Have Concerns Over Peak Oil Peaked?

It wasn’t that long ago that peak oil was on everybody’s minds. The basic scenario: Global energy demand would soon outstrip the world’s oil supply. Some of the more feverish types believe this will lead to a civilizational breakdown and a post-apocalyptic Mad Max landscape.

Peak oil anxieties first penetrated mainstream media in the mid-2000s, with concerns about Mideast oil running out.


A 2004 National Geographic cover story pronounced:

Humanity’s way of life is on a collision course with geology—with the stark fact that the Earth holds a finite supply of oil. The flood of crude from fields around the world will ultimately top out, then dwindle. It could be 5 years from now or 30: No one knows for sure, and geologists and economists are embroiled in debate about just when the “oil peak” will be upon us. But few doubt that it is coming.

In the New York Times magazine, Peter Maass wrote in 2005:

Few people imagined a time when supply would dry up because of demand alone. But a steady surge in demand in recent years — led by China’s emergence as a voracious importer of oil — has changed that.

This demand-driven scarcity has prompted the emergence of a cottage industry of experts who predict an impending crisis that will dwarf anything seen before. Their point is not that we are running out of oil, per se; although as much as half of the world’s recoverable reserves are estimated to have been consumed, about a trillion barrels remain underground. Rather, they are concerned with what is called ”capacity” — the amount of oil that can be pumped to the surface on a daily basis. These experts — still a minority in the oil world — contend that because of the peculiarities of geology and the limits of modern technology, it will soon be impossible for the world’s reservoirs to surrender enough oil to meet daily demand.

That same year, John Vidal reported in the Guardian that oil production could peak within a year. The subhead of his piece: “Kiss your lifestyle goodbye.”

A 2006 documentary captured the zeitgest.

Environmental organizations caught the wave.

Most economists were dismissive, but by 2008, New York Times columnist Paul Krugman wrote that peak oil was “a dismal theory that keeps getting more plausible.” Two years later, he declared that “peak oil has arrived.”

The peak oil frenzy probably reached its crescendo in the late 2000s.


In 2009, the International Energy Agency  (IEA) announced that peak oil was, in fact, true. Then a 2012 IEA report suggested that announcement was premature, prompting the Economist to say that America now had energy to spare. What the hell?

So what is the current status of peak oil? A recent article in EnergyWire canvassed experts from think tanks and universities. Their verdict:

The peak-oil concept is increasingly out of date less than a decade after its proponents said global output would surely hit the halfway mark. And few of these sources [experts] came from what one would think of as traditionally right-leaning or “pro-energy” institutions.

“There is little reason to believe that the peak in global oil production will be reached anytime soon,” said Jason Bordoff, the director of the Center on Global Energy Policy at Columbia University and a former White House climate aide to President Obama.

Hindsight, of course, may be 20-20, but Michael Ross, a political scientist at University of California, Los Angeles, and author of “The Oil Curse: How Petroleum Wealth Shapes the Development of Nations,” says it was a faulty theory to begin with. He pointed out that many of the countries from which oil and gas companies have historically steered clear — in Africa and Latin America — are now expected to become significant oil and gas producers, shaking up the landscape and adding a layer of cushion atop this elusive entity called global supply.

“I don’t think it was ever a well-founded theory,” Ross said. “The fact is these resources have always been out there, and it’s just a matter of the industry needing to invest more in extraction technology in order to get at that. That’s what we’re seeing now.”

Maybe Tim Worstall in the Telegraph is on to something here:

Can we please just declare the end of ‘peak oil’ and start worrying about something important?

I vote for peak coffee.

UPDATE: Via Twitter, I asked energy analyst Chris Nelder if the media overplayed peak oil or peak oilers overstated their case. His response:

  He also said this.

139 Responses to “Have Concerns Over Peak Oil Peaked?”

  1. JonFrum says:

    Can I give a shout-out to the late Julian Simon, who made the brilliant point that a ‘resource’ is not a thing in a barrel – or in an ore seam or a salt dome. Petroleum was not a resource until man found uses for it, and ways of accessing it. The resource is, then, in the mind of man, not in the ground.

    Every statement of a peak oil timeline assumes the opposite – that the resource we call oil (or gas) – is stuff that sits in a series of tanks underground, in known form, and known ability to access. Nothing can be further from the truth, as events have proven over and over again. Resources are literally created out of nothing but the ingenuity of man – see fracking. The natural gas that is being accessed by fracking was not a resource until the technology for accessing it was invented. Suddenly, vast amounts of ‘resource’ came into existence. Cool, no?

    The great thing about Julian Simon was that he showed that one could be both a hard headed realist and an optimist. The peak oil crowd are both the nattering nabobs of negativism and boneheadedly wrong.

  2. Tom C says:

    Kudos to Keith for performing an autopsy on a body that most of his poltiical allies would like to bury and forget.
    We skeptics have confidence in our assessment of climate alarmism precisely because it so mirrors similar scares like “peak oil”. In both cases, the alarm is media driven with the assistance of select experts. In both cases the countervailing facts are well known and have been well known for decades. In both cases there is centennial-scale history of similar failed predictions. In both cases, discussions of the topic on blogs are dominated by people like Michael Tobis blathering about how sophisticiated they are and how obvious the crisis is.
    A similar autopsy will someday be done on CAGW. Just a matter of time.

  3. Robert Ford says:

    Sometime is the next 10-175 years we’ll definitely see peak oil….I think. EVERYBODY SHOULD FREAK OUT

  4. Keith Kloor says:

    Climate change–and concerns about it–are different. Do activists tend to exaggerate for effect and catastrophize? Sure thing. But the science behind climate change is solid and worst case scenarios are legitimate, if often framed in a way that puts undue emphasis on them.

  5. Howard says:

    Peak (free-flowing) oil (trapped within relatively shallow, near-shore permeable zones) was accurately predicted by M King Hubbert.

  6. Buddy199 says:

    In a court of law the rule for testimony is false in one part, assume false on all parts. Considering how much hyperbole and truth stretching are injected into the AGW debate by activists it makes one question any of the science to a much greater degree than would otherwise be the case. Especially when the climate Cassandras insist that our only hope involves a top down, command upheaval of modern industrial society. The hard sell hasn’t sold me yet.

  7. Mobius007 says:

    Yes, human ingenuity is wonderful, and oil will never run out.

    Oil will, however, become ever-more expensive to produce, as new and ingenious ways to extract once unreachable oil are developed.

    Under this scenario, oil (or more correctly, fossil fuels) will continue to increase in cost and will ultimately have to be abandoned as our defacto primary energy source, as it simply won’t be cost effective.

    Many would argue that $100 oil is only borderline “economically tolerable”, and increases in the price of oil beyond this point lead to known and measurable declines in GDP.

    So, oil won’t run out, we just won’t be able to afford it, which lines-up nicely with the consequences of peak oil. And since there is no substitute for oil, these consequences are awesome.

    As we all know, peak oil was never about running out of oil but rather being able to achieve production levels that kept oil’s price in check (and thus our oil-based economy running smoothly).

  8. Tom C says:

    regarding worst case predictions, have you been following the climate sensitivity issue these days? It is really the basis behind every other worst case prediction. Check out the article in the Economist to see where we are at for climate sensitivty prediction.

  9. Lord says:

    Peak oil has evolved with the times. Rather than a one time peak followed by a crunch, it has become one of an extended peak where more drilling is done when the real price of oil rises and less when it falls leading to fairly stable real oil prices for some time to come.

  10. Mobius007 says:

    Oil has become ever-more expensive to produce, as new and ingenious ways to extract once challenging and unreachable oil have been developed.

    Ultra Deep Sea, Shale, Arctic, Tar Sands and Biofuels are all capital intensive and highly expensive propositions, previously economically infeasible. If you keep oil around $100/barrel these are economically workable production solutions. These production costs can only be expected to increase as ever more challenging oil is sought.

    Under this scenario, oil (or more correctly, fossil fuels) will continue to increase in cost and will ultimately have to be abandoned as our defacto primary energy source, as it simply won’t be cost effective.

    Many would argue that $100 oil is only borderline “economically tolerable”, and increases in the price of oil beyond this point lead to known and measurable declines in GDP.

    So, oil won’t run out, we just won’t be able to afford it, which lines-up nicely with the consequences of peak oil. And since there is no substitute for oil, these consequences are awesome.

    As we all know, peak oil was never about running out of oil but rather being able to achieve production levels that kept oil’s price in check (and thus our oil-based economy running smoothly).

  11. I will admit that I became influenced by the hype. And I changed some of my behavior as a result. I got a motorcycle license and a 100mpg scooter.

    That said, I still really like the scooter.

    But the failure of the hype to materialize has made me more skeptical as a consumer of media on issues like that. When I went looking at some of the sources and seeing the discrepancies between the media and the actual underlying evidence, I’m afraid I became really cynical about the media.

  12. Keith Kloor says:

    I saw that article. Would have liked it to be meatier.

  13. Keith Kloor says:

    That’s an interesting point. In other words, wonky peak oil advocates were more circumspect? But the media hyped them?

  14. AlisonCummins says:

    Exactly! When Ross talks about oil companies “needing to invest more,” someone’s going to cover those costs. That’s us. Other costs: externalities (disruptions to water supply and agriculture from fracking); military, as countries try to secure access to trade with the countries where oil is cheapest. Those costs may not be directly reflected in the cost of a barrel of oil, but in rising costs of food, water and housing and in a slower economy. It’s not enough to simply observe that the oil exists.

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  16. Mobius007 says:

    Thanks for touching on the externalities, particularly military activity. I normally don’t bother trying to explain that the primary reason we have our largest military presence (outside of the US) in the Middle East is because of oil, and that we have spent Trillion$ there in just the past decade.

    People just don’t get it.

  17. Buddy199 says:

    Serving spam for Good Friday, no thank you.

  18. Buddy199 says:

    Oil and Isreal. We can solve the oil problem but we’re still going to protect Isreal no matter what.

  19. Buddy199 says:

    The market always seems to have a way of trumping that scenario. As oil was apparently running out a few years ago, suddenly new technology was developed to squeeze more out of existing wells and unlock fantastic amounts of cheap natural gas. I’d bet the same happens with methane hydrates or other technology as yet undeveloped.

  20. Kuze81 says:

    The real question: have we reached “peak” peak oil articles?

    The Malthusians argue yes and perhaps gone over. For example, Time magazine hasn’t run a hysterical and over-simplistic cover story about it in years! This group believes that the supply of peak oil articles will soon run out with very concerning consequences for society as a whole.

    The Cornucopians argue that we haven’t and won’t soon run out.This group believes that while peak oil articles are finite, once supply becomes low the incentive will be created to discover new and exciting things to freak out about that we never even thought possible.

  21. Mobius007 says:

    The technology advancements seem possible, and I appreciate your optimism, but the fact that methane hydrates and kerogen are not being aggressively commercially developed (along with the prerequisite tech development) is because production from these sources is no where near a cost break even point – even with oil at $100.

    Many question if kerogen from oil shale (different from “shale oil”) and methane hydrates can ever be produced, in volume, economically.

    We’ll see, and in our lifetimes.

  22. Mobius007 says:

    “This group believes that while peak oil articles are finite, once supply becomes low the incentive will be created to discover new and exciting things to freak out about that we never even thought possible.”

    Yep, I’m sure we can count on the media, and perhaps our politicians, to point out the next looming “asteroid in the room” for us.

  23. There was a range of advocacy, like most cases, I’d say. But on the forum sites I was reading the hair-afire types would point to wonky takes and shout about how wrong they were. So you got exposed to the wonks as a result–and looking at the more measured takes you had to go…hmm….

  24. jh says:

    The problem with Hubbert’s theory was that it was developed for existing drilling and production technology.

  25. Howard says:

    That was my entire point if you read between the parens. However, It’s not a problem, it is the limitation of the calculation. The accuracy of his prediction is breathtaking, so maybe you should not be so smug when speaking about one of the greatest geoscientist of the 20th century.

  26. jh says:


    Peak oil was and is a flawed theory. The problem is that peak oil proponents simply don’t know (laymen) or don’t accept (most peak oil advocates) the fundamental principles – time tested principles – of resource economics. And along with peak oil is another common idea that ignores resource economics: the idea that we’ve got all the “cheap oil,” so even if we still can find and recover oil, it will be too expensive to produce and use.

    “Peak Oil” and “Cheap Oil” theory (if the latter can be called such) both come from what appears to be obvious common sense. There’s a finite amount of oil, right? And we’ve really used a lot of oil in the last century, right? So, therefore, we must eventually run out, or drive the resource to such a high price that it’s uneconomic to produce, right?


    The first problem with the “finite” aspect of this common sense approach is that it doesn’t say anything about what “a lot” is. From the production perspective, it doesn’t matter how many bazillion barrels of oil have been used. What matters is the volume of oil that has been extracted vs the volume of potentially producing rocks. That ratio is small. Oil is held in sedimentary rocks, which compose 75% of the surface of the continents and which in many areas are as deep as 20 km below the surface. Today’s deepest wells are 5-6km below surface. So we’re looking at a significant portion of the crust that has never been explored. And that doesn’t count oceanic crust.

    The second problem with the “finite” aspect of the common sense approach is that it presumes “oil” means “traditional oil” – big pools of liquid oil. If you do a little model – using many assumptions (as all models do) – you might find that, with the current technology (e.g., shallow, straight drilling) and known reservoir types the chances of finding a large pool of new oil in known producing regionsare small. This set of assumptions is basically the Hubbert model. But shale oil is outside these assumptions. Moreover, it’s not new. It’s been known since the 1970s, and has been just waiting for technology to provide the means to access it – just as gas hydrates are widely known today but not produced.

    The common sense approach peak oil theorists blatantly ignore these two issues.

    Then we have problem three, the “cost” aspect of the common sense model. The idea that commodities get more expensive over time as they supposedly become depleted is very popular and demonstrably wrong . Commodities, in fact, though they may fluctuate dramatically in the short term, become less expensive in real terms over time. This is a known and indisputable fact of commodity – and thus resource – economics.

    Blake Clayton has a nice post about this over at CFRs Energy, Security, Climate blog (http://blogs.cfr.org/levi/2013/03/27/three-graphs-that-resource-pessimists-dont-want-you-to-see/). Clayton notes that the only exception to this rule is oil. Guess why? Can you say OPEC? Oil is the only resource that has been controlled by any cartel (oh, perhaps we could include diamonds) over the last 125 years. And note that when OPECs control fell apart in the late 90’s, oil prices dropped as low as $12/BBL

    Why does this happen?

    It happens because technology allows the real cost of production to fall over time. Thus, today, companies can mine huge amounts of rock extracting copper at very low grades and still be profitable, because they use high-precision bulk processing facilities. Oil companies can profitably extract from smaller reservoirs because they can drill much deeper, use directional drilling, and have much better tools for understanding the nature of the reservoirs.

    So, here’s the bottom line. The peak oil theorists were wrong from the beginning on three counts.

    First: The volume of explored crust is small.

    Second: the assumption of “current technology” doomed all models of the future to failure.

    Third: the real cost of commodities declines over time.

    There never has been anything fundamental to peak oil.

  27. jh says:

    Hubbert’s theory was developed for existing drilling and production technology – originally just for a single oil field – and extended by Hubbert himself to make claims far beyond what the basic assumptions allow. That’s where the problem lies.

  28. Curzon Dax says:

    I think Peak Oil deniers haven’t realized something simple: If you provide the obvious evidence and they don’t accept it, then it might be best to let them in their ignorance. Why spend resources to convince those that deny it when it doesn’t benefit you?

  29. Eurodoom says:

    Interesting points. But energy is not just like any other commodity because to get energy you need to expend energy.

  30. Keith Kloor says:


    Thanks for the comment and the heads-up about Clayton’s post. The link was busted, so I’m pretty sure this is the post you meant? http://blogs.cfr.org/levi/2013/03/27/three-graphs-that-resource-pessimists-dont-want-you-to-see/

  31. Martin says:

    The ‘environmentalist’ concept of peak resources – that we are about to run out of this or that – have been around since at least Ehrlich and his predictions of imminent starvation and doom in the 70s. And possibly you could include Malthus.

    So it’s not some recent tentative theory that is probably being shown to be mostly false, instead it’s a recurring scare that resurfaces perhaps only when it’s been long enough for people to forget the previous scare and how nothing happened.

  32. mem, I’ve appreciated your discussions about GMOs on various sites, so I offer the recommendation to pay attention to Robert Rapier for rational discussion of peak oil. The near-term doomers were clearly wrong, but oil is a finite resource that will one day reach maximum output, and it’s still worth paying attention to. I hope Keith, whom I also deeply admire, will keep an open mind about the phenomenon even while excoriating the loud mouths and cranks in the peak oil movement. I discovered the hard way that the vast majority who write about peak oil deserve to be ignored. It is an extremely difficult issue to get a handle on, to learn whom to listen to, unlike, say, the issues of climate change and GMOs.

  33. jh says:


    Yeah, that’s the post. Clayton’s other recent posts are good as well and of course Michael Levi has many good posts. Both are thoughtful and well-versed resource economists, not inclined to hype.

  34. JonFrum says:

    No, no and no. My grandparents paid 10 cents for a loaf of bread. Is bread ‘too expensive’ now? I remember 28 cent gasoline. Is gasoline ‘too expensive’ now? The concept of ‘too expensive’ in this regard always boils down to ‘more expensive than now,’ and nothing more.

    Given that people were saying the exact same thing about natural gas just a few years ago, can you not understand the profound boneheadedness of what you are claiming? Overnight, seemingly, we’ve gone from ‘peak gas’ to ‘what will we do with it all?’ And how did it happen? It happened because natural gas fuel is not stuff in the ground – it is a resource. It is not found – it is created by the ingenuity of man.

  35. JonFrum says:

    When people invest, they don’t take money out of your wallet. The investment is independent of your bank account. They invest – rather risk – their own money because they believe that the market will be willing to give them back more than they put up. Both ends are voluntary – unlike the government, when it taxes you to pay for alternative energy subsidies.

  36. RogerSweeny says:

    In that case, the story is pretty much economics 101. The next step in the econ 101 story is that once it seems that the price will go high enough for long enough, there is a substantial incentive to develop and deploy technology to create substitutes.

    Nowadays, nobody worries that we have long since passed peak whale oil.

  37. jh says:

    Badabing! Excellent point, JonFrum. The new investment comes from the profit created by previous investments.

    Oil companies can’t charge what they want for oil – that is, they can’t charge higher prices to cover the cost of investment. The market establishes the price by bid. With the price established by the market, they have two choices: they can choose to produce or not, and they can choose to invest retained earnings – profit already secured – in new exploration and production or not.

  38. jh says:

    You need to expend energy to obtain any energy or any other product for that matter.

    There’s been much fuss about how much energy it takes to unconventional oil, along with a lot of fuss about the decline rate of shale oil wells. But claims that the high energy input required will doom the product suffer from the same issues that the Hubbert model suffers from: the flawed “current technology” presumption.

    When any new technology product becomes economic for the first time it will be the worst technology ever used to produce that product. Once the product breaks the economic barrier and produces a profit – especially if it’s not a patented product – two important things happen. First, producers can invest in research to improve the product and the production techniques. Second, and most important, the hundreds or thousands of people producing the product start tweaking and improving the production.

    So the cost of production in terms of energy will decrease as the technology improves. By how much no one can say: 10%? 25%? I’d guess wildly in that range. But improve it will.

  39. jh says:

    “production from these sources is no where near a cost break even point”

    It’s not just a cost equation. It’s an ingenuity equation. Many dollars can be spent finding the right formula but once that formula is found, the dollars spent on finding it have no bearing on the ultimate cost of production.

  40. Pacific Raised says:

    Not quite. Firstly, technology is not energy: new technology does not and cannot create new energy. Which is not surprising because matching the energy density, ease of transportation, convenience and relative safety of crude oil is darn hard. Also, what price do you think oil will need to hit for these substitutes to arrive? Oil at US$120/bb created no viable substitutes of scale, just newer and bigger alternative energy failures.Will US$150/bb be a high enough price? Or will it have to be over US$200/bb?

  41. jh says:

    Ultimately, both oil and FF in general are finite resources. But as we write today there are substantial known but untapped reservoirs of fossil fuels that await either higher prices, the technology to produce them, or both.

    One of the issues with the public’s understanding of resource economics is that the fluctuation of supply and demand that drives prices occurs over several decades, while most people seem to think on a <5 year time horizon.

    I think the 5-year horizon is also true of economics in general. I mean, just four years ago virtually no one could grasp the idea that the S&P 500 or Dow would succeed it's previous peak in a decade, much less four years. Millions of people lost piles of money because they pulled their investments out of the market.

  42. Jeffrey Brown says:

    For an alternative point of view, you can search for: Export Capacity Index.

  43. Pacific Raised says:

    All you’re talking about is a difference in timing is it not, not a difference in final outcome. The tracking from 1972’s Limits to Growth is very accurate.

  44. Pacific Raised says:

    The basic production pattern holds however, per well, and for large groups of wells summed together. Even with fracking technology (which has been used for decades). For poorer quality sources of oil i.e. ‘tight oil’, oil production can ramp quickly, but it also falls away quickly, far faster than conventional light crude wells which were being sunk in the 1950’s and 1960’s. Over time, many new (relatively poor productivity) wells have to be drilled for such a ‘tight oil’ field to maintain even a steady output, in order to compensate for existing well production declines. Very expensive.

  45. Pacific Raised says:

    Let’s see if the shale gas production boom lasts another 10 years. There are doubts as to the sustainability and I think that they are well founded. “t is not found – it is created by the ingenuity of man.” Energy can’t be created.

  46. Pacific Raised says:

    Most oil is traded on dark exchanges with no publicly visible bid or ask. The open market which we see only determines oil prices for a small fraction of what is actually traded.

  47. Pacific Raised says:

    The stock market merely hit a new nominal peak. Adjusted for expansion in the money supply and real inflation, it probably should not be considered a new all time high.

  48. ghung321 says:

    JonFrum wrote: “Resources are literally created out of nothing but the ingenuity of man –
    see fracking. The natural gas that is being accessed by fracking was
    not a resource until the technology for accessing it was invented.
    Suddenly, vast amounts of ‘resource’ came into existence. Cool, no?”

    One of the most ridiculous statements I’ve seen yet, but typical of what JM Greer recently described as “The Illusion Of Invincibility”. Best to just let it go for now. Attitudes like this will only accelerate the day when the peak resources realists will be vindicated. Party on dude!

  49. Jim Housman says:

    Well, actually, if you look around it turns out that the planet is finite. If you were interested in data instead of ideology you might also notice that fracking wasn’t invented recently. The oil and gas industry has been fracking wells for over 30 years. What brought an increase in oil and gas production was high prices, and when prices dropped on natural gas the drilling of new wells began to drop and prices are on their way back up. Most fracking is now done to develop oil, whose price remains high because it is more easily transportable than gas and economic growth in Asia is still relatively high. They can afford higher prices than we can. And it is not obvious to us data watchers that “vast amounts” of anything has come into existence. It was simply too expensive before, everyone in the oil industry knew it was there all along.
    Try to understand that the important thing is not oil or gas or even energy. It is energy at an affordable price. And oil is touching at the margins of affordability.
    One last thing. Quoting the crooked politician who was forced out of office for the equivalent of petty theft isn’t exactly cool.

  50. Would this be the same “JM Greer” who said we have to return to Druid “Magick” and who declared on the radio that everyone who currently survives on medications is going to die?

    If so, no thanks.

  51. yt75 says:

    lol, poor Amewikaa 🙂

  52. ghung321 says:

    In case you haven’t noticed, many who need medication to survive are having to choose between their meds, food, and housing,, and that there have been numerous medication shortages lately, globally. You also misinterpret his position on magic; he states that the old “magic” isn’t working so well. Of course, if you believe in the invincibility of humankind, you probably haven’t noticed any of these things.

  53. jh says:

    The term “very expensive” is meaningless. To have any meaning, the term “expensive” requires a comparison between two things.

    So what is it “very expensive” compared to? The cost of drilling a conventional reservoir? The cost of conventional (non-directional) drilling? The current oil spot price? The 1998 oil spot price? The futures contract? What?

    Economics is about relative value. Cost alone has no meaning.

    Shale oil will always cost substantially more to produce than conventional oil. I expect that, when pipeline infrastructure is in place to bring ND/Tar Sands oil to market, oil prices will fall. But so will production costs, and production costs will be pressured even more by falling market prices.

    Today WTI is at $97 and reported break even costs are in the $55-$65 range. That’s a pretty substantial chunk of change for producers.

    Expensive? Yes. Profitable? Very much so.

  54. jh says:

    Pacific, can you point to some fundamental factor to validate your predictions, or are you just blowing cold air?

    If history is any guide, you’re quite mistaken.

  55. jh says:

    Fracking may be decades old. Directional drilling isn’t. Improvements in drilling technology and reservoir characterization are very real and very new.
    “when prices dropped on natural gas the drilling of new wells began to drop and prices are on their way back up.”

    Excellent! You’re very perceptive about how markets work.

  56. jh says:

    “what price do you think oil will need to hit for these substitutes to arrive?”

    $60? It’s not a price equation. It’s a “relative price” equation. The price of new technology declines over time, right? Do you have some data that refutes this?

  57. jh says:

    Well, Bud, “nominal” values are the way we measure the value of stock market indices. Stock market indices don’t have a monetary value, so “real” terms are meaningless. Indices change to reflect the value in the underlying economy. The Dow of 1965 isn’t the same Dow as the one of 2000 or 2013.

    Whatever the case, my IRA is far ahead of 2007 in both real and nominal terms.

  58. jh says:

    Would you mind showing us that “tracking”? It would be nice to have a real argument from you to refute.

  59. Tam Hunt says:

    This article, and the key E&E article it links to, fail to connect the arguments by the continued proponents of Peak Oil with counterarguments by those who believe the theory is wrong. The result: a complete muddle that masks the key facts relating to peak oil as a real problem: 1) unconventional oil and gas fields have incredibly fast decline rates, requiring more and more wells to stay even or advance (the Red Queen problem; 2) the fact that the energy content of unconventional and replacement liquids is far lower than conventional oil (about 30% lower on average), leading to a very misleading comparison of barrel for barrel production; 3) the fact that major oil exporters are consuming more of their own oil as their economies grow, leading to declining net exports (the net export problem). The net impact of these three problems is very substantial. Here’s my article explaining in more detail: http://www.greentechmedia.com/articles/read/guest-post-the-future-of-energy-part-i

  60. hoary_nodens says:

    “It happened because natural gas fuel is not stuff in the ground – it is a
    resource. It is not found – it is created by the ingenuity of man.”

    LOL this would be so hilarious except so many desperate Americans want to believe this tripe – Let me guess – you have a background in the secular religion of economics and don’t think the laws of physics, thermodynamics, nor the principles of geology are important.

    Your smug and proud defiance against the laws that govern the universe means the people who are debating you are wasting their time.

    Take your “ingenuity” and go drill some new gushers in the east texas oil field. Or head off to Indonesia and with your ingenuity convert them back to a net oil exporter so they can rejoin OPEC.

  61. Pacific Raised says:

    Don’t get me wrong. Energy is going to be a very profitable industry to be in. After all, the scarcer something gets, the more profitable it tends to be to trade in (even more than now). As for the term “very expensive” – I was also speaking in terms of personally as a consumer. Energy is going to cost more and more as a % of my household budget, and as a % of the goods and services I buy with each single dollar. That’s what I meant by ” very expensive”.

  62. Howard says:

    Direction drilling is not new either, jh. The real difference today is the exploration and production from source rocks which contain 99%+ of the total hydrocarbons in the ground. Hubberts accurate Peak Oil prediction was regarding the <1% of the hydrocarbons that managed to flow from the source rocks and pooled in traps by structure.

  63. Pacific Raised says:

    Rapid, steep well production decline rates necessitating ongoing major capital investment just to keep production levels static.

  64. Pacific Raised says:

    “New technology” is not a homogenous phenomenon. New technology like the latest iPhone or Intel chip declines over time, Moore’s Law has proven a gift. But bew technology like the F-22 Raptor doubles, then triples, then quadruples, then quintiples the initial investment and price of an F-18. The latter is how I see the new energy equation.

  65. Pacific Raised says:

    “Stock market indices don’t have a monetary value, so “real” terms are meaningless.” I don’t want to sound like a goldbug (or maybe I do), but looking at things in terms of nominal pricing only ignores both the massively expanded money supply and the high rates of real inflation that people are experiencing.

  66. Why on earth would the National Geographic cover story be included in this? It was the end of cheap oil, and no one can argue that at some point, oil production will peak; It’s a finite resource.

    But perhaps instead of simply relying on media coverage to decide on whether peak oil theory is a fad or not, you might want to examine two sets of data: historical oil prices (http://goo.gl/CdMhD) and historical global production figures (http://goo.gl/SKRh7). In that last graph, the sliver of green at the top is the US tight oil bonanza.

  67. ThomasXxs says:

    It is simply nonsense to say that Hubbert’s theory was “just for a single oil field”! Just out of curiosity, which single oil field was that? And how was it so different from all the other oil fields in the world? Better yet, can you name any oil field where the oil production rate has not (or will not) reach a peak level before declining? In what other pattern could oil production levels possibly develop? Increasing every year without end? Or maintaining constant production levels forever and ever? What is the alternative model you have in mind, to that of “peak and decline”?

    Actually, there is a minority theory of oil formation known as “abiotic oil” which suggests that the earth itself produces oil and gas from inorganic mineral sources combining under extreme heat and pressure in the earth’s mantle, entirely independent of any organic sources (i.e. deposits of animal and plant life). The Abiotic theory was first developed in the former Soviet Union (by Ukrainian scientists to be exact). In the west, this Abiotic theory was most strongly promoted by the late Professor Thomas Gold of Cornell University (a highly respected Astronomer/Iconoclast, with serious and provocative efforts in other fields of science). Abiotic theory is in contrast to the mainstream theories of petroleum development, which all involve huge, ancient deposits of organic sediment (possibly involving prehistoric oceanwide die-off events) being deeply buried and gradually transformed into oil and gas by the levels of heat and pressure found at key depth ranges below the surface (the “oil window”) over very long periods of time.

  68. Ran Kohn says:

    While it looks like Israel …its really about oil. Actually Israel is our military surrogate in the Middle East. Without Israel we would still be all over that part of the world protecting “our” oil.

  69. Ran Kohn says:

    Some of us are being fooled by the oil and gas industry to believe we have unlimited supplies of tight oil&gas. The reality is there is a limit to everything. Sure we can turn the planet into Swiss cheese by ransacking and drilling everywhere. But eventually even the Swiss cheese will crumble.
    The reality is that Europeans and Americans consumed a very goodly amount of the supply of easily available oil and the concept that the rest of the planet which dwarfs us from a population perspective will do fine with tight oil is silly.

  70. Mista Ox says:

    I am really stunned that an article like this would be published by Discover. Where is the data?

    Here is Data. Verifiable Data. Prices up, demand (except for the 2008 recession) is up, Investment in extracting new sources doubled from 2004-2012 only increasing output by 2mbpd, while prices more than trippled per barrel, and havn’t come down even with reduced demand caused by recession. check the facts. The above article isn’t fit for a hamster cage.

  71. Pacific Raised says:

    Exactly. People think the socioeconomic consequences of peak oil occur down the track. Not so. they are occurring all around us, right now.

  72. jh says:

    Pacific, you’re a hoot! 🙂 You’re using defense contracting as a measure of the cost of new technology? 🙂

    Look at any piece of consumer electronics in your home today. Anything. It’s cheaper and more powerful now than it was 20 years ago, if it existed at all. And that goes for technology that you had twenty or thirty or forty years ago, before semiconductors were part of the scene. That’s what happens when thousands of people have a crack at re-engineering a product.

    Even your car is cheaper now than it the past in real terms and you get a lot more for your money.

    Your argument is flimsy.

  73. jh says:

    Yeah, it is, in the sense that its cost has fallen to the point that it can be widely employed for low-margin resource production.

  74. jh says:

    Hubert originally developed his ideas with respect to single wells and fields, then broadened them to include regions and continents.

    Wikipedia also notes:

    “Hubbert was concerned with “easy” oil, “easy” metals, and so forth that could be recovered without greatly advanced mining efforts…”

    Hubbert’s theory applies to a particular type of field, a particular type of oil and a particular type of production technology. Hubbert’s theory has no bearing on the long-term viability of a resource.

    Hubbert’s theory is not an economic theory at all, and therein lies the problem. It is nothing but a snapshot of the technology of a given period in the history of oil extraction.

    Obviously, because the Earth is finite, oil is also finite. But that’s not the question. The question is this: are we near the limits of that finiteness? 🙂

  75. Chad Brick says:

    The price of oil has roughly tripled since the 90s in real terms. This has brought forth a couple decades worth of supply. Are you ready for the next tripling?
    If you think the last few years have undermined the “peak oil” argument, you never understood it. Waves of price increases followed by new production of oil that can be profitably extracted at that new higher price, followed by more price increases when the latest batches of oil peter out, is exactly what the “peak oilers” were predicting. Fracked oil and gas will peak in the 2020s. Then what?

  76. Pacific Raised says:

    “Hubbert’s theory has no bearing on the long-term viability of a resource.
    It is not an economic theory at all, and therein lies the problem. It
    is nothing but a snapshot of the technology of a given period in the
    history of oil extraction.”

    Yet Hubbert curves can and are being accurately drawn for much more modern shale oil production. And the conclusion: well production decline rates after the first few years are catastrophically high, when compared to the ‘easy oil’ available through the 1960’s and 1970’s.

  77. jh says:

    “The price of oil has roughly tripled since the 90s in real terms.”

    In real terms, the price of oil:

    rose 1.57% annually from 1981 ($60.81) to 2012 (~$100).
    fell 8.35% annually from 1980 to 1998 ($12.71).
    fell 0.98% annually from 1957 ($17.43) to 1998.
    rose 3.3% annually from 1957 to 2013
    rose 5.8% annually from 1957 to 2013
    rose 14.73% annually from 1998 to 2012
    fell 2.07% annually from 1957 to 1972 ($12.73)
    fell 0.01% annually from 1972 to 1998
    rose 5.16% annually from 1972 to 2012

    Oil prices experience dramatic swings. The most dramatic of these have come since the dawn of OPEC and are driven by OPECs success or lack thereof in controlling production.

  78. Pacific Raised says:

    “So the cost of production in terms of energy will decrease as the
    technology improves. By how much no one can say: 10%? 25%? I’d guess
    wildly in that range. But improve it will.”

    In my view, the Red Queen scenario applies – you have to work harder and harder and spend more and more, just to keep production static. The bottom line being that net energy into the wider economy actually declines as more and more of it is used just to keep extraction going. i.e. the Energy Returned on Energy Invested concept.

  79. Chad Brick says:

    True, but we are on the better part of a decade of high prices and minimal production increases. Also, the marginal costs of production for the majors are pretty consistent with the current price of oil. There is no reason to expect the price to go down again on any sustained basis.


  80. jh says:

    “Yet Hubbert curves can and are being accurately drawn for much more modern shale oil production.”

    And your point is? 🙂

    My point is that Hubbert curves have nothing to do with the total production of a resource.

    “well production decline rates after the first few years are catastrophically high”

    Regardless, the “break even” price is still well below current prices, providing more than enough incentive to keep investing.

    Again, its not how much it costs to produce it. Its how much can be earned from producing it! 🙂

  81. Pacific Raised says:

    That’s an accounting trick, not a reality. If the first barrel of oil costs $10B to produce and the second barrel only costs $20, someone is still going to have to pay up.

  82. MrEnergyCzar says:

    All the global money printing to keep the debt growth based economies afloat is a reaction to the peaking of cheap conventional oil in 2006. Pretty basic stuff. Peak oil is about the peaking of conventional oil that economies can afford to burn, not tar sands or other more expensive unconventional sources that economies won’t grow by using more of each year……


  83. jh says:

    There never is. Whenever you ask the talking heads what’s going to happen, they simply extend the current trend into the future.

    I believe Rex Tillerson (CEO of XOM) testified a year or two ago that oil prices were “too high” for the supply situation, prompting much (feigned) outrage in Congress about oil price manipulation. Tar sands and Dakota oil are also landlocked for the moment.

  84. BobSmith77 says:

    I am an economist by trade (health) but the 2 things economists in general really suffer from like most of the rest of the population does:

    1. ‘Technology is magic’ – Human society can overcome all if the proper economic system such as free market capitalism is in place to invest and come up with technological solutions that will increase supply, decrease costs, etc.

    This is so wrong and flawed I don’t know where to start but because of the last ~100 years of industrialization we think it is the case and it has become a core tenet of economic doctrine & society as a whole.

    2. Everything has a substitute – Extension of basic macroeconomic theory. Problem is that for a lot of things in the world there are finite limits to things and once we use them/degrade them they are gone or not useful anymore and there isn’t a substitute available. We just go without and the processes that depend upon that resource grind to a halt.

  85. Pacific Raised says:

    As I mentioned, I believe the consumer electronics analogy is inappropriate to this scenario. One reason is that electronics is not an important contributing cost in oil production.

    As for your car scenario – per capita passenger miles in the USA have been declining steadily for the last 8 years. It doesn’t matter if you think cars are cheaper now, people are using them less and less.

    In my view you’re still mistaking technological progress for new energy. They’re not remotely the same thing.

  86. Rod Campbell-Ross says:

    Directional drilling is decades old – at least 40 years old.

  87. Jeffrey Craig says:

    I tell ya, the arrogance of economics majors and other cultists of modern finance is truly boundless. Newsflash: energy dictates to economics, not the other way around, mmkay? … I can pretend I’ve found a trillion barrels of the lightest, sweetest crude behind the moon. But that says literally NOTHING about the logistics of bringing it to market, nor the average consumer’s capacity to afford the price. … Here’s another newsflash: Peak is already here. And as costs continue to rise for ever more expensive junk-grrade “oil”, this so called “recovery” will remain more and more unreachable. Ignorance or arrogance, not sure which is more detrimental to societies. Modern conservative econ majors possess an abundance of both.

  88. Oil production very likely has peaked already. It has plateaued for almost the last 8 years globally (with an almost statistically insignificant recent increase), despite prices more than doubling, even tripling, over that period.

    One of the largest remaining reserves, the Alberta oil sands (1/4 of the world’s remaining reserves), represents between 6 and 10 years of global oil consumption. Even with prices shooting up up and away, commercial production from Colorado’s oil shale is effectively zero, because the required inputs to turn that stuff into usable oil are basically a wash with the oil you get out of the process. It doesn’t matter how high oil price goes, if there is no net energy return, than even an infinite oil price will not bring more oil out of the ground, because the input energy prices will be following in the footsteps pretty quickly.

    What more evidence of PO do we need?

  89. Expensive relative to an hour of labour, a pound of copper, a dollar, a car, or pretty much anything.

    Alberta oil sand cannot possibly be ramped up in time to save the world from oil decline. It is very slow oil, requiring factories to be built overtop each deposit and it needs to be cooked in the ground for months first. The fact that we are now pinning our hopes on turning pavement into oil is the ultimate proof that we are indeed running out of recoverable oil.

    The whole Alberta recoverable deposit, (1/4 of the world’s reserves) amounts to 6 to 10 years of global oil consumption. Stick that in a supply / demand chart.

  90. “The question is this: are we near the limits of that finiteness?”

    When the net energy return of our supposed saviour, Alberta oil sands, is 5 to 1, meaning that you have to put in 1 unit of energy (from natural gas) to get 5 out, which compares with 100 to 1 for historical light sweet crude;

    when it would require more than North America’s entire recoverable reserves of natural gas (300 t cu ft) to process the whole oil sands deposit;

    when energy development is touted as the solution to unemployment (meaning that there isn’t enough surplus energy available to power economic growth so people have no other jobs available — this is the beginnings of a Malthusian Collapse when everyone starts desperately scrounging around just to provide energy);

    when we appropriate a quarter of the planet’s entire net primary production (the total amount of all vegetation grown on the planet) for the purposes of food, biofuels, and just general degradation,

    when, despite all our modern agricultural advances, the total vegetation produced by the planet still has not increased; it’s actually gone down by 10%;

    when the growing population of the “third world” aspires for a western standard of living which would entail a 3 fold increase in global food production, and many times more energy “production”;

    when the debt-based financial system is teetering on the brink of collapse because it can’t grow anymore;

    when you look at Google Earth and note the agricultural holocaust wiping out virtually all natural ecosystems;

    and, most telling of all, when the mainstream media tries to convince us that there is no energy shortage,

    the answer is pretty obvious.

  91. The US peaked in oil production in 1971. With a few bumps along the way, the downward progression has been steady. The US now produces half what it did 40 years ago, on a per capita basis. Up until recently, it imported more than half of what it consumed. Even with the recent tight oil bonanza which won’t last, US production rates are nowhere near consumption rates.

    Tar sands is slow oil, and not large enough to supply the world.

    Tight oil has very dramatic decline rates after a few short years.

    “Oil” shale cannot be commercially produced despite sky high oil prices and practically free natural gas inputs — it effectively has a net energy return of parity — it’s a wash.

    Deep water, again, is slow and expensive oil with big capital requirements, just like all the other new players in town, that aren’t really new players at all. They’ve been around for a long time but are only now being called upon because the world is running out of conventional oil, which is why oil price is so high.

  92. The near-term doomers were wrong because it is very hard to predict when a ponzi scheme will collapse. That ponzi scheme is the global financial system built around the US dollar. But it will collapse and at that point there will be absolutely no doubt that it will be the dividing line between pre-PO history and the post-PO decline of humanity. As for a timeline, I predict within the next 3 years or so.

  93. “The market always seems to have a way of trumping that scenario.”

    Global oil production rates haven’t increased in almost 8 years despite price more than doubling.

  94. Kevin Kent says:

    Well, since the planet hasn’t warmed in 15 years then I’d say the science behind “climate change” is not quite as hard and fast as your crowd has claimed. Crazy thought–perhaps the climate is dynamic and is impacted by countless factors, ranging from the giant, nuclear fusion star in our solar system to volcanic activity to cloud cover to the electromagnetic field.

  95. Kevin Kent says:

    Can you provide an example that disputes your assertion that propositions 1 and 2 as you presented are in fact false?

  96. Kevin Kent says:

    Remember that oil is typically denominated in US dollars. In the last decade, the Federal Reserve has drastically reduced interest rates, down to essentially 0% at the federal funds rate. The Fed is buying $85 billion in bonds and MBS each month to maintain these ridiculously low rates. That has caused the relative value of the dollar to drop dramatically and has caused a spike in virtually all resource commodities, such as oil, gold, silver, and copper. The run up in the price of oil has little to do with limited supply.

  97. Marko Germani says:

    So were you sleeping when last September the Arctic ice reached it’s historical minimum? How do you explain that “Each year of the 21st century has ranked among the 14 hottest since record keeping began in 1880”?

  98. ThomasXxs says:

    Yes, and it makes a great deal of sense to predict that the larger group will behave in a similar pattern to that seen in all of its component parts. You have not said why this principle would not be true.

    And you are wrong in saying that Hubbert’s theory applies to a particular type of oil field. It applies to all oil fields. And it is clearly an economic theory – regardless of what some self-appointed “expert” may have written in a Wikipedia entry. You should look beyond Wikipedia.

    Hubbert was not especially concerned with “easy” oil. He merely pointed out that this will always be the category of oil resources produced first, because it results in the greatest and most quickly realized profit margin for the producer. This is why no one was producing any oil from the trillion-barrel Alberta Tar Sands for the first 80 years or so after their discovery. And it should tell all of us something about where we might be on any timeline of oil history, that we are just now finally resorting to the very dirty and expensive process of washing what’s left of some highly degraded junk oil out of tons and tons of frozen Canadian dirt. The dirt was where all of this new oil spilled up, out of its highly pressurized reservoir formation, then migrating up & up, nearly to the earth’s surface. And this geological drama transpired millions of years ago, well before any human oil needs or drilling equipment could arrive on the scene.

    Hubbert’s theory is actually the exact opposite of a “snapshot”, since it specifically addresses the entire cycle of the initially increasing, and then eventually decreasing, levels of oil production seen in nearly every oil field ever produced. It’s better to read what someone (Dr. Hubbert) actually wrote, rather than later opinions of those now wishing to dismiss his theories. And if Hubbert’s work has “no bearing” on the long term (as you wrote) then how was he so uniquely able to accurately predict the 1971 peak in US domestic oil production, way back in 1956? That doesn’t really seem like a “snapshot” approach to me…?

  99. jh says:

    Expensive relative to an hour of labor? 🙂 I don’t think so.

    In 1981 min wage in my state was $3.35, oil averaged $60.87. Today the min wage in my state is $9.25, oil is about $100/bbl.

    Looks to me like the min wage has gone up faster than oil.

    Screw drivers are cheaper and copper is about the same.

  100. jh says:

    Mark, can you provide some reference for your statement that it would require the entire US reserve of natural gas to produce Tar Sands?

    That one – just that one! – doesn’t sound right to me. wink.

  101. jh says:

    Mark, that’s not correct.

    Global production of “traditional” oil hasn’t increased. Total production – condensates etc included – has.

  102. Buddy199 says:

    There’s a reason we’re allies with Israel contra the surrounding Arab states, not the other way around. It’s cultural and that’s never going to change even if we somehow develop an economy that is zero dependent on Mid East oil.

  103. jh says:


    commenting on this topic has been a really interesting experience. The more rational the argument they have to square up, the more vehement the faithful become and the more prolific at generating “facts”.

    Quite interesting.

  104. jh says:

    The recent “bump” in US production is rather dramatic, I’d say.

    “on a per capita basis”

    ??? 🙂 Since when does population have anything to do with peak oil production?

    “”Oil” shale cannot be commercially produced…”

    Neither could the Tar Sands a few years ago.

    “Deep water, again, is slow and expensive oil with big capital requirements…”

    XOM, CVX, COP, APC, BP, HES and MRO all have plenty of capital, not to mention companies that aren’t active in the US.

  105. thebobbob says:

    In November 7, 1973, President Nixon warned that we needed to get off our addiction to fossil fuels. If only America had listened and started then to develop alternative fuels.

  106. Pacific Raised says:

    Reading your comments, its quite clear that you see nothing going on except slight variants of business as usual activity. In fact you seem to be unable (unwilling) to relate the current Great Recession that the developed world has been in for several years now to the fact that energy resources are now both more costly than the economy can afford and depleting faster than they can be replaced. If you are over 60 this circumstance won’t mean to much to you. If you are under 30 you’re going to see the end of the oil powered economy within your lifetime.

  107. Pacific Raised says:

    Interesting that you are remarking on others’ “faith”. Especially as you are the truest believer of them all.

  108. Lord says:

    This does represent an historical change from boom and busts to a quasi steady behavior that will support a gradual transition away from it, and not something necessarily inevitable though.

  109. Economics are as you say about relative value, and monetary costs has absolutely nothing to do with it, but what about the energy costs of extracting oil? tar sands have (as I am told) an EROEI-rating of 1:4, which means it is very costly in terms of energy to extract. How does the “peak oil is not really a problem”-pundits tackle that conundrum?

  110. It’s easy to cherry pick the peak of oil prices over the last 40 years (1981) and then claim that oil hasn’t gone up in price. That was a short term spike resulting from political supply constraints, not global geological constraints. Price quickly fell once the US was able to resume its oil trade deficit with the Middle East. The recent rise of oil price has been both sustained and based on genuine scarcity. Oil has increased in price more over the last 10 years than labour and most other commodities or manufactured items have.


  111. “Mark, can you provide some reference for your statement that it would require the entire US reserve of natural gas to produce Tar Sands?”

    According to the Alberta government, the ultimate potentially recoverable oil sands deposit is 315 billion barrels (page 2):


    The link seems to be broken now, but the Royal Society of Canada’s report from a few years ago on the oil sands confirms that the natural gas used for in situ steam generation alone “accounts for 20% of the energy contained in the produced bitumen”. This number is consistent with everything else I’ve seen and points to a net energy return of 5 to 1.

    So, to do the math: 315 billion barrels of produced bitumen multiplied by a conversion factor of 5800 cubic feet of natural gas per barrel of oil equivalent, divided by a net energy return of 5:1 gives us 365 trillion cubic feet of natural gas.

    This compares with 318 trillion cubic feet of proved NG reserves in the US:


    And my calculation is assuming that all of the remaining recoverable oil sands will continue to enjoy a net energy return of 5:1 which seems unlikely since the best deposits are always creamed out first.

    I suppose, to be fair, I should have included Canada’s proven NG reserves as well. And of course, new sources of natural gas are going to come online and those reserves are obviously going to increase to some extent as the Arctic is developed. On the other hand, I should also subtract out other uses for natural gas over the next 50 years besides the black hole of oil sands refining…

    So the numbers can be fudged both ways but overall I think my assessment is fairly accurate. The point is, we are definitely NOT swimming in energy as a result of the NG boom, contrary to what the mainstream media propaganda tries to convince us.

  112. Ran Kohn says:

    While I think you are right about our connection to Israel. Israel has just recently become energy independent as a result of its offshore oil and gas fields that are now pumping gas directly to Israel. It will become a an exporter of gas to Europe within5 years.

  113. “Since when does population have anything to do with peak oil production?”

    Because economists typically take the term oil “production” literally and believe that oil is actually produced. A larger population, they believe, should result in more labour inputs and voila, more oil “production”, right? It’s like magic!

    But in the case of the US it’s a bit different than typical because it has such a huge oil trade deficit. It’s growing its population as a way to keep the ponzi scheme financial system going, but powering a large chunk of that growth is imported oil. So although America has benefited from world prices for oil which have been kept in relative check by a consistent increase in production up until 2003, after which production plateaued, if America was truly exposed to economic reality, its oil prices would have risen dramatically as a result of its falling production. So then to try to tease this market malfunction out of the analysis, population growth can be used to substitute the increased oil price (in US $) that the US would otherwise experience if it didn’t enjoy the exorbitant privilege of owning the world’s reserve currency.

    “Neither could the Tar Sands a few years ago.”

    But the oil sands is being commercially produced today, and both oil shale and oil sands are exposed to the same high oil prices and practically free natural gas inputs.

  114. Landbeyond says:

    Oh well, if you’re going to use facts…

  115. Landbeyond says:

    Some people get it, some genuinely don’t. It’s not clear why (though Economics has a lot to answer for).

  116. Landbeyond says:

    If they understand it, they ignore it.

  117. Landbeyond says:

    A 25% decrease in cost of production in terms of energy is negligible.

  118. Landbeyond says:

    A rational economist! You’re an endangered species.

  119. Landbeyond says:

    You have to understand that the Dow always trumps EROEI. 😉 Physics – meh.

  120. Landbeyond says:

    Charles Hall points out that average EROEI has to be well above 1:1 to make an industrial economy possible. “Difficult” oil is still being “subsidized” by high-EROEI oil from the old, depleting fields.

  121. Landbeyond says:

    I doubt most of the deniers are even aware of the net export problem.

  122. Landbeyond says:

    Yes, those pesky “facts” – EROEI, net exports. Make them go away!

  123. Landbeyond says:

    That’s far too basic and obvious. I’m sure real growth will resume any second now – and continue for ever and ever.

  124. Landbeyond says:

    They never understood it.

  125. BobSmith77 says:

    These viewpoints at my PhD program made me a black sheep generally but I was a health econ guy so I was always kind of outside the ‘true econ’ guys.

    The one thing that overwhelmingly amazed me though was how simplistically economists viewed the world especially from a morality standpoint. As if almost all people would be rational actors and respond to incentives in the proper manner.

    I guess it was because I spent a lot of time around an uncle who was a Philly homicide detective and you realized that a lot of what happens isn’t rational or well-thought out or how often people responded to non-economic incentives in his 3 buckets of crime/murder – ‘power, pu$$y, or purse’ 95% of the homicides they had fit into one of those categories and maybe 5% were random or have no motive.

  126. Almost statistically insignificant, and in no way of a proportion in line with the dramatic price increase over that same period. Not what one would expect from an elastic market, as we’re being told by Peak Oil deniers that the oil market is. I’m waiting to see what the final verdict for 2012 was, as apparently it has increased a bit more.

  127. … and by natural gas. Without it the EROEI of oil sands would drop to 3 to 1 or so .. scary territory.

  128. “Commodities, in fact, though they may fluctuate dramatically in the short term, become less expensive in real terms over time. This is a known and indisputable fact of commodity – and thus resource – economics.”

    Seriously? This “indisputable fact” defies all logic (as much of neoclassical economic theory tend to do). Do you in all honesty believe that drilling 20km deep wells in the arctic will be cheaper than the easy oil of the past?

    If OPEC had not restricted production in the past there would have been even less oil accessible today. According to your logic this would somehow lead to lower prices today. Work that out for me please.

    And the fact that there are rocks 20 km below us is about as relevant as the fact that asteroids may contain valuable resources. Yes, we will discover more oil, but “peak oil discovery” was back in the 60s. Since mid-80s consumption has exceeded production.

  129. morphixeus says:

    This article is one f those that provides no facts or research to substantiaite its claim. How about the fact that in North America it now takes 250 wells to produce what 50 wells produced just 12 years ago? And how about the fact that it now takes 1 barrel of oil in energy to produce 5, but it previously took one barrel per 20? And how about the fact that tight oil and shale oil production peaks in 25% the time period of onventional oil?
    Tthose interested in facts need to do their own research, as you can’t count on today’s reporters to do it on their own, let alone checkingvto see where their sources are getting their information. Just follow the money.

  130. Jeffrey Brown says:

    Several points.

    First, regarding US crude oil (actually crude + condensate, or C+C) production, an increase in production, to a level below a prior peak does not negate the prior peak; it is a reduction in the rate of decline, relative to the peak.

    US C+C production hit a peak of 9.6 mbpd (million barrels per day) in 1970, and dropped to 8.1 mbpd in 1976 (EIA). Primarily because of Alaskan production coming on line, US C+C production rebounded, hitting 9.0 mbpd in 1985. Production then fell to 5.0 mbpd in 2008 (the decline was somewhat accelerated because of the 2005 Gulf Coast hurricanes). Production rebounded to 6.5 mbpd in 2012 (and to about 7.0 mbpd currently).

    However, I suspect, and the EIA appears to concur, that the current rebound in US C+C production is likely to fall short of the 9.0 mbpd secondary peak that we saw in 1985, resulting in a tertiary peak in US C+C production. In other words, we are probably seeing a continuing “Undulatling Decline” in US C+C production.

    Second, There are four key definitions of “Oil Production.”

    (1) Crude oil (less than 45 API gravity)

    (2) Crude + Condensate (basically gasoline)

    (3) Crude + Condensate + NGL’s (Natural Gas Liquids), AKA total petroleum liquids

    (4) Crude + Condensate + NGL’s + Biofuels + Processing Gains, AKA total liquids

    Unfortunately, it appears that no one tracks US and global crude oil production (defined as less than 45 API gravity crude). All we have is regional crude oil data, e.g., Texas Railroad Commission (RRC) and OPEC. But based on regional data, it appears quite likely that there was no material increase in global crude oil production from 2005 to 2012, despite a doubling in annual global crude oil prices. Even if we include condensate, I estimate that global Crude + Condensate production only increased from 73.8 mbpd in 2005 to about 75.5 mbpd in 2012 (a rate of increase of only 0.3%/year).

    For purposes of this discussion, crude oil = oil with less than 45 Degrees API Gravity, and not crude + condensate (C+C).

    Regarding crude oil volumes and prices versus total liquids volumes, it’s as if you ask your butcher what the price of beef is, and he gives you the price of steak. If you ask him how much beef he has sold today, he gives you the number of pounds of steak (crude oil), roast (condensate), ground beef (natural gas liquids) and pink slime* (biofuels) that he has sold.

    *Pink slime is a highly processed ground beef product, made from beef scraps and treated with ammonia

    Condensate and NGL’s (natural gas liquids, e.g., ethane, propane and butane) are byproducts of natural gas (NG) production, from both gas wells and from associated gas sources (NG produced along with oil). Condensate is basically natural gasoline, and it can easily be processed into finished gasoline, but it is not of much use in producing distillates, such as jet fuel and diesel.

    Based on OPEC crude oil production data data and based on the high percentage of condensate production in many US shale plays, I suspect that virtually all of the post-2005 increase in global hydrocarbon liquids production (crude + condensate + NGL’s) comes from natural gas sources (as condensate + NGL’s).

    As noted above, even if we count condensate, note that global C+C production was only up by about 2% in 2012, versus 2005, a rate of increase of about 0.3%/year.

    Here is the question the Cornucopians don’t want to address: Why has a doubling in global crude oil prices, from $55 in 2005 to $111 or more in both 2011 and 2012, almost certainly not resulted in a material increase in global crude oil production?

    I would argue that the post-2005 story has been one of higher prices causing (partial) substitution for crude oil (increased condensate, NGL’s and biofuels production), with probably no material increase in actual global crude oil production for seven straight years–even as the annual Brent price doubled from 2005 to 2011/2012.

    Of course, there have been some efforts to substitute compressed and liquified natural gas for liquid fuels, but note that the EIA shows that US dry natural gas production has been virtually flat since April, 2011 Given the very high decline rates that we see in shale gas wells, there is a serious question as to whether the industry will be able to fully reverse a NG production decline and bring NG production back to prior levels, given that the underlying decline rates from existing wells are so much higher now than at the start of the shale gas boom.

    Third, we have seen a material post-2005 decline in Global Net Exports of oil (GNE), which I define as combined net oil exports from the (2005) top 33 net oil exporters (BP + EIA data, total petroleum liquids).

    In my opinion, increased production of the liquid substitutes only made an incremental difference, and not a material difference, in the global net export market, as the developing countries, led by China, consumed an increasing share of a declining post-2005 volume of Global Net Exports of oil.

    So, in summary Brent doubled from $55 in 2005 to $111 in 2011 and $112 in 2012. In response, globally, regarding liquids production, we saw:

    (1) Increased condensate, NGL’s and biofuels production, all less than ideal substitutes for crude oil.

    (2) Probably flat global crude oil production.

    (3) Declining Global Net Exports (GNE), with developing countries consuming an increasing share of GNE.

    For more information on the outlook for Global Net Exports, you can search for: Export Capacity Index, a very long and detailed analysis of the global export market.

  131. Landbeyond says:

    “power, pu$$y, or purse” – a memorable phrase.
    I’ve speculated (no more) that studying/practicing economics could actually “re-wire” the brain to some degree. Students – brains still have a measure of plasticity – simplistic ways of viewing the world are established, and reinforced when others defer to your “superior” knowledge about the economy (gross errors being rationalized away). It’s as good an explanation as any for the Krugman phenomenon.
    Someone should study it: might be a Nobel Prize in it for them – a real one. 😉

  132. Landbeyond says:

    The “apparently running out” myth lurches on. How is it so often overlooked that “peak oil” includes the word “peak”. Of course it wasn’t “running out”; it isn’t “running out” and it will never “run out”. Integrity demands that the phrase be dropped.

  133. Landbeyond says:

    Has it gone quiet in here?

  134. Landbeyond says:

    I wonder how long that “stranded” gas will last.

  135. Javaman says:

    I love when people make these various proclimations when they refuse to look in the rearview mirror. by stating that peak oil is over and supply outstrips demand, is just plain foolish, especially since while the US economy is improving, the worlds econonmy is not. As soon as China and India fully rebound I can assure you all that the concept of not meeting demand will be once again on everyones mind as both china’s and india’s middle class expands.
    But you know all that already right? Oil is finite. Still is, alway was.
    And let’s all forget about the Energy invested on energy out. That never plays into anything at all.
    just talk to the saudi’s who now believe that 100 bucks a barrel is a livable price.
    And if we are sitting on such a pot of gold, why then hasn’t the price pre-barrel gone down? You all are aware, of course, that it costs between 65 and 85 bucks a barrel to get any of that tar sands heavy sulfar garbage, right?
    and if you think the price of extraction of that goop is going to go down in price, I have a bridge to sell you.
    And if you think natural gas is going to fill the shortage, let me ask you a question, has Detroit or any car manufacturer suddenly converted all their new cars to natural gas? I think we know that answer.
    so keep living in your fantasy land that we are now in the land of gas and oil where the spigot never runs dry.
    more fools.
    I seem to recall such proclimations being made in the run up to the 1929 market crash, but we know better now, right?
    LOL tragically comical

  136. Ask yourself one simple question: Is the supply of oil finite or infinite. The only plausible answer is that it is finite, and therefore peak oil is inevitable It is only a matter of when.

  137. ralfyman says:

    The IEA argued that crude oil production peaked in 2005 in its 2010 report. Hubbert argued the same (1995 + 10 yrs) in a 1976 television interview. BP revealed the same in its 2010 report.

    The use of unconventional oil doesn’t remove concerns over peak oil but actually confirms it. Otherwise, there’d be no need to resort to unconventional oil at all. And this was predicted before 2005, when some argued that by now crude oil production would reach 100 Mb/d and prices would drop to less than $30 a barrel. In 2009, Saudi Arabia boasted that it would reach 15 Mb/d easily by 2011.

    Finally, to make matters worse, if we look at oil production per capita (and not just oil production), which is more logical as oil is used by a growing global population with growing resource demands (thanks to a larger middle class), then that peaked back in 1979.

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