Has "Peak Oil" Peaked?

It is always interesting to watch what happens when the media latches onto a given issue and then, as the reality on the ground evolves — sometimes radically — the media fails to catch up to, or even monitor, the changes. This means the public is stuck with an outdated version of conventional wisdom which, even if it were true in the first place, is no longer so.

With oil prices falling by more than two-thirds last year before a slight rebound, the “peak oil” frenzy seems to have abated for now. Even its proponents must admit that high oil prices were driven in large part by a huge spike in demand (which has now fallen) and not just scarcity (whether real or sinisterly implied by those who hold oil reserves).

But even though the hysteria has died down, new technologies march on, quietly changing the rules of the debate (if, that is, there still were a debate).

Consider, for instance, this fascinating article by Guy Chazan from the Wall Street Journal‘s special report yesterday on energy. It’s called “Squeeze That Sponge.” Highlights:

Despite the engineering advances of the past century, nearly two-thirds of crude still gets left in the ground. So oil companies are raising the ante, investing billions of dollars in cutting-edge technology to increase the amount of crude they can tap. The potential rewards are huge: Raising the average recovery rate world-wide to 50 percent from 35 percent would boost the world’s recoverable oil by about 1.2 trillion barrels — equal to the whole of today’s proven reserves, the International Energy Agency says.

Such recovery measures aren’t pie-in-the-sky, either. Chazan’s article brims with specific examples; for instance:

One method of improving oil recovery could become a vital weapon against global warming: Some companies are pumping carbon dioxide into reservoirs to flush more oil out of the ground. The technique could become increasingly attractive as the world seeks to reduce greenhouse gases. Why not put the carbon dioxide to work, the thinking goes, rather than simply storing it in disused oil reservoirs, as is also done currently.

And:

BP is also experimenting with microbes that reduce the viscosity of heavy oil and help trapped oil move more freely. Another new technology: LoSal, a flooding technique that uses water with reduced salinity, unlike the salt water many oil companies use. BP has discovered that less salinity in the water can improve recovery rates.

This isn’t to say that oil is inexhaustible, nor that energy companies shouldn’t be pursuing more diverse and cleaner energy solutions. But they are. Consider two other articles in the Journal‘s special section: this one on tidal and wave power and this one on ultra-high-voltage power lines, which can move electricity further and with less line loss than regular power lines.

So many contemporary debates about energy are lame because the issue is a) heavily politicized; and b) fraught with too many adjectives and not enough numbers. That’s the very wise claim of a British physicist named David J.C. MacKay, whose new book Sustainable Energy — Without the Hot Air is a must-read for cutting through both the jargon and the pap. For instance:

People who want to promote renewables over nuclear, for example, say “offshore wind power could power all U.K. homes”; then they say “new nuclear power stations will do little to tackle climate change” because 10 new nuclear stations would “reduce emissions only by about 4 percent.” This argument is misleading because the playing field is switched half-way through, from the “number of homes powered” to “reduction of emissions.” The truth is that the amount of electrical power generated by the wonderful windmills that “could power all U.K. homes” is exactly the same as the amount that would be generated by the 10 nuclear power stations! “Powering all U.K. homes” accounts for just 4 percent of U.K. emissions.

So here’s a cheerful prayer for the future: let all our future energy debates be infused a bit more with the precision of MacKay and Chazan and a bit less with the effluvia of politicians and screaming headlines.


intricatenick

The improved oil recovery technologies have been around for quite some time. The fact that they are becoming more newsworthy and worthy of more economic investment actually tells you something about peak oil. These new technolgies only pay out well in times of high oil prices, since most of the companies selling this technology do it on the basis of a probalistic ROI.

I am interested in these microbes that make oil LESS viscous. How are they going about that when most microbes make oil heavier since the bugs usually go after the n-alkanes first and leave the more recalcitrant hydrocarbons alone?

Skip

"Even its proponents must admit that high oil prices were driven in large part by a huge spike in demand"

Really? Petro demand and population growth remained steady a 2-3% until the financial; crisis hit. That destroyed petro demand. New humans continue to accrue which may actually create a demand spike if the global economy recovers.

If you have a citation for the pre-financial crisis huge spike in demand it would interesting to see it.

Skip

miro slodki

stephen, the other factor in the peak oil spike of last year
was the flow of money looking for a place to invest
which at its peak was a marketplace of buyers where 80% of oil speculators were competing/driving up the prices for the 20% who actually needed the stuff to turn the wheels of commerce.

as covered in this post

What goes Up ...sometimes takes a different path coming Down
http://miroslodki.wordpress.com/2008/11/14/what-goes-up-sometimes-take-a-different-path-coming-down/

jonathan

One reason they're investing in methods to get more out of what they already have is that prices aren't high enough to justify the massive costs of exploration.

And good luck with making the debate rational. That would be a first.

Bill

Not to mention that nuclear power plants run 24/7 and are remarkably reliable, while wind power's output is unpredictable and much higher off-peak (at night) when the energy is not as needed.

John

Ditto with Skip. The 'huge spike in demand' is just population growth and maturation of developing markets, factors that won't go away.

Oil is obviously peaking. But if people react by weaning themselves from it (which they actually seem to for this brief moment) then no big deal if it does. I feel pretty confident that when demand starts to rise again, when we recover from the present crisis, prices will go right back to the stratosphere, though I remain confident that people will adjust. Our lifestyles waste a lot of oil; we'll just have to change them.

Peak oil assumes people will spend more on exploration and technological advances as the oil starts to run out. The point is just that, to paraphrase Wesley Snipes, you'll be ice-skating uphill.

Grant

This is a more general problem with the predominance of journalists and other non-experts as leading public intellectuals these days. A prime example is Thomas Friedman's bliovating about globalization. If you ask many historians and sociologists who study global economies and trade throughout human history you get a much different picture than Friedman would have you see. I recommend the work of people like Giovani Arrighi and Andre Gunder Frank as a counterweight to this idea that global economic interconnectedness is a recent phenomenon associated with neoliberal capitalism.

G Lazman

Being a scientist myself (Biotech), I'm always impressed but never amazed by scientific advances, since they have been occurring at an ever-increasing pace over the course of my lifetime (49 years). And though I commend those responsible for the advances, it is still somewhat beside the point. However you slice it (and I'll leave the environment/climate change argument out of this for the moment), the longer the US and its peaceful allies remain dependent upon oil as our main source of energy, we continue to cede a great deal of power to dictators (Putin included) and religious extremists, thus granting a few enemies the potential to wreak havoc on our economies and security. The breakthroughs described in the article above will only prolong this situation.

econobiker

As Grant #7 opins:
"This is a more general problem with the predominance of journalists and other non-experts as leading public intellectuals these days."

I would add that journalists are not even the news seekers and reporters of yesterday but closer to "talking heads" and "blurb / soundbite" generators.

Michael F. Martin

People like Donella Meadows have great insight into the systems dynamics associated with consumption of scarce resources. It is an under-appreciated point, for example, that an existing institutional structure cannot be reproduced indefintely at successively larger scales -- the very condition that must be satisfied for compound growth.

But the role of market prices in permitting institutional structure to adapt to new constraints on growth was under-estimated by this group, which might broadly include Paul Ehrlich and the peak oil advocates of late. Organizations have both spatial and temporal dimension, and institutions such as market price signals permit for organizations to integrate and disintegrate, speed up or slow down, and so on to match the fluctuations in demand.

Of course, market price signals don't *always* reflect all of the costs and benefits associated with a given organizational activity. But that's why we have government.

Read more...

James

Interesting discussion of peak oil and energy prices. Presentation available here:

http://www.simmonsco-intl.com/SearchResult.aspx?ID=1214
http://www.simmonsco-intl.com/SearchResult.aspx?ID=1163

These are from investment bankers for the oil industry, but offers some very interesting figures and perspective on peak oil.

Ann

The peak oil situation isn't that we're running out of oil. We're running out of cheaply acquired oil. As one person put it, "We've got plenty of oil left--at $200/barrel."

Jeffrey

No one critiques the exaggeration out of fear that binary thinking will pit people against clean energy. Of course... they're probably right. Most people are trained to think in zeroes and ones (or Red and Blue).

C. Larity

"Demand is the factor in driving housing prices so high, and not a speculative bubble"- National Association of Realtors, 2005-2007

"Demand is the factor in driving oil prices so high, and not a speculative bubble"- Oil industry "experts", 2008

Ian

@ intricatenick -

Microbe action is how the massive reserves in Alberta, Canada became bitumen and are such a hassle to recover.

Find a cheap way to thin the bitumen and you will be a rich person indeed.

Better_By_Design

As a former petroleum engineer, the whole rigmarole about oil 'reserves' and hue & cry about 'peak oil' amuse me at the same time they frustrate me.

Simply put, oil companies are ALWAYS looking for more ways to literally squeeze additional oil out of a stone - it's always been in their economic best interests to produce more oil out of existing wells - because finding new oil fields is always risky, and increasingly, costly. CO2 floods are not new, but the underlying input costs may change if CO2 disposal becomes a lucrative business, as opposed to a costly input.

As far as peak oil goes, I might be surprised in 50 years is it turns out that oil fields are magically regenerating, but the weight of current experience is that we will run out... only a matter of when. And of course, whether our global economy is so dependent on petroleum that 'peak oil' as a phenomena is apocalyptic or merely very troublesome.

Read more...

Jeffrey J. Brown

My comments about the WSJ article are shown in the following Energy Bulletin link. Scroll down to the third article "Squeeze that sponge."

http://www.energybulletin.net/node/48786

As I noted, a lot of non-technical people probably came away with the impression that two of the areas discussed in the WSJ article, Alaska and Norway, are doing great. 'Fraid not. Alaskan production has fallen from 2.0 mbpd (million barrels per day) in 1988 to 0.7 mbpd in 2007, while Norway is down from 3.2 mbpd in 2001 to 2.2 mbpd in 2008. Enhanced recovery techniques have simply slowed the rate of decline.

In any case, Lower Prices do not necessarily equal Higher Production. Relative to either the May, 2005 production rate, or the average annual 2005 production rate, EIA (crude + condensate) data show a cumulative shortfall between what we would have produced at either 2005 rate and what we actually produced, through 2008. In other words, oil prices went up to balance demand against a cumulative shortfall in supply.

Oil prices have recently fallen because of lower demand--and not because of higher prices.

Also, we have seen measurable declines in net oil exports worldwide, relative to the 2005 rate. Our middle case is that the top five net oil exporters will have shipped about half of their post-2005 cumulative net oil exports by the end of 2014, with the other half being shipped over the next 20 years or so. For more information, do a Google Search for Net Oil Exports + Jeffrey Brown.

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Omri

The price spike of 2007 was not caused by any spike in demand. Demand was rising at the same rate for a long time.

The price was because demand hit against wall. And that wall can be seen in the production figures that plateaued before 2007, and have stayed plateaued ever since. When supply becomes that insensitive to price, you might be at peak oil.

Andrea

Skip & John -

I decided to mentally edit his comments about the spike in demand to be about the spike in trading demand, not actual demand. There were definitely speculative contributions to the price of oil, manipulation along somewhat of a parallel to housing prices.

Jeffrey J. Brown

Edit:

Oil prices have recently fallen because of lower demand-and not because of higher PRODUCTION.