugely irresponsible. Most folks (9 out of 10 in the USA) have never heard of Peak Oil.
    Having a plan is better than freaking out. Public debate might allow plans.
    Otherwise, only one person in twenty (folks with computers spending time on the internet) will even know there “might be a problem.”
    Even for folks who don’t believe we are running out of oil, given the rising population (nearly 7 billion humans), meeting demand will become all but impossible. Shell’s CEO Jeroen van der Veer even said so in 2008. After 2015, they don’t anticipate “being able to meet global demand with readily available reserves.”

    • pino said:

      Too bad the near-debate happening on this site is not happening in meatspace (the non-cyber world).

      I agree.

      Fans of techno fix have little or no idea how large the global (internal combustion engine) fleet’s appetite is or how complicated any ‘switch’ would become logistically.

      I agree.

      Pretending we can grow (harvest, process and deliver) crops on the same scale indefinitely with whatever we hope some genius somewhere can devise is hugely irresponsible.

      I agree.

      Shell’s CEO Jeroen van der Veer even said so in 2008. After 2015, they don’t anticipate “being able to meet global demand with readily available reserves.”

      I agr……..

      Heh heh.

      He should know better. As you mentioned, we’re getting better and better at getting the hard stuff out. Further, we are finding more and more of “the other stuff”.

      For better or for worse, we’ll never get off until we “breakthrough” another technology [think penicillin] or until we really REALLY start to run out and the economics of it all force us to.

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