Peak Oil: World Crisis or More Crankery?

The announcement by the Organisation of Petroleum Exporting Countries (OPEC) that Venezuela’s proven crude reserves have risen to 296.5 billion barrels — even surpassing Saudi Arabia’s 264.5 billion barrels — has once again called into question the veracity of the “Peak Oil” theory.

According to the theory, “peak oil” is the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline.

It has its basis in the work of American geophysicist M. King Hubbert, who developed a bell curve predictor in 1956 which said that American oil supplies would peak between 1965 and 1970.

The theory’s most widely-known proponents, and upon whose work much of the current beliefs about peak oil are based, are geologist Kenneth S. Deffeyes, who worked with Hubbert at the Shell Oil Company research laboratory in Houston, Texas; and the now deceased banker Matthew Roy Simmons, whose company, Simmons & Company International, is a private investment bank based in Houston, Texas.

Both these “gurus” have however been shown to be spectacularly wrong before. For example, in February 2006, Deffeyes claimed that world oil production had peaked on December 16, 2005.

Obviously, with the new discoveries of a multitude of oil fields since 2005 (and not even counting last week’s OPEC announcement about Venezuela), this claim was hopelessly inaccurate.

Mr Simmons said in the “Financial Sense Newshour” programme broadcast in December 2008 that “Mexico’s ability to export oil will be over by the end of 2009″ (“Energy Roundtable,” December 13, 2008, prediction made at 35:50 of the interview). In reality, Mexico exported 1.59 million barrels of crude oil per day in May 2010.

Mr Simmons’ company took the unusual step of publicly distancing itself from its founder’s views on the topic.

In addition, many other industry experts have dismissed the entire peak oil theory as an exaggeration and an alarmist hoax.

The president of Royal Dutch Shell’s U.S. operations, John Hofmeister, for example, agreed that conventional oil production would eventually (and perhaps obviously) go into decline at some point, but dismissed Simmons’ analysis for being “overly focused on a single country: Saudi Arabia, the world’s largest exporter and OPEC swing producer.”

Hofmeister pointed out that there are large reserves at the U.S. outer continental shelf, and a vast supply in unconventional sources of oil such as the oil sands of Canada.

The Canadian oil sands — a natural combination of sand, water, and oil found largely in Alberta and Saskatchewan — contain one trillion barrels of oil.

Clive Mather, CEO of Shell Canada, said the Earth’s supply of hydrocarbons is almost infinite, referring to hydrocarbons in oil sands. Engineer Peter Huber believes the Canadian oil sands can fuel all of humanity’s needs for over 100 years.

Hofmeister has also claimed that if oil companies were allowed to drill more in the United States so that they could produce another 2 million barrels per day, oil and gas prices would not be as high as they were in the latter part of the 2000 to 2010 decade.

Dr. Christoph Rühl, Chief economist of BP, repeatedly uttered strong doubts about the peak oil hypothesis: “Physical peak oil, which I have no reason to accept as a valid statement either on theoretical, scientific or ideological grounds, would be insensitive to prices. (…)In fact the whole hypothesis of peak oil — which is that there is a certain amount of oil in the ground, consumed at a certain rate, and then it’s finished — does not react to anything… Peak oil has been predicted for 150 years. It has never happened, and it will stay this way,” he said.

So what is the truth?

The reality is that there is enough oil to last for a very long time, and that predictions of imminent collapse and shortages are simple crankery.

The only issues are extraction and distribution costs, but these are also subject to a vast array of socio-political pressures which can, and do, equally affect the price of oil.

Unnecessary wars in the Middle East, for example, have a far greater impact upon oil prices than any made-up “shortages” or imaginary crises.

This topic, like nuclear power, should be properly debated and discussed before being forced onto any political party at the whim of one person.

Crankery masquerading as “policy” must be prevented from being forced on an entire party through a process of formal study by experts, followed by consultation and discussion.

Let us hope that this lesson can be properly learned, and implemented, in the near future.

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  1. First class article – well done.

    The recent discovery off the coast of Brazil was recently upgraded in terms of its reserves. There are also believed to be enormous fields off the coast of the USA, which cannot be exploited due to a governmental embargo, for environmental reasons.

    The new methods of gas extraction determine there will be no energy shortage from that quarter, either.

    The reason for high energy prices are varied but one is the weakended strength of Sterling and another is the invisible charge that energy suppliers must add to their cost of supply, to reflect their requirement to purchase a given percentage from inefficient producers, such as wind farms.

    The peak oil possibility was always undefined and based loosely on some point in the future. Similar arguments occurred in the 1970s, in terms of a number of raw materials, which were then expected to run out in the ’90s.

    There is plenty of oil around; it becomes economic to extract it as prices rise (oil sands, as you explain). In the meantime, new discoveries tend to postpone the time when that point is reached.

    Unfortunately, the likelihood that the party will improve its performance and credibility in this and other areas has diminished over the past year, as the best members have deserted or become inactive, sidelined by the leader and the low calibre of those who now advise him.

  2. Good article, “peak oil” is exactly the same as “man made global warming” they both produce false panick and make a lot of profit,for the few.

  3. Oil is a finite resource and peak oil is real and it is more or less here, now. The announcement of new “reserves” does not invalidate the peak oil argument. Peak oil is as much as anything about flow rates. The oil reserves that the industry anticipates it will be drawing on is either difficult to get at i.e. deep water and/or of poor quality, i.e. tar sands, heavy sour crude which is costly to refine. It is taking more and more energy to produce a barrel of oil and therefore, the cost is rising. It is interesting to note that recent experience has show that oil at $147/barrel is the point as which demand is destroyed. The market cannot bear expensive oil. Given that energy is a primary good it is not possible to push to demand curve out. This bodes ill for the development of these low grade deposits.

    The website The Oil Drum is a good place to start one’s education. But this really is a no brainer: the limits to oil production were being discussed in the ’70s with publications like, “Limits to Growth”.

    Some quick off the cuff points:

    CEOs of oil companies are not going to admit that their balance sheets are collapsing. Of course, they are going to be bullish, their share prices depend on it. Having said that, Christophe de Margerie, CEO of French oil giant Total, has confirmed we are nearing peak:

    As for the old chestnut of tar sands and heavy oil: tar sands are bitumen. It requires huge quantities of natural gas and water to extract synthetic oil and of course the Canadians are going to play this up. Check out the effects on Alberta’s Athabasca River region:

    Mexico’s oil production is represented here:

    To end, here is a recent overview of the peak oil situation:

    The BNP needs to put its thinking cap on a start producing some detailed academic work on many important issues: energy; agriculture; health care provision; pensions; demographics; trade; monetary and fiscal policy (very, very important – is there anyone in the Party, or sympathetic who could, say, write an analysis of the implications of a return to the Gold Standard?); copyright/patents, etc. For it to be successful it needs talent, a commodity which has been scared off by a leadership mired from the outset in populism and the politics of the lowest common denominator; and the media’s relentless demonisation of all things nationalist.

  4. I cannot accept this blasphemy. To cast doubt on BNP policy is surely grounds for disciplinary action – if not immediate expulsion. Our leader – Nick Griffin – has repeatedly stated that Peak Oil is a fact – therefore it must be so. Our glorious leader has also stated that the party’s finances are sound, that there has been no “irregularities” concerning member donated monies, that the BNP is “Britain’s fastest growing party”, that the last weekend saw the most intense BNP campaign ever, that there was no cheating in the recent leadership challenge, and that the Trafalgar Club accounts are safe in his hands. If the chairman says such and such is true then it must be so, and all who claim otherwise are either useful fools, third columnists or Searchlight plants. I would like to comment further but feel I need to lie down in a darkened room, the effects of my recent frontal lobotomy appear to be catching up with me.

  5. Another excellent article Arthur,

    Apparently there are also enormous oil reserves under the ocean near the Falkland Islands.

    I have an uneasy feeling that our one party state which pretends to be a multy party democracy is planning a scuttle from the South Atlantic and will use the financial crisis as the excuse for this scuttle.

  6. Well said Arthur, but I suspect we will see artificial shortages, or ‘artificial’ price control, just like we say now with the 20% hike for consumers in electricity and gas prices.

  7. The basis of this article is flawed and misleading in my opinion.
    Global oil production has been on a plateau for the past six years, in spite of soaring prices and clearly rising demand from China and the rest of the developing world. In spite of the fact that the western world remains in recession and has seen deep cuts in demand due to direct economic destruction, Brent Crude is still selling for over $100/barrel.
    This is symptomatic of the fact that most new oil plays outside of OPEC are either deep (condensates), small, offshore or polar and therefore all very expensive to develop and maintain.
    UK oil production peaked in 1999. US production: 1971. Norwegian production: 2001. Venezuela: 1970. China: 2003. Indonesia: 1977. Brazil: 1986. Ecuador: 2004…the list goes on. Declining production of oil and soaring costs are now historical facts, which are directly linked to the decline of Western economic power.
    A few cranks will always argue that there is no real shortage of oil or anything else. Ultimately, this is true. Pay an infinite amount of money and you can ‘make’ a theoretically infinite amount of anything. But if the average man needs 10 gallons a week to keep his car going, how much can he really actually afford to pay? The more it costs, then the higher the price of everything that it is used to make or transport. The more we all collectively pay for essentials, the less money left over for servicing debts and buying consumer goods…i.e. banking crisis and recession, exactly what we have seen and are seeing right now.

  8. Griffin has been banging on about Peak Oil for a few years now. Has he been stifling dissenting views within the BNP on this topic? If so, why?

  9. Not sure I’d be taken in by this argument. I accept there is more oil out there but it will be prohibively expensive so there will be economic downturn and some chaos as a result.

    Not sure if I can take too seriously the “Borat” lookalike either!

  10. Good news for a change then. Time enough to ensure that real alternatives are invented, something that can only be possible if the mean IQ of a nation does not fall below critical levels. I do not know what that level is, but every Negro nation is incapable of, well, anything much. The spread of the Negro gene is perhaps the greatest threat to public IQ of all the problems we face:

    Back on topic, one obvious solution for the UK is deep tidal power – which is truly everlasting and constant – and could be combined with no-fishing nursery areas.

  11. See
    He tells of massive reserves of oil in Alaska.

  12. Hey, how about people walking a bit more, catch a train or a bus. Share a trip.

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