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Reasons Not To Be Concerned About Peak Oil

Here are the reasons I have read why the peak oil alarmists have it all wrong and that peak oil isn't a significant concern.

We've heard all this before.

The argument. From the beginning of the oil age right up until today, alarmists have complained about the "world's dwindling oil supply." this isn't the first time people have complained that we're "running out of oil." It's more like the fifth time. Yet here we are, continuing to enjoy the wonderful benefits of an oil economy. It's time for the alarmists to admit they're wrong. The sky hasn't fallen yet, and it's not going to fall. Let's move on.

Refutation. There's something to this. There has been a persistent drumbeat of pessimism, perhaps even alarmist pessimism, about the world's oil supply, and it's safe to conclude in hindsight that all those shrill warnings (that turned out to be false to one degree or another) have made it more difficult for people to believe cheap oil will ever end. The fact that the boy cried wolf and the wolf didn't come makes the boy less credible; however, even in the fable, the wolf did come after all.

I know of no one credible who has said the world is "running out of oil." What I have heard, and what I believe, is that we are about to exhaust the supply of cheap oil, that the world's oil supply is about to begin declining,  and that this declining supply will combine with a growing world demand to drive up the price of oil to levels at which it will disrupt the world economy.

There is plenty of oil still available.

The argument. The US Geological Survey has estimated that the world has consumed only 1/3 of a total of 3 trillion barrels of conventional oil, so by implication there's still more than enough oil to last as long as we need it. Present high oil prices are merely a temporary phenomenon that will disappear when increased production comes on line.

The state-owned Saudi Aramco makes an even stronger statement, that the total conventional oil reserves are 5.7 trillion barrels, meaning the world has produced less than 1/5 of the total. That means there's enough oil still in the ground to last more than 100 years. Pulitzer Prize winner Daniel Yergin says to expect the world's oil supply to increase by 16 million barrels per day between 2004 and 2010. So by 2010 we should expect the world oil extraction rate to be about 101 million barrels of oil per day.

Refutation. The size and quality of existing oil reserves is maddeningly difficult to ascertain, because most of the information needed is in the hands of key producers who operate behind a thick veil of secrecy. The sad reality is that when it comes to this most strategic of questions confronting our world economy, nobody really knows. Read more about world oil reserves.

If you want an easy and quick way to gauge the accuracy of the peak oil theory, Yergin's prediction is a great test. Yergin is a respected and well-informed intellect. He made that statement in July of 2005, and so far, it's too soon to tell whether he's right. If the world extraction rate increases above 90 million barrels per day within a few years, you will know that the peak oil alarmists have jumped the gun and that the boy has cried wolf yet again. If the world extraction rate remains stubbornly below 90 million barrels per day or actually begins to fall, you'll know the peak oil alarmists were on to something, that we humans have our work cut out for us, and that we better get busy.

And whenever you read about the world's "vast remaining oil supply," remember a simple formula: ERoEI.

We humans are ingenious; somebody will figure out a way to make oil exploration and extraction more efficient.

The argument. The oil's there; we just need to build a better mousetrap to go find it. That's what we do best. And our efforts are already bearing fruit. For example, Enhanced Oil Recovery has allowed us to extend the life of wells we thought would be bone dry by now.

Refutation. Yes, oil exploration and extraction are becoming more efficient. We drill fewer dry holes today than in the early days of oil exploration, and we can inject gas and water into wells to force the last drops of oil up so we can recover them. The primary utility of these processes, however, is near the end of a well's useful life, what we can loosely call "squeezing the tail." They won't affect the arrival of the well's extraction peak or the world extraction peak, Remember, that's a function of geology. Yes, we will see continued improvements in technology and efficiency. But those improvements will be small and on the margins, and they're already reflected in the reserve calculations. No, technology won't materially affect the supply of conventional oil.

The law of supply and demand cannot be repealed; as the price of oil increases, we will go find more.

The argument. The peak oil alarmists would be right except for one thing; they act as if there is no law of supply and demand. Oil production is price sensitive, and so is demand for oil. As the price goes up for oil, we will discover and produce more, and people will buy less. There's no crisis; the markets are simply doing their job.

Refutation. First, I don't shy away from the term. I believe oil extraction is at or near peak, I am indeed alarmed about it, and I believe you should be alarmed as well, so I'm not embarrassed to be labeled a "peak oil alarmist." I know of no peak oil alarmist who believes that the law of supply and demand is not applicable to the extraction and consumption of oil, and to argue that one does is to erect a straw man in hopes of avoiding the real questions with which we must wrestle together.

The price of oil is at about $60 per barrel as I write this, and the incentive is there for oil producers to knock the rust off their rigs and get busy. But with the exception of isolated patches in the middle east and elsewhere, there's remarkably little new exploration going on. One can guess at the reason, but I believe it's because the price of oil still isn't high enough to encourage producers to undertake what they know from experience is likely to be a futile search. And yes, maybe when oil is $120 per barrel, they will have that incentive, but history tells us the oil they find will be the kind that won't make a huge difference in the overall world oil supply, the kind that is deeper, dirtier, in less hospitable climates, and more costly to extract. And at $120 per barrel, I believe we will already be seeing the kinds of disruptions in the economy that have us peak oil alarmists worried.

And while we're talking about supply and demand, let's take a quick look at the demand side. The price of oil has roughly tripled during the last 7-8 years (from $20 or so per barrel to $60 as I write this), but the world's demand for petroleum continues to increase. Sure, some consumers may be taking steps to reduce their energy use, but what matters is the world's consumption of oil, which shows every sign of continuing to grow despite the higher prices of oil. The continued increases in demand in the face of sharply higher prices reveal that demand for petroleum is relatively inelastic, probably because there's just no reasonable substitute for oil and gas.

Once we figure out a way to deal with the nuclear waste, nuclear energy will be the answer.

The argument. Nuclear energy will save us from major disruption due to peak oil. It will produce vast quantities of electricity at affordable prices, using cheap and plentiful uranium. As a bonus, nuclear energy produces no greenhouse gases. All we need to do is to find a reasonable and safe way to dispose of spent nuclear fuel, and we will be in good shape. And even if the cost of uranium were to increase, it wouldn't increase the cost of the resulting power that much, because the cost of the fissionable material makes up such a small portion of the cost of nuclear-generated electricity.

Refutation. For most of my life, I have feared nuclear energy and opposed its development. Now I find myself reluctantly admitting that we have little choice but to use nuclear power as a stopgap. That's not because I see it as a great alternative, just the best intermediate term alternative. Let's be honest, however, about the limitations of nuclear energy:

The basic problem is that we don't have enough smart people focused on this yet. Once smart people become aware of the problem, they'll come up with a solution.

The argument. This is about more than better oil exploration. It's about thinking really big, like maybe a whole new source of energy. How about the hydrogen economy? Let's think about new ways of living together that use less power.

Refutation. I couldn't agree more. Far too much of our brainpower is focused now on the latest celebrity marriage or divorce and on which team will win this weekend. We do need to focus our efforts on solving the problems that peak oil will bring on. So let's get busy. And let's not delude ourselves that we can solve the world's energy problems with a goofy idea like the hydrogen economy.

In all likelihood, the most productive steps we can take are focused on learning to live in a peaceful and healthy way while consuming drastically lower levels of energy. Read more about the steps we can take.

You're right, we are running out of oil; we won't really solve this problem until we get serious about solar and wind energy.

The argument. It's high time we began to develop renewable energy sources like solar, wind, geothermal, and tidal. Although none of these alone is enough to replace petroleum, together they can allow us to continue to thrive.

Refutation. By all means, let's develop these renewable energy sources. And let's immediately move to encourage individuals to incorporate them in their homes by requiring every electric utility to allow net metering. But let's be honest with ourselves that these renewable energy sources produce a tiny fraction of the power that we generate with petroleum now. We still need to change the way we live so we can live peacefully and comfortably while using drastically lower quantities of energy. Journalist Richard Heinberg puts it best: he likens fossil fuels - cheap oil and gas - as a massive inheritance that we have spent unwisely, and he likens their logical successors - solar, wind, geothermal, and tidal - as a hard-won living wage.

Thank goodness for peak oil, which will solve global warming once and for all.

The argument. We can't bring ourselves to lower our generation of greenhouse gases, even though everybody but Michael Crichton has figured out that we are contributing to our own destruction. This insanity won't stop until we just run out of oil and gas, so bring it on. It's our only hope for survival.

Refutation. Would that it were that simple. If we continue to live by looking only at the short term, we'll try to replace petroleum with coal, which generates much higher levels of carbon dioxide and a smorgasbord of other nasty chemicals like sulfur oxides, nitrogen oxides, particulates, and even high levels of radioactivity. We can't depend on peak oil to address global warming; that's going to take a coalition of nations that are willing to reign in rogue nations like the U.S. and China and force lower levels of CO2 emissions.

What's more, the effects of global warming will make it harder for us to cope with the effects of peak oil. Just as sea levels rise and begin displacing people who live by oceans, and as higher ocean temperatures make storms more frequent and more intense, we will confront a shortage of the energy needed to ameliorate the effects of these disruptions. It's not a pretty picture.