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By Staff on Apr 29, 2010 with 2 responses

Why it doesn’t matter that there’s ‘plenty of oil left’

Peak oil felt like a very real and immediate possibility around the time of the oil price peak in mid-2008, but the “oil-is-here-to-stay” crowd has enjoyed something of a resurgence since then.

Oil prices are down (though back to more than twice the low seen after the financial meltdown). Furthermore, 2009 was a banner year for new oil field discoveries — more than 10 billion barrels in potential reserves of black gold, which was the most found since 2000. Then there’s the fossil fuel riches of the Arctic that will likely be opening up in years to come, thanks to climate change.

Don’t get too excited, though. While there might be plenty of oil left below the surface of our planet, it won’t be enough to prevent an oil shock in the short-term future. Here’s why:

  • What’s left is deep, hard to drill for and expensive to get at: BP’s Tiber find in the Gulf of Mexico, for example, lies below more than 3/4 of a mile of water … and then below an additional 6.6 miles of ocean crust. There are no more easy-to-reach, gushing Spindletops awaiting us just one-fifth of a mile below dry land.
  • With rising technological challenges comes rising risk: The Deepwater Horizon rig that exploded in flames and then sank in the Gulf of Mexico last week was drilling a well nearly 3 1/2 miles deep below the ocean at the time. The disaster, which has caused a massive leak of oil into the environmentally sensitive and economically important Gulf, is being blamed on a blowout preventer failure. Blowout preventers are needed to cope with the steep pressures and temperatures encountered while drilling such deep wells … and the risks of them failing grow ever higher the deeper we drill. (Ironically, it was the Deepwater Horizon responsible for last year’s Tiber find, courtesy of the deepest well ever drilled.)
  • One word: rust: Oil industry expert Matthew Simmons (pdf) has an expression for the oil industry’s looming infrastructure problem: “Rust never sleeps.” The combination of ageing, rusting oil and gas pipes — coupled with a high-skill workforce that’s also ageing — create “almost insurmountable obstacles” for the industry, he argues.
  • Price volatility: OPEC ministers now say an $80 barrel of oil is about the right price to keep the fuel flowing. (It’s trading at around $85 today.) That might be fine for OPEC, but it puts a bit of a pinch on a global economy that just over seven years ago was used to a price just a third as high. Bring the price much higher, and the economy can’t cope — people stop spending on other purchases to free up cash for the oil-related essentials, which include not just fuel but food. Bring the price much lower, and the energy companies lose their incentive to invest in new exploration, much less infrastructure upkeep and development of non-traditional fuel sources like oil sands, which require a high oil price to justify.

Government officials and business leaders, take heed: you’d be a lot better off tuning out the soothing reassurances from OPEC and the oil giants, and tuning in the warnings being given by everyone from Virgin’s Sir Richard Branson and the UK Industry Task Force on Peak Oil & Security.

As the Task Force noted upon releasing it latest report earlier this year, “Our message to government and businesses is clear. Act now. If we don’t, we run the risk of a return to the oil price shocks of the 1970s and 2008 with all the inherent uncertainty and trauma that brought.”

Anybody listening?

The article, “Why it doesn’t matter that there’s plenty of oil left” , was reproduced with permission from Greenbang.

  1. By CEA on May 10, 2010 at 10:07 am

    The events of the oil spill are tragic and the up most concern right now is getting it taken care of. What could be even more tragic, as the author implies at the end of this article, is if this stops us from developing our own domestic resources. Oil prices are only going to continue to increase. We run a very real risk of once again colliding with the thin volatility of the oil market which could strike at our economy again. We all want to get away from fossil fuels, but we need to make sure we do this is a constructive manner and one that makes good economical sense.
    Want to learn more about balanced energy for America? Visit http://www.consumerenergyalliance.org to get involved, discover CEA’s mission and sign up for our informative newsletter.

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  2. By Robert Rapier on May 13, 2010 at 6:36 pm

    I predicted when this first happened that it would at a minimum seriously slow down development. Others are coming to the same conclusions:

    http://preview.bloomberg.com/news/2010-05-13/bp-gulf-spill-delays-offshore-fields-holdings-billions-of-barrels-of-oil.html

    RR

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