Yet another voice has
questioned the theory of “peak oil,” which posits future
scarcity, rising prices, and economic collapse due to the lack of
precious fuels that drive the global economy. Under this theory the
rate of petroleum extraction will crest and then commence “an
immutable decline…as demand for this finite resource permanently
exceeds supply.”
This latest critic of the theory is the Boston Company Asset
Management LLC, which released a
white paper entitled, “End of an Era: The Death of Peak Oil. An
Energy Revolution, American-Style.”
The Boston Company report claims that “an array of structural
shifts in the Energy industry is conspiring to insulate the global
economy from any such dramatic increase in the price of oil.” This
is due, in part, to American consumers radically altering their
consumption of petroleum products in the world’s largest market.
Moreover, “heightened investments and technological breakthroughs
have spurred an explosion in resources, as source rock has expanded
the definition of ‘finite resources.’” This latter point refers to
the combination of directional drilling and hydraulic fracturing
that has allowed access to previously hard-to-reach supplies of gas
and oil in the continental United States. In Canada, the
development of oil extraction from tar sands has also escalated
dramatically in recent years.
In North America oil supply has grown annually by roughly
500,000 barrels per day while demand shrinks because vehicles are
increasingly burning less gasoline.
This contributes to the global market on top of 1 million
barrels per day from places such as the North Sea, Brazil, West
Africa, and, of course, the Middle East.
“If another 2 million bpd [barrels per day] can be added to
supply (including some give back from weaker demand), Asia — the
fastest growing region in the world — would have to double its
trend-line growth in consumption to achieve a balance,” says the
company.
“Thus, we bid farewell to the days of Peak Oil.”
“End of an Era” supports the argument made by noted energy
analyst Daniel Yergin, who won the Pulitzer Prize for his book,
The
Prize: The Epic Quest for Oil, Money, and Power
(2009).
Yergin outlines the sorry history of peak oil theorists in his
latest book,
The Quest: Energy, Security, and the Remaking of the Modern
World (2012), which continues and expands the history of
energy in American and around the world.
In The Quest Yergin calmly, patiently explains the
error in the concept of “peak oil,” which assumes “that the world
is near or at the point of maximum output, and that an inexorable
decline has already begun, or is soon to set in,” Rather, he
believes “The World has decades of further production growth before
flattening out into a plateau— perhaps sometime around mid-century
— at which time a more gradual decline will begin.”
“The date of the peak has tended to move forward,” he writes.
“It was supposed to arrive by Thanksgiving 2005. Then the ‘the
unbridgeable supply gap’ was expected to open up ‘after 2007.’ Then
it would arrive in 2011. Now some say ‘there is a significant risk
of a peak before 2020.”
Yergin documents at least five instances of the nation or world
having been declared to be running out of oil. In 1885 the state
geologist of Pennsylvania, home of the first oil boom, proclaimed
that surge of supply was only a “temporary and vanishing phenomenon
— one which young men will live to see come to its natural
end.”
The idea of peak oil originated with an eminent earth scientist,
Marion King Hubbert. In 1978 he predicted that children born in
1965 would see all the world’s oil supply gone in their lifetimes.
Humanity was embarking upon “a period of non-growth.”
“By 2010, U.S. production was four times higher than Hubbert had
estimated — 5.9 million barrels per day versus Hubbert’s 1971
estimate of no more than 1.5 million barrels per day — a quarter
of the actual number,” notes Yergin. Hubbert simply did not account
for the impact of prices, substitution, and technological
innovations.
Interestingly, the Energy Information Agency, a federal bureau,
recently stated
that U.S. crude oil production exceeded an average 7 million
barrels per day in November and December 2012, the highest volume
since December 1992. Increasing oil production in North Dakota and
onshore Texas drove the increase in U.S. crude oil production over
the last several months (although production in North Dakota took a
dip in November, before increasing again in December). This
increase in production is coming from shale and other “tight” or
very low permeability formations.
Nothing is forever, including oil and gas reserves, and gasoline
prices are near $4 dollars per gallon in many parts of the country.
There may be a point when supplies become limited and prices
escalate, driving businesses and consumers to even greater
efficiencies, electric vehicles, and other sources of energy such
as renewables or modular nuclear plants. Yergin notes that the
growth in world energy demand will be “greater than all the energy
that the world consumed in 1970.” And 75 to 80 percent will still
be carbon-based two decades from now.
“The globalization of demand may be shaping tomorrow’s needs,”
writes Daniel Yergin. “But it is accompanied by a globalization of
innovation.” The generation of knowledge and the application of
science is now “a worldwide endeavor.”
This global resource base of knowledge and creativity is
expanding, fueling insight and ingenuity that will lead to new
solutions for the benefit of humanity. Peak oil or no peak oil, the
future is neither bleak nor foreboding as long as markets, prices,
and human creativity are allowed to function so as to cope with the
challenges of the future.
