How Much Of A Threat Is Peak Oil?

With oil prices falling precipitously, this seems like a good time to reassess the widely anticipated phenomenon known as peak oil. How much of a threat is it as we look into the future?

There are basically two camps about the peak of global oil production.

• Cornucopians — Not only is the glass half-full, it is brimming over. There is no threat whatsoever to industrial civilizations. The Stone Age didn't end because we ran out of stones.

• Doomers — The glass is half-empty and we're draining it fast. Industrial civilizations are going to collapse soon because there won't be enough oil to go around. A new Stone Age is right around the corner.

Both these "schools of thought" are wildly incorrect. It's not an accident that this kind of dichotomy exists. It's not an accident that these opposed views closely resemble the political squabbles so prevalent in the United States today. You know, Progressives versus Conservatives ... blah, blah, blah. These are emotionally-based positions which have little to do with Reality. Naturally there are many more Cornucopians than there are Doomers because mindless optimism is the default human position (mistake) in all matters, not just oil.

I can demolish both positions in two sentences.

• Cornucopians do not know how to subtract.

• Doomers do not know how to add.

Of course when I say these people don't know how to add or subtract, I am describing the psychological requirements of these groups. Cornucopians can not acknowledge that oil fields peak and decline, and that global oil production might do the same. Doomers can not acknowledge that technology, exploration and wars in Iraq bring new resources on-stream. By and large, members of both groups know jack shit about the global oil industry.

Every other week, I describe some aspect of the upstream oil industry in my Saturday Oil Report. (The latest one was published yesterday.) Few people read these reports or learn anything from them because they already know in advance, unencumbered by data and its reasonable interpretation, what the peak oil outcome is going to be. (Some people do read these reports and learn from them, for which I am grateful.)

With respect to oil, as in all human politics, people fall into opposed camps. Their irrational beliefs about peak oil (or anything else) maintain group membership and coherence, and bolster their pre-conceived (but unconscious) psychological preferences. They are not trying to align their beliefs with Reality—that's not what people do. See my recent post Homo Sapiens — The Storytelling Animal. In short, Cornucopians or Doomers have got a story and they're sticking to it. Nobody reading this thinks people are rational problem-solvers, right?

What's the real deal with peak oil? First, there's this very important graph.

World Crude Oil Production, data from the EIA. Crude oil only. No biofuels, no natural gas liquids. See my post A Peak Oil Update.

How long might this plateau in oil production be maintained? For Cornucopians, the answer is not as long as you think. For Doomers, the answer is longer than you think. At least 5 years, perhaps 10, or even 15 (a very outside chance).

Of course this is merely a supply graph. Who knows what global demand will look like. Right now, it doesn't look like demand will be robust, and that could remain true for many years to come. If we're falling into a prolonged global recession, OPEC will cut their production. (You can see the supply dip in 2009.) The world will never produce 76 million barrels of oil each and every day for a prolonged period of time. Probably 76 million daily barrels is a pipedream.

Without getting into the details, what can we conclude about peak oil going forward? You don't have to be a rocket scientist to understand that—

1. Oil will never be cheap again. Even if demand falls off a cliff, producers require high prices to get new oil onstream to replace production declines. If demand is robust because the world economy is booming, as unlikely as that sounds right now, oil will get very expensive again in a hurry.

2. Industrial civilizations are not going to go out of business because oil is very expensive during the boom times and pricey (but not exorbitantly expensive) during the lulls. Peak oil acts more like a brake (one of many) on global economic growth when times are good. As usual, we'll know more in 10 years than we know right now.

I don't worry much about the disasters I write about. The writing is on the wall as far as I'm concerned. But if I were to worry about all these human disasters, where would I rank the threat of peak oil? I don't know. It's certainly a concern, and I do write about it, but I write about lots of stuff. Certainly the  longer term is fraught with difficulty if humans are depending on crude oil to fuel economic growth in the 21st century as it did in the 20th.

I was careful not to name names today. I did that intentionally. The people who can understand what I said today will understand it. The ones who can't won't. These latter are likely to be Doomers or Cornucopians. If I did name names, people would go off on me because I'm clearly fucking with their with emotions, their irrational beliefs, their heros, and finally their group and individual identities. So I didn't name names because I don't like getting hate mail or emotion-laden malicious comments.

As usual I leave it up to you to figure out whether what I said today makes sense. You will see that it makes sense or you won't according to your abilities as just described.

Later.

Comments

[T E Cho]

Perhaps some other issues to rank peak oil against...

-peak health, the US passed that long ago
-peak nutrition in average food purchased, again peaked long ago
-peak leisure hours, passed
-peak civic involvement or socialization, passed long ago
-peak family stability, passed
-peak education?
-peak consumption of the 'arts', passed, depending on reasonable definition of the arts
-peak education affordability, passed
-peak savings rate, passed
-peak R&D spending?

... Probably some other good ones missed, but many peaks are passed ...

[Wanooski]

http://www.desdemonadespair.net/2012/06/chinese-data-mask-depth-of-slowdown.html China's definitely starting to sputter.

[Bill Hicks]

I was in the "doomer" camp back in 2008 when I first became peak oil aware. Back then, prices soared so quickly to such unprecedented heights that it really did seem like things could unravel in a hurry. Four years later, it should be plainly obvious that oil production, especially total liquids, is going to stay in the plateau zone for a long time yet and that TPTB successfully staved off the "fast crash" of the financial system with massive bailouts and quantitative easing.

Where would I rank peak oil as a threat? Right there with climate change (and pollution), peak phosphorous and peak fish and overpopulation as the leading (but not the only) factors all converging to deliver the knockout punch to our industrial civilization by around the mid-21st century.

[T E Cho]

Guys,

This is interesting... RBS bank problems for 5 DAYS now, people can t get their money out, pay bills, etc...

A bank glitch... 5 days???

They have a fee-toll number to call, but difficult to get thru ... On the BBC

http://www.guardian.co.uk/business/2012/jun/24/rbs-natwest-ulster-computer-glitch?newsfeed=true

...

[Joy]

As you know, Jeffrey Brown has pointed out that even an extended plateau of oil production is still an unfortunate scenario for the formerly industrial nations of the west, as oil exporters are consuming more of their own production every year, leaving less net exports for the net importing nations to bid on every year. Not Mad Max, but frivolous mass motoring in the OECD has become a thing of the past. To Joe Bob, who can't put gas in his Chevy to drive to the Auburn game, it might feel like doom.

[Lew Stewell]

Shit. I get called a doomer for discussing exactly what you've outlined here.

[Randy]

I doubt that humanity will ever run out of oil, what we are running out of is the means to finance the production of difficult oil in the years ahead. There may be lots of oil, but if your unemployed and can't find work, it doesn't much matter to you what it costs as you won't be able to afford it at any price. I think Nicole Foss of The Automatic Earth will be right on this call.

[C. Paul Davis]

June 23, 2012

Dave Cohen:

An Excellent piece of writing. You helped to bring some clarity where it is badly needed.

Over the past seven years I have studied Peak Oil and I have written over 40 articles of which 12 have been published.

I have just finished my last article called, "Peak Oil - True or False".

I have also been involved with the development of a unique "Peak Oil Calculator Spreadsheet" that allows a person to enter 12 variables, so that they can determine for themselves when Peak Oil will happen.

Please contact me (C. Paul Davis) by e-mail at
"pdavis@titanoilrecovery.com" and I'll send you a copy of both documents.

Hoping to hear back from you.

Again, an excellent article that was badly needed.

Sincerely,

Paul

[Raintonite]

Nail meet hammer. You nailed it. Just take verifiable data and draw conclusions from it. The conclusions may appear almost banal but when you add in the simian dimension the ramifications are profound. Sensationalism is infantalism.

As an emergingly aware individual, I've stopped trying to persuade others to become aware or change. If they're unaware, screw'em. If they're aware but waiting for the second coming, screw'em. If they're aware and willing to lie to create sensationalism for the cause, screw'em.

The day I fear most is when a Cameron or Milliband (this being the UK) feel comfortable in talking about limitations. This means they are truely comfortable in jettisoing entire swathes of the population to penury and early demise without ramifications to themselves. When they're comfortable, I'll know the game is up.

In the meantime, I'd much rather prefer working with a couple or three people who are willing to work towards something that might mitigate against our common plight. May work. May not. It's all about risk management now.

It also seems pertinent to learn to live lean, without too much baggage but as much knowledge and application as one can learn. That's means doing without the human baggage as well.

[Alexander Ač]

Maybe peak phosphorus? Youngest physical chemistry in UK Chris Rhodes writes:

There is a Hubbert-type analysis of human population growth which indicates that rather than rising to the putative “9 billion by 2050″ scenario, it will instead peak around the year 2025 at 7.3 billion, and then fall. It is probably significant too that that population growth curve fits very closely both with that for world phosphate production and another for world oil production. It seems to me highly indicative that it is the decline in resources that will underpin our decline in numbers as is true of any species: from a colony of human beings growing on the Earth, to a colony of bacteria growing on agar nutrient in a Petri-dish.

http://oilprice.com/Alternative-Energy/Biofuels/As-Rock-Phosphate-Runs-Out-What-is-More-Important-Food-Crops-or-Fuel-Crops.html

Alex

[eugene12]

The issue I see with blogs and peak oil is the total lack of awareness of how the increasing oil prices are impacting the poor. From what I read on blogs, the blog/commenters are making good money so it's a much simpler subject to talk about. Far as I can tell, it's clearly at the academic/intellectual level. If you're at the 10-12 an hour level, the ever increasing prices on everything are slaughtering you. Living on a set income, I see it on a regular basis as do others I know. And if you're in some third world country, our blogs/comments would look just plain stupid.

Frankly, I see a reasonable amount of information lacking in this article. Relatively speaking oil has plateaued (sp), new discoveries are not replacing consumption and global demand will increase. The energy situation is extremely complex and rapidly changing. We get the ever familiar "gonna get rich" American bubbles, such as shale gas, only to find out it was all feel good talk to obtain financing. I love it when .5% of something or another is called a "massive increase". Rarely do I talk with anyone who figures out what .5% amounts to. 250,000 barrels a day sound like a helluva lot to the unaware.

Far as I'm concerned the vast majority don't have a clue about what "wonderful new technologies" will really do or not do. Will they bring on new energy? You bet!! How much, for how long and at what cost is never talked about. If you're in the top 3-5% of Americans living on six figures incomes, it's not much of a consideration. If you're living on 25K a yr as we are, it's a very different picture. Average family income in my area is 36K a yr. Instead of saying "that's enough, just economize", get a cup of coffee, a calculator and figure it out. You'll find you quickly run out of economize and, regardless if "peak oil" is real or not to the academic blogs, you're in deep shit.

[david]

You understand there is a third group, let's call them prepper's. The base is a breakdown in socety due a number of causes, ecomony, oil, etc.

David