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Tuesday, January 14, 2014

PEAK OIL: What's the Story for 2014?

I encourage guest reporters to this blog site.  The following is a contribution from Zeke Iddon:

Peak Oil: What’s The Story For 2014?

It’s been a little while since peak oil was last discussed on Planet Earth and Humanity, and since the icy grip of 2014 has firmly taken hold, it feels like a good time to recap on what we know about this fairly nebulous issue.

Let’s begin with a quick recap for the uninitiated. The term ‘Peak Oil’ was coined by geophysicist Marion King Hubbard, who, among his many great contributions to the physical scientists, offered up the prediction that U.S. oil production would start to decline around the late 60s.

He wasn’t wrong.

Oil production did indeed start to decline right on cue, and U.S. production dropped off just as sharply as it had risen in the half-century preceding the boom.

So why hasn’t a global state of Peak Oil already been declared? For the same reason different oil-producing nations have had their own  - very disparate - predictions as to when the black gold will run out: Hubbert’s predictive model was only ever designed to work on very specific regions, not on a global scale.

Throw into the mix the oft-overlooked fact that Hubbert was concerned with petroleum production rather than the myriad other oil derivatives (many of which didn’t exist back when Hubbert made his predictions back in 1956), and it’s easy to see why the story quickly gets muddy.

If we instead look at crude oil (incorporating lease condensate) production around the world, there has been an upward swing in production over the last decade or so:

World production of crude and lease condensate oil. Y axis represents thousands of barrels per day.

So Peak Oil is A Long Time in the Coming, Then?

Unfortunately, no. And nor does the data undermine Hubbert’s bell-curve of oil production in specific regions, excluding the affect of advanced drilling technology squeezing more out of these regions. Speaking of which, a common charge against Peak Oil is that we’re always finding new reserves, but as we can see from the above, this isn’t really true – we’re just eking out different more oil and different derivatives from existing supplies. In fact, only around 8% of the US proved reserve growth in 2011 came from new field discoveries:

There is also the possibility of synthetically creating more oil through the Poly2Petro process – namely, turning discarded plastic back into oil – but barring a widespread adoption of this system, it’s more a solution for solving the world’s plastic waste problem than for subsidizing oil production efforts.

But back to the above line graph. The obvious talking point in this is that there are some heavy troughs here, and 2013 may mark the start of another to come – things have been heading south over the last 18 months for which we have data; we produced 75,936 TBPD (thousand barrels per day) in September 2013, compared to 76,026 TBPD of February 2012.

And we can do one thing to the figures which dramatically changes the rosy picture which the total global production graph portrays – exclude the performance of the U.S. and Canada. Contrast the last few years of the above graph with the tail end of the one below:   

In a nutshell, kick away the crutch of North America and we end up with what looks startlingly similar to the beginnings of a Hubbert-esque bell curve:

Again, not particularly. The only thing propping up U.S. and Canadian oil production figures – and indeed, those of the world – is shale oil. This type of petroleum is remarkably difficult to obtain (in an economically viable manner), and the reason two-thirds of all shale oil is produced in North America is that drilling rigs elsewhere aren’t, for the most part, capable of getting to it.

As such, the shale dream isn’t something a gambling man would be wise to bank on in the long term. Once the shale becomes too difficult to get at, it’s anyone’s guess as to what will happen to the global market though the EIA has issued a prediction that the U.S. crude output will grow to 9.5 million barrels per day by 2016 before growth starts to slow and reach its peak of 9.6 MBPD by around 2019.

As the saying goes, there are lies, damned lies, and statistics. There are people on this earth who are paid astronomical sums of money by petroleum companies to skew figures in a more palatable light, and while the numbers do indicate that we’re currently experiencing some luck when it comes to keeping one step ahead of peak oil, the hard fact remains that oil is very finite resource.

We may not be any clearer on when Peak Oil will arrive, but that doesn’t make its arrival any less inevitable. And really, the ‘when’ isn’t the important question…

… it’s the ‘what’ we’re going to do in the mean time that deserves greater focus.
You can only use oil once.”

     - M. King Hubbert


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