Peak Oil is You
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Page added on June 15, 2013
The mega-lie underlying our energy problems
Exclusive: Porter Stansberry exposes 1 of politicians’ and industry’s favorite falsehoods
Peak Oil was a fantastic lie.
The idea was that our ability to discover and produce higher amounts of hydrocarbon-based energy had peaked and would be forever in decline. This “inevitable” decline in energy production would, in turn, destroy the modern world, as all the luxuries and technologies that we enjoy today (such as cheap electricity and automobiles) rely on these fuels.
I believe historians will look back and marvel over how we could imagine the world would run out of oil – and the incredible mania that thinking produced in the oil markets in the mid-2000s.
As I’ve said before, having a correct understanding of these issues is critical, perhaps the single most important economic issue of the next several decades.
Peak Oil was a terrific lie because it enriched so many powerful constituencies.
Oil and gas promoters used the theory to scare the public into investing huge amounts of capital into oil and gas exploration. Globally, the oil and gas industry’s annual capital investment budget soared, from a little more than $100 billion in 1999 to an all-time record $1 trillion in 2012.
The promoters’ pitch was intoxicating. Their siren song was the idea of the last barrel of oil in the world. What would it be worth? After all, if supplies could never be increased, then the price of oil and gas would soon reach unimagined heights. All this speculation drove oil prices to more than $150 per barrel in the summer of 2008.
Peak Oil was such a simple lie, even politicians could understand it. It was perfect for them because Peak Oil was a problem with no possible solution. When something can’t be fixed, politicians claim all sorts of powers to regulate the issue. That’s when the real trouble started.
The idea that we were going to quickly run out of oil played into the same guilty narrative that many politicians were telling about global warming. Not only were hydrocarbons bad for the environment, consuming them was tantamount to impoverishing our children and dooming them to a future without affordable transportation and electricity.
These ideas were used as cudgels by politicians to discredit the oil and gas industry. They justified all kinds of massive and stupid government-led investments into supposed alternatives.
None of these alternatives had the capacity to replace our country’s massive energy infrastructure (which is based almost completely on hydrocarbons). But that wasn’t really the point. These huge public-sector investments mostly served to enrich politicians (like Al Gore) and their lobbyists and backers.
We estimate that to date, the government has spent, wasted or simply lost roughly $500 billion on absurd energy investments. That’s roughly twice as much as it lost on the housing bubble.
This has fueled a huge binge of crony capitalism. Just look at solar-energy company Solyndra. Here the government lost half a billion dollars on one company. No one has gone to jail. No one has been kicked out of office. That’s because the politicians weren’t lining the pockets of their supporters, right? No, they were nobly trying to “solve” global warming – and forestall Peak Oil.
Sure.
The irony is, long before the shale oil and gas boom started, we had more than enough evidence to completely discredit Peak Oil.
The theory’s main flaw is that it assumes our knowledge of oil and gas reserves is complete. But the truth is plainly the opposite. For example, the U.S. Geological Survey estimated in 1994 that the recoverable amount of oil and gas in the North Dakota’s Bakken shale formation totaled 151 million barrels.
Today, about 15 years later, producers in the Bakken are extracting 255 million barrels each year – about 100 million more barrels annually than were supposedly to be in the entire basin.
Harold Hamm, CEO of the largest Bakken producer, Continental Resources, says the Bakken has at least 24 billion barrels of recoverable oil. His firm is currently producing more than 40 million barrels per year. If Hamm is right, the Bakken could be four times larger than the biggest oilfield ever discovered in the continental U.S. – H.L. Hunt’s giant elephant field, known as East Texas.
Peak Oil’s second main flaw is that it assumed recovery methods would forever be limited to extracting about 10 percent of the oil contained in a conventional reservoir. But as technology improves, most knowledgeable industry experts predict that ultimate recovery rates will exceed 40 percent. So even if we never discovered any additional oil reservoirs, we might still only be halfway toward Peak Oil.
Consider Denbury Resources, one of the best companies in the world at “renovating” existing oilfields by using new, advanced recovery methods. Denbury can take an old conventional oilfield and increase the average recovery rate from 10 percent to 25 percent.
Applying new technologies to existing oil reservoirs is a very good business, by the way. Denbury’s shares have soared from around $0.50 in the late 1990s to more than $40 at the peak of oil prices in the summer of 2008. Clearly, if Peak Oil was real, Denbury’s entire business model wouldn’t have worked. Not only did it work, it worked incredibly well because Denbury’s strategy eliminated the main capital risk of oil production – dry holes.
Here’s the fascinating thing: Enhanced production techniques were pioneered by the firm Kinder Morgan in the 1990s and then copied by dozens of companies like Apache and Denbury in the late 1990s and early 2000s. The actual results of these businesses made it clear that the assumptions of Peak Oil were simply wrong.
They weren’t sometimes wrong. They were always wrong. They weren’t merely wrong in theory. They were completely wrong in practice.
Regardless, the widespread belief in Peak Oil caused billions of dollars to flow toward oil and gas exploration and production companies. These companies, in turn, have used that capital to find and produce vastly more oil and gas than almost anyone thought was possible. That’s how the free market works: Demand drives savings and investment, which increases supply … until prices fall.
Since hitting a bottom in mid-2005, total annual energy production in the U.S. has grown 10 percent, from 62.6 trillion cubic feet equivalent (tcfe) to more than 69 tcfe.
But this doesn’t tell the whole story.
Total energy production in the U.S. includes coal and petroleum from the North Slope of Alaska. When you look at only the lower 48 states and take out coal, you see the real trend.
Oil production in the lower 48 states is up a stunning 75 percent and dry gas production is up 35 percent over the past eight years.
These increases are on a scale we haven’t seen in more than 50 years. They are huge increases in production that most people believed could never happen again.
These unprecedented increases have finally laid bare the self-serving lies of Peak Oil theorists.
24 Comments on "The mega-lie underlying our energy problems"
socrates1fan on Sat, 15th Jun 2013 4:37 pm
Peak oil is so simple to understand yet so many people have no idea what it is (such as the writer of this article).
I get a headache when people go around claiming “peak oil is a myth” and praise the new discoveries yet have no understanding of how much these “new discoveries” of unconventional oil fall in line with peak oil.
GregT on Sat, 15th Jun 2013 4:53 pm
“I believe historians will look back and marvel over how we could imagine the world would run out of oil – and the incredible mania that thinking produced in the oil markets in the mid-2000s.”
Run out of oil? Nah. The planet being finite is nothing more than a myth, the Earth is expanding exponentially, just to keep up with our demands.
dissident on Sat, 15th Jun 2013 4:57 pm
That graph is a fantastic lie.
John_A on Sat, 15th Jun 2013 5:03 pm
Denying reality is what we here in the States call “delusional”. For that graph to be a lie, you have to explain what parts of it are made up, because factually I believe it is correct. The article might be crap, but BP, the EIA, and most people with excel and oil production data for America can figure out for themselves pretty quick that oil us growing faster now than at any point in American history. Fact. Inconvenient fact maybe, but fact. We can all have our own speculation and conclusions, but we don’t get to make up our own facts. Sorry.
socrates1fan on Sat, 15th Jun 2013 5:22 pm
For the love of god, don’t read the comments on the article. Abiotic oil sheep everywhere.
J-Gav on Sat, 15th Jun 2013 5:24 pm
Another denier article which starts out with the old “Peak Oil = We’re running out of oil” absurdity. That in itself disqualifies it as serious discourse right off the bat.
jodell8964 on Sat, 15th Jun 2013 6:10 pm
“I believe historians will look back and marvel over how we could imagine the world would run out of oil – and the incredible mania that thinking produced in the oil markets in the mid-2000s.” I don’t think Historians will have the time to look back. I think if civilization does make it through to the other side of Peak Oil in one way or another, then humans will more than likely need to spend all their time acquiring the basics, like growing food or hunting. The role of an Historian would be obsolete.
Juan Pueblo on Sat, 15th Jun 2013 6:32 pm
How ignorant and stupid does a human being need to be to not understand Peak Oil?
I can’t believe anyone who can write like this is that stupid. This man is lying for money, plain and simple.
shortonoil on Sat, 15th Jun 2013 7:26 pm
The graph is absolutely useless. Its right axis says “millions of barrels”. “millions of barrels” what, per day, year, more than last year. Have no idea what they are talking about, and I doubt they do either!
indigoboy on Sat, 15th Jun 2013 7:48 pm
Is the originator of this dumb article, the same Porter Stansberry, as in this article :
http://briandeer.com/stansberry/stansberry-research-scam-1.htm
or this
http://dailycaller.com/2011/11/08/meet-porter-stansberry-the-fraudster-behind-ominous-newamerica3-ads/
Azrael on Sat, 15th Jun 2013 8:31 pm
So for a 10 times increase in investments you barely get 1.8 increase in productivity and you tell me that we haven’t hit a peak?
How stupid does this guy think we are?
rollin on Sat, 15th Jun 2013 9:40 pm
You have to admire the creativity behind this piece of fiction. Deniers completely ignore two facts, the US is still a large importer of petroleum and the world production of petroleum has stalled despite much higher prices.
Just because higher prices have allowed high tech extraction and EOR techniques in some areas does not mean that oil production is not peaking.
A big indicator of peak oil is the data agencies use of all liquid fuels as oil production.
On the other hand, the predictions were wrong so far. Civilization did not crash from loss of oil and it is now a race between oil and badly managed economics as to which (or both) will cause the crash.
I think it will be a long descent instead of a giant crash.
Newfie on Sat, 15th Jun 2013 9:53 pm
The USA peaked over 40 years ago. Duh.
Dmyers on Sat, 15th Jun 2013 10:20 pm
1970 10.2 Mb/d
2012 6.5 Mb/d
Does this NOT look like peak oil?
In my opinion, Porter Stansberry has no more business commenting on this subject than he does on the Theory of Relativity. He should have noted how many times this same article already has been written, since Maugeri’s “we are the new Saudi Arabia” debut, and chosen not to look like such an ape.
What has come to be called “peak oil” can’t be a lie when it is simply an observation of the way oil sources behave over time, when extraction is taking place. To say Hubbert invented peak oil in order to enrich his oil industry buddies is like saying actuarial tables were invented to create the illusion of death, to enrich the life insurance business.
He doesn’t make a very good case for its purpose as a lie, which he claims led to large expenditures in search of additional oil. How can he complain about the stimulation of investment when he is lauding what is probably a direct result of it, which is increasing oil production?
Viewing increasing production as on an upward curve that will keep ascending indefinitely is ridiculous and itself the big lie here. That curve will soon reflect steep depletion rates that are characteristic of this type of “oil”. It is on that point that the skeptics (aka peak-oilers)will prove to be correct, and the abundant-oilers will prove to be wrong.
mike on Sat, 15th Jun 2013 10:27 pm
thanks for the lulz! what a great article, the onion right?
Keith_McClary on Sat, 15th Jun 2013 10:39 pm
His linked article :
http://www.stansberryresearch.com/growth-stock-wire/3318/the-most-important-chart-for-oil-investors-to-see
says
“According to Bloomberg, it cost Suncor $139.94 to produce one barrel of oil in 2011 (the most recent data available). Compare that to ExxonMobil (NYSE: XOM) – the world’s best oil company – which spent just $9.44 a barrel on average.”
R. J. Simmons on Sat, 15th Jun 2013 11:35 pm
In reality, we don’t need oil to produce power. And many think it should be a crime to use it for that purpose, since a Harrell of oil can be used to produce other goods essential to our life.
Instead of oil for fuel, we could be burning hydrogen and spewing water from our exhaust pipes. A fellow named Stanley Meyer spent 20 years of his life perfecting a way to split the water molecule efficiently, and had his prototype dune buggy perfected that he claimed he could drive coast to coast on 22 gallons of water. He had military brass at his house. He had Sheiks at his house. He had a patent office evacuated because of the hydrogen his invention spewed into their building. The Arabs offerred him a billion dollars for the rights to his patents, but he refused them because he knew they would shelve it. Afterall, they siphon a billion bucks out of the USA about every week or two, so why would they want to promote hydrogen power. In the late 90’s, he stumbled out of a local restaurant where he was dining with his brother, clutched his throat, and said “they poisoned me”, and fell dead. Then his technology disappeared. So, the point is, we need all these oil wars, and all this pollution, like we need another arsehole. So go and google “Stanley Meyer and his hydrogen car”, and see for yourself. There are a multitude of YouTube videos that the good man left us.
R. J. Simmons on Sat, 15th Jun 2013 11:38 pm
Google “Stanley Meyer and his Hydrogen Car”.
dave thompson on Sun, 16th Jun 2013 1:24 am
“His firm is currently producing more than 40 million barrels per year.” That is two days worth in the US.
socrates1fan on Sun, 16th Jun 2013 3:26 am
The worst part about these idiots is they give people a false sense of security. They prevent good and strong support for renewable energy and conservation. “Don’t worry folks! You can keep doing what you do!” Yet gas is as high as ever (despite the recession and drop in demand) and climate change is rearing its ugly head more and more.
Economists are not geologists.
BillT on Sun, 16th Jun 2013 5:59 am
WND, another elite money rag to produce disinformation and distraction.
We peaked years ago. We now call anything flammable, ‘oil’. NET oil available for use is the number they keep dodging.
BillT on Sun, 16th Jun 2013 6:04 am
BTW:
1970 10M.bbl/day = 3,650 M.bbls/year.
2013 ~6M.bbl/day = 2,130 M.bbls/year.
Does that look like a ‘huge increase’?
Stephen on Sun, 16th Jun 2013 10:19 am
This guy should watch the movies Blind Spot, A Crude Awakening: The Oil Crash, The End of Suburbia, and read “The Party’s Over”, “Peak Everything”, “The End of Oil”, “and see if he still beleives this.
C.R. on Tue, 30th Nov 2021 3:25 pm
My limited understanding is that the earth is always producing oil. “Bacterial decomposition of the plants and animals removed most of the oxygen, nitrogen, phosphorus, and sulfur from the matter, leaving behind a sludge made up mainly of carbon and hydrogen.” In the deep bowels of the earth and buried sediments on ocean floors, oil is being produced. Global Warming Deniers…. Global Warming Bullies… 2 sides of the same coin: loudmouthed snooks who can’t say those simple words: we don’t know.