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Daniel Yergin's letter to the peak oil community, and a rebuttal




There Will Be Oil

Daniel Yergin, Wall Street Journal
For decades, advocates of 'peak oil' have been predicting a crisis in energy supplies. They've been wrong at every turn, says Daniel Yergin.
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Since the beginning of the 21st century, a fear has come to pervade the prospects for oil, fueling anxieties about the stability of global energy supplies. It has been stoked by rising prices and growing demand, especially as the people of China and other emerging economies have taken to the road.

 

This specter goes by the name of "peak oil."

Its advocates argue that the world is fast approaching (or has already reached) a point of maximum oil output. They warn that "an unprecedented crisis is just over the horizon." The result, it is said, will be "chaos," to say nothing of "war, starvation, economic recession, possibly even the extinction of homo sapiens."

The date of the predicted peak has moved over the years. It was once supposed to arrive by Thanksgiving 2005. Then the "unbridgeable supply demand gap" was expected "after 2007." Then it was to arrive in 2011. Now "there is a significant risk of a peak before 2020."

But there is another way to visualize the future availability of oil: as a "plateau."

In this view, the world has decades of further growth in production before flattening out into a plateau—perhaps sometime around midcentury—at which time a more gradual decline will begin. And that decline may well come not from a scarcity of resources but from greater efficiency, which will slacken global demand.

[More at original article]

Mr. Yergin is chairman of IHS Cambridge Energy Research Associates, an energy research and consulting firm. This essay is adapted from his new book, "The Quest: Energy, Security and the Remaking of the Modern World." He received the Pulitzer Prize for his book "The Prize: The Epic Quest for Oil, Money and Power."
(17 September 2011)
The complete text of Danel Yergin's opinion piece is now online at the Wall Street Journal.
- BA



Rebuttal to Daniel Yergin

By Jeffrey J. Brown

Jeffrey J. Brown is an independent petroleum geologist in the Dallas, Texas area. He has just been named to the ASPO-USA board of directors and has been a frequent contributor to Energy Bulletin and The Oil Drum. His website is GraphOilogy.

He submitted a letter to the Wall Street Journal in response to Daniel Yergin's article. The letter has not yet been published by the WSJ.

-BA



To the Editor:

Contrary to Mr. Yergin’s assertion that advocates of Peak Oil have been wrong at every turn, six years of annual global production data show flat to declining crude oil and total petroleum liquids production data.

The EIA shows that global annual crude + condensate production (C+C) has been between 73 and 74 mbpd (million barrels per day) since 2005, except for 2009, and BP shows that global annual total petroleum liquids production has been between 81 and 82 mbpd since 2005, except for 2009. In both cases, this was in marked contrast to the rapid increase in production that we saw from 2002 to 2005. Some people might call this "Peak Oil,” and we appear to have hit the plateau in 2005, not some time around mid-century.

Only if we include biofuels have seen a material increase in global total liquids production.

In the US, there are some good stories about rising Mid-continent production, and US (C+C) production has rebounded from the hurricane related decline that started in 2005, but 2010 production was only very slightly above the pre-hurricane level that we saw in 2004, and monthly US production has been between 5.4 and 5.6 mbpd since the fourth quarter of 2009, versus the 1970 peak of 9.6 mbpd. Incidentally, US net oil imports of crude oil plus products have fallen since 2005, primarily as a result of a large reduction in demand, because of rising oil prices (which Mr. Yergin predicted would not happen), but EIA data show that the US is still reliant on crude oil imports for two out of every three barrels of oil that we process in US refineries.

However, the real story is Global Net Oil Exports (GNE), which have shown a measurable multimillion barrel per day decline since 2005, and which are measured in terms of total petroleum liquids, with 21 of the top 33 net oil exporters showing lower net oil exports in 2010, versus 2005. An additional metric is Available Net Exports (ANE), which we define as GNE less Chindia's (China + India’s) combined net oil imports. ANE have fallen at an average volumetric rate of about one mbpd per year from 2005 to 2010, from about 40 mbpd in 2005 to about 35 mbpd in 2010 (BP + Minor EIA data, total petroleum liquids).

At the current rate of increase in the ratio of Chindia's net imports to GNE, Chindia would consume 100% of GNE in about 20 years. Contrary to Mr. Yergin’s sunny pronouncements, what the data show is that developed countries like the US are being forced to take a declining share of a falling volume of GNE. In fact, our work suggests that the US is well on its way to “freedom” from its reliance on foreign sources of oil, just not in the way that most people hoped.

In a November, 2004 interview in Forbes, Mr. Yergin asserted that oil prices would be back to a long term price ceiling of $38 by late 2005--because of a steady increase in global crude oil production. It turned out that Mr. Yergin’s predicted price ceiling has so far been the price floor. The lowest monthly spot crude oil price that the EIA shows for post-November, 2004 is $39.

I suspect that just as Mr. Yergin was perfectly wrong about oil prices, he may be confidently calling for decades of rising production, just as we come off the current production plateau and just as an accelerating decline in Global Net Exports kicks in.

Sincerely,
Jeffrey J. Brown

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