Not So Peak Oil?

Excerpt from April 30, 2005 article in The Economist summarizing the positions of oil 'pessimists' and 'optimists'.

Published: 26-May-2005

"The United States Geological Survey did a comprehensive study in 2000 and concluded that such a peak was at least two decades off. The IEA broadly concurs, arguing that oil supplies will not become constrained until after 2030, provided the necessary investments are made. However, some analysts disagree sharply.

"The leading lights among the petro-pessimists are Colin Campbell and Jean Laherrère. In a much-quoted article in Scientific American in 1998, they predicted that the global Hubbert's peak would be reached around now. There has been a flood of gloomy books with such titles as “Out of Gas” and “The End of Oil”. And Mr Simmons, the petro-pessimist investment banker, is bringing out a book in May that questions the sustainability of production in Saudi Arabia.

"In essence, the pessimists say that there is a fixed amount of oil in the ground to be found, and that mankind has found it already. According to Jim Meyer of the Oil Depletion Analysis Centre, a British think-tank, “Discovery clearly peaked in the 1960s. We are out of North Seas.” He argues that annual oil consumption has exceeded new discoveries since the 1980s, indicating that the world is running down its stock of “found” oil, and reckons that 18 major oil-producing countries, currently making up about 30% of world output, are now past their peak.

"Given that oil companies have poked and prodded the entire Earth (save Antarctica) for over a century, goes the argument, there cannot be any more “super-giant” fields such as Saudi Arabia's Ghawar, which alone produces 5m bpd. Mr Campbell has neatly summarised this view of the problem: “Understanding depletion is simple. Think of an Irish pub. The glass starts full and ends empty. There are only so many more drinks to closing time. It's the same with oil. We have to find the bar before we can drink what's in it.” ...

"Dozens of similar examples from around the world added up to defy Mr Campbell's prediction of a global Hubbert's peak by now, which plainly has not materialised. Indeed, even the legendary Hubbert did not get it quite right. His forecast for the American production ignored the vast quantities of oil that lie under the deep waters of the Gulf of Mexico. That may seem an unfair critique, as he had no way of knowing about the wave of offshore drilling technologies that have become available in the past decade. But that is the point: today's pundits cannot foresee tomorrow's innovations.

"Petro-optimists say the future for oil is bright. Mr Odell argues in a recent book, “Why Carbon Fuels Will Dominate the 21st Century's Global Energy Economy”, that conventional oil will not peak until nearly mid-century, and that unconventional oil resources such as Canada's tar sands will peak only at the end of this century. Morris Adelman of the Massachusetts Institute of Technology has even argued that the “amount of oil available to the market over the next 25 to 50 years is for all intents and purposes infinite.”"

A good point the Economist also makes is that we are still obsessed with the ability of the "Seven Sisters" to find oil. However, recent evidence shows that the best discovery rates are being achieved by service firms and small companies.

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