Peak Oil is You
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Page added on August 7, 2014
Is the Peak Oil Myth Dead?
In his 2005 New York Times best-selling book Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, renowned oil analyst Matthew Simmons outlined his belief that Saudi Arabia’s giant Ghawar oil field would soon begin a terminal decline that would result in permanently falling global oil production.
Indeed, from the post-recession lows of 2003 until peaking in 2008, oil prices seemed to prove peak oil proponents correct — with prices seemingly on a long-term exponential increase.
Brent Crude Oil Spot Price data by YCharts
However, what Mr. Simmons and other peak oil theorists failed to consider is that America’s shale oil revolution could not only make up for Ghawar’s production fall, but even replace the field entirely.
Permian Basin: dethroning the Saudis
According to Pioneer Natural Resources, the Permian Basin of West Texas and New Mexico holds an estimated 75 billion barrels of recoverable oil, an estimate that is up 50% in just the last year.
Compare this to Ghawar’s roughly 70 billion barrels of remaining oil and then factor in that the Energy Information Administration (EIA) estimates the US’s technically recoverable shale oil and gas deposits stand at 223 billion barrels, and one can see there is little cause for alarm. In fact, according to bank of America, in the first quarter of 2014 the US became the largest producer of fossil fuel liquids in the world, a fact verified by the International Energy Agency in June.
That impressive feat was accomplished thanks to the incredible growth of oil production from Texas and North Dakota, which increased their production by 117% and 177% respectively between 2010 and 2013.
However, as impressive as America’s explosive oil growth has been and as large as our resources might be, they don’t hold a candle to the immense untapped potential that exists around the world.
Drowning in oil
Russia’s Bazhenov shale formation is the size of California and Texas combined and is estimated to also hold 75 billion barrels of oil recoverable with current technology. To put that in perspective, 75 billion barrels is about 10 times the estimated recoverable resources of North Dakota’s Bakken formation, which has increased its production 20-fold in the last six years.
The EIA estimates that the Bazhenov ultimately holds 1.2 trillion barrels of oil in total.
To fathom just how much 1.2 trillion barrels of oil is, consider this: According to London’s Oil Depletion Analysis Center the world has thus far, in its entire history, produced 1.2 trillion barrels of oil.
Interestingly enough, according to the EIA, the world’s traditional (non-shale) oil resources currently stand at around 1.3 trillion barrels as well.
Russia’s Bazhenov formation may be mindbogglingly huge, however it represents just a fraction of total global shale oil resources, which the EIA estimates to stand at 3.357 trillion barrels. And Canada’s fabled tar sands alone could hold nearly as much oil as that — 2.5 trillion barrels at the high end of estimates.
However, the single largest potential mother lode of oil is Colorado and Wyoming’s Green River Formation, which the US Government Accountability Office believes to hold as much as 3 trillion barrels of oil.
Unfortunately, these resources come in the form of kerogen, which is trapped inside rock that must be intensely heated to extract. It’s estimated that, of this bounty, only 1.8 trillion barrels could ever be technically recoverable due to the intense energy and water resources required. For example, to extract 1 million barrels/day would take enough power for 9 million homes and enough water to supply all of New York City for 45 days.
Nonetheless, the world’s remaining oil resources all told stand at 7 trillion to 10 trillion barrels, six to eight times what humanity has thus far pumped out of the ground. At today’s production levels it would take 220 to 300 years to deplete all that oil (assuming our resource estimates don’t rise over time, as they’ve been doing for decades).
The stone age didn’t end because we ran out of stones
Before we all take to the streets to celebrate the end of the energy crisis, there are several important factors to consider. First of all, recent US sanctions against Russia over its actions in Ukraine have resulted in a denial of key economic resources, including deepwater offshore drilling rigs and fracking equipment. This could hinder exploitation of the Bazhenov formation, at least in the short term, because Russia is increasingly dependent on Western technology to increase oil production from hard-to-drill locations.
Second, much of these resources will never be economically recoverable simply because the amount of energy it would take to extract that oil would be more than is contained in the oil itself. In addition, though much of the oil could prove recoverable, it would require prices so high the world will have moved to alternative energy sources by then.
Finally, environmental concerns may convince humanity to forgo using all its potential oil, which brings to mind a famous quote by architect William McDonough:
“The Stone Age did not end because humans ran out of stones. It ended because it was time for a re-think about how we live.”
Foolish bottom line
Peak oil is inevitable in the sense that one day the world will find better alternatives to oil and voluntarily choose to stop using it as much. However, perpetrators of the supply side peak oil myth fail to take into consideration the innovative spirit of thousands of engineers, scientists, and industrialists who are constantly looking for solutions to our energy needs. In other words, it’s not inconceivable that your grandchildren might be driving gas-powered cars even 100 years from now.
17 Comments on "Is the Peak Oil Myth Dead?"
Dave Thompson on Thu, 7th Aug 2014 8:15 am
Total garbage.
westexas on Thu, 7th Aug 2014 8:16 am
It’s always nice to get a report from Fantasy Island.
But back here in reality, it is quite likely that actual global crude oil production (45 or lower API gravity) has been at or below the 2005 production rate for eight straight years, as annual Brent crude oil prices doubled from $55 in 2005 to the $110 range for 2011 to 2013 inclusive. Global natural gas production and associated liquids, condensates and natural gas liquids, have (so far) continued to increase.
Global Net Exports of oil (GNE), which are calculated in terms of total petroleum liquids + other liquids (EIA), have been below the 2005 rate for eight straight years.
Furthermore, developing countries, led by China, have been consuming an increasing share of a post-2005 declining volume of GNE. Available Net Exports (ANE), the volume of GNE available to importers other than China & India, fell from 41 mbpd in 2005 to 35 mbpd in 2012, and ANE were probably down to between 33 and 34 mbpd in 2013.
At the 2005 to 2012 rate of decline in the ratio of GNE to CNI (Chindia’s Net Imports), in 16 years China and India alone would theoretically consume 100% of Global Net Exports of oil.
Newfie on Thu, 7th Aug 2014 8:25 am
That site should be called Foolish.com
steve on Thu, 7th Aug 2014 9:36 am
When things crash these people who write this crap should be held accountable and be brought to trail for treachery…This misinformation campaign is only going to make things worse in the future…I have been talking peak oil since the early 1990’s and people have been laughing at me ever since then..When I talk about it today they still think I am nuts!
Davy on Thu, 7th Aug 2014 9:59 am
Steve, I am on the fence with your comment. Sometimes it is better to have people ignorant and positive that is if you want to continue BAU. Widespread acceptance of PO will collapse confidence and the financial system with it. I imagine quickly. Since slow collapse is a certainty anyway no matter what should we embrace that logic to allow bottom up lifeboat efforts to continue. Yet, I, like you am disturbed by the lies, distortions, and corruption of the truth.
JuanP on Thu, 7th Aug 2014 10:41 am
Steve, I can relate to the way you feel about people laughing at you. I used to talk about overpopulation, resource depletion, and environmental destruction all the time growing up and in my youth. I was called names, beaten, mistreated, laughed at, ridiculed, and disrespected for it. I was just trying to help!
Now I’m 45 and I no longer talk with normal people about this things, I just nod politely and listen to their stories with a smile as they blabber nonsense after nonsense. Most people never tire of talking.
As far as I am concerned we can’t change human nature, and that was a tough thing for me to accept.
Davy on Thu, 7th Aug 2014 11:10 am
Juan, it is surreal to see what people talk about. I do the same as you because it does no good to aurgue. I do hit them with back door disguised aurguments when I hear something off the wall. But direct frontal assaults on the cultural meme is a waste of energy
Craig Ruchman on Thu, 7th Aug 2014 11:28 am
“Unfortunately, these resources come in the form of kerogen, which is trapped inside rock that must be intensely heated to extract. It’s estimated that, of this bounty, only 1.8 trillion barrels could ever be technically recoverable due to the intense energy and water resources required. For example, to extract 1 million barrels/day would take enough power for 9 million homes and enough water to supply all of New York City for 45 days.”
Haha, the Red Queen twist. Ended up being an informative post on falling ERoEI, water scarcity, and the turbo charging of climate change!
Craig Ruchman on Thu, 7th Aug 2014 11:28 am
“Unfortunately, these resources come in the form of kerogen, which is trapped inside rock that must be intensely heated to extract. It’s estimated that, of this bounty, only 1.8 trillion barrels could ever be technically recoverable due to the intense energy and water resources required. For example, to extract 1 million barrels/day would take enough power for 9 million homes and enough water to supply all of New York City for 45 days.”
Haha, the Red Queen twist. Ended up being an informative post on falling ERoEI, water scarcity, and the turbo charging of climate change!
Northwest Resident on Thu, 7th Aug 2014 12:02 pm
JuanP, Davy, Steve — Surreal is a great way to describe our situation. So many people living in their alternate reality which is constantly fed and propped up by volumes of targeted propaganda — all created courtesy of TPTB of course with the explicit purpose of keeping the masses calm and unaware of the pack of encircling wolves. Be thankful for this fundamental reality! It is what gives you and me and others like us time to prepare.
Also, I may have mentioned that I am a software developer for a company that builds and sells financial investment software packages. I am right smack dab in the middle of the “all is well, business is great” attitude here at work. Imagine my conflicting thoughts when I sit in meetings and we are discussing grand software development plans for years out into the future, and everybody is doing the “rah rah rah” watching the stock market as it rockets to ever greater heights, “guaranteeing” our business is very well positioned. Little do all those people — good, smart, hard-working folks who I really like — but little do they know that a DOOMER sits within their midst, silently thinking how screwed all those people are, thinking how futile all the big plans are.
Dave Thompson on Thu, 7th Aug 2014 12:11 pm
This is a great overview of humanity and economy.http://collapseofindustrialcivilization.com/2014/03/27/the-biophysics-of-civilization-money-energy-and-the-inevitability-of-collapse/
Goat512 on Thu, 7th Aug 2014 3:00 pm
It’s a slow crash, but crash it is. Plentiful oil supply means gas at $1.25 which indeed it is not. Energy prices, over population and climate change are shredding the national economy, global economy, governments and families incrementally.
The pot of water we are sitting in gets a little hotter every day but like the proverbial frog not one is jumping (just yet).
And of course, the innovative spirit of thousands of engineers, scientists and industrialists will continue to find solutions for our dilemma until they can’t…
Kenz300 on Thu, 7th Aug 2014 6:43 pm
As the cheap and easy to extract oil gets used up and is replaced with costly higher priced and harder to extract oil the high price will make all substitutes look better.
It is time to end the oil monopoly on transportation fuels.
steve on Thu, 7th Aug 2014 6:58 pm
Well you are going to have to break peak oil to the people sometime….you just can’t wait forever….my you could start with peak oil light and work your way up to peak oil heavy…..
Makati1 on Fri, 8th Aug 2014 2:27 am
“…one day the world will find better alternatives to oil and voluntarily choose to stop using…”
Yes and the ‘better alternative’ will be food, clothing and shelter. Coming soon to a war theater near you. Oops! Was that too ‘out there’ for some here?
Arthur on Fri, 8th Aug 2014 5:07 am
Nah steve, breaking peak oil to the boobs is too crude.
fred1 on Fri, 8th Aug 2014 5:37 am
the longer the sheeple don’t know about peak oil the better. more time to prep