Peak Oil for Dummies (and Cornucopians)

As happens with most finite resources, “loose” oil gets found & extracted first, and “tight” oil is pursued later. More drilling and/or new drilling technology can’t turn tight oil into loose oil and reverse the fundamental predicament. So-called new discoveries (like the Bakken shale) are just old oil revisited out of desperation. To put it simply, “drill, baby, drill!” gets crushed by declining energy returns. There are marginal gains but no magic drilling techniques.

Peak Oil deniers ignore the fundamentals and treat oil like man-made currency, not a finite resource. Many Americans are unaware that U.S. oil production peaked around 1970 and there’s a cheap energy birthright mentality that gets tied into patriotism and other non-geological concepts.

The geological fact of “Peak Oil” is often misrepresented as “running out of oil” altogether. People fail to understand that hypothetical reserves have little to do with practical flow-rates. If all the world’s oil was pooled in a single huge lake, we could dip thousands of pipes into it and pump until nearly every drop was gone. In that imaginary world, flow-rates would be consistent (after an initial production ramp-up) and there would be no Peak Oil.

But in the REAL world, oil is trapped inside rock pores. The easiest oil naturally flows first and fastest, followed by oil in increasingly tight formations that requires increasing energy inputs to extract. An understanding of EROEI (energy returned on energy invested, aka “net energy”) and a decent knowledge of geology are the keys to comprehending Peak Oil. Some people simply refuse to learn those concepts. Investors hyping new oil plays (like Bakken in North Dakota) are unlikely to talk about inevitable EROEI losses. They want you to think booms equal endless returns.

Kerogen shale is perhaps the tightest oil of all, and it’s an utter lie to claim that kerogen can produce meaningful flow-rates when it may never break even commercially. Those who claim Peak Oil is a myth are simply ignoring what the term actually means.