A Great Example Why Peak Oil Theory Has Never Been That Compelling to Me

As I have written a number of times, reserves numbers for oil are not based on the total oil though to be under the ground, but the total oil thought to be under the ground that is economically recoverable at expected prices.  Changes in technology and/or oil price expectations change the amount of reserves, even without the discovery of a single new field.

Oil companies have known about the formation, and the oil trapped in it, since at least the 1950s. But they couldn't get more than a trickle of oil from the dense, nonporous rock.

That began to change in the early 2000s, when companies in Texas began using new drilling techniques in a similar formation near Fort Worth known as the Barnett Shale. They would drill down thousands of feet and then turn and go horizontally through the gas-bearing rock"”allowing a single well to reach more gas. Then they would blast huge volumes of water down the well to crack open the rocks and free the gas trapped inside.

The real shift has come in the past two years as companies honed drilling techniques, leading to bigger wells, faster drilling and lower costs. Marathon, for example, last year took an average of 24 days to drill a well, down from 56 days in 2006."

So apparently, oil production in North Dakota may soon pass that of Alaska, though this is more due to the fact that production can be ramped up in North Dakota without an act of Congress, which is not the case in Alaska.

The largest threat to oil prices and production remains not peak oil, but the fact that most of the world's best reserves rest in the hands of state-run oil companies whose competence and willingness to invest for the long-term is sometimes in question.

  • Will

    Peak Oil has to happen eventually. There is a finite quantity of oil. Very rapidly after we stop finding new sources, peak oil will occur. We could stop finding new sources at any point - very soon, or a long time from now, after something else kills us first. It's certainly not an inevitable doom. But it is a risk that should be considered.

  • TC

    The sky is Still falling!

    Wasn't there something about mass starvation and massive over population a bunch of years ago when farmers were only able to gather about 40 Bus per acre?

    Today they pull off 120 bus per acre.

    That's just wheat.

    I think I'll go bake some bread now. :)

  • Chris K.

    As long as the world needs any particular commodity there will be someone dreaming/wishing about the future when we run out.

  • Terrence

    Apparently, the first time "peak oil" was cried in the USA, was three months BEFORE the first oil well was drilled.

    The real oil problem in the USA, is that governments do not allow drilling to take place - off the California coast, and off Florida in the Gulf (mind you China drills there!).

    "Peak oilers" do not understand the size of some of these massive oil fields.

    BTW, the Russians, and others, think oil is being created all the time, that it was not created in the past and will run out. These theories actually make a lot of sense. If they are true, the peakers are toast - they may never admit it, just like global warmist believers will not admit that the world is not warming.

  • drb

    1. Oil will run out - it is finite and contrary to what Terrence thinks it is not formed at an appreciable rate. If it is formed, please provide a link to scientific article.
    2. The question is when will oil run out - and it is probably not soon since oil sands and things like that can be mined if energy prices are high enough. So the short-term effect of what people think of as "peak oil" will probably be $5 gas.
    3. However, it makes perfect sense to use less oil since it is purchased from regimes like Saudi Arabia. "Conservatives" that think that their duty is to drive a Suburban because liberals dislike this are, in fact, supporting religious fanatics with their $ (or communist crazies like Chavez).US is unlikely to have enough oil even if everything is drilled; it is not enough for sure in long run.
    4. As a consequence, it makes sense to use other energy sources. And the only real alternative is nuclear energy which is not that popular. Then oil can be used for transportation but houses can be heated with electricity from nuclear plants.

  • Flatland

    Some of these comments frustrate me. In the event that energy prices from oil, coal, etc. rises higher than sources like nuclear, solar, or wind; then oil demand will drop and that is more likely when we will start coming off a "peak."

    I'm actually from the Bakken in North Dakota. It's so busy that my hometown doesn't have any housing. People have slept in their cars for a couple days until they could get a hotel room. If you are motivated, you can make a ton of money, but the work is very hard and you'd better be prepared for winter. It's not fun.

  • Terrence

    drb - can you spell G O O G l E? You should give it a try sometime. You might, just might, learn something; you may have some fun doing it, too!

  • Terrence

    drb – it might be easier for you if I use all capital letters: G O O G L E?

  • drb

    So, dear Terrence, no answer, as expected :) . I kind of work in this field and have not seen any science proving that your point is valid.

  • Terrence

    I have in FACT work in the oil industry, "dear" drb, not "kind of". Had you bothered to actually read my comment, you may have been able to respond to IT, rather than pumping out knee jerk responses.

    What ever you do drb, do NOT look at new information! Never broaden your horizon, "dear" drb, after all YOU KNOW IT ALL!

  • Texas_Engineer

    Warren - I admire your work on global warming, because you stick to facts - but on peak oil you have a tendency to leave out the critical information. From the same article you were quoting:

    "U.S. oil production has fallen by nearly 50% since its peak in the 1970s. Even with the Bakken Shale, U.S. oil production isn't expected to ever return to 1970s levels, and even the most optimistic projections of production from the North Dakota field don't account for more than a small fraction of total U.S. oil demand."

    The authors real point was that the Bakken, while it will make some investors and drillers rich, will be an insignificant contributor to the peak oil predicament. The same is true for all of the other US sources. We should drill, but it will not solve our fundamental dilemma. The party is almost over. It is simple arithmetic, but it is easier to blame it on others.

    You continue to talk about reserve numbers, but peak oil is about rates and costs, not reserve numbers.

  • http://www.azecon.blogspot.com Scott

    Texas_Engineer - Rates and costs quickly translate into reserves.

    Note that ore is a mineral that can be mined at a profit. If you can't mine it at a profit, it's just waste rock. As the price goes up, or costs come down, that waste rock turns into reserves.

    The same thing happens with oil.

  • BillWilliam

    It looks like Texas_Engineer has it right. Wait I'm one of those too. Yes I do GOOGLE and the peak has long passed. Even the oil in Saudi Arabia is on secondary recovery in most of their fields. I've worked both production and the wild end of wildcatting. The last service company I worked for cost so much well exploration companies only hired us when it could not be done. While out in the Gulf of Mexico 120 miles or so I was looking at a seismograph chart on the wall. The geologist came by and ask if I understood it. I pointed to a small volcano looking feature on the sea floor, 4200' down, and asked, "what caused that"? He said the last company that tried to drill here got blown out of the hole and nearly lost the semi submersible rig. Some little outfit called Shell. I've been on some of the longest directional holes in the U.S.A. Saudi Arabia held the record at that time. What I am saying is new oil and gas cost a lot of money now. I see no decrease in the future. If I can get someone interested in my idea for hydrate recovery some money maybe made from that source of methane. Is there oil left? Sure but how much is the real question. How much money, how much pollution, how much change in our climate can we stand?

  • Gil

    So oil companies are using more advanced techniques to extract hard-to-get oil because the easy-to-get oil is all but gone yet we're not getting closer to Peak Oil . . . ?

  • Highway

    There's a difference between the peak of oil production and 'Peak Oil'. The peak of oil production will happen sooner or later because even if we don't run out, something better will come along. 'Peak Oil' the hyperbolic scare tactic will never happen. Even if there isn't as much easy-to-recover oil available anymore, there's still a lot. There's not going to be some huge sudden shock in either supply or price that's going to push everyone into the poorhouse. As oil costs get more expensive, which they'll do pretty smoothly, then other sources of energy will become competitive. As more things become competitive, energy prices will stabilize at that new level.

    'Peak Oil' as a crisis is just flim-flam and scaremongering.

  • Mesa Econoguy

    It’s pronounced: “nuculer.”

  • Dan Lavatan

    There is enough oil in ANWR to have $1 gas for the next 200 years. It is not used or considered a proven reserve because it is not lawful to drill there.

    The US government prefers to use Saudi oil in exchange for Saudi construction contracts being awarded to Haliburton and their ilk.

    However, if it came down to it, the US would rather allow drilling in ANWR than face revolution. As it stands, the biggest component of gas prices are taxes.

  • Greg

    For anyone who's interested you can find some info on the Russian deep, abiotic petroleum origins theory here:
    http://www.gasresources.net/Introduction.htm

  • http://www.grouchyconservativepundits.com Mike C.

    "There is enough oil in ANWR to have $1 gas for the next 200 years."

    Uh, you might want to look up OIP and reserve estimates for ANWR and compare those numbers to US daily consumption, because you're off by two orders of magnitude or so.

    As to abiogenic hydrocarbons, it has been conclusively proven that they can form in deep crustal conditions. It has also been conclusively proven that that is NOT the source of essentially all of the world's known oil reserves. Please the last 50 years' worth of petroleum geochemistry literature.

  • morganovich

    drb-

    oil will never run out. commodities in situ never run out (note: the one place this is not true are biological systems like fisheries). they just get more expensive until they are replaced by something else. it will never be economic to use the last barrels of oil. long before we would, we'll have switched to something else unless you believe that there is simply not enough energy for us in this ecosystem, which seems a difficult claim to support.

  • Mark

    As you said in your post only recoverable oil is included in reserves.

    I believe when they calculate reserves, they do not count recoverable oil on restricted areas either. So we could have a huge amount of oil in the Gulf, but since the feds say no drilling in the gulf it is not part of our reserves.

    Of course there are ways around this too. China just paid Cuba to drill in an oil field off the coast of Florida. So in our part of the field we will get nothing as China pumps it dry from Cuban territory.

  • IgotBupkis

    > As long as the world needs any particular commodity there will be someone dreaming/wishing about the future when we run out.

    Concerned attention to "what will we do then?" is appropriate and sensible, especially when the change does loom clear. But, as you suggest, "wishing" about it is the worst sort of pessimism, and often the purview of the most evil misanthropic sort.

    > 1. Oil will run out – it is finite and contrary to what Terrence thinks it is not formed at an appreciable rate. If it is formed, please provide a link to scientific article.

    I don't think that's really required, he's not claiming it's fact -- there are reputable sources which argue the position, citing them is sufficient with appropriate words of a "some believe..." sort. It's not yet been proven, but there are reasonable arguments that it may in fact be true at this point. Our current belief in oil formation may go the way of phlogiston chemistry and ether physics. May.

    > As to abiogenic hydrocarbons, it has been conclusively proven that they can form in deep crustal conditions. It has also been conclusively proven that ....

    Ether physics was "conclusively proven" -- it fit all the available facts -- that is, until it didn't one day.

    One needs to be careful about using the word "conclusive" in science. It's one of those words, like "consensus" that gets thrown out a lot but means less than it does in more casual conversation.

    > 3. However, it makes perfect sense to use less oil since it is purchased from regimes like Saudi Arabia. “Conservatives” that think that their duty is to drive a Suburban because liberals dislike this are, in fact, supporting religious fanatics with their $ (or communist crazies like Chavez).

    OK, now you're making sh** up. There's a reason the term is "Limousine liberal", and not "Limousine conservative".

    > US is unlikely to have enough oil even if everything is drilled; it is not enough for sure in long run.

    An ignorant statement at best. Current US oil reserves are greater than those available to pretty much any other nation (no surprise, we've put the most money, skill, and talent into finding most of the world's oil in the first place). The issue is always one of expense. A good chunk of that oil is harder to get at than, say, Saudi oil, and thus isn't practical at this price point.

    And it's remarkably easy to justify buying "cheap" Saudi oil NOW and selling our more expensive oil LATER at the higher prices. The net cash flow is out for now, but there will only be a much, much higher inward flow (given our greater reserves) which results later.

    The best concern there is offhand is the amount of oil money flowing to terrorists, terrorist causes, and support for the "education" of Muslims in radical forms of Islam.

    > The US government prefers to use Saudi oil in exchange for Saudi construction contracts being awarded to Haliburton and their ilk.

    Yeah, THAT's it: The GREENS that prevent drilling in ANWR are actually in league with Haliburton.

    You can't make this sh** up, but some people manage anyway...!

    > is simply not enough energy for us in this ecosystem, which seems a difficult claim to support.

    Indeed. Simply moving manufacturing out to space would solve any energy problems there are, directly and indirectly, at least until the sun goes out, which, sorry, isn't our problem to be concerned with.

  • http://www.grouchyconservativepundits.com Mike C.

    Sigh. IIRC, the closest a rig has been (in Cuban waters) to the US-Cuban economic boundary is over 25 Km. Nobody, but NOBODY drills an exploratory well with a 25 Km lateral departure. For one thing, that greater than the current world record for departure. For another, that wasn't a Chinese oil company anyway. Third, it's all exploration territory out there - there are no oil fields as of yet.

    Anybody that cares to dig can follow all of that in the trade publications Like World Oil or Oil & Gas Journal.

  • drb

    Morganovich - this is what I wrote...what people consider a peak oil in fact will look like expensive gas.

    Terrance - I am still waiting for a link to some scientific paper as opposed to name-calling and babble. I f I do not get a link to a recent original research I will assume that you are full of hot air and know nothing about this topic. I am from TEXAS and I have worked with the oil industry, and still do some things for them, and follow a lot of science about oil chemistry.

    IgotBupkis - the current more or less universally agreed scientific theory is that oil has a biological origin. The abiotic formation theories were popular with Russians in 1950's and so are a little out-of-date. I agree with you that this, as most things in science, is a THEORY, but it is currently accepted. Until someone comes out with a better proof for abiotic oil origin, we should stick with it even though some people may want to deny it for political reasons. Denial should come for scientific reasons, and not because Mr. Terrance wants so.
    And please see the other side of coin with limousines also - it is clear that Al Gore and other greenhouse people are hypocrites living in 10000000 sq ft mansions and preaching no use of fossil fuels; however, a conservative driving a Hummer and babbling about bad terrorists/communists is just as hypocritical because he sends money over to S. Arabia or Venezuela.
    Statement about not enough oil in US for a long run is NOT ignorant I believe. The extraction will become more and more expensive (it already does). At some point it will be so expensive that economy will start to suffer. I understand the sentiment of buying the cheap oil from other places first though, but if one would replace part of oil with nuclear then oil price may crash and those regimes would sell it even cheaper and would not have means to support radicals. Also, the nuclear power has a non-market fear component that hinders its development and is fanned by radical environmentalists.

    Greg: the link is babble, especially with respect to their (non)explanation of optical activity found in oil. If you want me to get more technical about this point, I can :)

  • Terrence

    "Mr", "dear: drb - I will not waste time or pixels educating a lazy, incompetent, closed minded, uninformed fool like you. Your "mind" is made up, you KNOW IT ALL!

    I am sure the only reason you are insisting that *I* supply *you* with "proof" is because you are completely incapable of finding any such documents, and even more incapable of evaluating them. Your "mind" is made up, you KNOW IT ALL!

    Please hold your breath waiting for me to waste any more pixels responding to a pompous, pretentious, lazy, incompetent,closed minded, uninformed fool, fool like you.

  • roger the shrubber

    "peak oil", eh? been using it for almost 200 years now; the world's getting bigger & (theoretically) richer; nothing is infinite......sounds reasonable to me. quick question, though: mankind has been mining/digging for gold for some 7000+ years now. in that time, world population has grown by a factor of...what....100x? 2.5 BILLION folks in china and india alone, every one of whom has by tradition been raised to admire and covet gold, right? PLUS all the newfangled gold investment vehicles, gold-nut survivalists, golden teefusses aficionados, and basically everybody in the entire *world* wants some too. right?

    so how come nobody ever talks about "peak gold"? why are people so sure oil WILL run out, but gold WON'T??

  • Roy

    drb- Babble? Greg's link is babble? You think your conclusion that certain?

    I have no formal training nor experience in petroleum exploration per se (other than as an engineer developing tools (pumps and valves) used in enhanced oil recovery in Okla and Texas before the price of oil *dropped below* what it took to support that effort, the market collapsed, and the company I worked for along with a host of similar others disappeared in 6 months mid '80s). But long before that experience I held a curiousity about the origins of oil.

    That has led to lots of interesting conversations and experiences over the decades. Once in a while when 'trapped' in some city while doing business travel I've spent part days poking around the science and technology section of university or city or county libraries, among other things trying to find out if there was a definitive (vs consensus) answer to the origin of oil question. I've not yet seen what I'd call a conclusive answer.

    In the meantime, people now know that there exist in several separate places in the solar system hydrocarbon pools dwarfing the totality of that known on earth.

    Which leads me to muse on three related threads.

    First: a sci fi story by, iirc, Heinlein, in which engineers solved the problem of water on Mars by building nuclear reactors on icy asteroids and using the water as reaction mass to move them to Mars.

    Second: My wife's college textbook from decades ago, "History of the Americas", which I grabbed from our library a few years back and took with me on a several week business trip. *Lots* I didn't know about history. Lots the author, who knew histories of nations, didn't know about the history of technology created (boats, navigation, food storage, farming techniques) to accomplish the Europeans exploration, development, and settling of the Americas. She could tell much about that story. But she simply did not have a feel for the time span between steps of development engineering. It was a combination of political will (choices made about how nations would use resources, wrestling with whether there was anything in the Americas that would prove worth the effort, deciding how to go about getting to, developing, and returning with that anything) *and* technological progress (where entire generations would pass before next steps appeared) that resulted in the European movement to the Americas taking centuries rather than years. Long winded story to get to this point: Maybe it will take several centuries for people to figure out how to get past earth's gravity well and take advantage of the stuff we know is not very far away.

    Third: In the meantime, there's Earth. If all those hydrocarbons exist on planets and moons in this solar system, places we know could have nothing like the biology of earth, what keeps the earth from having similar chemistry? On what *scientific* basis can one credibly claim that the local stuff is only biologically manufactured? Or even mostly by that means?

    In sum: lots of engineering challenges, folks.

  • Texas_Engineer

    Roger the Shrubber

    Here is an analysis of "peak gold". There have been several such studies. Almost every country that extracts gold has "peaked". That does not mean we are out of gold, but the rate of extraction is dropping.

    http://europe.theoildrum.com/node/5989

  • drb

    Roy:

    Greg's link has some scientific problems, one of which I mentioned. If you would like to look at a reasonably recent and good scientific paper that contrasts both theories please see http://www3.interscience.wiley.com/journal/121502173/abstract. No one can deny that hydrocarbons can be formed by abiotic pathways. HOWEVER, the question is if THE oil that we pump was made by biological or abiotic pathways. And there is a substantial scientific consensus that oil was formed by biological pathways since the abiotic pathway can not explain optical activity and porphyrin-type materials there. Until proponents of abiotic pathways explain these features I will stick with biological origin of oil theory.

  • morganovich

    drb-

    your answer doesn't make sense.

    first off, you said this: "1. Oil will run out – it is finite" and "The question is when will oil run out "

    oil may peak in production, but it will never run out. you seem to be confusing peak oil (which is unlikely in the near term as as likely to be caused by a new technology as by reserve depletion) and running out of oil. they are not the same thing.

    we didn't stop using whale oil because we ran out of whales, we stopped because we found something better and cheaper.

    there has not been a great deal of work on other energy sources in the last several decades, mostly due to low prices for fossil fuels. it's starting to ramp up meaningfully now. that said, a meaningful resumption of Iraqi supply will knock the bottom out of the market pretty substantially. they are seeking an opec quota similar to that of saudi. that will set alt energy back a bit, but it'll come, and at some point, the cost curves cross, and oil demand will start to drop.

  • drb

    Morganovich -

    I guess more precise way is to say that oil which is economical to pump out WILL run out because it is physically impossible to pump out all oil. And at $XX/gal gas people will, as you say, switch to something else that will be cheaper.

  • http://www.azecon.blogspot.com Scott

    Roger the Shrubber - I've been making the same argument about gold for about a decade. The typical response is like the one provided by Texas_Engineer. They go back to specific deposits and regions seeing declining grades and production. They tend to ignore the fact that total worldwide production isn't declining.

    The ultimate resource is the human mind. As long as we keep getting smarter about how to find it, produce it and use it, peak production continues to move off into the future.

  • Mark ii

    Yeah, there also was peak wood, peak salt and peak whale oil too. Did you know that many areas in the United States, such as New England, were practically devoid of trees? In some cases, people were so worried about running out of wood that they reserved tree lots for each member of the community.

    The alternatives for replacing oil as our primary energy source are out there. Natural gas would probably be the most logical replacement as the next most likely kind and that can easily transition us into an era where massive improvements in fuel cell technologies make all of these hydrocarbon technologies seem like a horse and buggy.

  • Allen

    "Warren – I admire your work on global warming, because you stick to facts – but on peak oil you have a tendency to leave out the critical information."

    But that wasn't the point Warren was aiming for. The point was that things change and we end up with a lot more oil because of it. He wasn't talking about if that one formation was enough to make up for known decreases in other fields.

  • IgotBupkis

    > The abiotic formation theories were popular with Russians in 1950’s and so are a little out-of-date.

    I don't claim deep knowledge of this but these theories are back in some vogue at this point for reasons I'm not able to argue nor willing to investigate to the extent where I could. I do believe you need to research them if you think they have not been receiving renewed attention for at least partly valid reasons in the last 10-20 years. That does not mean they are right, but there is a reason they have been receiving renewed attention of late.

    I'm not arguing for or against the theories but I am aware that there are reputable sources digging them back out of mothballs for whatever new data leads some to believe they may be accurate.

    > however, a conservative driving a Hummer and babbling about bad terrorists/communists is just as hypocritical because he sends money over to S. Arabia or Venezuela.

    I thoroughly disagree here. Someone like Al is a total hypocrite -- he is claiming a cause and then doing nothing to actually represent that causes' principles or concerns. One can justify larger cars for any number of reasons which override the relatively minor sub-issue of money going to Wahabbist and Salafists, because the fact of the matter is that the government should be doing things to discourage those abuses of money anyway, and would be far more effective at that task than starving oneself of oil usage.

    For Barbara Streisand to be whining about global warming then contractually demanding 17 SEMIS to operate her tour is ludicrous.

    For Sting and others to go to a concert to promote AGW "awareness" in a private jet is to show sneeringly condescending disdain -- some justified, I grant, as the AGW believers ARE obvious morons when they aren't able to put 2+2 together and get an even number -- towards the people they speak to.

    (non-energy hypocrisy, granted): For PETA to run commercials advising people to spay and neuter their pets is just insane. I mean, if there are any rights animals would have, one might think that perhaps the right to one's 'nads is pretty much the first one you get to presume.

    > if one would replace part of oil with nuclear then oil price may crash and those regimes would sell it even cheaper and would not have means to support radicals. Also, the nuclear power has a non-market fear component that hinders its development and is fanned by radical environmentalists.

    On the whole we're not as far off as one might think, but
    a) You can't replace oil with nukes, unless you're going to power electric cars, as most of the oil use is for cars, not power generation. There are a whole host of reasons why electric cars aren't the way to go right now. That could change in as little as 10 years, but it's the fact right now.

    b) I'm a major fan of nukes in general, so no arguments there. I believe that, if we set out to do it, we could create a standardized, modular design for nukes that would be fault-tolerant and safety-inherent and could be virtually mass-produced and installed on almost any site for a fraction of current costs. And then we could sell them to just about every nation that wanted power.

    > The extraction will become more and more expensive (it already does).

    Only to a certain point, at which point other sources become profitable and the price stabilizes at that new level. As to its effect on the economy, once more, only to a certain extent. If it goes above a certain point, we'll find a mechanism to substitute -- humans are pretty good at that. Further, there are other factors which apply, in that newer techniques are not needfully more expensive than older ones -- they're just more sophisticated. Often they are, but that need not be the case. Every time I actually read about this topic, there's some new field which has been discovered, or there's been some new way developed to get substantial amounts out of old fields formerly classed as "dry". If such is "more expensive" it's as likely a patent matter as it is a technique matter.

    I'm not claiming prices will not rise, I'm just saying that they don't go up in a smooth ramp, but often as not in spikes to plateaus. At some point, you get to a plateau which is capable of seriously entertaining long-term search for substitutes (we ain't there yet). The Oil Shale/Tar Sands stuff has been around since at least the 70s, and the chief reason none of it is used just yet is mostly because the prices keep dropping below the point where it's worth getting at. The fact that they "keep dropping back" says a lot about how close to "peak" we are.

  • Vangel

    Yet, the production of light sweet crude is at a lower level today than it was in 2005, when it hit a peak that has never been matched since.

  • Gil

    Is Peak Gold an example of why we'll will have plenty of oil for centuries to come? After all, the easy-to-get gold was found early on and the 'hyperinflation' caused by Spanish conquerors in South America only amounted to a few tons of gold. In reality the vast majority of gold has been mined the 20th century because there's huge amounts of hard-to-get gold wheras there never was much easy-to-get gold. Likewise there's umpteen gold in the oceans but it's really hard to get.

    By the same token is there not far more hard-to-get oil in the Earth's crust? Sure there was never much easy-to-get oil but there's uncountable barrels worth of oil in hard-to-get regions that used to be impossible to recover however does the technology now exist? If the technology does exist then we're cool, right?

  • http://www.azecon.blogspot.com Scott

    Gil - We've been hoping that oil shale would be economic for about 100 years.

    If it ever does become economic, Colorado will have more oil reserves than the Saudi's ever had.

  • morganovich

    drb-

    i still think you are missing a very salient point, which is that the price of economical oil depends entirely upon the price of competing technologies.

    if cold fusion or some sort of hyper efficient fuel cell were invented/perfected, demand for oil would start to drop and so would its price just as fossil oil drove whale oil out.

    with the price of oil around $80, enormous amounts of money are going into energy research.

    peak oil is more likely to be caused by emerging technology, not supply constraints.

  • morganovich

    vangel-

    the drop in production has more to do with politics than resource scarcity.

    iraqi, mexican, venezuelan, iranian, etc fields are run by governments and state oil companies. their fields are in decline from under-investment, not resource depletion. it takes money to maintain oil fields and well production. if you milk them for maximum cash flow, then production drops quite significantly after a couple of years regardless of the size of the reserve.

  • http://www.azecon.blogspot.com Scott

    "the drop in production has more to do with politics than resource scarcity."

    The same could be said for the US. Politics has left the vast majority of the US offshore areas undeveloped. Likewise much of Alaska.

  • Allen

    "Yet, the production of light sweet crude is at a lower level today than it was in 2005, when it hit a peak that has never been matched since."

    Hmmmmmm... a lot of state and local governments could say the same about their tax revenues..... and we could say something similar about economic activity. Fancy how those things just might all go hand in hand.

  • IgotBupkis

    > Gil – We’ve been hoping that oil shale would be economic for about 100 years. If it ever does become economic, Colorado will have more oil reserves than the Saudi’s ever had.

    Indeed, the chief issue is it has to consistently go above a certain price point, and stay there, yet it never does this. I believe most current estimates are if oil goes to the point where gas rises to about $5 a gallon in the USA (with current tax levels), and, most critically stays there, then we'll see a lot more development of oil shale and tar sands. The USA and Canada have, the last I heard, by far the largest known reserves of this in the world, with quantities which are greater than all that has ever been taken out of the Saudi fields.

    > Yet, the production of light sweet crude is at a lower level today than it was in 2005, when it hit a peak that has never been matched since.

    I DO hope you're being facetious, here, but probably not -- Simply put, the rising price of oil dampened demand in the short term, and the subsequent economic issues which have since occurred have also acted to suppress demand since that point, both of which issues have driven prices down and supplies-in-hand generally up. Why produce still more oil when you aren't selling what you've got on hand?

    Simply noting a "peak of production" is uselessly ignorant and presumptuous when you don't also know, or specify, a reason for it. There could be a thousand reasons why it "peaked" in 2005 and has declined since, and the global recession and credit crisis is probably closely related to that -- this seems sort of "duh", as in "prove it's not connected before assuming more unlikely causes".

  • bbartlog

    'Simply put, the rising price of oil dampened demand in the short term'

    You're making an elementary error here: conflating demand and consumption. Demand should be regarded as a curve showing consumption at different price levels (and supply similary as a curve showing how much is sold at different prices). But even if we accept your terms it's hard to find support for your idea - consumption is flat despite rising prices, until the recession. Consider the following annual figures (prices in inflation-adjusted $ per barrel, production volumes in millions of bpd), which show price and consumption both increasing. There is no downward movement of the demand curve until worldwide economic contraction in 2009.

    2003: 79.6 $32
    2004: 83.1 $43
    2005: 84.6 $55
    2006: 84.5 $62
    2007: 84.4 $67
    2008: 85.4 $91
    2009: 84.0 $44
    The most striking thing about these figures (to my mind) is the remarkable inelasticity of both supply and demand. Normally when the price of something doubles or triples, it's due to a large shift in supply or a large shift in demand - a crop failure reduces supply, or something becomes very popular all of a sudden. Further, such price changes normally result either in increased supply being brought to market or a large drop in consumption (especially if substitutes are available).
    In this case we didn't see either; the 2009 reduction in demand can be chalked up to worldwide economic contraction, but in general this looks sort of like the irresistible force (oil demand) meeting the immovable object (oil supply).
    It is true that simple logistic models of resource extraction don't account for increasing prices. So the oil production curve for the USA, which shows a peak way back in 1970, reflects only the limits of extraction at the relatively stable prices that existed between 1946 and 1998. No doubt more can be extracted at today's prices. Nonetheless, the speed of decline of current fields and the slowness with which new oil resources are exploited makes me think that we may well have seen the peak of world production. I expect the action to be in substitution by things like liquid natural gas. Converting cars to run on LNG is not expensive (except due to regulation), and we still have a lot of that.
    The bigger question in my opinion is not whether we have reached peak oil (I believe we have), but how much it matters. Is it irrelevant (like peak whale oil), with substitution by other resources about to take place? Or is it going to lead to some sort of monumental collapse (see: Tainter, Orlov, Kunster, etc...)? I'm personally sort of middle of the road on this question; I think substitutes exist, but that mobilizing them will require literally tens of millions of person-years of labor. Mobilizing that labor will be painful (which is to say, require high prices).

  • Steph