As those who understand peak oil are no doubt aware, coverage of the issue in the media has been extremely uneven. Some observers cite the best available data and production models, which indicate that there are perhaps 1.2 trillion barrels of economically recoverable conventional oil yet to produce. But a few seem intent on promoting an optimistic industry view (despite historical evidence to the contrary) that one day, the world can recover most of the estimated 12 trillion barrels of original oil in place—a factor of 10 variance in estimates!
Such a wide range of expert opinion has only served to confuse the public at a time when it is critically important that they get up to speed on the simple facts of oil production and understand what they might realistically expect in the future. In an effort to close this enormous gap, I have collaborated with Steve Andrews, a co-founder of ASPO-USA, on a new “Peak Oil Media Guide,” to address the important questions that regularly come up about peak oil. We encourage those who engage with the media to distribute the guide. It is my hope that the guide will become a “living document” which can be updated and enhanced as time goes on by knowledgeable experts. We welcome their input. For now, please send comments to Chris Nelder at [the original article at ASPO-USA]. and include “PO Media Guide” in the subject line. You can find the full document here (pdf).
Here is an abbreviated summary of the Guide’s key points (first edition).
It’s not the size of the tank which matters, but the size of the tap.
Peak oil is not about “running out of oil,” it’s about the peak rate of oil production. It’s not the size of the tank which matters, but the size of the tap. This is an essential concept. Talking only about the number of barrels of oil that might exist somewhere, without also talking about the rate at which that oil can be produced, and when, entirely misses the target.
We are now at, or “close enough” to the peak.
Right now, the world is producing between 86 and 87 million barrels per day (mbpd) of oil, and that rate has changed little since 2005. Our analysis suggests that world production is unlikely to ever exceed 90 mbpd, and might not increase much above where it now stands. It appears we are now on the oil peak/plateau, or close enough to it that the date of the technical, absolute peak doesn’t matter. Within the next three to six years, as the world goes into terminal oil production decline, it will be forced to live within an ever-decreasing supply of oil. Not only are we “close enough” to the peak, we’re far too close to it. According to the June 2008 revision of Colin Campbell’s model for world oil production, the global peak is this year, 2008.
Oil production in the U.S. is well past its peak, and is in long term decline.
U.S. oil production has been in decline for most of the last 38 years. This is not due to politics; it is simply the nature of petroleum extraction. The U.S. uses about 20+ mbpd of petroleum, and produces about 7 of that. The other two-thirds are imported, and there is no possible way that the U.S. could produce that amount domestically, no matter where or how quickly we drilled.
Oil shale: the fuel of the future…and it always will be.
After decades of fully authorized, commercial, even subsidized attempts to develop oil shale into a usable liquid fuel, no one has ever been able to make it economically feasible. Even if oil shale extraction does become economically viable some day, it’s unlikely to ever produce more than a modest flow (though perhaps a very long-lived one) of extremely expensive synthetic oil.
ANWR and the continental shelf are no panacea.
We believe that if all limits on domestic drilling were removed, including those on ANWR and the outer continental shelf, it could only increase U.S. oil production by 2 mbpd at best, and would require several decades to reach that level. Once that production comes online, it will be a drop in the barrel compared to the loss in global oil production. The idea that we can somehow drill our way to independence from imported oil is, therefore, misleading in the extreme. The only way we could become energy independent soon is by severely curtailing our oil demand.
Oil prices aren’t all about us.
It’s an all-too-common belief that if only we had authorized more domestic development of oil, our gasoline prices would be lower. With the global supply and demand balance as tight as it is for oil, natural gas, and coal, it is highly unlikely that a slight increase in U.S. production could make any noticeable difference in our gasoline prices. Once we take into account the decades it will take to bring new domestic resources online, any additional production we can manage will only slightly nudge the decline curve in global oil production, and only slightly depress domestic prices for gasoline, for a short while.
Decline rates are relentless.
Decline rates are also frequently misunderstood. The concept is simple: Oil production first must make up for the decline rate of mature fields before any net additional oil can be counted. It’s like pouring water into a bucket with a hole in it. Anyone familiar with a balance sheet should understand this concept, but many observers routinely miss it. World oil production must first struggle against a background decline rate of 4.5% or higher from mature fields before it can manage any increases. Currently, the net increase in global oil production is about 1% per year.
Expectations for the future are shrinking.
Peak oil deniers often like to point to the International Energy Agency’s (IEA) past estimates, which have projected that world oil production would rise from 86 mbpd today to as much as 130 mbpd in the future. However, the IEA’s estimates have been shrinking for the last several years, when it became clear that world net oil production had stopped growing. The old 130 mbpd estimate was reduced to 115 mbpd, and will soon be reduced again to 100 mbpd in a report to be released later this year.
Improved technology cannot move the peak.
The potential of enhanced oil recovery (EOR) techniques is well known, after over four decades of experience in the field. What that experience has shown is that (with a few minor exceptions) improved technology cannot move the peak. What it does is increase, over time, the overall amount of oil that can be produced. On the bell curve, it thickens and lengthens the tail. But it does not change the point in time at which production peaks.
Chris Nelder is a self-taught energy expert who has written hundreds of articles on peak oil and energy in general. His new book on investing in energy, Profit from the Peak , has received positive reviews from investors and the peak oil community. He is a frequent contributor to Energy and Capital.