Peak Oil will be one of the defining events of this century. Forecasts by professionals in energy-related fields fall in a large range between 2006 and 2025+, with most forecasts by institutions in the later half of this range. Estimates vary widely due to two very different kinds of factors.
Factor #1: Known Unknowns
- We know so little that about many factors that experts can only guess at their effects over the next 20 years.
- Economic growth. Today growth in global real GDP of 5%/year increases oil consumption by about 1% – 2%/year, although this relationship varies over time.
- Technological progress improving efficiency of energy use (e.g., hybrid cars) and production. Possible new energy sources include cellulosic ethanol, coal to liquids, gas to liquids, solar, fusion, kerogen (AKA “oil shale”).
- Rate of adoption of new technology, which depends on many factors but especially government incentives and the cost of oil.
- Growth of production from new conventional oil fields (e.g., Iraq).
- Decrease in production from mature (post-peak) fields. Ten years ago 3% was a typical assumption, based on history of US (e.g., Texas) fields. Today many large fields (e.g., UK’s North Sea, Mexico’s Cantarell) have decline rates in the low teens.
- Growth of production from unconventional sources of liquid fuels, such as Venezuela’s heavy oil, Alberta’s bitumen (aka “oil sands), deep-sea oil, Artic natural gas, and biofuels.
Factor II: Known Knowns — known to some, but not by us.
The above “known unknowns” are dwarfed in importance by these State secrets of the major oil exporting nations:
- When will production peak at the great Middle Eastern fields, especially Great Burgan (Kuwait) and Ghawar (Saudi Arabia)?
- How much can production increase at the giant fields of the Former Soviet Union (FSU), and how long can it be maintained at such levels?
Typical of the debate about these secrets is the book Twilight in the Desert, written by Matthew Simmons (2006). He reveals a fragmentary but intriguing mosaic of data suggesting that Ghawar’s production will peak soon. On that day world production also peaks. It is good work by an amateur expert. Unfortunately an investment banker – even from Texas – is not the best authority for information on such a momentous question.To follow-up Simmons’ insights urgently requires work by a team of well-funded professionals. The nature of our crisis is seen by the fact that no such effort has been started – or even publicly discussed by American decision-makers. All we have is lots of guessing and “back of the envelope calculations” by both sides of the debate.
The elephant is great and powerful, but prefers to be blind.
— David Halberstam, The Best and the Brightest (1972)
The owners of these fields have the data we lack. The Gulf sheiks and FSU governments can make reliable forecasts (plus or minus a few years) – while we can only guess.
Simmons calls for “transparency.” Oil exporters should share information about their oil reserves, since we are all in this together. The major oil-rich nations see things differently. Rather than all singing together, they see us playing poker together. Rather than showing us their cards, their official response is “trust us, we have lots of oil.”
See both sides of the debate by reading both presentations at the seminar “The Future of Saudi Arabia’s Global Oil Supply” held by the Center for Strategic and International Studies (CSIS) on 24 February 2004.
What do the KGB and CIA know?
History shows that secrets sometimes can be kept from the public for decades. For example, the public learned of the WWII allied code-breaking program ULTRA only in 1974 – an impressive accomplishment considering the hundreds of people involved in producing and disseminating this information. But keeping such secrets from intelligence services is far more difficult.
The Gulf states hire geologists and engineers to run their oil industry, a large fraction of who come from western nations. Over the past 20 years that adds up to thousands of people who have learned key data about the world’s great oil fields; many of them probably know their estimated peaking dates.
Have the CIA and KGB obtained these secrets over the past twenty years, or even penetrated senior levels of the Gulf’s national oil companies and governments?
Inductive Reasoning – are these secrets the foundation of US energy policy?
The US government might have good forecasts about the peaking of global oil production, but has not shared this information with us. Can we infer the answer through inductive reasoning? Consider the three possible scenarios.
Scenario #1: global oil production will peak soon, probably before 2017.
The Department of Energy commissioned a team of top experts, lead by Robert Hirsch, to determine the requirements for America’s adaptation to peak oil and how long it will take. The report’s (PDF) conclusion: at least 20 years. So if the CIA determined that we have only half that time – or less – than our Executive and Congressional leaders would have initiated crash programs to conserve energy and develop new sources.
Today America has no crash energy programs. We barely have any energy policies. Can we therefore conclude that the CIA has NOT determined that Peak Oil is imminent? Not quite.
Scenario #2: global oil production will peak only after 2017
Peaking more than ten years in the future – almost three election cycles – might seem too distant for immediate political action, especially considering the fallibility of long-range forecasts. In this scenario we would expect weak government energy policy, especially vs. other competing threat scenarios – such as global climate change and the War on Terror.
This fits actual government policy quite well.
Scenario #3: gross negligence by either our intelligence agencies or leaders
There is one more scenario. Evidence might show that one or more of the major Middle Eastern oil fields will peak soon, but…
- Our intelligence agencies might not have learned this – or even be looking for this data.
- They might not recognize its significance, or reported it to senior government officials.
- Our senior governmental leaders might have this data, but through incompetence not yet acted on it.
Scenario #1 is alarming, #2 is comforting, and #3 is terrifying. If #3 is correct, key aspects of our government are deeply dysfunctional. Failure to adapt to peak oil, whenever it occurs, might be the least of our problems.
Conclusions
Draw your own conclusions. This is a speculative analysis, and only time will tell the truth.
Please email me at fabmaximus @ hotmail.com if you have any relevant data or analysis – and say if I can share it with others in a future report.
By the way, geological peaking of oil production is only one aspect of the Peak Oil problem. And perhaps not the most likely or the most pressing aspect of Peak Oil.
Please share your comments by posting below (brief and relevant, please), or email me at fabmaximus at hotmail dot com (note the spam-protected spelling).
For more information about Peak Oil
- The most dangerous form of Peak Oil (8 April 2008)
- The world changed last week, with no headlines to mark the news (25 April 2008)
- Peak Oil Doomsters debunked, end of civilization called off (8 May 2008)
Here is an archive of my articles about Peak Oil.
Here are other resources about Peak Oil.
this is a bunch of huey!!! i work in an industry that spends hundreds of millions of dollars researching this stuff and can say with certainty that in two oil deposits alone that have just been found, only one is just beginning to be tapped into, there is enough oil to supply the world for over 200 years. thats just two deposits!!! there is much more out there yet!!
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Fabius Maximus replies: That is nice news. Unfortunately your forecasts are contradicted by every major source of which I am aware. IEA, EIA, the major oil industry consultants (even CERA is not that optimistic). If you are speaking of unconventional sources (e.g., bitumen, shale, heavy oil) the issue is not the resource size, but the feasible rate of production. For example, Alberta has vast fields of bitumen (aka oil sands), but by 2020 will at best be producing 5 million b/day (probably optimistic, considering the water and energy required to do so exceeds available sources– and the environmental impacts would be horrific). That will not even offset the decreased production of current N. American fields, let alone provide for growth.
Currently, all sources I can consult show that the oil peak is … now, which is terrific. The oil peak is predicted to be within the range 2005-2020 and most probably 2005-2010. The main problem being that with not enough information, it is difficult to know the peak is now. This is really terrific because if it is the case we only now we were in the peak in 2005-2010 in 2010-2015. This is too late to act with efficiency.
The only thing to do now is to act as if the peak is now. Later, the cost to adapt the world to peak oil will be much more high.
I don’t know what is done in the US to reduce oil consumption. Here in Europe, government are offering money to produce electricity using wind turbine, solar cells and solar water heater for personal use as well as for industrial use. The cars in Europe have environmental constrains equivalent and stronger than those used in California.
If you analyze the history of IEA predictions for peak oil since ten years you will see the peak oil is predicted to occur each time sooner. Furthermore, they assume Saudi Arabia to be 22 million barrels per day in 2030. However their production is decreasing since several years.
I believe the Scenario #3 is the real reason US invaded Iraq in 2003.
There are actually 3 peaks (not 2 as I have argued in the past):
(1) Peak quality oil – ie ‘sweet” low sulpher light oil. Preffered by the refinaries as it is easy to convert to petrol, etc.
(2) Peak Exportable Oil – That is the net oil available for export after domestic consumption in oil producing countries. Calld ther “Export Land Model” by the Oil Drum people.
(3) Geologic peak. When we hit the 50% level of reserve consumption and after that production declines no matter what you do.
Now I must admit to drawing on the Oil Drum people (http://www.theoildrum.com/) since they have produced some amazing work, plus the usual sources (BP report, etc).
Now where are we now, IMHO:
(1) ‘Good’ oil peaked a few years ago. Refinaries are increasingly using mixes of oil, rather than just the pure stuff.
(2) Exportable oil is peaking now. The gap between consumption and production means that exportable oil is now flat even if production increases (as it has been, albeit at ever slower rates)
(3) 2010-2015 for all oil. Based on the Wikipedia Oil Megaproject Database (http://en.wikipedia.org/wiki/Oil_megaprojects). Note that its projection means that oil production in 2020 will be the same or lower than 1990. Which given the higher population, domestic consumption by oil producers, etc, is going to be … interesting .. in the agonising sense for oil consumers.
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Fabius Maximus replies: TOD is an interesting source, but read uncritically one absorbs all sorts of nonsense. The oil industry literature has discussed peaking of conventional oil, based on the extraction methods required.
I think by “good” or “quality” oil you are refering to a trivial problem, the mismatch between oil supply and global mix of refining capacity (measured by complexity scores). There are massive refinery expansions in progress not that will probably fix this.
Exportable oil refers to another temporary problem, oil exporters subsidies of domestic consumption. They can end these as the gap between global and local prices increases — making the subsides more expensive. Note this is a problem as well in many consuming nations, and they are already phasing these out.
There is insufficient data to estimate oil peaking. The numbers you confidently give are just inspired guesses. The Oil Megaprojects database on widipedia is an interesting concept, but I here from industry sources it remains of less quality than the original Petroleum Review work by Chris S or the various ones done by Wall Street firms. In any case, there only give a roughly 5 year window into oil production from new fields.
Finally, none of this touches upon the central question: the ability and willingness of Middle East nations to expand production. They hold most of the cards. As I have written, the Saudi’s appear have decided not to expand production capacity beyond the projects already in motion — political peaking. This may account for the flat global production since 2005. Note this has apparently not harmed global growth; in 2008 real gdp will probably rise over 4% — a total surprise to folks relying on the confident forecasts of doom on TOD.
Also political peaking, while painful in the short-term, delays the date at which global production declines. That is, it forces an early adaptation to peak oil — and provides more time to prepare for its eventual production decline.
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There are two forms of peak oil. The most obvious is when global production eventually peaks, followed by a decline. The other peak is based on world population. That peak oil is when oil production per capita peaks, then falls off. They should be close together, but are different. If you kept production constant for the next 100 years, then double the population, then you would have the peak per capita production initally at double the final rate. That would be peak oil for you, me and everyone else, but not for the planet. As long as population grows, the per capita peak will preceed the absolute peak. Watch for it.
The $100 a barrel oil has caused the American consumption to fall off. That is what high prices associated with limited production does. Thus, the USA has passed peak oil on an absolute basis about 1970, and peak oil on a per capita basis recently with imports delaying it. The price of crude in the USA was $9.67 a barrel on January of 1999. How soon we forget. If it were priced below $20 again, would consumption soar again?
Steve,
The definition of peak oil has been a standard in the energy literature since Hubbard made his initial presentation on it in 1956. It is stated in terms of production, not consumption.
By the standard definition, US oil production peaked aprox 1971.
Global oil consumption is a relevant factor in the supply-demand equation. It’s role varies over time vs other factors such as excess available production, inventories, investment levels, and the cost to produce an addition (marginal, incremental) barrel of oil.
Demand destruction by high prices becomes dominant once current production is at the maximum available. As in the early 1970s, and Spring 2008.
Today there the Saudi Princes probably have substantial excess production, which they reserve to keep prices at their desired level. This might become more difficult if global growth remains stable while new deposits from tight rocks (e.g., shale) are opened.
In brief, the widespread statements that petroleum production had peaked in 2005 have been proven false. As have the wider range of forecasts of peaking by 2013.
The attempts of peak oil activists to admit the failure of their highly confident predictions is quite sad, and warrants their sidelining from the public policy debates about energy.
The lay climate activists might be following down this path, to be discredited if the longer forecasts of the pause are correct (i.e., ending in 2020 or beyond).
It’s the boy who cried wolf story. On the other hand, in that story the wolf eventually appeared. The boy was among those responsible for the ugly result, as his unwarranted false alarms short-circuited the community’s defensive instincts.
Steve,
My comment was a summary of the situation — more detail from a post — elaborating on yours.
Forgot to state that in the intro.
What oil consumption would’ve at $20 oil is not really relevant, since that would require some sort of massive change of conditions. Force example, cheap fusion power and much better batteries might reduce both oil price AND oil consumption.