Peak Oil is You
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Page added on October 21, 2013
No need to panic about ‘peak oil’
SO MUCH for “peak oil” alarmism, the dire warnings of a looming economic catastrophe when global crude oil production reaches its maximum rate and then starts to decline. Such cries of imminent doom reached a crescendo in 2008, when the oil price hit record levels on soaring demand and restricted supplies, topping out at $145/barrel. But then came the US subprime collapse, closely followed by international banking and sovereign debt crises, a liquidity freeze and global recession. Demand for oil fell back sharply, along with economic growth, taking the pressure off the market and causing the oil price to plunge. Peak oil crisis averted.
But for how long, the pessimists cried? Demand may have fallen off temporarily, but the peak oil problem relates to supply; when the world economy starts growing again, consumers regain confidence and China cranks up those factories, there will be trouble, just you wait and see!
Except it has not happened that way, just as the worst-case scenario did not occur in the 1960s, when conventional US oil production peaked, as Shell geophysicist Marion King Hubbert had predicted it would when he formulated his peak production theory a decade earlier.
In fact, after declining from a high point of 74-million barrels a day in 2005, global oil production has bounced back, setting new records in 2011 and last year. The International Energy Agency now predicts international oil production capacity will grow by a further 8.4-million barrels a day over the next five years.
This accords with the expectations of economists who argued against the notion of a looming Armageddon by making two key predictions: that new technologies and higher prices caused by a supply squeeze would open up new sources of oil that were either not accessible or not commercially viable before, and that alternative sources of energy would be found before the oil ran out.
The first prediction has been proved correct, starting with the exploitation of offshore oil resources in shallow waters, then through more sophisticated extraction techniques, then the ability to drill in deep waters, and most recently the ability to extract oil and natural gas from shale deposits.
That does not mean the Hubbert peak-oil theory is wrong, just that the model was never meant to be static. Oil is a finite resource that will eventually reach peak production and start to run out. On that the doomsayers are correct.
But, as has been proved time and again, it is too soon to panic. While the task of replacing oil and coal as the main sources of energy driving the world economy has been made all the more urgent by environmental concerns, there is little reason to fear that the oil will run out before an alternative can be found.
Shale oil and gas are proving game-changers for the energy sector. US consultancy Pira Energy Group announced last week that, according to its calculations, the US has overtaken Saudi Arabia to become the world’s biggest oil producer, on the strength of its exploitation of shale plays. It rates the “shale revolution” as second only to the Middle Eastern oil boom, which converted countries such as Saudi Arabia from poverty-stricken backwaters into some of the wealthiest nations in the world and influenced international power relations for decades. The effects of US energy independence and the decline of the Middle East’s strategic importance are arguably being seen in the political turmoil that has engulfed many oil-rich states in the form of the “Arab Spring”.
Cheap natural gas from shale beds has proven a serendipitous windfall for the US, and it could do the same for South Africa, which has a potential resource of as much as 390-trillion cubic feet of gas deep under the Karoo. In addition, there has been a resurgence of interest in the deep waters off South Africa’s west coast. Tullow Oil is developing the Kudu gas field off Namibia, and Shell is gathering seismic data in the Orange basin just south of the Namibian maritime border and about 180km north of the Ibhubesi gas field, where Australian company Sunbird Energy is investing R15bn to develop a resource it estimates contains 540-billion cubic feet of gas. South Africa is also in pole position to benefit for decades from the huge reserves of gas that have been discovered off Mozambique.
The point here is that the recent outcry over the government’s plans to build new nuclear and coal-fed power plants could prove unnecessary. Natural gas has the potential to perform environmental and economic miracles for South Africa, but we cannot know for sure if we fail to carry out the necessary exploration, including in the Karoo. This newspaper would be first in line to condemn any extraction attempt if environmental impact studies indicated that the ecology or water supplies of the region would be at risk, but that cannot be determined until tentative, responsible exploration is allowed to take place.
15 Comments on "No need to panic about ‘peak oil’"
J-Gav on Mon, 21st Oct 2013 10:29 am
That’s it, get your foot in the door, invest a bundle to make it impossible to turn back … A very short-sighted attitude.
rollin on Mon, 21st Oct 2013 11:30 am
Peak oil is not about supply, it’s about rate.
Red Queen syndrome: try harder and faster in more difficult, expensive and dangerous areas to just stay in place.
Not what I would bet the world on.
This writer thinks that because US natural gas has finally risen above it’s 1970 peak by a whopping 10 percent, that is a game changer. It took over 40 years and a ton of money to get that gain. That 10 percent is supposed to supplant coal and nuclear in power generation, supply some countries with LNG, supply transportation with fuel and provide domestic and industrial needs within the US. Talk about delirium.
Arthur on Mon, 21st Oct 2013 11:40 am
“But, as has been proved time and again, it is too soon to panic.”
Panic is never a good idea, but in general it is imprudent to start prepare for your pension… when you are old.
Yes, it is true, the 2000-ASPO Peak Oil model from Campbell/Laherrere is outdated –> RIP TheOilDrum. If you are looking for short-term spectacle, concentrate on geopolitics & finance for the rest of this decade, not resource depletion/climate Four Horsemen.
But as J-Gav suggests, this is absolutely no excuse for shortsightedness. We are getting some extra breathing-space, if it is allowed to misuse that noun in the realm of fossil fuel.
rockman on Mon, 21st Oct 2013 12:32 pm
Total propaganda IMHO. The most obvious:”causing the oil price to plunge. Peak oil crisis averted.” Yes…oil has PLUNGED to around $100/bbl. My dog even LOL’d at that statement.
“there will be trouble, just you wait and see!” Obviously there’s no need to wait: the US consumers are paying 3X as much for their oil consumption as they were just 10 years ago. And while US oil imports have decreased the country is paying those foreign producers a great deal more for that oil…over $260 billion per year. What are we “waiting to see”… an imported oil bill of $350 billion per year? LOL.
And one last chunk of major BS: “Cheap natural gas from shale beds has proven a serendipitous windfall for the US, and it could do the same for South Africa”. Developing shale gas in very expensive. I know first hand because I was helping Devon do that in east Texas when the bust came back in ’08. It was the expectation of NG prices 3X higher than they are today that drove the development. Which is why the rig count drilling the shale gas plays fell almost 80%. Now that’s a PLUNGE. LOL. NG prices are lower to due to excess supply and not because the gas shales are actively being developed. Same holds true for conventional NG: a few years ago I spent almost $400 million drilling for the cheaper to develop conventional NG. In the last 18 months I’ve spent exactly $ZERO drilling for NG. S. Africa may have a lot of shale gas in the ground. But unless they are better at getting it out of the ground cheaper than the most technologically advanced exploration machine on the planet (the US oil patch) then it will be anything but cheap for them.
Arthur on Mon, 21st Oct 2013 12:53 pm
Shell promo, reporting about the building of the largest vessel ever for LNG(488m, 35 Eiffel towers worth of steel or five times a large aircraft carrier):
http://www.youtube.com/watch?v=vx6pjAbciy0
NG Source: sea north of Australia. They would no do this if they were not convinced that gas is to become the next ‘big thing’, after coal and oil.
And no, I do not think that prices will take a plunge, but could remain on a plateau for a very long time. This could make climate change a more (de)pressing issue than resource depletion.
AlesB on Mon, 21st Oct 2013 1:12 pm
“The effects of US energy independence and the decline of the Middle East’s strategic importance are arguably being seen in the political turmoil that has engulfed many oil-rich states in the form of the “Arab Spring”.”
Really!? The Arab Spring was triggered by US energy independence (as if it was ever achieved)?
For a slightly better informed view of what’s going on, for example, in Egypt: http://www.theatlantic.com/international/archive/2013/08/how-resource-shortages-sparked-egypts-months-long-crisis/278802/
GregT on Mon, 21st Oct 2013 2:48 pm
The US national debt in 2008 was 9 trillion dollars. In the past 5 years it has risen to 17 trillion dollars, for an increase of close to 8 trillion.
The economy that was fuelled by cheap oil, is no longer functioning as it once did. It cannot afford 100 dollar a barrel oil, and any further price increases will only cause even more damage.
Peak cheap, easy, conventional oil has passed. The expensive, CO2 intensive, non-conventional stuff, is eroding the world’s economies, and causing untold damage to our already sick and dying planet.
We are living on borrowed time.
Raizcapoeira on Mon, 21st Oct 2013 3:22 pm
Why the admins of this website even bother posting articles like this is beyond me.
shortonoil on Mon, 21st Oct 2013 3:25 pm
50% of oil production in the US now comes from stripper wells. If the price of crude doesn’t increase fast enough, those marginal wells will be shut-in. Once the pumps are turned off, they will never be turned back on. That may not happen for a few more years, but it is going to happen. This author is floating around in La-La land; that nebulous place between ignorance, and episodes of self engrossment. It would be interesting to view his panic attack when reality finally catches up with him!
mike on Mon, 21st Oct 2013 3:44 pm
Peak oil happened in 2006, since then the world has been in a series of continuing crisis brought about by collapsing net energy. It will continue for the next century and more. It’s really that simple.
J-Gav on Mon, 21st Oct 2013 3:47 pm
GregT – Yup, to the point where we’ve even forgotten who we’re borrowing time from – i.e. Mother Nature.
george on Mon, 21st Oct 2013 5:31 pm
thanks for the monday morning sci-fi article
Stilgar on Mon, 21st Oct 2013 5:53 pm
“Peak oil is not about supply, it’s about (flow) rate.”
Absolutely rollin. What does the writer say about the fact we consume several barrels for every barrel discovered? That’s why flow rate will slow and probably not too far into the future. When flow rate does slow, oil price will rise until the economy contracts, reducing oil price, exploration and supply! Oh, were doing just fine – forget about peak oil – ha!
shortonoil on Mon, 21st Oct 2013 8:50 pm
“It will continue for the next century and more.”
Only 41% of the world’s 4,300 Gb reserve (OOIP) can be used to provide a beneficial component to society. 73% of that reserve has already been extracted. The remainder will stay in the ground; it has no commercial value.
BillT on Tue, 22nd Oct 2013 8:59 am
We are witnessing the ‘Perfect Storm’ of disasters for the human race and most of the life on this planet. Nuclear, ecologic, economic, and, last but not least, war. We live in exciting times.