Peak Oil Happened Already, but also Not

Scientific American’s David Biello, a sharp observer of clean (and less-clean) energy, posted this piece on peak oil yesterday. The long and short of it is peak oil (the moment when we’ve collectively burned as much oil — about a trillion barrels — as is left in the ground) actually happened in 2005.

Peak oil is important because, the thinking goes, the specter of  future scarcity will drive up prices and generally gum up the oil-dependent world’s economic works.

The wrinkle is that the 2005 peak-oil depends on it being defined as (relatively) easy-to-extract oil, or maybe oil reserves as geologists would have recognized them in the 1970s. With unconventional reserves like Canadian tar sands, production has been able to keep pace with rising demand from places like China and India. The pace of consumption also will play a role in how peak oil plays out: the more utterly dependent, the worse the withdrawal, meaning an electrified, or semi-electrified, fleet will help matters. The article’s well worth a look.

2 Comments

  • Mike Griffin Posted January 26, 2012 1:37 pm

    Todd,

    Re: “Peak oil is important because, the thinking goes, the specter of future scarcity will drive up prices and generally gum up the oil-dependent world’s economic works.”

    The price mechanism of markets is a wonderful thing. Given how oil and natural gas follow fairly predictable decline curves, and how net recoverable reserves are booked and reliably reported (more so in some countries than others), there will be sufficient price signals to drive prices gradually higher. The specter is always around the corner, but a safe distance. The real risk of rising prices and attendant economic disruption is political, with so much of our energy sourced from kleptocracies or messianic theocracies.

    So is peak oil actually a concern? If so, for whom? My hunch is that there will continue to be ways to coax hydrocarbons out of stingy formations, either through better seismic techniques, fracking technologies, microbial recovery and/or chemical treatment. This will be good for those who just looking for BTUs, not so good for those who worry about how the BTUs are generated. (Of course, I believe the latter is the driver behind the fracking hubbub, which, according to a ‘green’ geophysicist friend of mine, is a load of bunk.) At the end of the day, with an efficiently working market, price will drive innovation and solve the energy problem. I trust the judgement of a million people scrambling to make a buck over a pack of bureaucrats currying favor for the energy ‘solution’ du jour.

    Cheers,
    Mike

  • Todd Neff Posted January 26, 2012 2:01 pm

    I’m with you on most of this stuff, and do think the rise of renewables/natural-gas substitutes/efficiency and the like will buffer whatever peak oil shocks doomsayers predict.

    The one thing I’d suggest, though, is that while you don’t want bureaucrats betting on technologies (markets are better for betting), markets aren’t perfect, either as the crisis of 2008 and many before it have showed.

    In the energy world, they don’t price in externalities properly. So things like the wind production tax credit and other green-energy investments help steer markets to what would be their more natural target given accurate inputs. This is an imperfect process, of course, leading to screw-ups like Solyndra. But markets screw up, too — Countrywide, anyone? And look who’s holding the bag.

    Ultimately I have a hard time with the idea that unfettered energy market — or any market, for that matter — would produce an optimal societal/environmental outcome (whatever that might look like). Markets are only as good as the incentives driving them, which are inherently blinkered and skewed.

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