Conclusions – An Oil Peak
Ok, so what to make of all of this?
I guess the bottom line is that I’m unconvinced that we are nearing peak oil production. As I’ve indicated before, the graphs alone don’t tell us much without economical and geological context. For now I’m subscribing to the claims that the Middle East has plenty of oil for a while, and the theory that as oil prices rise, production of previously unrecoverable oil fields will rise. For better or for worse, we should find out in the next few years whether this theory is true or not. Oil prices in real dollars have increased by a factor of more than three since 1998 (source). If the optimists are right, we should see U.S. production start to reverse its course, or at least significantly slow its decline. According to the numbers, the latter has already happened, but it’s hard to tell how significant, in a statistical sense, the data is.
I also believe that we won’t truly know that oil production has peaked until it has already happened. There is simply too much uncertainty out there, not to mention too many strongly held opinions that will keep partisans from recognizing an oil peak until the evidence has become insurmountable.
To sum up, my best guess is that we won’t hit a peak next year. And that will be my prediction every year. Paradoxically, I also think that someday we will hit an oil peak, so I’m predicting that one day my prediction will be wrong.
I should be honest, and admit that perhaps the biggest reason for my skepticism of a near-term peak is that the people predicting such appear to be significantly in the minority. If most of the people who are in the know think we’re fine for a while, I’ll need harder evidence to overrule them. Likewise, everybody who has predicted a peak by 2006 or earlier has been wrong, and you’d be a fool to ignore that. At the same time, I think our society is overconfident about the energy issue at present, which is one reason why I started this blog.
At the same time, I certainly don’t buy the economists' argument, that rising prices will spur discovery and production to whatever levels the world needs. (Now their argument actually is correct in some sort of tautological economist sense – more on that later – but it is not a sense that should give the world much comfort.) It does sound like discovery rates are declining, and the fact that consumption outpaces discovery is a recipe for eventual depletion.
The fact that U.S. production peaked over thirty years ago is sobering. Current production is half of what it was in 1970, and I haven’t heard anybody argue that it will ever return to that level, no matter what we do. The U.S. is large and geologically diverse. I find it hard to believe that somehow OPEC nations live in some geologically different reality.
Ok, so I’m kind of chickening out. When do I think oil will peak? Heck if I know. It wouldn’t totally surprise me if it was next year, and it would not surprise me if it was thirty years or more. To come up with a better prediction, I would have to dig deeper into what the geologists are saying. At the least, I’ll say this. I do think there will be a peak within my lifetime. I also think that while the peak might not be for a long ways off, there is a significant chance that it will be soon, within ten-fifteen years. Even a ten-percent chance of that should be enough to shake us from our current complacency.
I’ve edited this post many times, trying to come up with something more definitive to say, but I really don’t have a good guess as to what’s going to happen. It does look like the pace of oil discovery is drastically slowing down; oil companies are publicly stating that they are more and more looking to develop heavier oils, which they wouldn’t do if there were plenty of more convenient oil. I think the key unknown for me is what the rate of depletion of existing oil fields is, and I don’t have much of a take on that.
By the way, I definitely don’t believe in that application of “Hubbert’s Law” that states that the oil production curve is symmetric. That might hold for individual oil fields, but it ignores technological advances and economic conditions.
I guess the bottom line is that I’m unconvinced that we are nearing peak oil production. As I’ve indicated before, the graphs alone don’t tell us much without economical and geological context. For now I’m subscribing to the claims that the Middle East has plenty of oil for a while, and the theory that as oil prices rise, production of previously unrecoverable oil fields will rise. For better or for worse, we should find out in the next few years whether this theory is true or not. Oil prices in real dollars have increased by a factor of more than three since 1998 (source). If the optimists are right, we should see U.S. production start to reverse its course, or at least significantly slow its decline. According to the numbers, the latter has already happened, but it’s hard to tell how significant, in a statistical sense, the data is.
I also believe that we won’t truly know that oil production has peaked until it has already happened. There is simply too much uncertainty out there, not to mention too many strongly held opinions that will keep partisans from recognizing an oil peak until the evidence has become insurmountable.
To sum up, my best guess is that we won’t hit a peak next year. And that will be my prediction every year. Paradoxically, I also think that someday we will hit an oil peak, so I’m predicting that one day my prediction will be wrong.
I should be honest, and admit that perhaps the biggest reason for my skepticism of a near-term peak is that the people predicting such appear to be significantly in the minority. If most of the people who are in the know think we’re fine for a while, I’ll need harder evidence to overrule them. Likewise, everybody who has predicted a peak by 2006 or earlier has been wrong, and you’d be a fool to ignore that. At the same time, I think our society is overconfident about the energy issue at present, which is one reason why I started this blog.
At the same time, I certainly don’t buy the economists' argument, that rising prices will spur discovery and production to whatever levels the world needs. (Now their argument actually is correct in some sort of tautological economist sense – more on that later – but it is not a sense that should give the world much comfort.) It does sound like discovery rates are declining, and the fact that consumption outpaces discovery is a recipe for eventual depletion.
The fact that U.S. production peaked over thirty years ago is sobering. Current production is half of what it was in 1970, and I haven’t heard anybody argue that it will ever return to that level, no matter what we do. The U.S. is large and geologically diverse. I find it hard to believe that somehow OPEC nations live in some geologically different reality.
Ok, so I’m kind of chickening out. When do I think oil will peak? Heck if I know. It wouldn’t totally surprise me if it was next year, and it would not surprise me if it was thirty years or more. To come up with a better prediction, I would have to dig deeper into what the geologists are saying. At the least, I’ll say this. I do think there will be a peak within my lifetime. I also think that while the peak might not be for a long ways off, there is a significant chance that it will be soon, within ten-fifteen years. Even a ten-percent chance of that should be enough to shake us from our current complacency.
I’ve edited this post many times, trying to come up with something more definitive to say, but I really don’t have a good guess as to what’s going to happen. It does look like the pace of oil discovery is drastically slowing down; oil companies are publicly stating that they are more and more looking to develop heavier oils, which they wouldn’t do if there were plenty of more convenient oil. I think the key unknown for me is what the rate of depletion of existing oil fields is, and I don’t have much of a take on that.
By the way, I definitely don’t believe in that application of “Hubbert’s Law” that states that the oil production curve is symmetric. That might hold for individual oil fields, but it ignores technological advances and economic conditions.
posted by Jim at
9:09 PM
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