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By Robert Rapier on Mar 26, 2007 with no responses

Is Peak Oil a Belief, Theory, or Fact?

One of the comments by KingofKaty that followed my essay Peak Oil and the Lunatic Fringe brought up something that is worth addressing, because it comes up pretty frequently. The phrase of interest was “you believe in peak oil.” I have heard peak called a belief , a theory, or just an observation. In fact, all three descriptions apply depending on the situation, but it is important to clarify what’s what. And I want to make it clear that even though I “believe in peak oil”, it is not in the same context as one would “believe in the tooth fairy.”

Peak Oil as Observation

Peak oil is an observation, in that we have observed many regions of the world see their oil production rise, sometimes plateau, and then fall. Texas, for instance, saw oil production peak in 1972 at 3.45 million barrels per day. At that time, the average well produced 20.6 bbl per day. Today, oil production in Texas – despite very high prices – is about a million barrels per day. The average well today produces about 6 barrels per day, and proved reserves are about a third of what they were in 1972.

Likewise, the Lower 48 peaked in 1970, and production has fallen by more than 50% since then. We can go through the same exercise for many countries. So, this is peak oil as an observation. It is the fact the oil reserves are finite, and therefore eventually production will peak and start to decline. At some point, production for the entire world will peak and decline. In fact, world production did peak in 2005, and that leads to the “theory” and to the “belief” aspects of peak oil. This has been the topic of many of my recent debates: Is the 2005 peak, “The Peak”? That’s where the believers come in.

Peak Oil as Belief

The “believers” of peak oil are generally people who believe that peak is now, and this is the beginning of the end of the world. For them, the debate is over – they can only see evidence in favor of “peak now.” If you argue with them about this, they sometimes lash out irrationally. I guess it is somewhat understandable because some of these people were not entirely rational in the first place.

While I have never had any of these sorts of issues with Matt Savinar – who does post at The Oil Drum – a read through his site Life After the Oil Crash will give a flavor of the kinds of things the believers, many of them “Doomers”, believe. From Matt’s site:

The effects of even a small drop in production can be devastating. For instance, during the 1970s oil shocks, shortfalls in production as small as 5% caused the price of oil to nearly quadruple. The same thing happened in California a few years ago with natural gas: a production drop of less than 5% caused prices to skyrocket by 400%.

It’s not just transportation and agriculture that are entirely dependent on abundant, cheap oil. Modern medicine, water distribution, and national defense are each entirely powered by oil and petroleum derived chemicals.

In addition to transportation, food, water, and modern medicine, mass quantities of oil are required for all plastics, all computers and all high-tech devices.

If you read through Matt’s site, it can be pretty scary. It is doom and gloom, mass starvation, and is what most people probably think of when they hear “Peak Oil.” But what Matt describes as an end-of-the-world scenario where billions of people die off is a belief. And I am sure that some of the believers are the same ones who were locked up in their basements with 6 months worth of food as 1999 rolled over to Y2K. And while I think the peaking of oil production will be unprecedented, I am not of the belief that it will spell doom for most of humanity. A major shift in our lifestyles? Yes. The end of several billion people? No.

The problem for many who are very concerned about oil depletion is as odograph said following my earlier essay: The “extreme doomer fringe” owns peak oil. That is why my friend Nate Hagens has suggested that we stop using the term and start talking about resource depletion. Peak oil has come to be associated with fringe elements, and just as soon as some people hear you mention the term that is the image they conjure up.

Peak Oil as Theory

However, there are very serious scholars who believe that Saudi Arabian (and world) oil production is at or past peak. For an example of this, see Stuart Staniford’s comprehensive essay Water in the Gas Tank, where he tries to read the tea leaves of what’s going on in Saudi, and concludes that they are actually in decline. (Read the comments following the post where you will see a decent sampling of believers – “we can easily start backcasting the models using 2004-2005 as a known peak“; what you have is people who are readily willing to accept that Saudi has peaked – even though Stuart admits that his work is not conclusive).

I disagree with Stuart’s assessment, and made my case in an essay also posted to The Oil Drum. I believe that the Saudi declines are voluntary, and that they will raise production later this year. But Stuart, a Ph.D. physicist, is no dummy. He has made a compelling case; I just think there are some aspects he is overlooking. But these are the debates that I would throw into the “theory” category. They are attempts at explaining what is actually going on in the world of oil production. And of course the theoretical aspect attracts lots of kudos from the believers – as long as you say what they want to hear.

As an aside, on the topic of scholarly attempts at reading the tea leaves, there was a recent Ph.D. thesis by a student at Uppsala in Sweden – Fredrik Robelius – that you can find archived here (3.7 meg PDF warning). Besides a very well-researched treatise on oil production, his conclusion was that world oil production will peak some time between 2008 and 2018.

What I Believe

Peak oil for me is an observation, not a belief. It has been observed in country after country. I believe that when peak happens on a worldwide basis, there will be a lot of hardship. The U.S. is especially vulnerable because the country is highly dependent upon cheap oil. I believe that Fredrik Robelius is probably correct; that world oil production will peak in the time frame he mentioned. The wild card in all of this is Saudi Arabia. If they are telling the truth about their reserves, then peak won’t happen for quite some time. They are the key, which is why so much time and effort is spent in trying to figure out the situation there. And while I am not willing to accept the Saudi party line on their reserves, if you go back to 1982 when their books were still open and subtract off the production since then, you get more remaining reserves than you should if the imminent peakers were correct. And that is assuming they haven’t discovered a drop since then. I covered this in an essay here.

I also believe that even if the world doesn’t peak for a few more years, supply and demand will remain very tight. I think we are in a permanent era of higher oil prices. If you look at expected demand growth, and compare that to the expected production that is forecast to come online, I think my Peak Lite scenario will play out over the next few years. Any new capacity is going to be consumed by fast-growing demand.

But I think when oil production does peak, we will muddle through and humankind will persevere. It will be a big adjustment. But if the U.S. can learn to live with the kind of per capita energy consumption the rest of the world uses, then oil supplies will last quite some time. It is not that difficult to make do with less. My own fossil fuel usage is probably 1/4th that of the average American. But I am quite comfortable. I am just very conscious of my energy consumption, and I don’t waste energy. If we all learn to be more careful with our energy consumption – and I think higher prices are going to force that on us anyway – then the doomers will all be wrong about the consequences of peak oil.

But I have also come to the conclusion that the fringe elements own the rights to “Peak Oil.” I am going to transition to using the terms oil depletion or resource depletion in the future.