Is Peak Oil a Belief, Theory, or Fact?

One of the comments by KingofKaty that followed my essay Peak Oil and the Lunatic Fringe brought up something that is worth addressing, because it comes up pretty frequently. The phrase of interest was “you believe in peak oil.” I have heard peak called a belief , a theory, or just an observation. In fact, all three descriptions apply depending on the situation, but it is important to clarify what’s what. And I want to make it clear that even though I “believe in peak oil”, it is not in the same context as one would “believe in the tooth fairy.”

Peak Oil as Observation

Peak oil is an observation, in that we have observed many regions of the world see their oil production rise, sometimes plateau, and then fall. Texas, for instance, saw oil production peak in 1972 at 3.45 million barrels per day. At that time, the average well produced 20.6 bbl per day. Today, oil production in Texas – despite very high prices – is about a million barrels per day. The average well today produces about 6 barrels per day, and proved reserves are about a third of what they were in 1972.

Likewise, the Lower 48 peaked in 1970, and production has fallen by more than 50% since then. We can go through the same exercise for many countries. So, this is peak oil as an observation. It is the fact the oil reserves are finite, and therefore eventually production will peak and start to decline. At some point, production for the entire world will peak and decline. In fact, world production did peak in 2005, and that leads to the “theory” and to the “belief” aspects of peak oil. This has been the topic of many of my recent debates: Is the 2005 peak, “The Peak”? That’s where the believers come in.

Peak Oil as Belief

The “believers” of peak oil are generally people who believe that peak is now, and this is the beginning of the end of the world. For them, the debate is over – they can only see evidence in favor of “peak now.” If you argue with them about this, they sometimes lash out irrationally. I guess it is somewhat understandable because some of these people were not entirely rational in the first place.

While I have never had any of these sorts of issues with Matt Savinar – who does post at The Oil Drum – a read through his site Life After the Oil Crash will give a flavor of the kinds of things the believers, many of them “Doomers”, believe. From Matt’s site:

The effects of even a small drop in production can be devastating. For instance, during the 1970s oil shocks, shortfalls in production as small as 5% caused the price of oil to nearly quadruple. The same thing happened in California a few years ago with natural gas: a production drop of less than 5% caused prices to skyrocket by 400%.

It’s not just transportation and agriculture that are entirely dependent on abundant, cheap oil. Modern medicine, water distribution, and national defense are each entirely powered by oil and petroleum derived chemicals.

In addition to transportation, food, water, and modern medicine, mass quantities of oil are required for all plastics, all computers and all high-tech devices.

If you read through Matt’s site, it can be pretty scary. It is doom and gloom, mass starvation, and is what most people probably think of when they hear “Peak Oil.” But what Matt describes as an end-of-the-world scenario where billions of people die off is a belief. And I am sure that some of the believers are the same ones who were locked up in their basements with 6 months worth of food as 1999 rolled over to Y2K. And while I think the peaking of oil production will be unprecedented, I am not of the belief that it will spell doom for most of humanity. A major shift in our lifestyles? Yes. The end of several billion people? No.

The problem for many who are very concerned about oil depletion is as odograph said following my earlier essay: The “extreme doomer fringe” owns peak oil. That is why my friend Nate Hagens has suggested that we stop using the term and start talking about resource depletion. Peak oil has come to be associated with fringe elements, and just as soon as some people hear you mention the term that is the image they conjure up.

Peak Oil as Theory

However, there are very serious scholars who believe that Saudi Arabian (and world) oil production is at or past peak. For an example of this, see Stuart Staniford’s comprehensive essay Water in the Gas Tank, where he tries to read the tea leaves of what’s going on in Saudi, and concludes that they are actually in decline. (Read the comments following the post where you will see a decent sampling of believers – “we can easily start backcasting the models using 2004-2005 as a known peak“; what you have is people who are readily willing to accept that Saudi has peaked – even though Stuart admits that his work is not conclusive).

I disagree with Stuart’s assessment, and made my case in an essay also posted to The Oil Drum. I believe that the Saudi declines are voluntary, and that they will raise production later this year. But Stuart, a Ph.D. physicist, is no dummy. He has made a compelling case; I just think there are some aspects he is overlooking. But these are the debates that I would throw into the “theory” category. They are attempts at explaining what is actually going on in the world of oil production. And of course the theoretical aspect attracts lots of kudos from the believers – as long as you say what they want to hear.

As an aside, on the topic of scholarly attempts at reading the tea leaves, there was a recent Ph.D. thesis by a student at Uppsala in Sweden – Fredrik Robelius – that you can find archived here (3.7 meg PDF warning). Besides a very well-researched treatise on oil production, his conclusion was that world oil production will peak some time between 2008 and 2018.

What I Believe

Peak oil for me is an observation, not a belief. It has been observed in country after country. I believe that when peak happens on a worldwide basis, there will be a lot of hardship. The U.S. is especially vulnerable because the country is highly dependent upon cheap oil. I believe that Fredrik Robelius is probably correct; that world oil production will peak in the time frame he mentioned. The wild card in all of this is Saudi Arabia. If they are telling the truth about their reserves, then peak won’t happen for quite some time. They are the key, which is why so much time and effort is spent in trying to figure out the situation there. And while I am not willing to accept the Saudi party line on their reserves, if you go back to 1982 when their books were still open and subtract off the production since then, you get more remaining reserves than you should if the imminent peakers were correct. And that is assuming they haven’t discovered a drop since then. I covered this in an essay here.

I also believe that even if the world doesn’t peak for a few more years, supply and demand will remain very tight. I think we are in a permanent era of higher oil prices. If you look at expected demand growth, and compare that to the expected production that is forecast to come online, I think my Peak Lite scenario will play out over the next few years. Any new capacity is going to be consumed by fast-growing demand.

But I think when oil production does peak, we will muddle through and humankind will persevere. It will be a big adjustment. But if the U.S. can learn to live with the kind of per capita energy consumption the rest of the world uses, then oil supplies will last quite some time. It is not that difficult to make do with less. My own fossil fuel usage is probably 1/4th that of the average American. But I am quite comfortable. I am just very conscious of my energy consumption, and I don’t waste energy. If we all learn to be more careful with our energy consumption – and I think higher prices are going to force that on us anyway – then the doomers will all be wrong about the consequences of peak oil.

But I have also come to the conclusion that the fringe elements own the rights to “Peak Oil.” I am going to transition to using the terms oil depletion or resource depletion in the future.

19 thoughts on “Is Peak Oil a Belief, Theory, or Fact?”

  1. To me, “Peak Oil” simply a fact of life that is either in my immediate past or my near future, one that requires planning and action. It’s too bad the term has come to be synonymous with depletion doomerism as epitomised by Richard Heinberg’s books. I don’t blame you for wanting to avoid it.

  2. I didn’t mean to start a controversy. Count me in the peak observed fact category as well. Oil peaked in Pennsylvania in the 19th century, in Oklahoma it peaked in the 1940s. Texas peaked in the late 1960s. The “oil capital of the world” has picked up and moved several times.

    But I think we have decades, if not centuries to come up with a solution. I’ve always believed that alternatives will be found just as our predecessors developed oil and natural gas to replace whale oil and coal.

    I don’t know how anyone can declare that even Saudi Arabia is running out of oil since not all of the KSA has even been explored!

    One thing that never gets discused in peak oil circles is how ownership of the mineral rights affects development. In the US, mineral rights on private property are owned privately. In most of the rest of the world they are owned by the state. Compared to the private sector, governments are very bad at developing their resources. They tend to have other agendas (maximizing employment, local content, social development) other than maximizing production and efficiency. The Feb. 2007 Baker Hughes rid count shows 3,352 rigs working, with 1,725 working the U.S. and 252 in the Middle East. Why? Not because the U.S. is the most prospective area in the world, but because it is one of the few places on earth that private capital can develop resources. Imagine if a highly prospective company (say Iraq) opened its doors to private investment? What would peak oil look like then?

  3. Robert,
    Humans are pretty resilient – and the doomers tend to forget that. To see what can be done under pressure, just consider the technologies developed during WWII.

    Not included in that list is a technology particularly relevant to peak oil: coal->liquid fuels, aka gasification/Fischer-Tropsch. If the doomers are even partly right there will be a lot of pressure when “oil peaks”. This, in turn, will lead to rapid technological advances – heck, we might even see Uncle Sam doing something useful!

  4. But if the U.S. can learn to live with the kind of per capita energy consumption the rest of the world uses…

    I cannot think of a comment that is funnier than that statement on it’s own, but I have to try….

    Well.. menthol hydrate! The U.S. realized there were no WMD before they invaded Iraq, parked all of their S.U.V.’s, took up walking and the last 5 years have just been made up TV filmed in a abandoned aircraft hanger for CNN ratings.

  5. I didn’t mean to start a controversy.

    I don’t mean to imply that you did. But you did bring up something that comes up frequently, and was well worth addressing.

    I don’t know how anyone can declare that even Saudi Arabia is running out of oil since not all of the KSA has even been explored!

    I had this discussion last year with our Chief Economist. She said the same thing. However, there are those who swear that KSA has been completely explored. So, if you believe that, this is how they can declare it. But we are again back to “belief” in that situation. I know that KSA says they haven’t explored everything, but the believers will not accept anything that KSA themselves say, unless it is to their advantage.


  6. It is a bit sad that the otherwise excellent Oil Drum cannot seem to stand a bit of dissent and question.

    Sorry to see you go.

    Just to clarify, it isn’t The Oil Drum itself that is the problem. The contributors, editors, and vast majority of posters are great – and the editors have never had any issues with my postings. It is that fringe element that started taking more and more of my time to deal with. As I have said, if I posted anonymously, I could just ignore them. Given that I don’t, I feel compelled to answer them lest someone read one of their charges and wonder if it’s true.

    As I have said, I may post some things down the line, after more data comes in on Saudi. For now, we have to wait and see what they do. If they raise rates, I think the question of whether their decline has been voluntary is settled (except some conspiracy theorists have already come up with the theory that oil is being piped in from Iraq to mask a Saudi decline).



  7. Roger Conner, a frequent poster at The Oil Drum, captured perfectly the problem as I see it:

    Roger Conner on Bipolarity

    Ah, TOD! Our glorious, interesting, educational, controversial and yes, very bipolar TOD! That last part is a little family secret among TOD followers, and this string is an absolutely perfect microcosm of how the ailment can kick in without warning, and the family has to weather yet one more episode, as any good family would do with a bipolar child….

    The string begins with what is undoubtedly one of the best mathematical, technical attempts to understand and model a complex subject I have ever seen by Stuart Staniford. THIS is the stuff of a brilliant blog, more useful than almost any I can think of off the top of my head.

    The issue is discussed by people who are fascinated by the very interesting and technical aspects as presented….and then….

    The bipolar side kicks in…..within only a few posts, we are once again facing a starvation crisis, “Start thinking about how you are going to feed your family”, riots in Saudi Arabia, office workers and college grads spending 10 and 20 hours per week in the fields attempting to grow food, according to one poster, something almost impossible to do without great education, a hostile government will defeat all efforts at individual or even group survival (gee, if starvation was not enough, now my government is going to try to kill me!)

    That is brilliant. Check out his post. He wrote quite a bit more, and documented some of the more hysterical comments. Interestingly, I note among those making the hysterical comments were some of my harshest critics. Coincidence?


  8. I’ll be a little less obtuse and explain what I meant previously regarding my opinion on why you are getting some of the strong bipolar opinions directed at you.

    A reasonable approach to resource constraints is as you have said, “learn to live with less resources.” That to me sounds like an intelligent, rational and simple solution, but a comment like that strikes directly into the center of the frustration in the average citizen of the industrialized world that was set up by the fantasy of “The American Dream©”.

    I don’t think it’s possible to have a calm and rational discussion on the matter in a larger forum and attempting to do so is a stressful waste of time. If I understand correctly, this is what you are trying to say.

  9. I know I’m a hard-liner on this. That is, I think the “Peak Oil” movement had a stark choice, either throw the doomers “under the bus” (American political term for public abandonment), or be forever bound to them.

    I wrote at TOD about what I called “The Scarborough Incident” and how important I thought it was:

    odograph on October 22, 2006 – 9:13am

    My hard line is admittedly based on my subjective view of human nature. I don’t believe a group can have a vocal “we’re all gonna die” contingent without being shaped by them.

    I think, or I think I learned from this experience, belief has strong social and group feedback mechanisms.

    I don’t care if you are, intellectually, a rational moderate. If you hear about working in the fields or food shortages, you are going to check your cupboards. You are going to be _shaped_.

    That is just the way we get, and share, our beliefs. The more insular a group becomes, the stronger the affect.

  10. I was on one of the Core Venture teams looking at the KSA gas development in 2001. Most of the southern and western part of the KSA is unexplored. The producing region is along the Persian Gulf to Riyadh in the south, maybe 10,000 sq km of the 2.15 million sq km that makes up the KSA.

    Setting aside the KSA, there are lots of places we haven’t looked yet. How about the 1002 area in Alaska? Nobody has seriously explored offshore CA in a generation. We have much better tools today. Deepwater GOM on Mexico’s side? Nada. Western Africa? Barely scratched the surface. Offshore FL? Not explored? Offshore East Coast US? Ditto.

    Have your friends at TOD explain the Baker Hughes rig count. Why are 1/2 the 3,300 rigs in the world working the U.S.?

  11. I was on one of the Core Venture teams looking at the KSA gas development in 2001. Most of the southern and western part of the KSA is unexplored. The producing region is along the Persian Gulf to Riyadh in the south, maybe 10,000 sq km of the 2.15 million sq km that makes up the KSA.

    Thanks for posting that. Interesting information. You should post some of that at TOD. I have seen more than 1 person swear that Saudi has been completely explored, so a voice from someone with firsthand information would be good. Of course, you are going to be going up against certain diehard beliefs, and well…..

    Cheers, RR

  12. I’ll pass on TOD. If they called you names they really won’t like me! I was on one of the Core Venture teams looking at the KSA gas development in 2001. My team was working on the gas, power, and water assets. There was another team looking at the exploration. But we met regularly – I just checked with one of my friends on the team. He confirmed, the KSA still remains largely unexplored.

    This only makes sense. The KSA has 260 billion barrels of known reserves. They produce about 10 million barrels a day. So they have a 70+ year supply at current rates with current technology. There is no reason for them to go on an agressive E&P program.

  13. KingofKaty said…
    But I think we have decades, if not centuries to come up with a solution.

    Can I assume you don’t accept the science of global warming? Because we don’t have centuries to solve that problem.

    Can I echo other’s disappointment that we will no longer be reading Robert at TOD. Perhaps you could avoid commenting on controversial issues such as HL and KSA reserves, and continue commenting on other topics? I’d love to hear your thoughts on cellulosic ethanol and alternative vehicle technologies such as the H2CAR discussed today.

  14. I’d love to hear your thoughts on cellulosic ethanol and alternative vehicle technologies such as the H2CAR discussed today.

    I actually reviewed that and commented to EP before it was published. 🙂 That Purdue story is incredibly overblown. I have a very similar patent application working its way through the system (H2 addition to a gasification process). I guess I should have called a press conference.

    Cheers, RR

  15. First of all thanks for your post here and on TOD. I am a recent newcomer to TOD, but I think it’s quite easy to tell between the doom-prophets and the ones trying to figure out what’s going on without prejudging ‘peak’.

    The fact that Stuart Staniford usually refrains from engaging directly with the doomers just gives him more credit in my eyes. Very quickly I realized he is worth reading while most comments I just browse through.

    It’s a tough one: I have no knowledge on oil/geology etc. I read TOD, grappling with the charts that often mean very little to me, in order to figure out what’s going on. But the people I trust to be serious – like yourself or Stuart – seem very cautious about giving ‘the score’ (3 years. 10 years. etc) For good reasons.

    I’ll say one more thing. The effects of depletion have only partly to do with the question of oil supply. From the little I know it seems that Economics is about psychology as much as anything else. So I’m much more worried about peak-panic than peak itself. The peak will come and we will still have lots of oil, less cheap, but we can easily adjust. But the sudden arrival of this issue to main-steram-media could be scary for a lot of people.

  16. Can I assume you don’t accept the science of global warming? Because we don’t have centuries to solve that problem.

    I accept the observed facts that the planet is now warmer than it was 100 years ago but cooler than it has been at some point in the past. I accept that CO2 levels in the atmosphere are higher now than they were at the start of the industrial revolution, but also lower than they have been in the past. I haven’t seen any compelling argument proving cause and effect. So I remain cautiously skeptical. I also look at the last century where global temperatures have risen by 1-2 degrees but global wealth has risen nearly 2,000% and human life expectancy has doubled. I also observe that over the 200,000 years or so humans have been around (a blink of an eye in geologic time) we have managed to survive super volcanic eruptions, ice ages, global pandemics, world wars, and any number of cataclismic events.

    What to do about GW is an entirely different question. I think about it like an insurance policy. One has to balance the cost of the current premiums against the probability and magnitude of a future loss. If stopping a few degrees of global warming means wrecking wecking western economies, then I believe the premium is too high for too little benefit. That doesn’t mean we can’t take some sensible low-cost alternatives now. We can move to increase efficiencies, work at creating more sustainable, less energy intensive communities, use technology to reduce energy consumption, promote more diverse energy supplies (including nuclear), and move to lower carbon energy.

    I see almost no mention of how we might adapt to future GW scenarios. In any event, if global wealth increases even at a fraction of the rate of the previous 100 years, we will be in a much better position to deal with the problem.

  17. OK, here we go.

    KingOfKaty – you are not starting the controversy. Prince did. But before that, it wuz somebody else. And if you been readin’ Robert you’d know there ain’t no “controversy.” Robert is usually pretty square on with what he’s saying.

    Am I right?

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