Peak Oil: A Breakdown
Supply, Demand and Oil Prices
Supply influences price, which in turn influences demand—the less there is of something, the more it costs, which then reduces the demand for that thing. Price also influences supply, both directly—by encouraging more people to get in the business of supplying that thing—and indirectly—by encouraging the development of new technology that stretches supply.
A recent example is what happened with gasoline in the United States in late 2008:
- the increase in gasoline prices caused people to drive less
- the price increase caused sales of hybrid and fuel-efficient cars to increase (though that reversed itself when prices fell again)
Is There a Consensus Opinion?
No, though the U.S. Department of Energy predicts that world conventional oil production will most likely peak in 2037 and then decline.
The DOE believes this prediction is fairly conservative, and it’s on the lower end of a range of “peak dates” (which vary by the exact assumptions made about oil reserves and consumption) that the department believes are credible, ranging from 2021 to 2112.
Of course, even though the DOE feels that its estimate is conservative, some people feel it’s overly optimistic. Simmons, for example, thinks world oil production peaked in 2005 or 2006.
(image: eia.doe.gov)
Of course, despite Simmons’s own admission that you only know the peak when looking backwards, he’s assuming that the only cause of a recent flattening of production is the dreaded peak, instead of it possibly being due to some or all of the following:
- Political actions, such as Venezuela’s nationalizing private production
- Economic decisions, such as when OPEC nations reduce production to support oil prices
- Natural disasters, such as Hurricane Katrina or Hurricane Ike
What’s the bottom line? We don’t know for sure, though the DOE’s prediction of a 2037 peak hangs together with our earlier, back-of-the-envelope calculation that if nothing changes, we’d expect to run out of conventional reserves—the easy-to-find, cheap-to-use oil—in another forty-plus years, or around 2050.
Soft Landing vs. Hard Crash
The really big question is, “What does a peak and decline in oil production mean?” As with the debate over the whether and when of the peak, there’s no agreement on what will happen next. Depending on your assumptions about human nature, society, and technology, predictions run the gamut from:
- A Malthusian crisis in which society collapses. People go cold and hungry, until they start eating each other and burning books for warmth. Think Mad Max, but less cheerful.(If you want to read some of the most dire predictions, try lifeaftertheoilcrash.net, dieoff.org, or the work of Jim Kunstler.)
- A long-lasting global recession, in which society goes on, but economic opportunity and security are limited. It’s a stable but somewhat bleak and dystopian future. Think Blade Runner, but without Daryl Hannah as Pris.
- Nothing much—as the price of oil rises, it encourages a combination of conservation, discovery of new fields, technological advances that make unconventional oil practical, and development of new energy sources. We meet the challenge, rise to it, and master it. Think Star Trek—no warp drive or transporters yet, but a sort of forward-looking, can-do world.
This last notion—that peak oil will happen, but will be more of a hiccup than a heart attack—is based on the idea that as a resource becomes scarce, technological advances and behavioral changes accommodate the scarcity. It’s based in part on the work of economist Robert Solow and his theory of “back-up resources”—that when one resource runs out, society finds another. It may also have precedent: some people believe the West already met and conquered its first energy crises in the late 1500s. Wood had been the fuel of choice through the 1500s; however, as England’s population grew, the island nation started facing a “peak tree” problem. Large parts of England were becoming deforested, and the price of wood was soaring. Did England’s economy come crashing down? No—England began using coal, which not only averted a “wood crisis” but also made possible the Industrial Revolution.
The idea is that what happened before will happen again, and the world will navigate an oil shortage the same way. That’s not to say there’s no need to worry, or that that we shouldn’t conserve resources while investing in alternate or unconventional fuel technology, but it does suggest that there’s no need to figure out which neighbor you’ll eat first when civilization collapses from oil starvation.
Dept of Energy Acknowledges Possibility of Peak Oil Production After 2011 | HeatingOil.com says: says:
[...] Glen Sweetnam’s new uncertainty and the above graph from the DOE show that the Department takes seriously the possibility of peak oil, the lack of outright confirmation of the coming decline it predicts likely follows from the line [...]
UK Scientists Say World Oil Reserves Are “Exaggerated” | HeatingOil.com says: says:
[...] that compile statistics on oil and energy, reported the Daily Telegraph of London. The researchers warned that organizations like the International Energy Agency (IEA) and the Energy Information Admi… that OPEC’s estimates are misleading, and could be failing to prepare governments for the oil [...]
Kuwaiti Researchers Predict Peak Oil Production in 2014 | HeatingOil.com says: says:
[...] study began with the Hubbert forecast model, named for peak oil pioneer M. King Hubbert, who successfully predicted that crude oil production in the US would peak in 1970. Though proven to be a useful tool in predicting peak oil, the Hubbert model has limitations when [...]
Richard Branson Pours Fuel on a Fiery Debate with Prediction of Peak Oil in 5 Years | HeatingOil.com says: says:
[...] always-controversial peak oil theory states that global crude oil production will eventually reach (or has already passed) its [...]
BP Economist, Arab Oil Producers Say No Peak Oil Any Time Soon | HeatingOil.com says: says:
[...] article in Emirates Business 24/7 this week announced new studies and figures aimed at proving that claims about peak oil are “exaggerated.” This latest round in the high-stakes game between oil producers and [...]
Peak Oil Task Force Helps Kentucky Town Prepare for its Future | HeatingOil.com says: says:
[...] would do if global oil supplies were to dry up (and the world was to reach what’s dubbed “peak oil”), or the price of crude was to spike significantly, city officials last year created the [...]
Brazil Set to Become Latin America’s Biggest Oil and Gas Producer by 2011 | HeatingOil.com says: says:
[...] in the world of oil production, there is no standing still: to stand still is to fall behind. All wells and fields experience a reduction in output over time as more readily accessible reserves are drawn down. Exacerbating that is that the infrastructure of [...]
Canada’s GV Energy to Produce Little-Known Biodiesel | HeatingOil.com says: says:
[...] Although DME is not widely known in North America, stricter U.S. greenhouse gas emissions standards may boost its popularity. GV Energy CEO Eric Switzer told the CBC that even though DME might never completely replace fossil fuels, if the world has reached peak oil production as many believe, it could comprise a viable solution. [...]
Physicist Aleklett Says Peak Oil Led to Dubai Crisis | HeatingOil.com says: says:
[...] many attractions are meant to be enjoyed by people who would travel to Dubai by air. In light of peak oil, a phenomenon Aleklett wholeheartedly believes in, aviation will not be able to expand in the [...]
IHS CERA Says Peak Oil Won’t Happen Until 2030 | HeatingOil.com says: says:
[...] debate over peak oil rages on. The New York Times’ Green Inc. blog discussed Tuesday the latest report from IHS [...]
Schork: Oil Prices Inflated but Could Keep Rising; Peak Oil is Political Phenomenon | HeatingOil.com says: says:
[...] one of his simplest, most made-for-controversy remarks: when asked about peak oil, Schork replied, “I don’t believe in it at all.” Not believe in peak oil? Does Schork believe [...]
Oil Expert Maugeri: 21st Century Will See Increased Crude Oil Supplies | HeatingOil.com says: says:
[...] theory of peak oil, developed in the 1950s by Dr. M. King Hubbert, a geoscientist at the Shell Corporation, can be [...]
UK Study: We’re Not Ready for Peak Oil | HeatingOil.com says: says:
[...] HeatingOil.com reported this summer, peak oil refers to when global oil production reaches its max, and we’ve essentially accessed all the oil [...]
CEO of Saudi Aramco: Oil Demand Will Rise, But Not Soon | HeatingOil.com says: says:
[...] about the long-term prognosis? When asked about the threat of running out of oil, as predicted by peak oil theory, Al-Falih said, “oil will be with us not for decades, but for generations to come. . . . [...]
Profile of an Oil Producer: Libya | HeatingOil.com says: says:
[...] Peak Oil: A BreakdownCFTC Report Will Blame Speculators for Oil Price Spike, New Regulations LikelyBiofuel Heating OilCFTC Announces Plans for Tighter Controls on Speculation; Heating Oil Prices Could be Affected DIY Home Energy Conservation Projects that Will Save You Big Bucks [...]
Oil Experts Hansen and Cota Talk Prices on Vermont Public Radio | HeatingOil.com says: says:
[...] reflects expectations of a future in which world demand for oil increases while supplies decrease (the peak oil scenario). The demand for oil, Hansen said, also closely follows the path of the world’s economy as [...]
Wash. DC-Based Environ Pioneers Process to Extract Fuel from Plastic Waste | HeatingOil.com says: says:
[...] waste plastic sitting in landfills. Turning that sows ear into a silk purse could help stave off peak oil and make a hefty [...]
Energy Analyst Kopits Says Oil Prices Could Keep US in Recession | HeatingOil.com says: says:
[...] Kopits is a strong believer in the global peak oil theory, which holds that worldwide oil production will peak sometime in the next 10 to 100 years, as oil becomes more scarce, reducing supply and increasing cost. Peak oil implies that we need to reduce our dependence on oil because we could eventually run out of the stuff. [...]
When Green Energy is Blue Energy: Power From the Sea | HeatingOil.com says: says:
[...] CFTC Report Will Blame Speculators for Oil Price Spike, New Regulations LikelyBiofuel Heating OilCFTC Announces Plans for Tighter Controls on Speculation; Heating Oil Prices Could be Affected DIY Home Energy Conservation Projects that Will Save You Big Bucks Peak Oil: A Breakdown [...]
Dismal Sciences « The Clever Use of Flags says: says:
[...] this conclusion from “Peak Oil: A Breakdown”: This last notion—that peak oil will happen, but will be more of a hiccup than a heart [...]
Energy Analyst: Peak Oil is a Foolish Fear | HeatingOil.com says: says:
[...] days, the theory of global peak oil is generally accepted as fact. Geologists (remember Hubbert?) say we have a finite amount of fossil [...]
EIA: Peak Oil and Resulting Crude and Heating Oil Price Spikes 10 Years Away | HeatingOil.com says: says:
[...] term “peak oil” refers to a time in the future when crude oil essentially maxes out and production be…. Most geologists and economists today generally believe that peak oil is real, but some do not. [...]
Opinion: Stats Show That Peak Oil Has Come and Gone | HeatingOil.com says: says:
[...] Is it possible to “max out” the amount of oil we can produce per day? And, if so, have we reached that point? There is evidence that the answer is “yes” to both of these questions. In the 1950s and 60s, prominent geologist Dr. M. King Hubbert developed the “Peak Oil” theory. The Peak Oil theory states that once the most easily available portion of a resource is reached, production has reached its peak, and then production will begin to slow. More details about the Peak Oil theory can be found in this HeatingOil.com article. [...]
Visions of a World Without Oil | HeatingOil.com says: says:
[...] what happens when oil gets scarce? One day it will, though people do disagree on when that will be. Not surprisingly, some people have spent A LOT [...]