Is peak oil pure fiction?

Technology keeps on making more and more crude available—the oil era is far from over. Prices have tripled in two years to over US $70 a barrel and there’s talk of $100 by the year end, so the energy world is doing what it usually does at times like these—talking about oil running out and global economic chaos.

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By  Nicholas Wilson Published  June 6, 2006

Comment|~|comment2.jpg|~||~|Prices have tripled in two years to over US $70 a barrel and there’s talk of $100 by the year end, so the energy world is doing what it usually does at times like these—talking about oil running out and global economic chaos.

If one listens to it for long enough one could be forgiven for thinking that soon we’ll all be riding donkeys.

Despite the apocalyptic forecasts we are not running out of oil and gas.

From an American point of view we are merely approaching what might be its seventh energy crisis of the past 150 years—the first one was the great coal scare about the industrial age coming to an end due to impending shortages of coal. Today there is still so much coal that people talk about its supplies lasting for centuries.

The crises that followed shared the same pattern: energy price spike due to short-term supply problem; higher prices accompanied by wailing end-of-the-world claims of energy shortages, governments leaping up to be seen to be doing something from demonising foreigners to taxing oil companies and pumping cash into alternative fuel sources; then finally new technology and fresh energy discoveries end the crisis as suddenly as it began.

In the 1860s, the US Geological Survey said there was “little or no chance” that oil would be found in Texas or California. Although strangely enough it was a Texas oilman Tony Sanchez who funded George Bush junior’s election campaigns. And Bush senior was also an oil man from the state that would have none of the black stuff, according to the naysayers.

In 1914, the US interior ministry said there was only a ten-year supply of oil left; which it raised to 13 years, 25 years later in 1939, although there seemed to be enough to go round in world war II. And in 1951, it told the world, straight faced, that oil would definitely run out, this time, by the mid-1960s. In the 1970s, US president Jimmy Carter announced that “we could use up all of the proven reserves of oil in the entire world by the end of the next decade.”

Funnily enough, despite Canada announcing in 2004 that it has more oil in its tar sands than Saudi Arabia has in all its reserves, some analysts still like to haunt the world with their boogeyman—Peak Oil. Like the boogey man Peak Oil doesn’t exist, at least not for this generation of oilmen.
Experts estimate that there is as much oil in the west of America’s shale rocks as there is in all of Opec’s fields combined. And if this isn’t enough to go round, the American Petroleum Institute thinks there are at least 100 billion barrels in Alaska and offshore.

One reason why the-end-of-the-world-is-near crowd keep getting it wrong, is that they assume technology doesn’t move with the times.

Even a ten-percentage-point jump in extraction rate from 30% today, to 40% would increase reserves by one third.
But there is also the ability to find oil and then to get at it in currently inaccessible places. As the Wall Street Journal put it “Fifty years ago people would have laughed out loud at the idea of drilling for oil at the bottom of the ocean or getting fuel from sand, both of which were technologically unfeasible. The first deep-sea oil rig went on line in 1965 and drilled 500 feet down. Now these rigs drill two miles into the ground-—and miraculously, the price of extracting oil from 10,000 feet deep in the sea bed today is approaching the cost of drilling 100 feet down from the richest fields in Texas or Saudi Arabia 40 years ago.”

It is that technological drive that made the price of petrol plunge in real terms in the 20th century.
Relative to income an American family in 1900 would have paid in today’s terms $10 a gallon, instead of the $3 a gallon that has caused the consumer squealing in the land of Lincoln.

Likewise, in 1860 oil sold for the equivalent of about $400 a barrel in today’s terms. But along came innovation from modern drilling techniques in 1869, to steam injection in 2006.

However, where the forecasters of gloom do have a point is that despite continual technological advances, oil will be more expensive this century in real terms than in the last one.
The price will rise, as while more oil is found it becomes harder to get at it.

And this means that other sources of energy from coal to nuclear to wind will be more widely used, slowing the rate of increase of oil usage.
But the end of hydrocarbons in a decade or so? We’ll leave those predictions to the kind of people who said all those years ago that King Coal was dead and oil would run out any day soon.||**||

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