by Carey W King
The discussion of the death of peak oil has ramped up along with the increased hydraulic fracturing and horizontal drilling into tight sands and formations across North Dakota and Texas. In fact, even people that think peak oil will correlate to significant problems for society shy away from the term. But just as it is becoming more difficult to define what “oil” is in energy databases (it is now popular to report “liquids” that have vastly different life cycles and energy densities), the definition of “peak oil” seems to be in the context of the penholder (or typist). Since I’m writing this blog, I of course get to define it for myself here, in what is a simple manner:
Peak oil is the concept that someday the rate of oil production for a country, region, or the world will reach a value that will never be exceeded
There is no need to pretend that a peak in oil production will occur due to decreasing demand or decreasing supply (or production). However, it seems as though many articles have come out recently describing how peak oil theory is wrong because it is not the supply of oil that is peaking, but the demand for oil is peaking. See these articles that give you the basic “peak demand” point of view:
The Economist (August 3, 2013): The world’s thirst for oil could be nearing a peak. That is bad news for producers, excellent for everyone else
EnergyWire (March 22, 2013): Has ‘peak oil’ gone the way of the Flat Earth Society?
Motley Fool (February 16, 2012): The End of the Peak Oil Theory
Note in my definition I don’t describe a shape to the curve describing production rate over time. Many pundits claim that because oil production rate over time does not closely resemble a normal distribution (or bell curve), then peak oil theory is wrong. That is ridiculous. There is nothing inherent in the peak oil production concept that says there has to be a defined production rate over time.
Another “straw man” argument against “peak oil theory” is that adherents to the concept forecast calamity once oil production begins to irreversibly drop. I’d say some people that focus on peak oil do believe there will be social chaos after it sets in. There are an equal number of scholars, and likely more, that are just as knowledgeable but believe there will be declines in what most of us interpret as good living standards, but not necessarily social chaos. The safest assumption is that we don’t know. The global economy has grown along with oil production, and it will be forced to change with less oil production.
One of my favorite “peak oil” arguments for people avoiding the concept of finite resources is that we keep finding more oil (and oil-like substances) to extract. True. But this still does not avoid the mathematical certainty that oil production on Earth will peak someday. Just as horizontal drilling and hydraulic fracturing enable us to produce the marginal barrel of oil at near 80 – 100 $/BBL, the fact that we have cars that get over 40 miles to the gallon also enables us to afford oil that costs 80 – 100 $/BBL. If we never improved car fuel efficiency, we couldn’t afford as much oil as we consumed today. If you want to afford more expensive oil, make your economy more oil-efficient. At the moment, oil at $100/BBL is just about the level that keeps the developed world just above the brink of economic recession, but won’t let it get much further.
After denying that the world is a finite sphere (roughly), many commentators portend that the peak in oil production will be because of successes in the economy (new technology, increased efficiency, etc.) rather than failures or naturally-imposed limits. The truth is that the debate will continue as long as oil is extracted. The most likely scenario is that no one will ever be able to statistically determine if the peak in oil production occurs because we couldn’t produce enough versus we didn’t want to (or couldn’t afford to) consume enough. People consume what they can afford and adjust for what they think they will be able to afford in the future.
Will a peak in the oil production rate mean that the global economy has successfully found substitutes or unsuccessfully tried to consume more?
This question is a setup because, again, we won’t be able to tell the difference. All human choices (driving less, hybrid electric cars, biofuels, etc.) that end up causing “peak oil demand” are all responses to the overall inability to produce an infinite rate of anything in a finite space over a finite time. If more oil could be produced at cheaper prices, people would be less incentivised for efficiency. If oil must be produced at > $80/BBL, then consumers will, perhaps too slowly, adjust their total expenditures accordingly.
Stating that peak oil theory is dead while claiming we have reached “peak oil demand” is like pretending your body doesn’t cast a shadow. You can’t have one without the other (wait … what about if the sun is directly overhead exactly halfway through the day?)