Seven myths used to debunk peak oil, debunked
Peak oil is a fact, not a theory. From US conventional oil production peaking in 1970 to global conventional oil production peaking in 2006 the figures are indisputable. Even institutions such as the International Energy Agency (IEA) and publications like The Economist that are not known for alarmism have admitted that oil production from conventional sources has peaked. So why are there still commentators out there that refuse to believe peak oil? Similar to the climate change debate many, but not all of the most vocal deniers tend to be politically conservative, pro-business and by their refusal to take into account basic statistics, anti-science. They are ideologically opposed to what will happen now that we are living in a post-peak world in terms of reduced energy use per capita and the inevitable downsizing of the global economy. So what are their arguments and why are they so wrong? The top seven are listed below:
1. “Peak oilers say oil is running out, it’s not”
At best this is a misunderstanding, at worst this is a straw-man argument deliberately fabricated to cast doubt on the assertions of those concerned with the realities of peak oil. No peak oiler worth their salt has ever argued that we are running out of peak oil. Sure there may have been a couple of fringe bloggers arguing the case alongside conspiracy theories about alien abduction cover-ups and laser guided death unicorns but no one takes them seriously. The issue is not when oil will run out, it is about when oil production will peak. Global conventional oil production peaked in 2006 according to the IEA’s 2010 World Energy Outlook. Unconventional oil has filled the gap for now at least but there is a lot of scepticism as to how long this can last.
2. “Fracking will save us from peak oil”
While it is certainly true that the massive increase in fracking was unforeseen by most peak oilers it is merely a game extender, not a game changer. Oil from fracking currently accounted for less than 5 percent of the daily U.S. consumption last year. This is even after a 750 percent increase in tight oil production since 2003. Clearly there needs to be an unprecedented increase in exploration and drilling for oil from fracking to even begin making a dent in the wider scale of things.
The other trouble with fracking is that production figures for individual wells commonly decline 60-80 percent in the first year followed by a more gradual decline. This means new wells must constantly be drilled to avoid production for a whole area dropping off very quickly.
The U.S. Energy Information Administration (EIA) forecasts that domestic production of tight oil will max out at 1,325,000 barrels a day by 2030. This is only 7 percent of the current U.S. daily consumption. And no one seriously believes that the U.S. economy can grow without increasing oil consumption. The numbers don’t stack up, it’s as simple as that.
3. “The United States is now or will soon be a net oil exporter”
The rise of tight oil extracted through fracking has been hailed as a new era for U.S. energy independence. Some have even gone as far as saying that the U.S. is now a net oil exporter. The devil is in the details however. On a Btu basis the U.S. imported 58 percent of the oil it consumed in 2011.
Now it is true that the U.S. became a net oil product exporter in 2011 for the first time in over sixty years. This is however very different from being a net oil exporter. Gasoline, diesel and heating oil made up the majority of these products. However much of this oil was initially imported as crude from overseas, refined in the U.S. and then exported back out. This doesn’t make the U.S. a net oil exporter. Total net crude and product imports did fall 11 percent in 2011 to 8.436 million barrels a day, the lowest point since 2005. And domestic oil output did rise 3.6 percent to 5.673 million barrels a day. But this still leaves a 48.7% difference between imports and domestic oil output, a huge gap that the IEA forecasts will not be closed as far out as 2035.
4. “Oil production is still increasing annually”
Like many peak oil denier myths this old gem is true up to a point. But only if you include unconventional oil, natural gas liquids and biofuels. Which means that when you take those figures away you get…that’s right…a peak in the production of oil from conventional sources. And as we see from the example in the U.S. it is highly unlikely that unconventional plays will be able to take up much of the slack.
5. “Saudia Arabia will ramp up production to ease prices soon”
Crude oil prices have been over US$100 a barrel since February 2011. This is after steadily climbing from a low of US$42 a barrel in December 2008 after the last recession killed demand. The question is: with oil prices so high for so long, why hasn’t Saudi Arabia stepped in already to ease prices? Saudi Arabia produced the highest amount in thirty years in November 2011 and then actually decreased output and exports the following month. The increased November output dropped prices by $3.00 per barrel to $107.97 for December. The easing was shortlived however with average March 2012 prices sitting at $126.4 per barrel, the highest price since July 2008. Production capacity figures for OPEC countries are notorious for being inflated and there is increasing scepticism that Saudi Arabia couldn’t priduce any more oil even if it wanted to.
6. “East Africa is the new Middle East”
Madagascar has been targeted by Exxon and Norway’s Statoil since 2005. Statoil has found a billion barrels of oil equivalent. That may seem like a huge find but consider this: the largest conventional oil field in the world, Ghawar in Saudi Arabia, has produced 65 billion barrels of oil since 1951 from initial reserves of over 100 billion barrels. The Madagascar field extends down to Mozambique where Anadarko have found 1.3 billion barrels of oil. Further inland Tallow has found 1 billion barrels of proven reserves in the Ugandan Albert basin. Plenty of other African countries are now being explored by a number of interests but they have yet to show any major finds.
Oil pundits might be saying “game on” but really all there is to show at the moment is a lot of hope and we all know that at the end of the day hope won’t fill the gas tank. I should know, I tried that plenty of times in my student days. The truth is that most of the new oil finds throughout the world are less than 2 billion barrels each. The global annual consumption is currently a little less than 33 billion barrels per year. There is a huge disconnect between the size of the fields currently being discovered and the predicted future demand for oil.
7. “There is always a new frontier”
The question is why do we need new frontiers if oil production isn’t peaking? It is an odd concept that oil companies would spend millions of dollars in politically unstable countries and areas where the physical barriers are immense such as the Arctic just for the hell of it. The truth is all the low hanging fruit have been picked. All the easy to access and produce oil has been found and developed. What we are seeing now is increased exploration in increasingly economically dubious areas such as the Canadian tar sands, deepwater drilling, and fracking and horizontal drilling in tight oil plays.
It is as if the pundits pushing this line have never seen a globe before. The world is round. There is a finite amount of land and ocean that can realistically be developed to economically produce oil. From all the evidence that has been collated over the last few years it appears that we are pushing up against these limits right now.
The biggest oil find since the 1960s, the Kashagan oilfield in the Caspian Sea has 13 billion barrels of proven reserves. Development of the field has however been plagued with funding problems with Shell shutting its Caspian office in May last year. At this stage it is unlikely this field will produce anything close to the original estimates due to ingoing delays with development.