Another Peak Lite Endorsement

Hmm. I am going to have to trademark “Peak Lite.” This viewpoint is gathering momentum. First the IEA, then the NPC, now the former chairman of Shell has come out and endorsed this view:

Oil industry ‘sleepwalking into crisis’

Lord Oxburgh, the former chairman of Shell, has issued a stark warning that the price of oil could hit $150 per barrel, with oil production peaking within the next 20 years.

He accused the industry of having its head “in the sand” about the depletion of supplies, and warned: “We may be sleepwalking into a problem which is actually going to be very serious and it may be too late to do anything about it by the time we are fully aware.”

In an interview with The Independent on Sunday ahead of his address to the Association for the Study of Peak Oil in Ireland this week, Lord Oxburgh, one of the most respected names in the energy industry, said a rapid increase in the price of oil was inevitable as demand continued to outstrip supply. He said: “We can probably go on extracting oil from the ground for a very long time, but it is going to get very expensive indeed.

Commenting on whether “peak oil” – the point when global oil production goes into terminal decline – was likely to be reached in the near future, he said: “In a way it scarcely matters; what really matters is the gap between production and demand. I don’t know whether there is going to be a peak in world oil production, whether it’s going to plateau and then slowly come down.

It is hard for me to envision a scenario in which oil prices aren’t under severe pressure going forward. $150? Sure. Within 20 years? I have no doubt. Within 2 years as some are saying? I have a hard time seeing that, as people will start to respond as prices remain elevated.

14 thoughts on “Another Peak Lite Endorsement”

  1. I don’t think we can get to $150 per barrel. Coal to liquids (CTL), even with sequestration competes even at today’s prices.

    The reason we don’t jump to CTL today is the concern that prices will drop back to $30 per barrel, making the economics on CTL go negative.

    There are more mineable carbon atoms below the state of Illinois than all of Saudi Arabia and Kuwait – combined.

    We need to think of fuels as transitional, not permanent. When we run out of petroleum, we transition to clean coal, or hybrid/electric, or some other fuel.

  2. Thanks to its carbon content, CTL is viable in the same way that we can use nuclear weapons as earth moving devices.

  3. Thanks to its carbon content, CTL is viable in the same way that we can use nuclear weapons as earth moving devices.

    You forgot to mention that we also get to use some really cool, and really big toys.

  4. This week’s issue of Barron’s has a story, it interviews a guy named Rothman, who says crude prices are going to sink soon.

    One thing the doomsters forget is that world crude demand right now may be peaking. We may have Peak Demand right now. Remember what happened after 1979? Oil demand fell by 11 percent, and did not recover for a full 10 years .

    This go ’round not exactly the same, but close. Demand is not growing, at more than $60 a barrel. In fact, it is falling in the developed world.

    So, when a scaremonger says demand will outstrip supply, and oil will hit $150, they have to say the peak crude production is now, and will fall rapidly.

    Add to that, they have to say we cannot succeed at coal-to-liquids or gas-to-liquids. Forget Sasol. Forget biofuels. Forget KSA opening up huge fields soon, and Kuwait and Qatar ramping up production, or Canadian tar sands, or the Chevron strike, or the Orinoco tar belt.

    Actually, I suspect anythign higher than $60 a barrel will simply not be sustainable. Demand will fall. And keep falling. Peak Demand will be in 2007, or 2008. Perennial declines in demand for a commodity, but higher prices for that same commodity just do not go hand-in-hand.

    Maybe we should use nukes to melt tar sands quickly, getting a bunch of oil at once!

  5. The difference between high prices and low is really a very small margin. Plus or minus 1% of supply is probably all the market needs (on a sustained basis) to shift prices substantially.

    And that does worry me, because a price collapse on energy right now would destroy the momentum of the renewable energy and the green building industry, but it wouldn’t actually mean that we were out of the woods with regards to energy. Not at all. It would mean that we would be less prepared than otherwise when the crisis does arrive.

    However, I’m not too worried about this happening, for two reasons: China, and India.

  6. rohar – Cool! That is what I was talking about. Instead of stopping at historical markers, I park at the scenic overlooks of nuclear power plants and other energy infrastructure. When I lived in Oklahoma I was friends with one of the project managers at Unit Rig, they were bought by Terex. I got to drive one of the 200 ton models around the Unit Rig parking lot. It was a kid’s dream come true.

    Mostly strip mining is for lignite, which has a high ash content and isn’t as good for CTL operations. We’d prefer to use bitumen or sub-bitumen or petroleum coke. But we still get to play with some pretty cool toys. For a Chem E. making diesel from coal is a lot of fun.

    Others are correct, in the late 1990’s the Saudis put an extra 2 million barrels on the market, that was enough to send prices back into the $15 range. The worldwide economy grew last year, but crude oil use was up only 1%. I think the US needs a crude price floor to incentivize alternatives and to protect large captial investments. That idea goes against my free market principles, but since 90% of the world’s reserves are off-limit to free market competition, then it really isn’t an entirely free market anyway.

  7. Right, right, right…small decreases in demand could sink oil prices. Last year fossil oil consumption grew only 0.7 percent (BP stats).
    The problem is the world’s oil is controlled by thug states. So counting on higher production to lead to higher prices is not wise.
    I agree with King, free markets would be wonderful.
    But, as a nation, we must now rely on thug states for a our oil, where a contract is never a contract, there are no property rights, no democracy, no law etc.
    Better to go it alone, as there are not enough free market democracies to ensure a supply of oil to us.
    So, yes, subsidize domestic energy and put a tariff on imports.
    The United States is the oddest nation ever. We will plow into another nation with armed forces, occuply it, and say we don;t cxare that the UN did no sanction.
    But we are so delicate when it comes to worrying about trade law, and could we really tax imported oil w/o angering somebody somewhere, or breeching international law.
    Of course, the other answer is that Bush is just an oil-industry pawn and buddy of the KSA.

  8. Not the place to debate the Bush Doctrine. History will judge if this was the correct course.

    We complain about Venezuela or the KSA not producing enough oil, yet the US locks up one of the biggest potential oil fields in North America (the 1002 area), all of the west coast offshore, all of the east coast, coastal waters in FL, and a big chunk of the Rockies.

    I too think an oil import tariff is needed. So as not to anger the producers, we could set it at $40 or $50 per barrel. Within NAFTA the tax wouldn’t apply. The import tariff would protect investments in alternatives, fuel conservation, and other measures requiring substantial capital investment.

    Once the US puts several million barrels per day of alternatives on to the market the price of oil will crash. This will put some energy intensive industries at a disadvantage, but mostly oil is used for transportation fuel. I think the economy could adjust. Lower world prices will defund the thugs and dicatators, and perhaps reduce political tensions.

  9. “Not the place to debate the Bush Doctrine. History will judge if this was the correct course.”

    I agree not the place, but I can’t resist commenting that we see early judgment in the positions politicos take, and expectations for 2008.

    Democracies to not always make the right decisions, but they have the ability to throw out old decisions without revolution.

  10. Unlike some comments, Robert seems to give Lord Oxburgh some credibility. If oil goes to an extreme price, whether $150 or not is immaterial, I am interested in thinking about the ramifications for myself and my daughter over the next several decades. Surely demand will be modified. And surely new technologies will come along. But what will the effects in the near future be on heating, food, transportation, the global economy? Can anyone point me to a site where possible consequences are discussed?

  11. Benjamin Cole said: “Maybe we should use nukes to melt tar sands quickly, getting a bunch of oil at once!”


    Something similar has been tried before with generally lackluster results. In the late 1960’s Project PLOWSHARE was started to find peaceful ways to use nuclear weapons. One of the experiments was to try using underground nuclear explosions to increase the flow of natural gas from underperforming wells.

    They did try underground explosions in New Mexico and Colorado, and had one planned for Wyoming that never happened. You can read more at:

    Project GASBUGGY

    Project WAGONWHEEL


    One of the interesting things about WAGONWHEEL was an estimate that the nuclear explosion would have relesed 35 times more energy than they could ever hope to have recovered from the natural gas wells. What a dismal EROEI that would have been — 1:35! (Of course you can’t burn plutonium in your home furnace.)

    And that didn’t take into account the embodied energy in the nuclear bombs. One of th well-kept secrets of the nuclear energy business is the huge amount of energy it takes to produce either plutonium or fissionable uranium.


    Gary Dikkers

  12. There are many other fuel sources that we can be using now. You can see many of these fuels being used on That site airs videos on all things green and there are some cool things going on around the world with alternative fuels.

  13. re: Lord Ron Oxburgh

    I know him, and whether he’s right or wrong on these details, I would always listen hard to him, as he calls it like he sees it and he’s a very smart guy.

    Note of course, that he’s done a lot of different things, including being Rector of Imperial College, London, and was parachuted in as Shell Chairman to help clean up that mess they had a while back.

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