Peak oil pundits are at work again. The downward journey has begun; they are endeavouring to hammer out, one way or the other. And the setting for this new push is the Sheraton Denver Downtown Hotel, where the proponents of the theory, under the umbrella of the Denver-based Association for the Study of Peak Oil & Gas-USA (ASPO)— assembled last week to trade proof and seek solutions to the issue at their much heralded, annual event — the peak oil conference.
“Up until now, technology has delivered dazzling results to America and the world economy, in delivering oil from all around the world despite increasingly challenging environments,” said Dave Bowden, executive director of the ASPO. “The harsh reality is, despite the best efforts of amazing technology, they’re not finding as many of these big fields anymore.”
ASPO insists world production of the vital liquid is at, or just a couple of years shy, of its absolute high point. Once oil companies begin to squeeze less and less from the ground each year — while demand skyrockets in fast-emerging China — spot shortages will blow up prices, shock economies and destabilize governments.
One of the more visceral arguments of peak-oil supporters shows production already past the high in dozens of nations — the lower 48 in the US, for example, passed their peak in 1971, Egypt in 1993, etc. As each nation goes, so goes the world, peak-oil theorists’ claim, and oil companies won’t be able to keep boosting annual output past about 2015 at the latest.
World reserves, meanwhile — the pool from which that annual production is drained — are being depleted by about 4 percent a year, ASPO says. That leaves the world margin of error far too small, and vulnerable to disruptions such as rebel attacks on Nigerian pipelines or disputes with Iran about nuclear weapons and oil supplies.
And the debate moves on.
Oil at $200 a barrel is not far off and with it a new world order that will see the demise of globalization, predicts the well-known Canadian economist Jeff Rubin in his book: “Why Your World Is About To Get A Whole Lot Smaller.” Rubin believes recent low oil prices are directly related to the ongoing recession and will surge once economies start bouncing back.
The UK-based Energy Research Centre is also cautioning that there is a significant risk that global production of conventional oil could “peak” and decline by the year 2020. And despite pointing out, that the debate about peak oil is a polarized one, the report states that the 10 largest oil-producing fields in the world are all in decline, with governments exhibiting little concern about oil depletion.
For argument’s sake, at this juncture, one could definitely have questions about the data available with the Energy Research Centre and its source. After all countries and companies are notoriously reticent about oil reserves. Some of the super giants are found in this part of the world. Ghawar is by far the largest, producing for decades over a half a million bpd. And no one else except Saudi Aramco has access to this giant.
And interestingly Saudi Aramco, the operator of the reservoir, so important to the global demand — supply equation, firmly denies that Ghawar’s production is on the decline. There are experts within Aramco and beyond too, who believe with the induction of new and innovative technology, the uptake from Ghawar could even be increased. Aramco has been Ghawar’s midwife, and if it tells something about its current state, it needs to be taken seriously. Those commenting with little access to operating scenario could at best be naive.
All these reports are pouring in at an interesting phase. The International Energy Agency projects now that the global oil demand is to recover at a faster pace than previously expected next year due to a more optimistic economic outlook, averaging 86.05 million bpd. And this too depends on whether the current recession is ‘V’ shaped and not the much feared double dip ‘W.’
Skeptics of the peak oil theory — and there are plenty of them — do not seem convinced. The US Energy Information Administration insists that peak world oil production is not imminent but more likely 20 to 40 years away.
When the world was running out of whale oil for lighting in the 1800s, economies moved to kerosene, Michael Lynch, a Massachusetts-based petroleum supply analyst said. If oil stocks do indeed become more scarce, an abundance of natural gas will become one of the transition fuels for developed nations.
Daniel Yergin, the author of “The Prize: The Epic Quest for Oil, Money and Power” making a mockery of the entire debate says it is actually the fifth time that the world has supposedly “run out” of oil. The first time was in the 1880s; the last instance before this most recent time was in the 1970s. And then he highlights a careful examination of the world’s resource base — including by his own firm — of more than 800 of the largest oil fields, indicating that the resource endowment of the planet is sufficient to keep up with demand for decades to come. He however, clarifies that any number of “above ground” risks and obstacles, from government policies that restrict access to tax systems to civil conflict to geopolitics to rising costs of exploration and production to uncertainties about demand, can stand in the way of bringing the resources on stream.
And an increasing part of the new petroleum will come in the form of so-called “unconventional oil” — from ultra-deep waters, Canadian oil sands, and the liquids that are produced with natural gas.
Many others don’t agree with peak oil pundits. Issues are above ground and not beneath so let’s finally agree too!
