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Page added on June 14, 2012
Peak oil: Why we’ll never run out of oil
Remember the term “peak oil”? What happened to it?
The notion that world oil production had reached its summit and would soon begin a decline — bringing with it shortages, economic collapse, resource wars, and general ruination — was in vogue not so long ago.
“Is global oil production reaching a peak?” asked the BBC in 2005. “We are approaching peak oil sooner than many people would have guessed,” said The Houston Chronicle three years later. Two years after that, The New York Times reported on a group of environmentalists who “argue that oil supplies peaked as early as 2008 and will decline rapidly, taking the economy with them.”
Government agencies also bought into the idea. In 2010, the U.S. Joint Forces Command warned that “by 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day.” Just this spring, seemingly every other report warned that $5-a-gallon gasoline — or worse — was just around the corner, and certainly would arrive by summer.
Well, here we are at summer, 2012. The Chicago Tribune reports that the nationwide price for a gallon of regular “has fallen well below $4 a gallon.” The term “peak oil” seems to have been completely forgotten. Not only that — it is beginning to look as though the U.S. could largely cease to depend on the Middle East as its principal supplier.
The Washington Post reports that U.S. imports from OPEC countries have declined by 1.8 million barrels a day. Last year the top American source of crude oil by far was Canada, which supplies 29 percent of U.S. imports. By contrast, the No. 2 supplier, Saudi Arabia, supplies only 14 percent. “Production has risen strikingly fast in places such as the tar sands of Alberta, Canada,” The Post says, “and [in] the ‘tight’ rock formations of North Dakota and Texas — basins with resources so hard to refine or reach that they were not considered economically viable until recently. Oil is gushing in once-dangerous regions of Columbia and … Brazil.”
But that’s not all: “A host of new discoveries or rosy prospects for large deposits also has energy companies drilling in the Chukchi Sea inside the Arctic Circle, deep in the Amazon, along a potentially huge field off South America’s northeast shoulder, and in the roiling waters around the Falkland Islands.”
So what the heck happened? It’s no great mystery. As supplies tightened and prices rose, producers were motivated to find new sources and develop new technologies. When you hear that only X trillion barrels of “recoverable reserves” of oil exist, remember: The term does not refer to all the oil that there is. It refers to those reserves that are neither too costly to tap at present, nor off-limits because of government policy. Both of those factors can change.
And how. In just the past six years, North Dakota has shot to the No. 2 domestic source of oil, thanks to improved horizontal drilling techniques that have tapped the Bakken and Three Forks fields. Thanks to the oil rush the population of Williston, N.D., has roughly doubled. Unemployment is 1 percent — with 3,000 jobs still open — and average pay has shot up from $32,000 to $80,000. North Dakota’s oil boom also has been made possible by a new technology, fracking (short for hydraulic fracturing). Fracking has drawn criticism from environmentalists, but it works.
This shows why it is a mistake to judge oil reserves by guessing how much is in the ground. First, that omits the most important factor: human ingenuity. While resources are limited, ingenuity is not. So when, in 1989, Colin Campbell — the founder of the Association for the Study of Peak Oil — claimed that the peak already had been reached, he might have been correct given the technology of the time. But then, more than a century before Campbell, Henry Wrigley — head of the Pennsylvania Geological Survey — also warned that oil production had reached its peak, too. People have been warning that we’re about to run out of oil not just for the past few years, but for the past few decades.
Yet as Donald Boudreaux, an economics professor at George Mason University, explained a couple of years ago, running out of oil “is not as much a question of physics as it is one of economics. And economics assures us that we will never run out of oil.”
Never?
Yes, never: “My colleague Russ Roberts explains why in his book The Invisible Heart. Imagine, Russ says, a room full of pistachio nuts. You love pistachios and can eat all that you wish as long as you throw each empty shell back into the room whenever you eat a nut. You might suppose that you’ll eventually devour all of the nuts in the room. Their number, after all, is finite. But … the more you eat … the more difficult it becomes to find uneaten nuts among the increasing number of empty shells. Eventually, it will not be worth the time and effort required to search amidst the empty shells for the relatively few remaining nuts. You’ll voluntarily leave uneaten pistachios in the room.”
What will you do then? Go find another source of energy, of course. Just as we will with oil.
15 Comments on "Peak oil: Why we’ll never run out of oil"
Cabra1080 on Thu, 14th Jun 2012 1:59 pm
“What will you do then? Go find another source of energy, of course. Just as we will with oil.”
Pray tell – what will that other source of energy be that we will find? What other source will replace this ultra energy dense ENDOWMENT of oil, free in the ground, ready to use, the perfect motor fuel and source of so many materials including plastics, pharmaceuticals, asphalt, fertilizers and so much else?
Sure, when you finish the pistachios, you can switch to peanuts, walnuts, almonds or even apples. However, this is not an apples-to-apples comparison.
I cannot comprehend what we can “switch to” that has anything like the properties of crude oil and is “free for the taking” right out of the earth. I think we will have to totally re-tool the economy and way of life in the not-too-distant future to make way for a much, much lower energy future than the one we have enjoyed for the past one hundred years. Also learn to live with substantially and shockingly less material possessions and services – including food and water.
Siddhartha on Thu, 14th Jun 2012 2:28 pm
Thank you Cabra1080 for pointing out just how wrong this article was. Spot on mate!
mike on Thu, 14th Jun 2012 3:17 pm
Article thinks “peak oil” means running out of oil. Article can be ignored as is operating on false premise. If this is all the debunking that is left on peak oil (as in making shit up) then it looks like were finally winning.
I love the best argument these people have is “well we’ll just find a new energy source wont we, the stone age didn’t end because we ran out of stone you know” they truly are top level genius’
People like this judge energy in terms of dollars, we judge energy in terms of energy. Guess who is closer to reality.
SOS on Thu, 14th Jun 2012 6:06 pm
Although his final paragraphs were a bit on the absurd analogy side his main point is exactly spot on: There is no shortage of oil and wont be unles politics causes it. The mental conditioning of peak oil through the media, political and enviromental outlets has been very effective in garnering attention for their false claims of resource depletion. Many people refuse to accept what is happening akin to the flat earthers of the olden days.
Many hysterical voices have been silenced or forced to switch subjects from “no more crude in the ground” to “no more fracking” because, for many different reasons, these voices dont like oil.
Point of clarification: He mentions North Dakota/Bakkan Crude is hard to refine. That doesnt mean the crude is of a low quality, in fact quite the opposite. It is very “sweet crude” and desirable for refiners to have. What it means is the limited refining capacity in the country is very far away from North Dakota. The states oil refinery, established when the Tioga fields first started to produce, is at capacity. Hopefully the State will build another one. The debate is on!
GO OIL REFINERIES!! GO NORTH DAKOTA!!!
Roger on Thu, 14th Jun 2012 7:11 pm
Dude, you replaced the name of “peak oil” with the name “peak pistachios”. You still haven’t answered the question of “when”. Yes, human ingeniosity is infinite. We know and hope for that. Anything else valuable you have to say ?
Beery on Thu, 14th Jun 2012 8:06 pm
SOS’s last line says it all – he has all of the ‘Rah-rah!’ spirit of a sports fan, and none of the rationality to figure out that his chosen team hasn’t a snowball’s chance in Hell.
cipi604 on Thu, 14th Jun 2012 11:40 pm
the whole article does not talk about peak oil but about the possibility of squeezing the towel
BillT on Fri, 15th Jun 2012 3:53 am
This is a propaganda piece for the oil pimps to point to to support their deception. It is to keep suckers investing in the failing fields and therefore to keep the fat cats at the top sucking in those 7+ figure salaries a few more years.
The oil industry is dying. Only a fool would go to college today to become a petroleum engineer. Better they take up subsistence farming, blacksmithing, farrier ( one who shoes horses, or midwifery. There is a future in those careers. There is little long term future in anything that is connected to oil, except, perhaps teaching about it in a history class.
DC on Fri, 15th Jun 2012 7:10 am
You know its funny, all these dudes keep yapping on about the huge glut of oil thats out there. Well, there is a small kernel of truth in that, there is surplus at the moment, but only b/c the shop-drive-consume economy has been sputtering along for the last few years. So there is slight surplus out there, but it does not exsit because of magi-tech, or good ol yankee know how, but a stalled conumption economy. But, it you look at the actual amount of oil being and capable of being produced, its about, more or less where it was in 2004-2005 when it leveled off. Minor ups and downs for most of the last 7-8 years, with little change in sight.
Be nice if these guys would include actual charts of actual production figures when there trashing PO eh?
DC on Fri, 15th Jun 2012 7:29 am
Funny this amerikan thinks they are going to somehow magically ‘replace’ the 14%(trivial amount) that SA provides now. Guesst that sounds better than 2.5mbpd, or = to about the entire production of Mexico atm. And as we all know, mexico doesnt EXPORT 2.6ish mbp, but produces it. Exports to the US are about one mpbd. Replacing SA imports would be like replacing the entire exports of Mexico, hardly a trivial matter as they make it out to be. Besides, if the US lost that 10-14% it receives from SA, the USeconomy would totally collapse, food riots would break out, and govt would likely be overthrown in pretty short order. And its days of global empire would end overnight. Tar-sands wouldnt come close to replaceing the quantity or quality its gets From SA for decades, and by then, no could afford the oil anyhow, or the tar-fields likey be shut down or sabatogued to prevent them from totally destroying whole US states and Canadian Provinces. The only reason tar-sands kinda work is, there still being propped up by sufficent oil import form well..the middle east. When that dries up, the tar-sands would come close to replaceing it.
Ham on Fri, 15th Jun 2012 7:30 am
Print money and ‘oil will come out of the ground’ is pure cloud cuckoo land thinking. The giant oilfields are now tarnished with heavy sulphur and we are drilling six miles under the oceans at vast expense. Most of World’s refineries need an overhaul and we are going to solve this by fiscal rabbits out of the hat? No we will not. Unless you want to turn the Planet into an unlivable lunar landscape. Such a premise has no basis in reality. Complete baloney.
bobinget on Fri, 15th Jun 2012 1:47 pm
President Chavez bragged to his people that Venezuela now has greater reserves then Saudi Arabia. (he’s running for reelection)
Like Alberta’s tar sands, Orinoco oil is as expensive to process into something that flows inside a pipe. Since Venezuela seems further then Alberta,
damaging the enviroment is of little concern here.
The Alaska Dispatch article, while correct about never running out, could have just said “we used most of the easy, relativly cheap oil”.
Brazil’s ultra deep saltwater oil is coming in at about
$80. a barrel. One doubts Brazil will export that crude for less. Eighty bucks BTW, is what it costs Venezuela
or Canada to process bitumen.
The world is using about 91 Million barrels p/d.
The entire world is squeaking out one hundred thousand barrels over that number. Saudi Arabia’s
oil minister calls that ‘balanced’. Do you?
Harquebus on Sat, 16th Jun 2012 7:02 am
Price mate, price. The worlds economy can not handle the high prices needed to maintain production. Europe is finding that out.
Glenn Dixon on Sun, 17th Jun 2012 3:02 am
These myths were already debunked right here on PeakOil: http://peakoil.com/generalideas/seven-myths-deniers-use-to-debunk-peak-oil-debunked/
Tony Tan on Sun, 17th Jun 2012 4:20 am
Shale oil is of higher quality light crude oil, but we should also know that the depletion rate is 60% which means a well that produces 1000 barrel in 1st year will produce only 400 barrels in 2nd year and 150 barrels in 3rd year.
Continuous drilling is needed to fill the gap, hence the price will be higher.