Whatever Happened to Peak Oil?

Why are peak oil-ers like Jehovah’s Witnesses? Answer: When the definitive JW prediction of the ‘Day of Wrath’ failed in 1914, they did what false prophets have done in every generation: shifted the goalposts (to 1975 in the case of JW’s—and wrong again). It’s what false prophets do to save face, enabling them to keep fleecing the inherently gullible. Peak-oilers do likewise.

Having written their headline-grabbing, money-making blockbusters predicting the imminent collapse of an oil-driven industrial world, peak-oilers like to maintain a ‘fluid’ approach to their predictions. In the case of oil, however, that’s becoming a tougher proposition, as their ignorance of energy, economics and the sheer ingenuity of man is increasingly revealed in the looming global oil boom.

The ‘new Middle East’

When John Fogerty sang about coming home to Green River, the incentive was hardly a 200 year supply of oil. But that’s the reality of the world’s largest shale oil—more properly, tight oil—deposit at the Green River Formation (GRF). The USGS estimates the GRF holds 3 trillion barrels of oil, around half of which is deemed recoverable. That’s equivalent to the total of the world’s proven oil reserves.

At current levels of US consumption—19.5 million barrels per day (bpd)—Green River on its own could supply domestic US needs for the next 200 years. Then there are the Bakken and Eagle Ford shale plays. The former alone is on a par with big Persian Gulf producing countries. Eagle Ford may even match the hydrocarbon endowment of the Bakken/Three Forks play in North Dakota and Montana. To date, shale or tight oil has added about 700,000 bpd to US oil production.

No wonder North America is being talked about in oil terms as ‘the new Middle East’. But the Bakken and Eagle Ford plays aside, there are a further 18 plays with plenty of energy potential across the United States. And I haven’t even touched on the granddaddy of North American oil plays: Canada’s huge Athabasca oil sands development. Just for good measure, a report by Citigroup analysts estimates that America’s “reindustrialization”, driven by its conventional energy (oil and gas) sector, could see the creation of a whopping 3.6 million new jobs and add a full 3 percent to national GDP.

Deepwater and beyond

A USGS report of 171 global regions in 2012 further estimates that the world’s undiscovered conventional and technically recoverable oil resources, much of it in deepwater, stands at 565 billion barrels of oil (BBO). That’s a figure that only represents known conventional resources. But it pales in significance when unconventional resources, such as heavy oil, oil sands and shale oil, are taken into consideration. As the USGS reports, the mean estimate for recoverable heavy oil from the Orinoco Oil Belt in Venezuela alone stands at a mammoth 513 BBO. The shale oil potential of Russia’s Bazhenov Formation in Western Siberia may well prove to be 80 times larger than America’s Bakken Formation. At present six of the world’s largest oil fields in Ghana, Mexico, Kazakhstan, Iraq, Brazil and Venezuela (the Orinoco Field) all still await development—the last directly due directly to President Chavez’s anti-West politics.

A recent study by Leonardo Maugeri, a former senior executive with Italian giant ENI, confirms the global prognosis. Such is the positive nature of exploration, the impact of new technologies and the sheer weight of finds and prospective new resources, Maugeri states: “Contrary to what most people believe, oil supply capacity is growing worldwide at such an unprecedented level that it might outpace consumption. This could lead to a glut of overproduction and a steep dip in oil prices.” Maugeri further suggests that “capacity exists to increase the world’s 2011 production of 93 million barrels a day by as much as half, hitting, by 2020, around 111 million barrels a day—and rising.

You might have thought: great news for those around the world being forced into increasingly fuel poverty through having to pay for national green taxes to subsidize expensive, poor-generation, renewable projects. Not so it seems for social engineers like leading eco-activist and erstwhile Brit columnist, George Monbiot or ‘Moonbat’ to his critics. Newly convinced by Maugeri’s study, and already having recanted his views on nuclear power, Monbiot has now recanted also his alarmist views on peak oil, claiming “the facts have changed”. (Actually George they haven’t, rather you’ve just become acquainted with them.)

For the naive Monbiot, as for all peak-oiler scaremongers, rising oil and energy prices provided proof positive that oil scarcity was just around the corner, a fact, they said, presaging the end of industrial civilization as we know it. This was supposed to be the key ‘frightner’ for our technology-loving society to agree to subsidize ridiculously expensive, poor-production, renewable energy. What the Guardian’s Moonbat and his colleagues failed to understand, however, is a basic economic fact of energy life: high prices are also the market’s way of incentivizing new investment and greater human ingenuity. Necessity being the mother of invention, industry entrepreneurs duly came up with the goods, including the energy game-changer of the hydraulic fracturing of shale deposits. Once again, the ‘end-is-nigh-ists’ like all false prophets, shifted the prophetic goalposts. Instead of peak oil presaging social “disaster”, now the lack of a prospective peak for oil production quickly became the disaster.

“Peak idiocy”

So where did it all go wrong for peak-oil alarmists? Interestingly, for better ‘experts’ than Monbiot, it was their abject failure to understand either energy or the economics of energy. A double failure that led inexorably into a state which economist Mike Munger rightly terms: “peak idiocy”. Munger’s thesis bears repeating:

“Of all the idiotic things people believe, the whole “peak oil” thing has to be right up there. It is literally impossible for us to run out of oil. We have never run out of anything. And we never will.

If we did start to use up the oil we have … three things would happen.

1. Prices would rise, causing people to cut back on use. More fuel efficient cars, better insulation on houses, etc. Quantity supplied goes up.

2. Prices would rise, causing people to look for more. And they would find more oil, and more ways to get at it. Quantity demanded goes down.

3. Prices of oil would rise, making the search for substitutes more profitable. At that point alternative fuels and energy sources would be economical, and would not require government subsidies, because they would pay for themselves. The supply curve for substitutes shifts downward and to the right.

Well put and accurate. And precisely the argument posited in Huber and Mill’s seminal book, The Bottomless Well, which states: “Energy supplies are—for all practical purposes—infinite”. So why don’t more allegedly informed pundits grasp the basic economics of energy? In a word: ideology. In this particular case, the ideology of the leftwing social engineer prepared to politicize any issue for their personal ‘higher’ purpose.

“The facts” were widely known well before the likes of George Monbiot and co were forced to admit the jig was up, with Moonbat lamenting, “We were wrong on peak oil. There’s enough to fry us all”. True—and on both counts. But a much more positive and factually-based perspective might conclude: “there’s more than enough oil, coming from much friendlier countries, that turbo-boost the economy and create millions of jobs for decades to come—and at a much cheaper rate, too.”

And which has the merit of more consistent “prophetic” insight? Depends on whether a vacillating Moonbat/Guardian-esque ideology trumps the intellect, I guess.

Canada Free Press