Is the Theory of ‘Peak Oil’ Dead?

Yet another voice has questioned the theory of “peak oil,” which posits future scarcity, rising prices, and economic collapse due to the lack of precious fuels that drive the global economy. Under this theory the rate of petroleum extraction will crest and then commence “an immutable decline…as demand for this finite resource permanently exceeds supply.”

This latest critic of the theory is the Boston Company Asset Management LLC, which released a white paper entitled, “End of an Era: The Death of Peak Oil. An Energy Revolution, American-Style.”

The Boston Company report claims that “an array of structural shifts in the Energy industry is conspiring to insulate the global economy from any such dramatic increase in the price of oil.” This is due, in part, to American consumers radically altering their consumption of petroleum products in the world’s largest market. Moreover, “heightened investments and technological breakthroughs have spurred an explosion in resources, as source rock has expanded the definition of ‘finite resources.’” This latter point refers to the combination of directional drilling and hydraulic fracturing that has allowed access to previously hard-to-reach supplies of gas and oil in the continental United States. In Canada, the development of oil extraction from tar sands has also escalated dramatically in recent years.

In North America oil supply has grown annually by roughly 500,000 barrels per day while demand shrinks because vehicles are increasingly burning less gasoline.

This contributes to the global market on top of 1 million barrels per day from places such as the North Sea, Brazil, West Africa, and, of course, the Middle East.

“If another 2 million bpd [barrels per day] can be added to supply (including some give back from weaker demand), Asia — the fastest growing region in the world — would have to double its trend-line growth in consumption to achieve a balance,” says the company.

“Thus, we bid farewell to the days of Peak Oil.”

“End of an Era” supports the argument made by noted energy analyst Daniel Yergin, who won the Pulitzer Prize for his book, The Prize: The Epic Quest for Oil, Money, and Power (2009).

Yergin outlines the sorry history of peak oil theorists in his latest book, The Quest: Energy, Security, and the Remaking of the Modern World (2012), which continues and expands the history of energy in American and around the world.

In The Quest Yergin calmly, patiently explains the error in the concept of “peak oil,” which assumes “that the world is near or at the point of maximum output, and that an inexorable decline has already begun, or is soon to set in,” Rather, he believes “The World has decades of further production growth before flattening out into a plateau— perhaps sometime around mid-century — at which time a more gradual decline will begin.”

“The date of the peak has tended to move forward,” he writes. “It was supposed to arrive by Thanksgiving 2005. Then the ‘the unbridgeable supply gap’ was expected to open up ‘after 2007.’ Then it would arrive in 2011. Now some say ‘there is a significant risk of a peak before 2020.”

Yergin documents at least five instances of the nation or world having been declared to be running out of oil. In 1885 the state geologist of Pennsylvania, home of the first oil boom, proclaimed that surge of supply was only a “temporary and vanishing phenomenon — one which young men will live to see come to its natural end.”

The idea of peak oil originated with an eminent earth scientist, Marion King Hubbert. In 1978 he predicted that children born in 1965 would see all the world’s oil supply gone in their lifetimes. Humanity was embarking upon “a period of non-growth.”

“By 2010, U.S. production was four times higher than Hubbert had estimated — 5.9 million barrels per day versus Hubbert’s 1971 estimate of no more than 1.5 million barrels per day — a quarter of the actual number,” notes Yergin. Hubbert simply did not account for the impact of prices, substitution, and technological innovations.

Interestingly, the Energy Information Agency, a federal bureau, recently stated that U.S. crude oil production exceeded an average 7 million barrels per day in November and December 2012, the highest volume since December 1992. Increasing oil production in North Dakota and onshore Texas drove the increase in U.S. crude oil production over the last several months (although production in North Dakota took a dip in November, before increasing again in December). This increase in production is coming from shale and other “tight” or very low permeability formations.

14 Comments on "Is the Theory of ‘Peak Oil’ Dead?"

DC on Tue, 5th Mar 2013 3:10 pm 



RoFL Yergin? The world allready IS on a bumpy plateau, old news around here. Not in a ‘few’ decades, but right here and now.

The rest of this article is equally sad.

actioncjackson on Tue, 5th Mar 2013 3:40 pm 



Except that Hubbert was spot on accurate with regards to U.S. peak oil, peaked around 1970. Bakken is indicative of oil age in it’s death throws. If it was so abundant then why did all those thousands of drilling rigs disappear? You know when they start denying that the exact opposite of what they’re saying is about to occur, another “stay calm and don’t worry and keep giving us you’r money until it collapses” article.

keith on Tue, 5th Mar 2013 4:31 pm 



wait. This article makes perfect sense- to the elite that is. We can get at any oil as long as it can be sold. The elite will always be able to afford oil at whatever cost. In this future world of innovation the rest of us will be innovated into serfdom. And if we step out of line, they can always go republic of china on our asses.

LT on Tue, 5th Mar 2013 4:52 pm 



There is an ABSOLUTE limit here; that is when it takes one barrel of oil to dig/recover one barrel of oil,

Which means: EIOER = 1:1 ratio

All the digging will cease to exist, regardless of how much money one has.

dsula on Tue, 5th Mar 2013 5:36 pm 



What if I can use a solar panel to run a pump to get oil? Even with EROEI of less than 1 it might make sense. EROEI does not mean much. Only doomers seem to be hung up on it.

ianmcpherson on Tue, 5th Mar 2013 6:21 pm 



This article is an idiotic piece of self-congratulation. The oil industry is proceeding just as Robert Hirsch suggested they do in his original peak oil study back in 2005. Unfortunately, in their rush to burn every possible unconventional hydrocarbon known to man, they will raise the average temperature on the planet by 4-6°C by the end of the century and commit the human race to a path that could threaten the species. That’s innovation for you! Bravo Big Oil!

Adam Grant on Tue, 5th Mar 2013 8:11 pm 



Before the EROI of extracting fossil hydrocarbons get anywhere near 1:1, competition from renewables will halt fossil fuel extraction.
Every month brings new and cheaper processes for turning sunlight, wind and geothermal power into usable energy. As renewables move from pilot projects to mature solutions that governments can deploy to supply their power needs, carbon will increasingly be priced out of the market.

There are still existing oil wells that produce energy more cheaply than renewables, but these are quickly being depleted. It’s the expensive-to-extract-and-process hydrocarbons from the tar sands and shale that will remain in the ground because they’re more expensive to produce than the equivalent amount of energy from renewable sources.

LT on Tue, 5th Mar 2013 8:21 pm 



Where will that solar panel come from? Heaven?

There is no gambling or manipulation or geopolitics in Heaven! Jade Emperor will not allow that! That’s what his job is. 🙂

LT on Tue, 5th Mar 2013 8:21 pm 



Where will that solar panel come from? Heaven?

There is no gambling or manipulation or geopolitics in Heaven! Jade Emperor will not allow that! That’s what his job is. 🙂

DC on Tue, 5th Mar 2013 8:48 pm 



Since the solar panel itself is made from oil, and its replacement has to be built with oil, dsulas apparent attempt at creating a perpetual motion machine falls flat on its face.

Lets use a direct comparison using economics.

If my business is losing money, cant I just print more money to make it look profitable? Well, yes, you could do that. But the end result is currency debasement, ie your still losing money. You might be able to kick the can down the road a ways, for a time, just like your solar panel might be able be to run your oil well, for a time. Then the panel wears out-and no replacement is available. It wont even matter if there is still oil down there that hasn’t been pulled up to the surface.

The economy is contracting because the opportunities to create ‘new’ net profit have or are drying up. In energy terms, the whole economic system will grind to a halt once it can no longer delver cheap HQ energy in sufficient quantities to allow ‘growth’ to resume.

Not complicated.

J-Gav on Tue, 5th Mar 2013 11:00 pm 



Not bad, DC, your analyses are getting more and more – how shall I put it? – fine-grained. Keep on goin’ with those investigations: monetary system, energy (surplus, no surplus?, whatever the source), maybe throw in something on biodiversity, agriculture/soil/water and climate change now and then and you’ll soon be on a roll. If I allow myself to say that it’s not at all condescending as I shamefully only started to get serious about these things around 15 years ago and I think I’m a little older than you (62). Looks like you and several others on this site have got some good ‘ole common sense on their side.

rollin on Tue, 5th Mar 2013 11:35 pm 



Maybe we should concentrate less on profit and more on achieving goals.

LT on Wed, 6th Mar 2013 12:34 am 



Mr.DC,

Thank you for elaborating it. I want to add a bit to yours: solar panels require electronic inverters/converters to run with it. And electronic components reuires lot, lot of power to manufacture. and the machines making these electronic components need to be built as well.

Can a milling machine or a lathe machine be powered with human’s muscle energy? 🙂

GregT on Wed, 6th Mar 2013 2:20 am 



Dsula,

EROEI is everything. If you continually expend more energy than you take in, you will die. That’s kind of an important thing to get hung up on.