Peak oil? Not any time soon

We’ve heard for decades that there is a phenomenon known as peak oil. The Green taliban all want us to change our ways because apparently oil is going to run out soon.

That argument wasn’t really gaining traction so along came climate change to scare us into using alternative fuel sources.

However, peak oil is still referred to by the wombles…the only problem is we are way past when it was predicted to be and we are still finding oil.

Oil is more plentiful than you can imagine. And we keep figuring out easier and more economical ways to get it out of the ground.

In 1938, the famous geologist M. King Hubbert came up with the concept of peak oil, which is defined as having extracted half of the recoverable, conventional oil reserves. After that, oil production declines and cannot keep up with growing demand as the population continues to rise.

In Hubbert?s time, most of the conventional oil reserves had already been discovered. Hubbert went on to predict that U.S. production would peak in 1969, and it did appear to peak in 1970. World reserves were supposed to peak around 2010 (see figure). ?

However, about 20 years ago, the industry really leapt forward on the technologies to find oil and to extract it. Particularly fracking.

This changed everything.

BP?s Spencer Dale summed it up nicely, ?For every barrel of oil consumed over the past 35 years, two new barrels have been discovered.? And this shows no sign of slowing down any time soon. Peak oil has probably moved out a hundred years or more.

Right, so not really a problem then, is it?

Drilling into unconventional sources like oil and gas shale is quite different, more like tiramisu ? the petroleum is in many layers that have to be individually tapped using horizontal drilling and fracking methods to open up the rock.

Saudi Arabia has a bunch of really big jelly donuts. The United States has lots of tiramisu, plus some pretty good jelly donuts as well. But we keep finding more tiramisu.

Hydraulic fracturing, or fracking, of these rocks has allowed us to recover gas and oil from these tight rocks, and horizontal drilling, as well as drilling many-directional strings from a single well, have allowed pinpoint targeting of these deposits, making recovery economic. If the crude is think and tarry, and won?t flow at all, like the Alberta tar sands, it must be removed by using heat, steam or solvents and mixed with more fluid crude for transport.

Unfortunately, the environmental cost of unconventionals is even greater than for conventional sources.

World oil and gas reserves are estimated in four ways:

1) those that are economically recoverable (this is what is used most often), also known as proven reserves,

2) those that are technically recoverable (we think we could recover these in the future),

3) total or in-place reserves (the total amount of oil and gas we know of but know we can?t get it all out yet), and

4) Unknown reserves (those we do not know about yet, primarily under ice sheets).

We still only use the first two to estimate global oil reserves, and so they keep changing as we develop new technologies and find new unconventional reserves.

Saudi Arabia was so concerned they initiated a price war hoping to drive the shale oil producers out of business. But the Saudis forgot about market forces. Shale oil producers got leaner and meaner, they are still in business but at a lower production rate.

Initially, this oil war made the U.S. shale oil industry leaner and meaner as the big guys like Exxon bought out the small guys going bankrupt. But eventually, even the big guys had to decrease shale oil production, and even some conventional reserves have been closed down.

So the oil war seems to have worked out for the Saudis and OPEC. According to Chris Helman of Forbes, the Saudi?s tactic has brought a halt to the shale boom and has also potentially scared off a whole generation of exploration into the deepwater and arctic. ??75% of America?s drilling rigs are in mothballs and fracking crews have been tossed to the wind.?

Oil prices are back up over $50/bbl and holding steady.

The unconventional oil is still there, it?s just that OPEC will not make it very economic to recover until we really need it.

But certainly, Peak Oil is no longer in sight.

Next time you hear a green womble banging on about peak oil, smile nicely at the stupid person.


– Forbes