Has oil production peaked?

Oil is not everybody’s preferred topic of small talk. It tends to make the eyes glaze over. But the consequences of a terminal shortage are horrific and should worry us all.

It’s worth noting, for instance, what Lord Ron Oxburgh, former non-executive chairman of Shell UK, and not a man given to sensational exaggeration, said at a conference late last year. "We may be sleepwalking into a problem which is actually going to be very serious.” By the time we are fully aware, he added, it may be too late to do anything about it.

At the same event, the annual conference of the Association for the Study of Peak Oil (Aspo) in Cork, the former US Energy Secretary Dr James Schlesinger said oil industry executives now privately concede that the world faces an imminent oil production peak – a point at which demand will permanently overtake supply, and prices shoot up and up. 

Schlesinger, also formerly Defence Secretary and CIA Director, said it is very difficult for politicians to break this news to the people. “To have real movement, the public has to be hit over the head with a two-by-four.”

Without plentiful cheap oil, motor and air transport become unviable. Our financial system, premised on endless growth, is incapable of addressing new, shrinking economic conditions. And when you remove artificial fertilizers made from fossil fuels, the earth can support only 1bn or so people - so we seem to be heading for mass starvation.

These issues are comprehensively examined in a new documentary film, A Crude Awakening. It largely comprises straight interviews with sober economists, geologists, professors of physics and politics, and a former acting secretary general of OPEC. Between them, they grimly demolish the case for many wished-for alternatives to fossil fuels.

A physics professor at Stanford is asked, “Are my grandchildren ever going to fly in an aeroplane?” A gripping question, he replies. “And I think the answer is probably no.”

One interviewee, the startlingly depressing but all-too plausible Matthew Savinar, is asked if we face something like the challenge President Kennedy presented in the early 1960s - to get a man on the moon in ten years. “The problem we’re facing is more like colonising Pluto,” Savinar replies. “If JFK said we’re going to have a hundred thousand people living in three-bed houses on Pluto in ten years, then obviously we would not have been able to accomplish it.”

Comments

[Ralph]

s/oil/y2k/g

[Paul Newbold]

Fred, back in March 08 you said "The top oil producer in the world is Saudi Arabia but not “by far” as you state. In 2006 Saudi Arabia produced about 10.665 mbpd (IED) . Russia produced about 9.7 mbpd. Russian output has been growing rapidly."

Since then Saudi have refused (or maybe can't) increase output, despite pleading by Bush, and Russia has admitted it is now past peak and in decline.

Many stories have been published about the possibly insurmountable production bottlenecks of oil from tar sands in Canada to. Mostly to do with limits to the inputs of natural gas and water.

It is not looking good, and we need to be diverting resources to promoting renewables and increasing fuel efficiency urgently.

[Jess W Fulbright]

Here is a prime example of why we are in trouble. The United States is currently using almost 21 million barrels of oil a day. The latest "solution" to high oil prices by our government was to quit filling the strategic oil reserve. Both democratic presidential candidates supported the measure and it passed nearly unanamously.
How much additional oil is now on the market in the US today by congress taking this ingenius action? 2 million barrels? 1 million barrels? No, 7000 barrel was what we were putting into the reserve on a daily basis. Do any of the people who are posting here believe that this 7000 barrels of oil a day is going to help anything at all. I doubt it.
The point is our government will not face the tough choices if it might cost them a vote in the next election. We probably have the reserves available to stave off the looming crisis for awhile, what we do not have is the political will to develope them.

[Ray]

Gentlemen,

Your assertion that the societies of this world are going to disintegrate into some Mad Max scenario rather than open up areas currently off-limits for environmental reasons, is patently ridiculous.

You look around your humbled version of a once great empire and see no hope for the future. Britain's demise is not the manifest destiny of all great nations. You got yourselves there with your continuing affection for wealth redistribution and the belief that government and the ruling class has all the answers. The rest of us prefer to see the world for what we can make it.

We hear peak oil and see 800 billion barrels of economically recoverable oil in the U.S. Green river deposit. Will it be easy? No! Is it impossible? Absolutely not!

The future is reserved for those that look at problems and see possibilities. Not for feeble-minded doomsayers like The Times.

[Frank]

Malthus called for you.

He wants his theory back.

[James Kennett]

How can the Canadian gas be "stranded" (uneconomic to transport to market), but not the oil that could be produced from this gas with oil sands or shales? If the oil can be removed by pipeline, so can the gas. If by tanker, so can the gas (after liquefaction).

[Howard Grattan]

Martin Aston, you have already been ticked off by the writer of this article, over your 12mpg Range Rover. Don't knock the lithium bike idea (of John's), it may be closer than you think; well, the lithium bit anyway. And I hope you are not running down badgers in that wasteful car of yours, are you?

[Howard Grattan]

Martin Aston, you have already been ticked off by the writer of this article, over your 12mpg Range Rover. Don't knock the lithium bike idea (of John's), it may be closer than you think; well, the lithium bit anyway. And I hope you are not running down badgers in that wasteful car of yours, are you?

[Martin Aston]

Response to John:

Lithium bikes ? The very idea. I should like to know how a lithium bike and its windburned rider would fare in a collision with a badger; not well, I fear. On the other hand you hardly even feel the bump when in a Range Rover. Perhaps you should consider this next time before suggesting such impractical and downright dangerous modes of travel !

[Howard Grattan]

Response to Fred!
Thanks Fred, I am amused by your follow-ups! (on nearly everyone!) Quite informed and interesting, I must admit. I like your phrase "failure of imagination in accounting for human ingenuity and the strength of response to the price signal in a free market. Human ingenuity is essentially incalculable." I suspect that is the true answer; as every generation faces its own challenge, and must come up with the answers. The Middle Ages, for example, had to contend with the Black Death; but survived. No idea who you are; but public debate is always healthy!

[Fred]

Response to Richard Earle:

We all can point to countries or fields that have lower production but there is no mention of the many examples of production increases. Increases over the last few years are occurring, and seem to be continuing, in Algeria, Angola, Kuwait, Libya and Qatar, among OPEC countries. Russia, Kazakhstan, Canada, China, Brazil and Ecuador show significant growth among non-OPEC countries. In a baseball analogy, the declining camp points to a few batters who are off their game or at the end of their careers (let’s call these Mexico, Venezuela and the US) but doesn’t mention that the team batting average keeps going up as rookies join the club and veterans continue to produce and improve (let’s call these Russia, Brazil, Kazakhstan and Kuwait).

The top oil producer in the world is Saudi Arabia but not “by far” as you state. In 2006 Saudi Arabia produced about 10.665 mbpd (IED) . Russia produced about 9.7 mbpd. Russian output has been growing rapidly.

The amount of energy required to produce a barrel of oil from sand and shale is large but the oil produced is still net oil available to the world. Virtually all of the Canadian projects are run off of natural gas which is stranded locally. Stranded means it is not economic to connect this gas to pipelines where it can be transported and used productively. So if this waste gas is burned to produce oil, all of the oil will be net oil available to the market. There is no subtraction to the market for the energy consumed since that was not and will never be available to the market. Thus it is completely sustainable.

The collapse of Western Society due to shortages has been predicted many, many times over the last few hundred years (Malthus is a famous example, the Club of Rome a more recent example) so you are not alone in your prediction. And the case is plausible, perhaps even “calculable”. But the evidence against current predictions of collapse due to shortages of some critical element is very strong and empirical……there has, in fact, been no collapse over the last several hundred years’ of predictions.

The essential problem for the collapse advocates is that they project from current trends and have a failure of imagination in accounting for human ingenuity and the strength of response to the price signal in a free market. Human ingenuity is essentially incalculable. Of course it could be different this time, but when a school of thought has been wrong for several hundred years it is right to begin to think that it is fundamentally flawed in its logic.

[Fred]

Response to Howard Grattan:
You are the first to mention a real threat to relatively inexpensive oil: environmental concerns. Much of the US is already off limits for this reason. Canada may also place restrictions on oil sand development, the net result of which is higher prices.

[Fred]

Response to Eric:
It is interesting that several people have posted that world oil production has already peaked. This is simply wrong as new records in world oil production have been reached in each of the last 25 years.

Mexico (Cantarall) is notorious for underinvestment in its oil industry and declines due to lack of investment shouldn't be included in the debate as evidence of peak oil.

The United States has been the most intensively drilled country in the world by a very long measure and can give one an idea of the amount of oil that can be extracted as other countries get worked over. Fantastic opportunties exist in the OPEC nations once the "easy" oil is extracted. As I mentioned in an earlier post, Saudi proved reserves are around 75 years at current production rates. Iraq, Kuwait, Venezuela and UAE have over 100 years supply.

We do not know the real production potential of the United States but we do know for certain that it is far higher than current production rates since virtually the entire offshore and much of the continental US is offlimits to drilling.

The point though is that areas and particular oil fields will come and go but new discoveries (Brazil) and new technologies (Canada) and combinations (the recent huge deepwater find in the Gulf of Mexico) will continue to grow world production over the next century, as it has despite near-constant predictions of peaking, over the last century.

[Richard Earle]

Yes it is true, and I am amazed that the vast majority of people seem not to be aware of oil depletion, or if they are, choose to ignore it. We are all now fully aware of and concerned about climate change, when oil depletion is probably a more pressing issue.

World oil production has just about peaked and in the not too distant future, demand for oil will exceed supply and the days of abundant cheap energy will be over.
Saudi Arabia is now by far the worlds biggest oil producer, and this is the first year that Saudi has not increased it's production.

Many people assume that we will never run out of oil, even if we are no longer discovering any major new reserves, technology will solve the problem for us, and there is lots of oil available in oil shales etc.
This is true, the oil will not run out overnight, but as demand exceeds supply, shortages will result, pushing up the price and making currently non economic oil fields economic to exploit. More oil comes to the market, but the irony is that as it becomes available, the faster we use it...and world demand for oil and energy is constantly increasing.

Incidentally on the subject of extracting oil from oil sands and shales, most people are aware of the environmental damage and the water pollution associated with this. But few are aware that it actually requires more energy input (burning gas to release the oil from the sand and shale), than you get out in terms of the volume of oil produced.
More energy put in than you get out is clearly not sustainable.

The good news is that with world oil depletion and diminishing supplies of fossil fuels, in the future less carbon dioxide will enter the atmosphere, which will hopefully help to reduce global warming and climate change.
However it may already be too late to halt global warming, because of the vast quantities of methane which is now being released by the melting tundra, (methane having 20x the global warming potential of the carbon dioxide).

The bad news for the 'western world' is that oil depletion and shortages of the limitless supplies of cheap energy that we now rely on, will probably result initially in the collapse of stock markets and western economies, followed by the collapse of modern industrialised society in the western world.

Increasing world population, currently 6.5 Bn with 9 Bn predicted by 2050, is driven by limitless supplies of cheap energy derived from oil, so with reducing supplies, these numbers and economic growth can not be sustained. However the articles prediction, that the earth can only support 1 Bn people with out oil, is probably slightly pessimistic. As most now predict that without modern mechanised agriculture (fuelled by oil), the earth can support a population nearer to 2Bn. But it is interesting to think that when I was born in 1961, world population had just turned 3Bn.

If you get chance to see the film 'A Crude Awakening' it is quite an eye opener for most people who are not aware of the oil depletion problem.
See
http://www.oilcrashmovie.com/film.html

Initiatives like 'Transition Towns', see http://www.transitiontowns.org/ are trying to raise public awareness of the problems, and are having some local successes.
Certainly if everyone in the western world becomes aware or the oil depletion problem in the very near future, and takes drastic action to change their lifestyle and massively reduce individual and national energy usage, by a factor of about 5, we might stand a chance of averting the longer term problems.
But we all know this is not going to happen in out current 'I'm alright jack' society, so in the future it will be 'every man for himself' !

Personally, I don't think the long term prognosis for the West is a good one, once oil depletion starts to bite. The mild energy and fuel price increases that we have seen recently are nothing compared with what is to come, and in the longer term, following the failure of world economic and transport systems and the break up of industrial society. There is likely to be a period of anarchy and massive population reduction through starvation, disease and 'civil unrest'. Followed longer term by the survivors returning to a pre industrial revolution style of subsistence farming, carried out be local extended family groups.... It might sound a bit far fetched, but just think through the scenario of our modern world operating with ever decreasing amounts of ever more expensive energy.

The question is will we be there to see it ?
Richard Earle

[John]

Overall from the above comments its clear most realise the gusher has gone.While new supplies are hard to find and insufficient for current or future demand.
So we return to the past for the future.
Bikes and electric bikes for local journeys (new lithium bikes do almost 40 miles on a charge).The steam train (engineered for the 21st Century) for goods and long trips.
Problem solved

[Howard Grattan]

None of these post even mention the possible impact on the earth of global warming arising from unlimited supplies of oil, even if such a thing exists. What is needed is a radical departure from current ways of using oil; cars, for example, are hugely wasteful, even if they are magnificent toys. Same applies to air-trips, when you think about it. A change of thought-pattern is needed, to eliminate both peak oil and global warming. A totally new invention, like electricity was 100+ years ago.

[Eric]

To all those who see no end in sight for ever increasing oil production ... Why has world oil production remained flat in the last 3 years? Why has the oil production of the United States, the greatest oil producer in history, peaked in 1970 and gone down almost every year since then, despite having access to the most advanced technology on the planet and more oil wells (2 million) drilled than the rest of the world combined? Why is the North Sea and Cantarell (Mexico) oil production dropping at over 5 percent a year? How can country after country go past peak and the whole of the world produce yet more oil every year?

[John-Paul Flintoff]

Martin Aston, you might do better not to buy that big car, regardless of the remaining oil reserves. It takes an awful lot of composted tea bags to offset a Range Rover.

[Ron]

Production has 'peaked' to force the price up.

[Martin Aston]

Excellent work, chaps. Depending on which submission I read I am flipping from dizzy euphoria to flatline depression.

Here I am, trying to do everything right to ensure the survival of the human race by drinking tap water and composting used tea bags, but nobody appears able to tell me what's what regarding the disposition of our most crucial natural resource !

Now I'm about to do my bit for the depressed UK car manufacturing industry by purchasing a Range Rover with a 3.6 litre V8 engine, with which I will convey my kids to school in the Central London rush hour. I will be lucky to return 12mpg on this little beauty so for god's sake sort yourselves out and let's get a consensus before I get my fingers burnt.

[Fred]

Response to Scott:

Of course everything on the planet is quite old. And except nuclear, all our energy is a natural product derived from the sun. Oil is simply stored and concentrated plant-derived solar power.
The only question as to whether we might run out of oil is when. There are hundreds of years of supply in oil sands and oil shale formations as well as decades of years supply in liquid form using current technology. No one is searching for additional oil sands or shale since hundreds of years supply is already known and many liquids areas, in OPEC countries for example, are not even being explored.

Limits-to-energy advocates have been making their case for literally hundreds of years and run afoul of human ingenuity. Dusty rock becomes coal, Black gunk becomes useful oil, dangerous ore becomes clean and safe nuclear power. Imagination fails them as they can show you calculations that prove we absolutely must run out. But, in a free market, rising prices call forth all the energy of human ingenuity to confound the projector.

[scott]

Anyone who argues that peak oil isn't happening is a fool! Yes we now have the tar sands as a "reserve", the difference is that we are stepping in and forcing the tar sands to produce oil. We have just short circuited the process that took millions of years to produce the oil under the sea.
North Sea oil took millions and millions of years to get where it is. We've ripped out more half of it in 25 years!!!(production peaked in 1999)
There is nothing else that this planet has that will replace this free energy. I mean free because after you drill the hole you have tapped into a millions of years old battery.
Every other energy source that man requires has to be generated, whether it be nuclear solar, wind etc.
This world is going to get an enormous shock. Economies crashing, people starving. The £20 jolly in a budget airline to Prague will be consigned to history. We will look back and wonder how we could have been so wasteful and stupid.

[Fred]

Further response to Martin:
Worldwide unproduced reserves grew again last year, as they have annually since 1980. For example, here is a graph from the 2007 report of the EIA. http://www.eia.doe.gov/oiaf/ieo/figure_38.html
An interesting stat is that the US reserve to production ratio has ranged between 9 and 13 years for the last 25 years. Thus we have produced our proved reserves 2 times over since 1982 and still have a similar amount of proved reserves.

Another interesting stat is the country with the largest decline in proved reserves during the period 2000-2007 is Venezuela with 16 bil barrel decline. The country with the largest increase is Canada with 174 bil barrel increase. Two other countries, Iran and Kazakhstan, show increases of 46 bil and 24 bil barrels respectively.

Also, note that very little exploration is conducted in major oil producing countries of OPEC. Current proved reserves in Iraq, Venezuela, Kuwait and UAE are over 100 years' supply at current production rates. Saudi Arabia is 75 years at current production levels. Sensibly, these countries spend little or no money on exploration and proving additional reserves and instead focus on developing existing reserves and spending the money elsewhere in their government budget. Thus the most fertile areas of exploration in the world are not being explored. And yet world proved reserves keep growing.

[Fred]

Response to Pheba:
Agree with you on ethanol. That is primarily a political product rather than an energy market product.

Canada's oil sands were recently added to the world's proved oil reserves. The total amount at current technology and prices is equal to Saudi Arabia. This is discovery on a massive scale. Of course we have known it was there for 150 years, same with oil shale. It is changing technology and a higher price that has made it hugely profitable to produce.

I think your math breaks down in the face of human ingenuity because you probably do not have an input for declining cost of production or new discoveries in methods of production. Note my earlier post on oil shale. The United States has the world's largest supply, a hundred years' worth. If oil prices are sustained at the current levels so that investors can count on this price, and if oil sands and conventional oil and alternative energy do not make up the difference, this resource will be produced.

[Fred]

Response to Mark:
You are simply incorrect Sir. Worldwide oil production has increased every year since 1980. Major discoveries were made just this year in Brazil and the Gulf of Mexico (amazingly the Gulf of Mexico is still not played out after decades of intensive exploration. Why? Constantly improving technology). Western oil company investment hit a new all-time record last year and is expected to increase another 14% this year to another all-time record. The innacuracy of your premises of course casts substantial doubt on your conclusion of $1000 oil.