The Death of Peak Oil (at least for now)
During the five years between 2004 and 2009, the hot topic in energy-watching circles was Peak Oil. According to the popular extrapolation of M. King Hubbert's theory, all the straws we had jammed into Gaia's petroleum milkshake would soon be sucking air as the oil remaining in the big fields like Ghawar, Cantarell and the North Sea began to run dry. The volume of oil we could suck from the teats of long-suffering Mother Earth would begin to decline, never to recover. The implication for many (myself included) was that the collapse of civilization was therefore imminent, with Mad Max waiting just around the corner to sell us the remaining dregs at gunpoint, for $500 a barrel.
For those who followed the monthly data on crude oil extraction in those years, the picture seemed clear. Crude and condensate production had been on a wobbly plateau for four years, hitting a peak of 74 mbpd in 2008.The decline to under 73 mbpd in 2009 seemed to confirm our nightmares. It was all over but the cannibalism.
Well, most of us are still eating hotdogs rather than neighborhood dogs; the fears proved to be unfounded. Oil production recovered in 2010 and has not looked back since.
The question of how so many smart, well-intentioned people could have been so wrong deserves an answer. My take on it, after spending some time in self-examination, is that two factors were responsible.
The first problem was that the Peak Oil "analysts" were operating out of a knowledge silo. The majority of them had experience in the oil industry, as petroleum geologists or other workers. Because of that, their knowledge was primarily confined to the details of oil recovery. Very few of them (Nicole Foss and Gail Tverberg being notable exceptions) had much exposure to economics, finance or politics. This meant that most of the players did not fully understand that oil was only one factor in a complex global socio-economic system. It was a glaring example of the attraction of reductionism - when the only tool you have is a hammer, all problems become nails.
Then there were the people like me, amateurs who became transfixed by Hubbert's theory and relied primarily on the expertise of the oil guys in the group. We became the religious converts - the average Joes and Janes who reinforced the self-image of the experts through our breathless agreement.
The second problem was one of human psychology.
Most people are prone to something called normalcy bias: the assumption that "things are generally normal", and that since a disaster never has occurred then it never will occur. It causes people to interpret warnings in the most optimistic way possible, seizing on any ambiguities to infer a less serious situation. The opposite of normalcy bias would be overreaction, or "worst-case thinking" bias. Guess which camp the Peak Oilers fell into?
Every time someone with a wider perspective tried to intervene in our oil-centric "orgy of doom" we simply accused them of suffering from a bad case of normalcy bias.
One other factor complicated the psychological landscape. Many of us felt the crushing stress of being out of step with an increasingly inhumane world. I suspect that as a result some of us harbored a desire that it should all come to an end, no matter what the human cost might be. Most of us never expressed that desire - it's not socially acceptable after all - so we repressed it and instead channeled our mental energy into validating our catastrophist biases.
With the world exhibiting severe problems and crises in so many areas, from climate change and biospheric damage to economics and international politics, finding a realistic path through the competing messages becomes a real tightrope act. If one is open to the negative data and does not want to fall victim to normalcy bias, one runs the constant risk of falling off the tightrope on the catastrophist side. On the other hand, if someone is not comfortable with the idea of catastrophe, they may take refuge in normalcy bias. Both sides of these debates engage in serious cherry-picking of the data and tend to pay attention to only those facts that reinforce their psychological outlook. It's just human nature, after all.
We would all benefit from the Peak Oil kerfuffle if we used it as lesson learned, and put some conscious effort into examining our own biases, beliefs and hidden desires with a rare bit of ruthless honesty. As I can attest, such self-assessment is a slow, halting and often painful process. But with so much at stake in the world these days, a little honesty can go a very long way.
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First, is even OPEC acknowledge by its public records that its production of oil will start to slow down after 2030. No one trusts those records for every OPEC member has good reason to LIE about their recoverable oil, thus 2030 has always been the LAST date for peak oil to kick in and NO ONE BELIEVES IT TO BE THE DATE. We are CLOSE to peak Oil, unless we have already passed that point.
Second, and in many ways most important, peak oil is when peak production of oil occurs, but oil will continue to be produced for anyway for 140 to 160 years. Yes, some people tried to tied in peak oil with the end of civilization, but I for one never saw it as such. What I foresee is a society slowly changing to a world where the demand for oil exceeds its supply and that difference is resolved by pricing oil so that demand equals supply. I have also pointed out that the price of oil, once it is no longer under the control of any "Swing producer" will fluctuate radically, much like the price of coal, which has never had a "Swing producer" who could control price by increasing or decreasing its supply of coal. i.e prices for example only, you would see the price of gasoline vary from $5 a gallon to $2 a gallon. The high price will continually go up, the low price will follow, but you will see massive switch between the two. Thus today's low prices is compatible with Peak Oil, we are just in one of those low price periods, which will lead to a reduction in production as the price drops below the cost of some oil producers. Sooner or later the price will bottom out, mostly do to people seeing the price of oil so low that they believe that using oil, rather then some other alternative, is the most cost effective and this leads to increase demand. As the demand for oil increases, so will its price, till it hits a point where the increase production at some price, exceeds the demand for oil at that price, then the demand will drop, as will the price.
Such price fluctuation will become the norm as peak oil hits and oil production CAPACITY drops. Now, one of the side affects of high prices for oil, is what were considered oil plays to expensive to drill in previous years become profitable. This is what happened in 2006-2008 period. Oil fields no one had thought would ever become profitable, where suddenly profitable when oil reached its highest price since the Civil War.
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=F000000__3&f=A
http://econweb.ucsd.edu/~jhamilto/oil_history.pdf
http://www.resilience.org/stories/2015-08-16/what-is-the-price-of-oil-telling-us
http://www.resilience.org/stories/2015-08-14/double-dip-oil-rout-why-an-oil-glut-may-lead-to-a-new-world-of-energy
Now, the price of oil has been dropping since 2008, as demand for oil in the US DROPPED for the first time ever, the drop was marginal but real (and even greater in the other Developed countries) but more then offset by the increase in Oil usage in the Third World, including China and India:
http://oilindependents.org/global-demand-for-oil/
Now, the key is Saudi Arabian Oil Production, which has been relatively flat (Only a slight increase in recent years, and most of that heavy sour oil NOT the light sweat oil preferred by most refineries), while US oil production from Fracking has been increasing:
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Details on Saudi Arabia Production:
http://www.eia.gov/beta/international/analysis_includes/countries_long/Saudi_Arabia/saudi_arabia.pdf
Most of the increase in World Wide Oil Production has been in the Fracking fields of the US, but given these have a decline rate of up to 90% in the first year, you need constant drilling to keep up the production, a rate of drilling that WAS maintained till 2014, when, due to the drop in the price of oil, drilling of new wells slow down:
http://carnegieendowment.org/2014/11/01/tight-oil-in-united-states-recent-developments-and-future-financial-sustainability/hvm6
http://carnegieendowment.org/2015/05/21/saudi-arabia-and-shifting-geoeconomics-of-oil/i8vv
Please note, one of the reason we have had increase oil production since 2005 is that most producers have adopted secondary and Enhanced recovery methods, both speed up the depletion of a well. Secondary is simply pumping water into a wells, for oil floats on top of water and this will force oil up to other wells into the same oil formation.
"Enhance recovery methods" are more complicated then water, there are three types, often used together:
Gas injection, which uses gases such as natural gas, nitrogen, or carbon dioxide (CO2) that expand in a reservoir to push additional oil to a production wellbore, or other gases that dissolve in the oil to lower its viscosity and improves its flow rate. Gas injection accounts for nearly 60 percent of EOR production in the United States.
Chemical injection, which can involve the use of long-chained molecules called polymers to increase the effectiveness of waterfloods, or the use of detergent-like surfactants to help lower the surface tension that often prevents oil droplets from moving through a reservoir. Chemical techniques account for about one percent of U.S. EOR production.
Each of these techniques has been hampered by its relatively high cost and, in some cases, by the unpredictability of its effectiveness.
http://energy.gov/fe/science-innovation/oil-gas-research/enhanced-oil-recovery
Just a comment, that the low prices of today is compatible with Peak Oil. From what I have read today's low prices should last till 2017, when most of the fracking oil wells would have played out and given the low level of replacement wells are being drilled today, supply will drop and demand will exceed supply once again. This up and down pattern in typical of extraction industries as supplies of the mineral in question comes into short supply.
On the other hand, watch out for those peak oilers who foresee doom in peak oil. Peak Oil will NOT lead to any massive change, but will lead to slow gradual change as the price of oil keeps going higher. I see more and more people moving closer to where they work, and the stores catering to those workers moving with them. Suburbia will probably die, but urban cores will boom. If moving back to the city from Suburbia is your nightmare, then Peak Oil will be a disaster, but for most people Peak Oil will be just a small change in how they live (i.e. walking to where your shop and work instead of driving).
