Michael Lynch: Shale Oil Didn’t Kill Off Peak Oil

A number of recent articles have noted that “peak oil” seems to have fallen off the radar of most media and the public, and suggested that the rise of shale oil in the U.S. bears a large amount of the credit.  Peak oilers respond that shale oil is unconventional and hard to produce, plus “the Bakken was going to peak and decline in 2016-2017 regardless of the price,” as S. R. Srocco explained. He bases this on the earlier writing of Jean Laherrere, one of the two fathers of the peak oil craze (with Colin Campbell) by co-authoring the 1998 Scientific American article “The End of Cheap Oil.”

And others note that the date of peak oil production has been repeatedly predicted and repeatedly passed without consequence, rather like apocalyptics such as the 19^th century Millerites, who calculated the end of the world based on Biblical writings (the book of Daniel).  And, like the Millerites, they tried revising their calculations when they proved wrong, never admitting that the basic principal might be incorrect.

But most critics of pea oil focus on the missed predictions and fail to delve into the underlying math.  As my recent book, The Peak Oil Scare and the Coming Oil Flood, explains in some detail, expectations of peak oil were based from the beginning on bad theory and invalid math.  Reading the Scientific American article, one can see a prominent example in a graph which purports to show how individual oil field production curves add up to a bell or “Hubbert” curve, named after the geologist who first applied it to production trends in 1956.

But it doesn’t take much effort to note that the graph actually presents the field curves and a bell curve, and asserts that the former result in the latter without showing how that happens.  Not surprisingly, since the actual production curves for real world oil fields vary widely and rarely match the representative curves show.  Plus the production from most countries does not display the bell or Hubbert curve, something that can be discovered from readily available data.  Yet few bother to fact-check this assertion.

There have been more than a few observers who initially embraced the peak oil arguments but gradually became skeptical, but far more have treated it as “scientific” and ignored substantive criticisms, dismissing anyone who disagreed as “shills” for the oil industry.  The fact that many of the peak oil writers were physicists, computer scientists, or oceanographers with little prior experience in researching energy resources did not seem to impress their supporters, perhaps because they are “hard” scientists rather than social scientists.

The background and funding of peak oil advocates is not very important; the real issue is that many crucial aspects of the peak oil theory don’t hold up to scrutiny, something few seem aware of.  As mentioned, oil production rarely follows a bell curve, but also production having declined in a country can grow again, estimates of field sizes are regularly increased around the world, and new technologies are constantly increasing the percentage of oil recovered from existing fields.  All of these violate core assumptions made by the peak oil founders.  In most cases, even a casual perusal of the oil industry trade press would make it clear that the primary arguments made by the early peak oil advocates were simply incorrect.

More recently, there has been less focus on geological scarcity and more on the difficulty of producing oil, epitomized by the phrase “the easy oil is gone” which was echoed by many in the oil industry.  No one bothered to say, “So what?”  Or how it was that the easy oil disappeared at the same time as political disruptions of supply drove prices up.

The superficial nature of such comments is reinforced by Ignorance of the industry.  Problems are described without any context, mainly because most of the writers are unfamiliar with the industry, its economics and history.  As one example, Matthew Simmons’ book Twilight in the Desert described engineering challenges in the Saudi oil fields without explaining whether or how they were different from any other oil fields or indeed why he thought these were becoming worse, beyond an increase in the number of articles.  A number of critics pointed out the technical errors in his work, beyond the lack of context, but few peak oil advocates have noted these.

One telling sign of the shallow nature of the research was his reference to “fuzzy logic” which, he was informed on a tour of Saudi Aramco, was being used to model the reservoirs.  He recalled “I had never heard the term ‘fuzzy logic’ before. Hearing the Aramco manager’s comment was one of the little events that tipped my thinking about the Saudi Arabian Oil Miracle towards skepticism.”  Others, like author Peter Maass, repeated this as being a revelation when in fact, a simple internet search would have shown it was simply a programming method developed in the 1960s.

This highlights a general problem in public policy, which is the tendency to repeat assertions without checking their veracity, usually because the assertion supports one’s own beliefs and preferences.  Many peak oil writers, having realized that the Hubbert curve is not valid, no longer mention it, but others find older references on the internet and don’t realize it has been discredited.

The been later peak oil theorists, who have focused much more on production difficulties than resource scarcity, often repeated industry comments, but similarly with a lack of context.  My favorite is the oft repeated Red Queen problem, as in “You have to run as fast as you can just to stay in place,” which refers to the industry’s need to replace production capacity lost due to field depletion.  None ever seems to mention the fact that this has been going on throughout the history of the industry and was defined mathematically by those like my mentor, M. A. Adelman, a well-known resource economist derided as a ‘cornucopian’.

Typical was Robert Hirsch’s quote of Saddad al-Husseini saying “[A] whole new Saudi Arabia [will have to be found and developed] every couple of years to satisfy current demand forecasts.”  To many, this sounds alarming and it has been often repeated by oil industry pundits as part of the ‘easy oil is gone’ mantra, but few seemed to be aware of Jimmy Carter’s 1977 comment, “[J]ust to stay even we need the production of a new Texas every year, an Alaskan North Slope every nine months, or a new Saudi Arabia every three years. Obviously, this cannot continue.”  Yet continue it has for four decades to date.

None of the problems described by peak oil advocates is new and most have been raised repeatedly.  Political risk dates to the 1861 Confederate attack on oil fields in Union territory, shortages of skilled workers have repeatedly occurred (especially during periods of high prices and activity), and declining returns to drilling (energy or otherwise) have been a concern for decades.  The industry has dealt with every challenge, sometimes at the cost of higher prices and/or lower profits, but all have been overcome repeatedly.  Yet peak oil advocates treat problems as insurmountable, ignoring the cyclical nature of some (high costs, political risk) and the ability to overcome others (falling yields), implying to them that a production peak is near.

In many ways, peak oil resembles Neo-Malthusian warnings of overpopulation.  The very model is flawed and the advocates rely heavily on short-term problems (drought raising food prices, the Arab Spring raising oil prices) to support their beliefs in a permanent shift in the global political economy towards scarcity, resource wars and the possible end of civilization.  Now, with the re-emergence of Iran, Iraq, and Mexico (and probably soon Venezuela) to the world stage, encouraging new investment and aiming for higher production, the potential for years of production growth in conventional fields, to say nothing of shale oil, is very high.   My expectation, outlined in some detail in my book, is that barring massive political disruptions to production, the next decade will see abundant supplies and a continual struggle to maintain prices.

Forbes