The World Has Plenty of Oil

Many energy analysts view the ongoing waltz of crude prices with the mystical $100 mark — notwithstanding the dollar’s anemia — as another sign of the beginning of the end for the oil era. “[A]t the furthest out, it will be a crisis in 2008 to 2012,” declares Matthew Simmons, the most vocal voice among the “neo-peak-oil” club. Tempering this pessimism only slightly is the viewpoint gaining ground among many industry leaders, who argue that daily production by 2030 of 100 million barrels will be difficult.

In fact, we are nowhere close to reaching a peak in global oil supplies
Given a set of assumptions, forecasting the peak-oil-point — defined as the onset of global production decline — is a relatively trivial problem. Four primary factors will pinpoint its exact timing. The trivial becomes far more complex because the four factors — resources in place (how many barrels initially underground), recovery efficiency (what percentage is ultimately recoverable), rate of consumption, and state of depletion at peak (how empty is the global tank when decline kicks in) — are inherently uncertain.

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Where do reasonable assumptions surrounding peak oil lead us? My view, subjective and imprecise, points to a period between 2045 and 2067 as the most likely outcome.

Cambridge Energy Associates forecasts the global daily liquids production to rise to 115 million barrels by 2017 versus 86 million at present. Instead of a sharp peak per Hubbert’s model, an undulating, multi-decade long plateau production era sets in — i.e., no sudden-death ending.

The world is not running out of oil anytime soon. A gradual transitioning on the global scale away from a fossil-based energy system may in fact happen during the 21st century. The root causes, however, will most likely have less to do with lack of supplies and far more with superior alternatives. The overused observation that “the Stone Age did not end due to a lack of stones” may in fact find its match.

The solutions to global energy needs require an intelligent integration of environmental, geopolitical and technical perspectives each with its own subsets of complexity. On one of these — the oil supply component — the news is positive. Sufficient liquid crude supplies do exist to sustain production rates at or near 100 million barrels per day almost to the end of this century.

Wall Street Journal