Feeling somewhat peakish? Has Peak Oil happened?

PETROBRAS just announced an offshore oil find that could boost Brazil’s oil reserves by 40%. Vast oil reserves remain largely untapped under Iraq. High oil prices are encouraging oil companies to activate old oil fields and develop expensive unconventional oil and gas plays (sands, shales, coalbed methane, etc.).

Does this mean that Peak Oil (the point in time at which maximum global oil and gas production is reached) can be delayed a few more years? It depends who you ask.

What is Peak Oil?

In a nutshell, Peak Oil or Hubbert’s Peak is a prediction model about the future size of finite oil reserves and when they might start into irreversible decline. In 1956 Shell Oil geologist M. King Hubbert predicted that oil production in the Continental US would peak in the early 1970s and decline forever after. This prediction, delivered at an oil and gas conference in San Antonio, became known as the Peak Oil model, or Hubbert’s Peak.

While the general thrust of the model (the eventual decline of available fossil fuels) is almost universially affirmed, advocates can be found that support three conflicting positions about this prediction: 1) Hubbert was right and Peak Oil has already happened, beginning in the 1970s; 2) Peak Oil is happening right now; and 3) Peak Oil can be delayed to the 2020s, 2030s, or beyond. 

In the first camp are some Peak Oil doomsday scenarios played out on sites such as Kerala, India-based Countercurrents.org whose contributors see oil depletion accelerating over the next 40 years while population and energy demand surges, resulting in massive societal disruptions, the collapse of industrial civil society, and mass famines. “Peak Oil and Famine: Four Billion Deaths” screams a Hobbesian headline from Peter Goodchild that predicts a wretched life in a post-oil world as seemingly solitary, poor, nasty, brutish, and short. Blimey!

In the second camp — it’s happening now — are some writers at The Oil Drum. The recent run up of oil prices to almost $100 a barrel is not just about refining bottlenecks and geo-political tensions in oil-producing areas, but is also about tight supply and the belief that OPEC may be fibbing about the true nature of its oil reserves. Analyst Mathew Simmons asks, “How much oil is there, really, under the sands of Arabia?” Good question. His answer, a lot less than the Saudis say they have.  Not good. 

But all is not lost. In the third camp are the folks at Cambridge Energy Research Associates (CERA), led by Pulitzer Prize-winning author of The Prize: The Epic Quest for Oil, Money and Power, Daniel Yergin . CERA believes the Peak Oil doomsayers have based their analysis on faulty data and the world has 3.74 trillion barrels available, three times the level estimated by the prophets of Peak Oil. To drive this analysis home it points out that Hubbert’s model, while elegant, simple, and persuasive (following a Bell curve logic) is flawed in how it has actually played out over time. In 2005 oil production in the Lower 48 states was 66% higher than Hubbert had projected. Whew, that’s a relief!

I’m going with Yergin. In the immortal and possibly apocryphal words of Willie Nelson, “Who are you going to believe, me (Yergin’s right) or your lying eyes (ConocoPhillips and TOTAL predicting tight oil supply from here on, almost $100 a barrel oil, and close to $4 a gallon gasoline)?”

Willie doesn’t lie.

It’s more “On the Road Again” (albeit in a smaller and more gas-efficient vehicle) than “Turn Out The Lights, The Party’s Over.”