Has Peak Oil Come and Gone?
Global energy is back in the spotlight, with good reason. Next month in Copenhagen, the world’s leaders will meet to discuss steps that can be taken to limit climate change and work toward lower carbon emissions and a more sustainable energy future.
One of the biggest topics of conversation lately has centered around the notion of ‘peak oil’, or the point at which worldwide production of oil could go into terminal decline; by some estimates, this could be as early as 2020, according to UKERC, the UK energy research council.
The debate is hotly contested, with experts on both sides weighing in with supporting data from the energy sector, scientists, and the latest figures from various government agencies. In a recent NY Times article, ‘Peak Oil’ – is a waste of Energy, Michael Lynch debunks the notion there is a crisis looming and largely attributes speculation to people using poor analysis, as well as the mis-interpretation of technical materials. The article outlines the arguments in a well-reasoned way, but goes on to say that the most misleading claim in the peak oil debate is the number of recoverable barrels of oil available. He argues that the real number is closer to 10 trillion barrels vs the 2 trillion previously stated by peak oil advocates.
Inflated numbers have also gained support inside the International Energy Agency, when in 2005 they predicted oil production could rise as high as 120m barrels a day by 2030. These once trusted figures were cast in doubt recently when an article published in the Guardian newspaper last week featured a dramatic news story in which an IEA industry whistle-blower stated that key oil figures were distorted (click here for the full article). The source claims that production numbers have already been significantly revised downwards, first to 116m and then to 105m last year, while also stating that many inside the IEA believe that sustaining 90m to 95m barrels a day of production would be impossible. The insider asserts that much is hidden from public view due to the possible threat the information could have on financial markets, as well as threatening the US oil supremacy by risking greater conflict and control issues over oil resources.
Fact is, it isn’t just a lone whistle-blower taking issue with the data. A leading Swedish academic institute has called the IEA’s report a political document that should be independently reviewed by European governments to ensure that politicization of the figures is not taking place. Kjell Aleklett, a physics professor at Uppsala, who runs the Global Energy unit, claims oil production is more likely to be 75m barrels a day. Liverpool University expert Simon Snowden goes further, saying “the IEA is expecting the oil to be extracted at a pace never previously seen without any justification for this assumption.”
Colin Campbell one of the world’s preeminent depletion analysts, Oxford PhD, and co-author of the 1998 Scientific American article, “The End of Cheap Oil” drafted a letter to the Guardian newspaper in the UK in response to a number related stories run in recent weeks. (For a full version of the letter click here.) He asserts that we are currently right at the peak level of global oil production, and highlights the chart below as an indicator of where we have been with oil production since the 1930s.
Even if you don’t completely agree with the numbers, the stark reality is that we are imminently close to, or have reached, the peak oil tipping point. It’s also clear that technology will continue to improve and will aid in more efficient extraction methods and exploration discovery. However, this is nothing new, and the gains in yields are arguably of less significance due to the relative maturity of the industry. Even Daniel Yergin of IHS Cambridge Energy Research Associates, who has been steadfastly optimistic on the peak oil equation, puts the timeline at a less than reassuring 2030 before we would see any declines.
Technological advances occurring in the renewable energy space are far more likely to produce greater impact and jumps in production, efficiency, and yield due to the infancy of many of the technological components involved. While the immediate future may not threaten a zero oil landscape, it only makes sense that nations prepare now for a global energy transition and a more sustainable energy future.
Perhaps the most significantly overlooked part of the problem is not located below ground in the reserves, but above ground in the politics of extraction, exploration and the battle for geopolitical control. Combined difficulties in obtaining investment and resources needed to continually support the industry could lead to ‘oil shock’, wherein prices like those we saw in 2008 return to the market. Oil shocks where production has dropped as little as 5% have caused prices to quadruple in the past. It has only been a decade since we saw prices in the $15-20 a barrel range, and therefore not hard to imagine that prices could soar beyond $200 a barrel in the next decade.
Thanks to Flickr user azrainman
