Peak Oil is You
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Page added on October 19, 2011
Jeff Rubin: Peak oil is about price, not supply
Heading down to Washington to speak at the Association for Peak Oil-USA‘s Truth in Energy conference on Nov. 2, I sense a general malaise within the peak oil movement.
The pequists, as they have become known, appear to be on the defensive these days as they once again roll back their dating of the dreaded supply peak, confounded by the oil industry’s never ending ability to develop new extraction technologies and discover new sources of supply.
While conventional production may have peaked long ago in the lower 48 U.S. states as predicted by the father of the peak oil movement, geophysicist M. King Hubbert, new sources of supply have been found in Alaska and under the Gulf of Mexico. And now oil sand production from Alberta and oil from the Bakken shale deposits may soon replace conventional oil in the mix of North American fuel.
Our definition of oil has changed so much the U.S. Energy Information Administration doesn’t even refer to oil any more but rather to energy liquids. This includes all kinds of energy sources we would not have previously called oil such as natural gas liquids, liquefied refinery gases, and even corn-based ethanol.
But peak oil as it turns out isn’t about supply but rather demand. It is a concept rooted more in economics than geology. It doesn’t matter if there are billions of barrels of oil waiting to be tapped from oil sands or oil shales if the prices to extract them are beyond our economies’ capacity to pay.
The peak in our oil consumption will be determined by our ability to pay ever rising prices for the fuel, not by the ability of those same prices to drive new sources of supply.
The energy industry’s task is not simply to find new fuel sources but to find new supplies of oil our economies can afford to burn. While the energy industry has an impressive record on the first count, it has a much less impressive track record on the second.
It has taken successively higher prices to get that extra barrel of oil out of the ground. The price of Brent oil, the benchmark used for most of the oil traded on world markets today, has traded in triple digit range since the beginning of this year.
Maybe that is why the world economy seems to be teetering on the brink of another recession. But if our economies will no longer be growing, neither will oil production.
Some people might call that an oil peak. Others might say we are simply running out of the oil we can afford to burn.
5 Comments on "Jeff Rubin: Peak oil is about price, not supply"
SimplifyIt on Wed, 19th Oct 2011 2:39 pm
Why must so many writers insist on playing this little game of merry-go-round where they first deny peak oil and then immediately agree with its basic principles? It has always been about what is economically feasible to produce!
Kenz300 on Wed, 19th Oct 2011 2:54 pm
The world economy was built around cheap (OIL) energy. That is coming to an end.
How will the world economy adjust to higher prices and limits on supply? Every individual, business and country that imports energy needs to develop a plan for greater energy self sufficiency. We will walk a little more, bicycle a little more, use public transit a little more and be concerned about energy efficiency a little more. We will transition to alternative energy sources. How fast will depend on the rise in price and reduction of supply oil. The impact on the economy and national security is to be determined.
Gale Whitaker on Wed, 19th Oct 2011 4:36 pm
I think conservation is a huge part of the solution however walking and biking in Minn. will cause a few folks to freeze to death.
DC on Wed, 19th Oct 2011 4:59 pm
How exactly is the industry confounding the uhhh pequists again? I must have missed the press releases of all the new super-giant fields discovered recently. Last I heard, we were still useing far more old oil, than we are discovering new oil. Most reports these days Im reading treat billion barrel finds as if they the greatest thing since Saudi-Arabia. We need to find 30+ of those every year just to break even, and we arent anywhere near close to doing even that. The EIA is lumping sorta oil-like tar sands in these days, because they are deliberately attempting to mask the fact that most of the ‘real’ oil is either gone, or allready found and being produced. Padding the numbers with tar-sands and sorta oil, like frak gas or kerogen even, is just a way to hide the essential truth of PO for a little while longer.
@Gale. As for people walking and biking in Minn, I dont really see where people are going to have a choice, do you? The fact that Minn, and indeed everyone else locked in a cars-only infastructure, is a problem, even a serious one. But humans have been walking, and working in cold weather and surviveing for 10,000’s of years. If they couldnt manange that, we wouldnt be here to discuss it would we?
Plantagenet on Wed, 19th Oct 2011 7:02 pm
@Gale. Don’t despair—there are other choices than walking or biking in a Minnesota Winter. If we had an intelligent president, he’d be aware of these issues and he would be making speeches explaining the peak oil problem to Americans and then working hard to get light rail commuter systems built in the cities, and high speed rail connections built between the cities instead of spending all his time campaigning for re-election.