Experts Split on Peak Oil

Note: I am traveling to Seattle on Monday, returning Wednesday. No updates during that time, and responses to e-mails will be delayed.

Per a story in today’s Austin American Statesman:

Is oil at its peak? Experts split

A sampling of the opinions cited:

‘As much as you’re uncomfortable with today’s oil prices, these are going to be the good old days. We’re talking about pain here that is unimaginable. There’s no question in my mind that we’re likely to see oil production go into decline somewhere between 2010 and 2012.’

Robert Hirsch, oil expert and author of the Hirsch Report

‘For the past three years, global oil production has remained constant at roughly 85 million barrels per day. OPEC production has remained largely flat while non-OPEC supply growth has been well below levels seen just four years ago. … If there are no additional supplies of oil, for every 1 percent increase in demand, we would expect a 20 percent increase in price to balance the market.’

Samuel Bodman, U.S. Energy secretary, at a June 22 oil summit in Saudi Arabia

‘Political factors, barriers to entry and high taxes all play a role here. In other words, when it comes to producing more oil, the problems are aboveground, not below it. They are not geological, but political.’

Tony Hayward, BP CEO, during a June 11 presentation on BP’s annual world energy report

‘The imminent peak in global oil production has been predicted for a century – but incorrectly; it has not occurred. This does not mean that it will not occur ever. … But we need to be aware that some of the very arguments we are hearing today have been heard before – and have, in retrospect, been scaremongering.’

Peter Davies, BP’s special economic adviser, in January 16 speech to a peak oil group in London

‘The global economy is facing the third great oil shock of recent decades. … We are becoming increasingly aware of the technical, financial and political barriers to the production of more oil.’

Gordon Brown, prime minister of Britain, in a May 28 commentary published in the Guardian

‘There is enough oil and gas in the ground, but the access is what’s impeding production. So we could have a squeeze in the years ahead if we don’t get after increasing our supplies.’

David O’Reilly, Chevron Corp. chairman and chief executive, CNN, June 17

‘It’s supply and demand. … We don’t have excess (production) capacity in the world anymore. That’s why you’re seeing the oil prices.’

Warren Buffet, CNBC, June 25

‘The consensus view is that oil above $100 a barrel is going to be with us for some time. So we have two choices. One, continue exporting our wealth overseas … and hope that American consumers can outbid the Chinese and Indians in the world oil market; or two, we can commit to blazing a new path, one that frees our country from the shackles of oil.’

Rep. Edward Markey, D-Mass., at June 11 congressional hearing

Of course this is the same confused Markey who thinks we need to tap the SPR to bring prices down:

Rep. Edward Markey, the Massachusetts Democrat who chairs a special energy panel in the House, told reporters he will be introducing the legislation if President George W. Bush continues to oppose any withdrawals of oil from the Strategic Petroleum Reserve. Markey said that the bill will call for replenishing the SPR through government purchases of heavy crude oil over five years.

“I am going to introduce legislation that will require the president to sell 500,000 barrels of oil a day for a six-month period and to require that he put together a plan to repurchase heavy crude over a five-year period in order to replenish the oil,” Markey told reporters.

Yes, let’s refill the SPR with oil that many refineries can’t use. I presume someone told Markey that heavy crude is cheaper than light crude, so he figured this is a good way to raise money. Maybe next he can seek to understand why heavy crude is cheaper. One also wonders how this is supposed to help us ‘free our country from the shackles of oil.’ (If it seems like I am picking on Markey, I am. I think he has historically proven himself to be one of the biggest oil demagogues, right up there with Chuck Schumer).

My own view remains that I think there is a 90% probability that we will peak within 5 years. I think there is a 10% chance that we have already peaked.

34 thoughts on “Experts Split on Peak Oil”

  1. It is a fair point that "above ground" political constraints as well as below ground geological constraints can have an impact on peak oil. (For political constraints, we need look no further than the US Congress).

    But there may be an interaction between political & geological constraints. There is anecdotal evidence that some of the major Middle East exporters are struggling technically to meet their production targets, with internal debate about the optimum offtake strategy. If there is a decline in demand, some of those exporters may breathe a sigh of relief and cut back their production to offset it.

    Whether that counts as politically-constrained or resource-constrained, it would look rather like Peak Oil.

  2. There is lot of oil; unfortunately it is largely locked up in thug states. Iran, Iraq, Libya, Russia, Nigeria, Venezuela, Mexico, Saudi Arabia, Kuwait — not one of these countries is remotely an open, democratic free enterprise society and economy.
    So, we may in fact have Peak Oil, even if there is plenty of oil in the ground. Every country on the above list could be higher by 1 mbd if not a thug state. That’s 9 mbd. I guess the good news is that the oil will be there later, and we will have even better recovery techniques, in the future.
    All that being said, I think we are moving past Peak Demand this year. Automakers are bringing cars to market that can obtain 60-70 mpg, while the GM Volt promises even more for city dwellers.
    US demand down this year by 1 mbd from last year,. and that trend could continue for decades, if prices stay up.
    The demand of the developing world is a rel concern, though much of that demand grwoth was generated at much lower oil prices. Sooner or later, developing world demand will have to respond to higher prices.
    And who is to say they all won’t drive Volt-type cars? The Volt claims 50 mpg even when running on the motor. Imagine what is possible in the years ahead.
    I thin Buffet’s comments about transferring wealth out the country are very important. We ned a national energy policy, but the medicine — higher gaoline prices — is not one our two Prezzy candidates are going to spread. McCain is actually talking about eliminating the federal gasoline tax. Talk about pandering, And Obama has evidently decided to say nothing substantive until after the election — the ol’ safe defense and kill time strategy, that has lost so many football games.

  3. I’ve been reading more on economy and investment lately, and less on energy and environment.

    One thing that struck me recently is that some successful investors could be regarded as mercurial. They have a fine opinion, and then another contradictory one a year later. I think what might seem like a flaw is actually a … well if not a strength, it is at least fortunate.

    Humans are bad at prediction, especially about the future. It might follow that fickle people adapt to the news, moving dropping what was often a weak prediction in the first place.

    If prediction is hard, especially about oil, how sure should we be? How much should we trust the types that tell the same story for 10 years or more?

    Maybe those stubborn prophets are placeholders for a position rather than flexible thinkers.

    So is it peak oil? I’ll step up and say I don’t know. We can all observe the scramble for new sources, and the increased difficulty to produce light sweet crude … but that’s where I stop.

    I’ll be mercurial.

  4. Note, the nice thing about blogging is that it can give you time stamps. I know I was exposed to Peak Oil right around February, 2005, because that’s when I wrote it up:

    How about this as an argument … if no one in that time has proved peak or not, why not admit that it is indeterminate. It is Schroedinger’s cat. And THAT is the rarely argued, but rational, position.

  5. odo, I think you raise good points, as usual. Whether someone holds a fixed opinion or changes their mind is not a good indicator of the quality of the opinion.

    The question I ask is “can a prediction be right, but the timing wrong?” Of course, until something happens, it is not proved right or wrong, so unless you accept open ended predictions I think there has to be some timeframe has to be placed on predictions in order for them to be verifiable.

    But if the methodology of prediction is faulty in regard to timing, then I suspect the methodology in general. While Peak Oil is bound to happen eventually, people who have consistently predicted for several years an imminent collapse in production would seem to have been proved wrong.

    Peak Oil seems to be more of a gray swan than a black swan.

  6. Request for clarification: is that a 10% chance that the peak is in the past, an 80% chance of it being some time in the next five years and a 10% chance of it being five years or more in the future; or a 10% chance of the peak being in the past, a 90% chance of it being in the next five years and no chance of it being any later?

    I suspect you mean the former, but it could be read either way.

  7. I think the odds of peak oil ever happening are maybe 10%. Sure,conventional crude oil production will peak. But,gains in non-conventional production will outpace the decline in crude. It’s about an 85/15 mix today.

    Dupont says it’ll be making commercial quantities of cellulosic ethanol by 2012. Amyris and LS9 plan to go commercial with their processes in 2011. PHEV’s will be hitting showrooms about the same time. OPEC priced itself out of the market. It just doesn’t know it yet. Peak oil reminds me of the Y2K thing. That was going to destroy civilization too.

  8. But,gains in non-conventional production will outpace the decline in crude.

    However, we have seen gains fail to keep pace with demand. Thus, the huge run-up in crude prices, which was required to keep supply and demand balanced. Crude production has been essentially flat for 3 years (as have ‘total liquids’, which include those unconventional liquids).


  9. But,it took those high prices to get serious movement on the alternative fuel front Robert. There’s no putting that genie back in the bottle. Not this time.

  10. I’m not an expert on the issue, of course, but might not the failure of non-conventional sources to pick up the slack from conventional sources have something to do with the fact that they are, well, non-conventional? Up until now, we’ve been drawing most of our oil from the traditional places. True, there’s an increased push towards increasing our supplies from non-conventional sources, but most of that is a result of the fact that conventional oil can’t keep up with demand. In other words, we didn’t start to seriously look into non-conventional oil until after conventional oil let us down. Given what we know about how long it can take for oil discovery to translate into oil on-the-market, I would be a little surprised if total liquids had been greatly augmented by non-conventional oil just yet.

    But, as I say, I’m not an expert. My entirely non-expert opinion is that non-conventional oil make take some of the edge off our oil problem, but it’s not going to eliminate it. Also, I think peak oil (as a geological phenomenon, if not a social one) is inevitable. Unless we completely stop drilling from oil, we will eventually reach the point where we have removed more oil from the ground than remains left in it. I don’t think it needs (or is even likely) to mean social or economic chaos, nor do I necessarily think that reaching the geological peak means that our demand will exceed our supply, given the possibility of increased efficiency and reduced reliance on oil in the first place. But we’re going to see a peak, and I expect it’ll be in my lifetime, even if it’s not within the next five years like Robert predicts.

  11. Peak oil reminds me of the Y2K thing. That was going to destroy civilization too.

    What struck me about Y2K was not the fact there was a potential problem, but that a lot of people commenting on it were quite clueless. And a lot of the real experts stood to profit from selling hardware or services. Being an IT guy I knew it was mostly hype.

    I’m not an oil guy, so rely on people like RR for a sober assessment of the facts. Personally I think oil has probably peaked already, but the actual peak data is not important, cumulative production is a continuous function. The peak is an artificial “event”. It’s the long ride down the slope where the problems will arise.

    We are barely at the peak yet there is a good deal of discussion at governmental level. They do realise the serious nature of energy security, even if some of the actions are misguided thus far.

    In the modern world the ability to move information and capital to where it can be applied is unprecedented. If the system is unable to address the energy problem, it’s unlikely we be able to address the more serious threats to civilisation.

  12. People take comfort in believing they know what’s going to happen tomorrow. Like the ancients who worshipped stone gods in the belief that this would make their harvests richer.

    Given that most of the Earth is still unexplored for petroleum, coal, gas, and unconventional oil-equivalent, the idea that people are giving odds on peak oil this year vs. peak oil next year suggests a deficit of human intelligence–peak stupidity?

  13. @ al fin —

    you mean like the people who suggest that the entire world hasn’t been closely combed for oil and the people who say that the many geologists are wrong when they estimate the odds of any finds large enough to keep up with the depletion rates of existing fields as low — you mean we’re at peak stupidity with them? You mean that their stupidity will decline from now on? That’s great!

  14. Looking at the highlights of the last couple of oil market reports, I have to wonder if they’re trying to obscure the data.
    clearly says “Global oil supply rebounded by 490 kb/d in May to average
    86.6 mb/d
    “, but the following month there is no clear statement of global oil supply.
    Non-OPEC supply is seen rising 640 kb/d to 50.6 mb/d in 2009, following a late-year increase in 2008“. Does that mean that non-OPEC supply is currently 50.0mb/d? Or is it less than that now, and expected to rise to 50.0mb/d in late 2008?
    OPEC crude supply increased by 350 kb/d in June to 32.4 mb/d“.
    So if I add 50.0mb/d to 32.4 mb/d that gives me a global crude supply of 82.4 mb/d. Yet they don’t mention this number. Are they trying to hide it because it’s a large 4mb/d drop from the previous month’s 86.6 mb/d?

  15. If we are at or near Peak Oil, then we will switch to EVs, such as the GM Volt.
    Good news — check out this quote from NYT, on radically decreasing demand for energy to power lights.
    “The L.E.D., a type of semiconductor, generates light when an electric current is passed through positive and negative materials. Energy is given off in the form of heat and light. Different colors and greater efficiency are created by altering the composition of the material. Typically, a compact fluorescent bulb uses about 20 percent of the energy needed for a standard bulb to create the same amount of light. Today’s L.E.D.’s use about 15 percent. Next-generation bulbs still in the labs do even better.”

    In hotls, lighting is about 60% of power consumption. I see no problem in powerinf EVs from our grid. Other demands are trending south, not north.

  16. Peak stupidity is people who debate the issue of “peak oil” when they do not even have a precise definition of the term. It is an ever moving goal post, meant to make someone feel he knows what he is talking about. A primitive trait inherited from one’s distant ancestors.

  17. “If we are at or near Peak Oil, then we will switch to EVs, such as the GM Volt.”

    I think we’ll have electric cars with wireless grid connections in 20 years Benny. Well before that,I’d expect parking spots at the local mall to have wireless devices that recharge cars while folks shop. There’re a number of small devices with wireless power connections already on the market. Someday,I’ll be telling the grandkids yarns about the fossil fuel depots that once graced every other corner.

  18. Certainly, anonymous, any geologist who claims the entire Earth has been closely combed for oil, and who confidently claim that there is no possibility that significant new oil will be found: those geologists are at or very near peak stupidity.

    Have they combed the entire Earth’s seabed? Have they explored Antarctica? What about the entire Arctic?

    Hell, even Saudi Arabia has barely been touched by exploratory wells compared to the US and Canada. “…more than 70 percent of the world’s oil exploration wells are concentrated in the U.S. and Canada—countries that hold only 3 percent of the world’s oil reserves. Conversely, only 3 percent of the world’s exploration wells are drilled in the Middle East.” quoted from National Geographic.

  19. Clee, I think you’re mixing all liquids with crude+LC numbers. 86.6 is all liquids, 32.4 from OPEC is not.

  20. Just to make a point someone else may have already made (if so apologies).

    Peak Oil doesn’t just depend on how much recoverable oil remains in the subsurface, or what political barriers prevent us from producing it. It also depends on price.

    If oil collapsed to $5, we’d see a dramatic rise in demand, while exploration and development for new reserves would go into a tailspin. All things being equal, peak oil would be accelerated.

    If oil rose to $500, we’d see a dramatic fall off in demand, but a huge increase in exploration and development. All things being equal, peak oil would retreat further into the future.

    As prices drift towards one or the other of the two extremes in the future, we’d probably see associated increases in pressure to tap politically locked reserves plus conservation measures plus new pulses of alternative energy investment, which would in turn increase supply…. or conversely pressure to exit sensitive areas, the re-emergence of Hummers, and the decline of all but the most promising alternative technologies, which would in turn reduce supply.

    It’s definitely a moving target, but with a built in self correcting mechanism.

  21. doggydogworld writes:
    Clee, I think you’re mixing all liquids with crude+LC numbers. 86.6 is all liquids, 32.4 from OPEC is not.

    Okay, I can believe that. A drop of 4 mb/d seemed suspiciously high. Still, I could not find the June number that is equivalent to the May 86.6 number. Can you? Why isn’t it there as clear day?

  22. Peak oil in 50 years, rather defeats the purpose of all the teeth-gnashing, eh, what? Peak due to lack of demand is another party pooper for PO pederasts.

  23. Markey is dumb. Give the dude a break.

    RR, Arm chair is right, if oil stays about $100 a barrel, oil production will keep rising.

    Do not forget Venezuela and Iraq, or all the shale and sand oil. Peak oil is almost certainly more than 5 years away.

  24. RR, did you see my previous post on your previous thread on “possible,” probable” and “proven” oil reserves?

  25. Request for clarification: is that a 10% chance that the peak is in the past, an 80% chance of it being some time in the next five years and a 10% chance of it being five years or more in the future; or a 10% chance of the peak being in the past, a 90% chance of it being in the next five years and no chance of it being any later?

    That’s a good point. Let me clarify. I think there is a 10% chance that we have peaked, and a 10% chance peak is more than 5 years away. I think there is an 80% chance the peak will occur between now and 5 years from now.

    Cheers, RR

  26. RR, did you see my previous post on your previous thread on “possible,” probable” and “proven” oil reserves?

    I did. It was a comment worthy of a stand alone post. However, I don’t have enough time right now for the in-depth response it would require. To address all of the issues you brought up would require some research, and another essay.

    Cheers, RR

  27. “That’s a good point. Let me clarify. I think there is a 10% chance that we have peaked, and a 10% chance peak is more than 5 years away. I think there is an 80% chance the peak will occur between now and 5 years from now.”

    Interesting that we make, and are drawn, to such untestable claims.

    A peak-or-not in 5 years cannot prove or disprove the probability map given.

    If people don’t get this, consider if I said:

    “That’s a good point. Let me clarify. I think there is a 5% chance that we have peaked, and a 40% chance peak is more than 5 years away. I think there is an 55% chance the peak will occur between now and 5 years from now.”

    No peak date will show my distribution right and Robert’s wrong.

    To really test the distribution we’d need many, many, outcomes. We’d need 1000 parallel earths.

  28. I’ll leave it to the reader to sit back and consider how much the whole Peak Oil thing depends on untestable claims.

    My conclusion is that it depends a lot, and even if Peak Oil represents a real risk, the uncertainty and un-testability of the whole thing limit how much attention we should give it.

    IOW, cover your bases, spread your bets, and move on to something more immediate.

    (As I am wont to say, in my own untestable prediction, your patterns of diet and exercise will matter more than your Peak Oil preparations.)

  29. To really test the distribution we’d need many, many, outcomes.

    If it were an actual probability distribution, then you would be correct. It is not. It is my own personal confidence level on when peak will occur.


  30. I do value your judgment Robert, but it’s a PO thing that one person’s confidence level is another person’s untestable claim.

    I mean, Daniel Yergin has been sitting on his confidence level for some time …

  31. I was thinking that a peak at 5+ years could simply be viewed as a low-probability outcome, and one that is consistent your framework:

    ” a 10% chance peak is more than 5 years away. “

    I was contrasting this with a falsifiable claim, say “0% after 10 years.” Given that we have only one sample, we need a 0% boundary to disprove it.

    I get the spirit of what you are saying though, that the next five years are critical and … that they will resolve the issue?

  32. Peak Oil – Every-one has struggled with a definition.

    Simple: Peak oil occurs when other energy alternatives become equally attractive in the market-place. It is not a geophysical phenomenon. It is simply a matter of economics.

    Peak oil has nothing to do with how much oil is off-shore or how many barrels are untouched in Anwar.

    Or hidden Saudi reserves………

    There’s tons of oil out there. Can it compete ?

    The Republicans chanted “Drill Baby, Drill” at their convention. It is a useless enterprise.

    Oil is finished, not because there are no reserves, but because it has become un-economical to extract it vis a vis other alternatives.


    Why should we care about so-called alternative energy ?

    How is alternative energy going to
    fill our gas tanks with petroleum from the mid-east ?


    Through an electrical grid which we control.

    What do a few windmills and a scattering of PV installations have to do with me ?????


    Hide and watch. Your children will drive electric vehicles.


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