Is Peak Oil Dead or Just Postponed?

Several months ago, I wondered if the media’s fascination with peak oil, which crested in the mid-2000s, had ended. A big concern of many in the energy/sustainability nexus had found expression in popular culture

and in visuals like this:

But now the zeitgeist has flipped, from crude awakening to crude abundance, thanks to advances in horizontal drilling and fracking. (Yes, this is not an unalloyed good.) The United States, which had for years been fretting about its dependence on foreign oil, is now producing a “tidal wave of oil” of its own, as one analyst recently put it in a CNN report. The story of this turnaround can be told in one graph:

Chart showing the renaissance in US oil production since 2005

In May a press release on a new International Energy Agency (IEA) report was titled:

Supply Shock from North American Oil Rippling through Global Markets

From a U.S. geopolitical perspective, this is good news; from a global climate perspective, it’s not so good news. Regardless, the above-described trend has given rise to many peak oil is dead pronouncements.

Not so fast huffed Chris Nelder, a respected energy analyst back in March:

Along those lines, I thought he a made number of legitimate points in this interview with Brad Plumer at The Washington Post. Still, the peak oil is dead narrative has been reinforced in recent weeks with news that The Oil Drum, a popular intellectual locus for peak oil conversation on the web, is closing down at the end of the month. The official announcement cites “the high expense of running the [web]site” and a “scarcity of new content,”  but it’s hard to imagine this coming to pass if the world wasn’t suddenly swimming in newly tapped fossil fuel reserves. Perhaps the cognitive dissonance became too much to bear.

Personally, I found much value in the high-level discussions on natural resources and energy that were a staple of The Oil Drum, even if the overall slant was one I disagreed with. So I’m sorry to see the site close down. Others are chortling and seeing its demise as further proof of peak oil’s demise.

But what if the peak oil eulogies are premature? After all, as D. Ray Long, one proponent of the theory, argues:

Peak Oil can never really die, because oil is a finite resource and any finite resource peaks in production.

He makes an excellent point in another post when he says:

It’s important not to confuse “Peak Oil” with the “Peak Oil Debate” – a mistake many make. Peak Oil is simply a number, nothing more, nothing less.

This is true. But if the numbers aren’t in your favor right now–and they won’t be in the immediate future–then you can’t sustain a debate on peak oil. That’s why The Oil Drum is closing down and that’s why the media and people in environmental circles are no longer talking about peak oil.

99 Responses to “Is Peak Oil Dead or Just Postponed?”

  1. C Giroux says:

    This is simply a case of “apres moi, le deluge.” I have harped upon Peak Oil concerns for almost a decade now. I am tired of repeating the same subject matter over and over. Anyone who doesn’t understand that fossil fuel resources are finite is living with Santa Claus. It is only a matter of time before the peak is reached. It has always been known that new technologies and the increased value of the resources (due to scarcity) will drive extraction of less available resources. That’s an integral part of the peak oil theory – we’re never going to run out, it’s just going to become economically or energetically infeasible at some point to try to continue extracting the resources. Fracking is a perfect example of this. The oil and gas now being exploited is not new discovery. All of the major fields are just tapping deeper than the now expired shallow wells. So this extends the peak another decade or so. Maybe new technologies to extract even more difficult resources can push the peak another decade or so. So what? Unless all you care about is the resource lasting until you die, the issue is real and will only continue to grow in importance.

  2. If peak oil were either dead or postponed, oil would be trading at $20/bbl, as it was for decades. The fact that oil is much, much higher than $20/bbl means that peak oil is alive and doing very well indeed, whether the Oil Drum’s critics admit it it or not.

    Whether the oil junkies understand it or not, we are now in the age of peak oil.

  3. C Giroux says:

    Also, don’t confuse the fact that the US is exporting as an indication of surplus. The US has a huge addiction to oil. We still DEPEND upon foreign oil; that will not change no matter how much fracking is occurring. The graph above shows that we have reached levels of production similar to 1985. In 1985, the US did not consume as much oil as it does today. OPEC was necessary (and still is) to provide for our needs.

  4. lngtrm1 says:

    “Peak oil” was an answer to a question we should have never asked…at what point do conventional oils reach peak supply?

    At this juncture, peak conventional oil supply is a vague footnote in energy supply history. It just isn’t important.

    And as others have noted, it’s really about demand and price as to how much gets produced at any given time. For example, if conventional oil was fixed at $300 a barrel for five years, and non-conventional at $100, my guess is you would see a new peak.

  5. ashermiller says:

    The graph above showing “total oil production in the US” is highly misleading. One of the fun things that the energy agencies have engaged in in recent years is broadening their definition of what oil is. In this chart they are including such lovely things as biofuels, refinery gains, and natural gas liquids. None of these are really oil and in the case of biofuels in particular there’s a highly suspicious form of double-accounting taking place since the best estimates of the “net energy” of corn ethanol is that one barrel is produced for each barrel that’s consumed in its production.

  6. Keith Kloor says:

    I don’t agree that the chart is “highly misleading,” but I will agree that there is another chart that would be more accurate, as Chris Nelder pointed out to me on Twitter:

  7. ashermiller says:

    It is misleading, if titled “total OIL production.”

  8. Robert Ford says:

    I think this might be the worst comment I’ve read on the internet in a while. Did you actually read the post or just skip to the bottom and copy/paste one of your comments from 2005?

  9. Robert Ford says:

    Excellent post, Keith. Hilarious the Oil Drum shut down. I love it. Looks like a few pretentious, foil hat Drummers made their way over here to leave some of their insane “info” too:)
    “The world has produced about 1 trillion barrels of oil since the start
    of the industry in the nineteenth century. Currently, it is thought that
    there are at least 5 trillion barrels of petroleum resources, of which
    1.4 trillion is sufficiently developed and technically and economically
    accessible to count as proved plus probable reserves. Based upon current
    and prospective plans, it appears the world liquid production capacity
    should grow from about 93 million barrels per day in 2010 to about 110
    mbd by 2030. This is about a 20 percent increase.”

  10. Rob Neff says:

    You say these oil reserves were already known. That is true, but “proven reserves” only counts oil that is economically viable to produce, so these reserves didn’t show up on the balance sheets until fracking became available, and the price of oil went above $70/barrel. So by the numbers, it looks like we now have more oil than we used to, just to confuse the masses.

    I agree with your larger point, and as confirmation, you can see the price of oil hasn’t declined appreciably even with fracking. The oil that’s left is simply more expensive to get out, and that will continue. I don’t need to ride my bike year-round, as I once feared, but I’m still not selling my Prius.

  11. Rob Neff says:

    There was some hullabaloo about this last year, when we became a “net exporter of petroleum products”. Again, need to pay attention to the exact wording. This is refined oil products (gasoline & diesel mostly), not raw petroleum which we were still importing. What this indicates is we actually have a refinery surplus and can import petroleum for the sole purpose of refining it and selling to the highest bidder, whether it’s foreign or domestic.

  12. Rob Neff says:

    Cheap oil is in decline, but total oil production is not. Tar sands of Canada, Bakken oil fields, Venezuela has more tar sands, etc. But this has been left until now because it’s generally hard to get to, and hard to refine, making the end result more expensive.

    So we have many years of oil supply left, but we won’t ever get back to $20/bbl. Not unless algae-based oil production suddenly has a breakthrough.

  13. Rob Neff says:

    At the time that Peak Oil was named, conventional oil supplies were the only game in town. So you look at field discoveries, and projected growth in demand, and it’s easy to see there was a gap coming down the line. No matter the price, you couldn’t produce more oil than what existed.

    Because we knew of that gap, we’ve found other sources and mitigated the effect. Supply of conventional oil surely has peaked, but not our total supply of oil.

  14. Rob Neff says:

    20% increase in 20 years will be a difficult task. Keep in mind that the population is also expected to increase from 7 billion to 8 billion over that same time period (14% increase), and much of the developing world (primarily India and China right now) wants a higher standard of living. So don’t expect any of that hypothetical 20% increase to go to you.

  15. Robert Ford says:

    yeah, the conversation is about peak oil but thanks for assuming i’m retarded. i’m aware of the population increase

  16. Rob Neff says:

    Okay, I can see why you have a hard time converting people to your cause when you immediately take such a caustic tone.

    Supply and demand is an important concept when talking about a commodity like oil. You were talking about supply, I was talking about demand.

  17. harrywr2 says:

    Peak anything is an economic, not a geologic argument.

    Peak $2/barrel oil happened long ago.

    Peak oil will come when the cost of extracting and marketing oil exceeds the cost of a substitute good or the cost of modifying behavior..

    US Oil consumption was at a 16 year low in 2012.

  18. Desy says:

    Learn about bumpy peak oil, the original depletion curve was just one of a few curves Hubbert came up with. Fact is haven’t produced as much oil in the US since 1970 and unlikely to do so again. Fact is twice as much money has been spent on raising production to current levels as was needed before and we didn’t double global production which is why those marginal barrels are keeping prices high. Pendulous is more accurate description of price/demand/supply as production constraints are met.

    Also a lot of weight has been put into EIA projections who have an absolutely abysmal record

    In March, 2012, EIA did a retrospective study to determine just how often they had been correct in their forecasts.

    The results were dismal. And eye-opening.

    For instance, EIA, by its own admission, states that they had overestimated crude oil production 62% of the time; they had overestimated natural gas production 70.8% of the time; and they had overestimated natural gas consumption 69.6% of the time. Not the best track record by anyone’s estimation except perhaps EIA’s.

    It is also noteworthy that EIA had overestimated the energy intensity ratio a whopping 96.5% of the time. This is a ratio of total energy consumption and GDP. They tended to overestimate energy consumption and underestimate growth in GDP.

    In short, EIA is not very good at forecasting. But what is even more interesting is that Dr. Montgomery, the lead author of this new study, was once in charge of models and forecasts at EIA. Both NERA and Deloitte used EIA forecasts as the basis of their report models. Deloitte even stated that they considered EIA’s forecasts to be too conservative in spite of the fact that EIA has not projected natural gas demand accurately 70% of the time.

  19. Oil production doesn’t have to be in decline for peak oil to be a reality. All it has to do is become more expensive. Yes, there’s decades of supply left – we all know that, but how on Earth does that prove anything about peak oil?

    Peak oil does not mean ‘running out’. I mean, why do people always assume it does?

  20. Do you actually have a point to make, or is mindless ridicule your stock in trade?

  21. Robert Ford says:

    you said the exact opposite of what the entire premise of the post was. can you explain yourself?
    it seems like you should probably be banned if you’re going to say comments like that without providing any links

  22. ashermiller says:

    A key question is at what price does demand destruction take place? Demand in developed countries has gone down as a result of declining economic activity and mobility, along with an increase in vehicle efficiency. These, themselves, are partly a result of higher prices. See the work of Professor James Hamilton, who shows that 10 of the last 11 recessions have been preceded by a spike in oil prices:

    That’s why I find the recent talk of “peak demand” (while pooh-poohing peak supply) to be fatuous.

  23. LOL. I should be ‘banned’? You spend half your time here spouting nonsense and the rest name-calling. What use are you?

  24. Robert Ford says:

    yeah, you still haven’t answered my question. nice posturing tho. links or gtfo

  25. Rob Neff says:

    Very good point. I had suspected that, but hadn’t done the analysis. It was pretty clear in 2008, and also I believe the Clinton years were boom years because energy was cheap, not because Clinton was some kind of genius.

  26. Rob Neff says:

    Well, the classical theory, introduced by Hubbert in the 1950’s, does define peak oil as the peak in production due to declining supplies. It doesn’t mean the oil is gone, but that production can no longer increase, and it cannot match demand.

    What we have now, is new sources of oil unknown to Hubbert who only analyzed traditional oil fields. Of course, this new oil is more expensive to recover and to refine. Since we still have enough oil, for those with money, now there’s an incentive and time for green alternatives and increased efficiency, hopefully weaning us off of this before it really does run out.

  27. jh says:

    “The oil that’s left is simply more expensive to get out”

    Producers can’t directly set the price of oil, so they can’t raise the price to recoup their costs of production. The only way they can respond to falling profits is to curtail exploration, and that takes years to work it’s way into the price. So the price of “getting it out” doesn’t really have a short-term impact.

    “and that will continue.”

    New technologies – such as horizontal drilling, fracking, reservoir analysis and steam extraction – tend to become less expensive, not more expensive, over time. So what you’ll probably see, at least in the near term, is a reduction in the cost of production as engineers refine and improve these technologies. Eventually, they’ll hit a wall on improvements and the cost will flatten. Also, one driver of high production costs has been the high cost of iron, steel, and other basic materials, but that’s fallen off steeply in the last year.

    “you can see the price of oil hasn’t declined appreciably”

    Many influential people (such as senators from my state) think that Dirty Speculators are keeping the price of oil high. Certainly, by any rational assessment, it should be falling with a supply glut. Personally, I think it’s a geopolitical issue. Much of the world (China, India, Europe) is still vulnerable to supply shocks caused by political instability in the middle east.

  28. jh says:

    I think Mr Nelder is playing the same card that the poor Oil Drummers played to an increasingly dubious audience.

    As Michael Levi has pointed out, much of the “total liquids” production can be used to replace oil, so it really doesn’t matter if it’s “crude oil” (circa 1966) or “petroleum liquids” (circa 2013). This is a game of narrowing the definition of “oil” to support the idea that it’s declining.

  29. jh says:

    ” those marginal barrels are keeping prices high ”

    *sigh*. The cost of production of a “marginal barrel” doesn’t have anything to do with the market price of oil today.

    The simple fact is that the cost of production is sufficiently low that companies are spending spending spending and spending on exploration. You don’t need to check EIA stats to see that. Look at the profits of drilling services firms. They’re going through the roof.

    When the cost of production becomes too high, the first thing you’ll see is a) rig counts dropping; and b) the stocks/profits of oil services firms stalling/falling. It’ll take a few years after that for the production that’s already rolling – and therefore already mostly paid for – to so slow down. Only THEN will you see the price of a “marginal barrel” start to affect supply, and therefore price.

  30. Rob Neff says:

    Many fields, such as Canada oil sands, are not worth producing if oil drops below $70/barrel for a sustained period of time. They will simply stop production if that happens.

    Fracking has improved over time (originally it was thought to be a pipe dream, until our government funded the research that made it possible. Free enterprise folks forget the role our government played in that). But fracking is still more expensive than drilling into a pressurized field of sweet crude in Texas. Deep sea wells and wells int the Arctic Sea are also expensive. Doesn’t matter what kind of improvements you make, it’s still harder to get to that oil than it was to get to the typical oil field 50 years ago. Look at the return on investment, or barrels produced per barrels expended. Saudi Arabia used to be able to produce nearly 100 barrels of oil for every barrel used to find, pump and ship the oil. Now it’s maybe 50 to 1 or 40 to 1, and they’re the lucky ones. New fields today can be 10 to 1. Corn-based ethanol is essentially 1 to 1 (no energy gain).

    Technology gets us to that oil, but it’s never going to be as cheap as the old days of Ma and Pa Kettle shooting a hole in the ground (yes, I know that was fiction).

    Speculators can drive up the price in the short term, but long term it’s still driven by supply and demand.

  31. jh says:

    “Peak Oil can never really die, because oil is a finite resource and any finite resource peaks in production.”

    What “finite resource” has peaked in production in the modern era?

    Look. There are plenty of sedimentary rock packages that are >10km thick. We’ve explored, what, the upper 4km at best and, say, on average, the upper 2 km. Even the Marcellus shale is only a few km below surface. We’ve hardly explored deepwater at all.

    The “finite” argument is fine, yes, the earth has finite volume and the amount of oil can only be a small fraction of the earth’s volume. But that volume is huge. HUGE!! There is also a finite amount of salt in the ocean but no one is worried about running out of salt.

    The “finite” argument is valid and irrelevant at the same time. In the long term – perhaps 30 yrs, more likely 50 yrs, perhaps longer – the finite argument will come into play. But not soon. More like eventually.

  32. ttman says:

    $100 oil is a number that seems to help the Peak Oil side. One of the Cornucopians on CNBC (Joe Kiernan) who once said “all Malthusian predictions are always wrong” bristled recently about the fact that oil isn’t at $50. He didn’t appear sure about who to blame – in his mind there will never be a shortage – but why is oil now so much higher than 10 years ago?

  33. ttman says:

    Do as much chortling as you can with oil at $100 a barrel. As the price rises your chortles will grow softer and be less fun.

  34. ttman says:

    “Total Liquids” is not made up of only “petroleum liquids”. Total liquids includes plant-based ethanol and NATURAL GAS liquids. They also include volume gains that come from processing in a refinery (that don’t increase energy), although that practice may not be new.

  35. ttman says:

    “Modifying behavior” could have severe ramifications on the economy. The Travel/Airline industry would be the first hit. I don’t think it would be a simple adjustment to make (to much more expensive oil).

    Although there is a lot of slop built into the American use of oil. A massive amount of people driving a car to work each day, and often quite a long way. Put most of those people in buses or trains and you use a lot less oil.

  36. ttman says:

    So just keep blowing through stuff now, and increasing out population, and leave it to the grandkids to sort out?

  37. Robert Ford says:

    what a dumb comment. we’re talking about weather we’re at peak oil

  38. Buddy199 says:

    Everyone realizes that oil is a finite resource, market-driven technological advances have extended the “past due date” of world supply. Coal is another matter: cheap, abundant with a 150 year world supply. And it will be used, because developing countries could care less about polar bears and ice bergs; only when health care or economic costs outweigh benefits will coal be retired.

    Wind and solar will always remain marginal. They’re only viable with massive government subsidies, as Germany and Spain discovered. Even if some miraculous technological breakthrough doubled the energy output of wind and solar it would push their relative contribution to just 7% of total U.S. electricity production. Conservation is all well and good but will remain marginal a marginal solution, like wind and solar. It’s just the realities of physics and chemistry.
    Fusion remains a mirage always on the horizon but never attainable and probably will remain so until the latter part of this century. Which leaves fission nuclear as the only realistic bridge to a non-fossil energy sector.
    However, as has been pointed out repeatedly in this blog, the people who usually style themselves as “people of science” refuse to accept these scientific facts about energy. They’re adamantly against
    anything but wind, solar and conservation, the three most marginally effective solutions. It’s all about symbolism and ideological purity more that an realistic plan that takes into account the facts of world industrial need, the aspirations of billions of people to enter the middle class and the principles of chemistry and physics.
    News for greens: scientific ignorance, naïve empty symbolism and knee-jerk anti-capitalism are not going to be the solution to the energy problem.

  39. Buddy199 says:

    The price has a lot to do with commodity trading as well, not just organic supply price / demand, which is what he was getting at.

  40. Buddy199 says:

    That’s not practical in the suburbs or rural areas.

  41. harrywr2 says:

    I used to own a 1965 Oldsmobile Starfire with a 450 cubic inch engine that got 5 MPG.

    When gasoline hit $1/gallon I couldn’t afford to drive it anymore and I bought an econo-box.

    As far as the airline industry…todays jets are substantially more fuel efficient then 20 or 30 year old jets. Lots of jets have been sent to the jet graveyard on fuel efficiency grounds.

  42. ralfyman says:

    It is too late to argue that peak oil died as oil production per capita peaked back in 1979.

    Also, as pointed out by others, oil prices tripled while conventional oil production could not meet increasing demand. This led the IEA and others to acknowledge that conventional production peaked in 2005.

    Ironically, it is for this reason that we are now resorting to non-conventional production, which some are hailing as the solution. Unfortunately, non-conventional production has lower energy returns and steep decline curves.

    Finally, the effects of peak do not have to take place with a drop in oil production. They can take place when production cannot meet demand.

  43. ralfyman says:

    From what I remember, the IEA expects an increase of 9 pct in energy produced from all oil and gas resources by 2030, but this assumes that conventional production won’t drop. Meanwhile, demand has to go up by around 2 pct a year to maintain economic growth.

    More details can be seen here:

  44. ralfyman says:

    We are not yet at peak oil, but the effects of peak oil can take place even before oil production peaks or drops. That is why oil price increased significantly, contrary to views that by now conventional production should be increasing dramatically and oil price dropping to less than $30 a barrel.

  45. ralfyman says:

    It should be because oil price has tripled the last few years, and energy returns for non-conventional oil are lower. And even with an increase in oil price, demand for the rest of the world kept increasing. Meanwhile, oil production costs are going up.

  46. ralfyman says:

    It’s actually a geological argument, and based on physical realities. That is, U.S. oil production peaked in 1970, production peaked for various oil-producing countries, and even oil production per capita peaked in the late ’70s.

  47. ralfyman says:

    The “finite” argument is not based on oil reserves but on the rate of flow. The effects of the latter can be felt when seen in light of demand.

  48. St_Roy says:

    The OIl Drum website shut down because Peak Oil is behind us. There is very little left to say on that subject. TOD never was meant to be a forum for how to live in a world of declining net energy.

  49. C Giroux says:

    I believe demand destruction currently occurs at about $140/bbl. I believe the price spike in 2007-2008 was not natural. The gas/oil companies were experimentally determining the “breaking point” for the economy.

  50. C Giroux says:

    Mr. Ford, you did not contribute anything valuable to this thread

  51. C Giroux says:

    Rig counts and stocks / profits of services firms can be largely driven by investor money. Only time will tell if those investors make money or are victims of a Ponzi-like scheme.

  52. C Giroux says:

    Energy is only a small component of our dependence on oil. Plastics (cannot even begin to list the modern uses), chemicals (fertilizers, pesticides, herbicides, fungicides, pharmaceuticals…the list goes on) are examples of products whose raw material supply depends upon crude oil. Fission energy cannot replace those resources. Eventually, perhaps not in your life, but eventually, our lifestyles will have to change. The change will likely have to be a return to a more natural lifestyle. BTW, I am a licensed professional engineer, so I don’t consider myself scientifically ignorant; however, I am not ashamed to say that I am a naturalist.

  53. C Giroux says:

    So, you’re one of those “apres moi, le deluge” types?

  54. C Giroux says:

    Salt is a poor example of a finite resource. On a per-capita basis, in a salt-poor region, salt resources may become a concern; however salt persists in the environment; using does not mean losing. Our oil and gas resources are often burned, leaving nothing to recover; using does mean losing. Considering that the fossil fuels require geological timescales to develop, there is little to no equivalence between salt and oil in our economy.

  55. C Giroux says:

    Peak oil is also an energetic argument. Physics cannot be ignored. If the energy recovered is less than, equal to, or even just marginally more than what was expended in the recovery, it is a losing game.

  56. ashermiller says:

    There are some serious questions about the long-term supply of coal:

  57. C Giroux says:

    I don’t think the question is whether or not we are currently at the peak, but whether or not approaching peak oil is having relevant effects in our economy today (it is). Beyond that, I believe the argument here is also what time frame the peak will occur. You must admit, no matter how far away you believe the peak is, it will occur eventually. If you don’t care because you’ll be dead, you must share the Louis XV notion of “apres moi, le deluge.”

  58. C Giroux says:

    I am who I am. I am my mother’s son and my father’s boy. I am my wife’s husband. I am a professional engineer with over a decade in the oil and gas industry. Who are you?

  59. Robert Ford says:

    oh, i just wanted to let you know that you don’t need to talk to me.

  60. jh says:

    Yes, all that you say is true and none of it is new. There has always been a shut-down price, whether oil was $3bbl or $30bbl. That’s the way exploration and production have always worked.

    But today oil is $100 bbl, well below it’s $150+ high. $60 is a long way down from here. And what will get us there? A massive supply glut or dramatically falling consumption. Either way, it’ll be hard to argue that peak oil is just around the corner.

    The “hard to get out” argument sounds appealing but it’s meaningless. Supply rises, the price falls, production and exploration slow until the supply dries up and the price rises. It doesn’t matter what the exact prices or costs are.

  61. jh says:

    “Rig counts and stocks / profits of services firms can be largely driven by investor money”

    Um, yea.

    Investors are investing because the price of oil is high relative to the cost of production. So, apparently, production costs aren’t prohibitively high.

    No doubt, smart investors will make plenty of money and stupid investors will lose plenty of money, whether or not any new oil is discovered.

    I’m getting a hoot out of watching the oil haters trying to resuscitate peak oil – or anything that will just make Bad Oil go away.

  62. jh says:

    What kind of oil production was “conventional” in 1923? Was it the same in 1966? 🙂

    The “conventional” argument is the same as the “liquids” argument and just as irrelevant. It’s just another method of changing the rules to win the “peak” argument on a technicality, but it doesn’t effect the facts on the ground: oil production is still growing.

    But hey, if you don’t like what you’re seeing while you’re driving down the road of life, you can always put a bag over your head to make things better.

  63. kdk33 says:

    Peak oil. Never understood the fuss. There seems to always be an implied urgency – a sense that we should “do something” because oil was running out. One day we will wake up and suddenly it will all be gone; upheaval, war, rebellion, and flesh eating zombies to follow.

    Oil will never run out. Ever. And nobody has to do anything.

    Lookit, oil price just signals to society how to distribute our efforts. On the supply side — low prices tell energy companies to invest less in oil extraction; High prices signal more; continued high prices signal investments in substitutes (say nuclear energy). And similarly on the demand side.

    And, oh by the way, if there is one thing the world will always want more of it’s energy. Yes the marginal barrel sets the price. Supply always matches demand..

    The best thing everybody can do is stop worrying and go back to figuring out how to make as money as you can.

  64. jh says:


    This thread has many comments that illustrate how educated and intelligent people can delude themselves by rejecting simple and well established facts and principles.

    No one can say with any certainty when peak oil will occur and, of course, it will occur. But at the moment, there’s every indication that oil prices and supply are following the same technological/economic incentive curves that drive and have driven almost all resource production throughout the history of civilization. (moreover, we’re already transitioning to nat gas, even for transport, so unless the peakers are right in the next five years or so, their victory will be hollow).

    Yet commenter after commenter trots out the same old canards (Finite Resource! Harder and harder to get out! ) that have driven the anti-oil movement since the early 70s. Why do people cling to these arguments? I think the answer is obvious: they oppose oil development.

    So I’m sure you’re having a hoot thinking “ha, well, there you go, buddy, that’s what it’s like to confront climate deniers”. (I would be!:))

    But that’s not the point. The point is that intelligent, thoughtful, and knowledgeable – and even expert – people can and often are lead and deluded by their beliefs even when the data rejecting their beliefs is as clear as a brick wall in front of them. And I note that several scientists and climate scientists have expressed general agreement with peak oil ideology.

    I think you should keep that in mind with respect to climate science.

  65. jh says:

    “we still DEPEND upon foreign oil”

    But we may not as nat gas increasingly replaces it as a transport fuel.

  66. jh says:

    ‘There was some hullabaloo about this last year, when we became a “net exporter of petroleum products”. ‘

    You’re right, it doesn’t have anything to do with peak oil or oil dependence, but it is a net economic positive that we didn’t have before. For many people, that’s what the hullabaloo was about.

  67. jh says:

    “demand for the rest of the world kept increasing.”

    In part because some large economies (eg Inida) subsidize fossil fuels and thus insulate the consumer from the rising costs.

  68. jh says:

    “thanks for assuming i’m retarded”

    Perhaps just emotionally impaired.

  69. ralfyman says:

    The effects of peak oil can take place when production cannot meet demand.

  70. ralfyman says:

    Actually, not just India but the rest of the world:

  71. ralfyman says:

    Yeah, oil is not a finite resource and is easier to find. That’s why we’re not resorting to shale, etc. 🙂

  72. ralfyman says:

    Don’t forget to look at oil production costs.

  73. jh says:

    “Our oil and gas resources are often burned, leaving nothing to recover”

    “Considering that the fossil fuels require geological
    timescales to develop”

    Au contraire, mon frère!

    Humans generated very roughly 170M* tonnes of methane in 2010 from agriculture and landfill waste. Of that, at least 12M tonnes was recycled for energy use. Need I point out that methane is the primary component of natural gas? Aside from that, natural emissions were, again very roughly, another 150M tonnes. So, indeed, like salt, “fossil” fuels are continually regenerated by both human waste and natural processes on daily timescales.

    Moreover, there is a massive supply of “fossil” fuels in gas hydrates that haven’t yet been developed, and it’s likely that some component (perhaps small) of atmospheric methane is continually lost to gas hydrates.


    Natural gas tonnages are calculated from:

    a) %-contributions of human and natural sources of methane:

    b) Total tonnage of agricultural methane produced in
    metric tonnes of CO2 equivalent:

    c) The conversion factor for CO2e to actual tons methane (1/25).

    The figures given above are roughly consistent with older published figures at:

  74. jh says:

    Note the note at the bottom of The Economist piece:

    “The authors of the BP report have asked us to highlight that a large part of the difference between consumption and production, in the charts above, is accounted for by such things as biofuels, oil made from coal and other non-conventional sources, which are not included in their production figures.”

    And Slate? Really? In a piece by Ray Pierrehumbert of Team Of Warming Catastrophists? That’s been hammered by energy experts (which Mr. Humbert isn’t)?

    See Michael Levi’s response:

    I don’t follow vid references, so I’ll let ya slide on the You Tube link.

  75. jh says:

    So between massive price supports from developing countries and efforts at supply constraints from OPEC, demand is rising. Not too surprising.

  76. jh says:

    The supply/demand curve is like the predator prey curve. A supply constraint leads to new exploration and development which leads to additional supplies and relief of the supply constraint.

  77. jh says:

    Shale oil isn’t “hard to find.” Most shale oil resources have been known since the ’70s. Now they’ve moved from the “resource” column into the “reserve” column.

    But no doubt, this round of exploration has generated both new resources and new reserves.

  78. jh says:

    Which are about 60% of the price for shale/tar/tight oil, and probably declining. Hence the flow of money into exploration and development.

  79. Robert Ford says:

    no, emotions help you make good judgments. they help you decide whether to, for example, make unwanted comments or not;) (see above comment for reference)

  80. ralfyman says:

    Useless point, as money can be created easily. The catch is the physical realities that drive peak oil, which ironically explains why you are now referring to “shale/tar/tight oil.”

  81. ralfyman says:

    The problem isn’t that it’s “hard to find” but decline curves, etc.

    Hence, resources and reserves and not rate of flow.

  82. ralfyman says:

    Yeah, with a “predator prey curve” is assured of “additional supplies”. 🙂

  83. ralfyman says:

    Hence, we see the effects of peak oil even before oil production drops.

  84. ralfyman says:

    The IEA figures are not “through 2010.” The same goes the 12 Mb/d forecast for North America. As for spare capacity:

    Now, all you have to understand is what affects crude oil also affects what will replace it.

    Your claim about OPEC keeping the price high makes zero sense given production costs:

    Your reference to Slate is nonsense, as you refuse to deal with the content of what was given.

    Re: that response:

    Not following “vid references” is the least of your problems.

  85. kdk33 says:

    Actually, these comments reflect a failure to understand simple economics. And it is a common failing (see Union, Soviet, Former for another example)..

  86. kdk33 says:


  87. Desy says:

    Fine don’t believe me how about the head of Total? Peak oil is cheap oil, what’s left isn’t cheap, period

    “Christophe de Margerie, chief executive of Total, the French oil producer, last month warned that technology is not reducing marginal costs in the oil industry.”

    “Net income margins in the sector are now at the lowest in a decade,” the firm said after reviewing the economics of the world’s 50-largest listed oil companies. “This is not sustainable. Either prices must rise or costs must fall,” it added

    Sanford C. Bernstein estimates that the marginal cost of oil production has increased about 250 per cent over the last decade, rising from just under $30 a barrel in 2002 to a record of $104.5 a barrel last year. At the same time, cash costs have risen from $9.70 a barrel in 2002 to $44.20 a barrel last year.

  88. Steve Fitzpatrick says:

    About 7 years ago I spent an evening at the home of a former head of state in Latin America. We discussed many subjects, but one which clearly concerned him was the prospect of much higher than US$100 per barrel (and ever rising!) prices for crude oil. I explained that my experience in the petrochemical field suggested to me that there exists a huge potential supply of petroleum if prices remain near US$100 per barrel, and further, I predicted that claims of the end of oil, and ever higher petroleum prices, would be shown to be utterly wrong. (indeed, The interesting/sad thing is that politicians and “intellectual leaders” are so often wrong about so many simple things, like raw material supply elasticity, that it becomes almost futile for those who look at things rationally to continue to point our past failings of predicted doom. How many times must the Club of Rome be completely wrong before the Club dissolves, or is uniformly laughed at in derision?

    I am sure that the doomsayers responsible for The Oil Drum continue to believe, in spite of all evidence to the contrary, every stupid thing their blog promoted…. that is the nature of being a doomsayer. After all, you can’t effectively sell nonsensical rubbish if you don’t honestly believe that rubbish yourself.

    Yes, petroleum is a finite resource, and humanity would do well to reduce it’s use for it’s energy content and use it instead for more valuable purposes (like petrochemical feedstocks). But energy really is fungible. If petroleum is no longer available, carbon can be reduced by other means, so long as sufficient energy is available. The key is sufficient energy. Bio, solar, and wind are never going to do it.

  89. Craigskeet says:

    So, can geologists tell us that they have explored every square mile of the earth’s surface for oil? I bet they can’t! I think we’ll have oil available into the indefinite future. After all, the plant sediments were set down over BILLIONS of years on earth!

  90. C Giroux says:

    If you compare the most generous estimates of oil / gas reserves in the United States and compare to current demand (which isn’t decreasing), imagining that the infrastructure necessary to extract and deliver to the consumers exists already (it doesn’t), the supply would be depleted in years, maybe decades, but surely not centuries. Since the infrastructure does not yet exist, the resources extracted here will continue to be a fraction of our demand.

  91. C Giroux says:

    I am aware of the ability for biomass to generate hydrocarbons. I am also aware that the current demand cannot be supplied by biomass. The fossil fuels are a hydrocarbon savings account. The savings were built up over millions of years, we are spending as fast as we can extract. Since circa 1850, about 160 years, we have already spent a significant fraction of the account. Peak oil (whenever that actually is or was) signifies 50% of the account depleted.

  92. SecretCommie says:

    ‘Cheap oil’ is a relative term – there’s a constant competition between the difficulty of getting the oil, and the technology to get it – when oil was REALLY cheap back in the 1860, you had to carry it to market on the back of a donkey. The price of oil might not hit $20, but it’ll hit $40 within 5 years, I’m willing to bet. Oil will return to it’s longtime price range – there’s no reason to think it won’t.

  93. Rob Neff says:

    Uh, there’s one big reason to think it won’t – we’ve run out of the cheap stuff.

  94. SecretCommie says:

    This is happening exactly how Julian Simon described, and your forgetting the last part. Increased demand causes shortages which cause price run ups. The higher price causes businesses and inventors to seek new solutions which are eventually found. These new solutions become more and more cost effective over time, and we end up better off than if the original shortage had never happened. So you’re suggesting cost of extraction is the main determinant, when it’s not, it’s the supply relative to the demand, with cost of extraction playing a role. Obviously no one is going to produce oil for more money than they can sell it, but there’s still a lot of *traditionally* cheap oil in the ME that is being deliberately throttled (which won’t be for much longer), and what is expensive oil today will not be tomorrow. So… I’ll make you a gentleman’s bet of $1. Oil under $40 a barrel in 5 years.

  95. SecretCommie says:

    Oil is not ‘finite’ by the technical definition of the term. To be finite, something has to be countable and bounded.

    But oil is not countable – no one knows where all the oil is, and oil exists in many different grades, what would be counted as oil today is not the same thing as will be counted 20 years from now. Would we have counted ‘tight’ oil 20 years ago?

    Oil is not bounded, if we consider bio-fuels which are grown. Something like 3% of oil came from bio sources last year. It had a small but meaningful effect, lowering traditional oil production. Who can say where this tech might go in 20, 50 or 100 years if conventional oil rises in price.

    The price of oil will never be determined by considering how much oil is left in the planet. It will always be determined by how expensive it is to get the next barrel to market, as well as how many other people have barrels to sell versus how many buyers there are. This make oil ‘not finite in an economically meaningful way’ (Julian Simon).

  96. Will Howard says:

    As a climate scientist with a background in geoscience, I find this an interesting argument.

    The tension between our continuing need for fossil fuels and the need to reduce carbon emissions is a central problem. No matter how optimistic you are about renewables, it will take time for them to scale up. Meanwhile we still need fossil fuels. My take-away from what I’ve seen is if we intend to do something about carbon emissions, “peak oil” may not help us in the near-term.

    Continuing technological developments in exploration (e.g. 3-D seismics) and extraction (horizontal drilling, fracking) keep making available new resources.

    So I tend to see the problem not so much in terms of “peak oil” but “peak cheap oil.”Not so much that we are running out of oil (though that will happen *eventually*) but we are running out of the cheap easy-to-access stuff.

    Ironically some analysts think though oil is expensive it’s not expensive enough to drive investment

    US oil production is rising now, in part due to shale oil:

    How long can that last? Not clear. Some resources, such as the Marcellus (W. Va-Ohio-Penn.-NY), seem to have a lot of life in them:

    Others like the Monterey and some of the Chinese basins, may not be economically viable sources of shale oil and gas.

    Conventional oil seems to have peaked and we’re seeing growth in production (esp. from the US) in unconventional resources (not cheap).

    IEA for what it’s worth, says:

    “What is peak oil?”

    “Peak oil can mean different things to different people. Some see it as the potential result of economies maturing and deploying more energy-efficient and diverse fuel technologies, meaning that year-on-year growth in world oil demand may level off. Others see it as the maximum possible annual rate of extraction of conventional crude oil, due either to physical resource constraints or above-ground political, economic or logistical factors. While others insist that since the definition of what constitutes conventional oil is constantly changing, total producible liquid fuels is what should be looked at. ”

    “Where does the IEA stand in the peak oil argument?”

    “Our analysis suggests there are ample physical oil and liquid fuel resources for the foreseeable future. However, the rate at which new supplies can be developed and the break-even prices for those new supplies are changing. Global oil production levels are also dependent on the production policy of OPEC, which holds between one and six million barrels per day of spare capacity in reserve. Declining oil production in any given year can occur for one of several reasons unrelated to peak production, including OPEC production decisions, unplanned field stoppages and the impact of earlier investment decisions by the oil industry. A combination of sustained high prices and energy policies aimed at greater end-use efficiency and diversification in energy supplies might actually mean that peak oil demand occurs in the future before the resource base is anything like exhausted. “

  97. Ray Del Colle says:

    Divest from fossil fuel; decarbonize your portfolio by Dropping Kentucky Carbon First. Read Merchants of Doubt or see the film coming soon to a local cinema. In the USA repeal Citizens United. The wealthy can be taken down. It won’t be easy. It has happened at the end of the First Gilded Age. Check out Move To Switching to renewable, sustainable CLEAN energy will stimulate our economy, create jobs, save us some money, improve our health, clean up our environment and reduce our carbon footprint. “Carbon dioxide has increased about 40 percent in the atmosphere since the 1750s, due to pollution from dirty energy like coal, oil, and gas. The result is a warming climate.

Leave a Reply

Your email address will not be published. Required fields are marked *