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Page added on November 5, 2013
Noam Chomsky on Peak Oil, Economics, Financial Markets
Noam Chomsky on Peak Oil, Economics, Financial Markets, Bailouts, Investment, Climate Change (1998)
Peak oil is the point in time when the maximum rate of petroleum extraction is reached, after which the rate of production is expected to enter terminal decline. Global production of oil fell from a high point in 2005 at 74 mb/d, but has since rebounded setting new records in both 2011 and 2012. There is active debate as to when global peak oil will occur, how to measure peak oil, and whether peak oil production will be supply or demand driven.
The aggregate production rate from an oil field over time usually grows until the rate peaks and then declines—sometimes rapidly—until the field is depleted. This concept is derived from the Hubbert curve, and has been shown to sometimes be applicable to the sum of a nation’s domestic production rate, and similarly to the global rate of petroleum production. However, the discovery of new fields, the development of new production techniques and the exploitation of unconventional supplies can disrupt this correlation. Peak oil is often confused with oil depletion; peak oil is the point of maximum production, while depletion refers to a period of falling reserves and supply.
M. King Hubbert created and first used the models behind peak oil in 1956 to accurately predict that United States oil production would peak between 1965 and 1971. His logistic model, now called Hubbert peak theory, and its variants have been used to describe and predict the peak and decline of production from regions, and countries, and has also proved useful in other limited-resource production-domains. According to the Hubbert model, the production rate of a limited resource will follow a roughly symmetrical logistic distribution curve (sometimes incorrectly compared to a bell-shaped curve) based on the limits of exploitability and market pressures.
Some observers, such as petroleum industry experts Kenneth S. Deffeyes and Matthew Simmons, predict negative global economy implications following a post-peak production decline—and oil price increase—due to the high dependence of most modern industrial transport, agricultural, and industrial systems on the low cost and high availability of oil. Predictions vary greatly as to what exactly these negative effects would be.
In 2008 oil prices reached a record high of $145/barrel. Governments sought alternatives to oil, particularly the use of ethanol, but that had the unintended consequence of creating higher food prices, particularly in the developing countries. Throughout the first two quarters of 2008, there were signs that a global recession was being made worse by a series of record oil prices.
Optimistic estimations of peak production forecast the global decline will begin after 2020, and assume major investments in alternatives will occur before a crisis, without requiring major changes in the lifestyle of heavily oil-consuming nations. These models show the price of oil at first escalating and then retreating as other types of fuel and energy sources are used. Pessimistic predictions of future oil production are that either the peak has already occurred, that oil production is on the cusp of the peak, or that it will occur shortly. In 2013 the International Energy Agency (IEA) projected that global oil production capacity would grow 8.4 mb/d over the next 5 years.
One Comment on "Noam Chomsky on Peak Oil, Economics, Financial Markets"
rockman on Tue, 5th Nov 2013 7:30 pm
”The aggregate production rate from an oil field over time usually grows until the rate peaks and then declines—sometimes rapidly—until the field is depleted. This concept is derived from the Hubbert curve, and has been shown to sometimes be applicable to the sum of a nation’s domestic production rate, and similarly to the global rate of petroleum production. However, the discovery of new fields, the development of new production techniques and the exploitation of unconventional supplies can disrupt this correlation.”
At least they got it partially right: no…the “aggregate production rate” for oil fields wasn’t derived from Hubbert’s curve. It was observed in the development of thousands of oil fields. And typically fields reach their maximum production rate very quickly and then decline at a much slower rate. Rarely has a field of even minimally significant size depleted quickly. And Hubbert, in his own words, said his analysis dealt only with the specific trends in the US he analyzed. His curve had zero application to any other US trends yet alone other countries. Hubbert’s peak production curve was only applicable to those trends upon which he based his analysis. Which is exactly why the boom in the shale plays and the deep Water GOM don’t represent an error in his model: they were not a part of his model. He was predicting the peak oil production rate of just the fields in his analysis…not the entire US. One can build comparable models for other US trends but that needs to be done with the development profile of those particular trends which have nothing at all to do with the trends Hubbert analyzed for his PO curve. His projection for those trends was very accurate. Folks should go back a read the details in Hubbert’s report.
The same case can be made for analyzing global oil production trends. One can do the same Hubbert style analysis for the fields in the Persian Gulf. Unfortunately the data isn’t nearly as verifiable as that which Hubbert used. But one could make a good guess IMHO. But the PG PO curve would only apply to those trends. The development of the Deep Water trends off of Brazil would not prove the PG PO analysis was in error because the PG PO analysis would only apply to those trends. And then there’s the question of when DW Brazil PO will occur. Who knows…it has barely started to produce. Maybe 15 to 20 years down the road there will be enough data to create a Hubbert style PO curve for that trend. Hubbert’s type of analysis is only applicable to trends that are fairly mature. It has zero application to young trends let alone plays that have just started to develop. Not to take anything away from his work but Hubbert wasn’t predicting the future production rate from yet to be discovered trends in the US or anywhere else. He was analyzing just those rather mature US trends which established decades earlier the basis for much of our production at the time he did his analysis.