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Heinberg: Peak Denial

Heinberg: Peak Denial thumbnail

There is nothing but “Sad News for Peak Oil Disciples” these days, according to the Financial Post.

The latest example: Leonardo Maugeri, a fellow in the Geopolitics of Energy Project at the Kennedy School’s Belfer Center for Science and International Affairs—and a long-time critic of Peak Oil analysis—has just published a new report, “Oil: The Next Revolution,” in which he forecasts a sharp increase in world oil production capacity and the risk of an oil price collapse. His report has triggered a spate of press articles with titles like “No Peak Oil In Sight”, “Potential U.S. Oil Boom shakes Up Energy Politics,” and “Peak Oil Is Simply Not a Threat Anymore.”
These follow on the heels of a string of other articles touting increasing production of oil from “tight” shale deposits in the US—pieces with titles like “Has Peak Oil Peaked?” and “Is ‘Peak Oil’ Idea Dead?” And those in turn ride the slipstream of Daniel Yergin’s widely feted book The Quest, which provided last year’s fodder for an anti-Peak Oil media frenzy.
The recent deluge of cornucopian triumphalism has provoked a few thoughtful responses, including, “Has Peak Oil Idea . . . Peaked?” and “Is Peak Oil Dead?”, both of which carefully sift the evidence and conclude that world oil production is better understood when viewed through the depletionist lens than through the rose-colored glasses of the Peak Oil naysayers.
No doubt peakists will continue to produce thoughtful, well-reasoned, and fact-filled articles elucidating the precariousness of global energy supplies. Nevertheless, the sheer number and media prominence of “No Peak Oil” pieces (in the Wall Street Journal and New York Times, and even on NPR) is having an effect. Depletionist sites are seeing declining web traffic. And while far more people now have heard of Peak Oil than was the case just a few years ago, many mistakenly believe that its core assertion has somehow been “debunked.”
Those of us who have been around this discussion for more than a decade—from the days when petroleum geologist Colin Campbell coined the phrase “Peak Oil,” and the “movement” consisted mostly of daily discussions on an obscure e-mail list-serve—have seen it grow into a social phenomenon of sorts, with books, newsletters, websites, and organizations devoted both to analysis and citizen activism. Evidently growing public concern about the inevitable decline in world oil production has rankled some powerful people, who’ve been knotting their ropes in search of a bit of favorable data (declining oil prices, rising production) to use as the pretext for a public lynching.
The cornucopian mindset is certainly rife among leaders in the oil industry (Rex Tillerson, CEO of ExxonMobil, recently said of climate change and energy security, “We [humans] have spent our entire existence adapting. We’ll adapt . . . it’s an engineering problem and there will be an engineering solution”). But a similar inability to imagine anything but happy endings is widespread also among many environmentalists, as I learned last weekend at the Aspen Environment Forum, where I debated Mark Lynas, author of Six Degrees and The God Species. While environmentalists are often accused of being alarmists, they can also evince a strain of can-do techno-optimism. Stewart Brand (founder of Whole Earth Catalog), who was another speaker at the conference, has morphed into a pro-nuclear, pro-geo-engineering, bright-green futurist. Jim Kunstler, likewise at Aspen, summed up his take on the event: “The techno-narcissism flowed like a melted Slurpee. . . .
In the course of our debate, Lynas more than once cited a litany of failed forecasts from pessimists, starting of course with Malthus; similarly, Daniel Yergin has scored points by claiming that prophecies of a peak in world oil production have proven wrong again and again for a century or more. It’s strange that the failed forecasts of optimists get comparatively little public attention, given that they are at least as numerous. The most relevant example: around 1998, when the modern Peak Oil discussion was just hatching, the International Energy Agency, the US Department of Energy, and the US Geological Survey all issued forecasts that world oil production would grow steadily to achieve 120 million barrels per day by 2020, while prices would remain at the level of $20 per barrel (in 1998 dollars) even beyond that date. In 2004, when it was already clear that those forecasts had no chance of being realized, Daniel Yergin declared that oil prices would stay at $40 per barrel for the next 15 years. Neither the IEA, nor the DOE, nor the USGS, nor Daniel Yergin foresaw a situation in which crude oil production would flat-line for seven years beginning in 2005, or in which prices would whipsaw to record highs of up to $147 a barrel as they did in 2008. Yes, some of the Peak Oil forecasts for world oil production declines starting in 2005 or 2008 have proven premature, but it’s pretty obvious that the peakists had the more accurate and useful take on world petroleum prices and supply levels during the past decade. So it’s humanly understandable why resentment has been building among the Yergins and Maugeris of the world.
And so a spurt of new production from “tight” shale deposits now serves as a pretext to declare victory. The peaksters should have seen it coming, after all: high oil prices do indeed trigger increases in reserves and production from lower-quality resources. Indeed, some of the better analysts did see it coming. I recall Jeremy Gilbert, the former BP chief petroleum engineer, speaking about the potential of new production technology at an Association for the Study of Peak Oil (ASPO) conference a couple of years ago. “The current fields we are chasing we’ve known about for a long time in many cases,” he noted, “but they were too complex, too fractured, too difficult to chase. Now our technology and understanding [are] better, which is a good thing, because these difficult fields are all that we have left.”
The Peak Oil debate is not a sporting event. What matters is not which side wins, but what reality awaits us. Will we see a continuing plateau in global crude oil production? How long will it last? How big a proportional contribution to total liquids production will we see from tar sands, shale, and other unconventionals? What will be the climate impact as the world’s petroleum supply is increasingly derived from lower-grade resources? And what will be the economic impact?
We at Post Carbon Institute hope to sort out some of the technical issues related to unconventional oil in a report (forthcoming in September) by David Hughes, a follow-up to his 2011 reality check on U.S. shale gas production. But the bigger environmental and economic questions will no doubt continue to generate uncertainties for some time.
Still, there are a few observations that no serious energy analyst can dispute. Oil exploration and production costs are skyrocketing (Bernstein Research estimates that this year the industry needs prices in the range of $100 a barrel to justify new projects). The super-giant oilfields that still account for 60 percent of world crude production are aging, and so the more modest contribution of unconventionals, which are expected to be both expensive and slow to come on line, must push against a tide of depletion and decline. It’s only a question of when the overall global production decline begins, not if. Meanwhile, some of the fuels (ethanol, natural gas liquids) counted by IEA and EIA in the “all liquids” category have significantly lower energy content per unit of volume than regular crude oil; thus an increase in barrels-per-day of “all liquids” does not necessarily mean an increase in the amount of energy delivered to society. Further, all the unconventional liquid fuels (including biofuels, tar sands, and “tight” oil) offer a low energy return on the energy invested in producing them. Therefore, even if the number of barrels of liquid fuels delivered to market is still gradually increasing, the amount of useful net energy being made available by the petroleum and biofuels industries, when energy costs are accounted for, is probably already declining. And this is almost certainly true in the US—the poster child for unconventional oil production. Finally, available global crude exports are declining rapidly as producing nations use more of their oil domestically—leaving less each year for importing nations like the US, Europe, and China (this rate of decline is far greater than the relatively minor rate of increase in worldwide “all liquids” production).
Meanwhile, soaring oil prices and plummeting real energy yields from liquid fuels have already left economic carnage in their wake, as a fragile global financial system perched on a Matterhorn of debt has been dealt blow after blow by the failure of the real economy to expand as expected. It turns out that industrial production and global trade depend on energy, not just credit and confidence. June saw weaker oil prices—but this was due to an accelerating erosion of world economic strength (leading to expectations of falling oil demand), not to moderating petroleum production costs or substantially increasing production.
As many peakists have been saying all along, we’ll know for sure precisely when global oil production peaks (in terms of rate of production in barrels per day) only when we can see a steady decline in the rear-view mirror. But by then it will be too late for society to prepare for the economic impacts of Peak Oil. So is the Peak Oil “movement”—not as an exercise in analysis, but as an effort to warn the world and prevent catastrophe—doomed to failure? Maybe. But by the same token so is most of, if not the entire, environmental movement. We will not substantially change our collective behavior until crisis is upon us.
But even if we cannot avert a crisis, we can prepare some portion of the populace for the aftermath. We can build community resilience. We can seed the public conversation with information that will undermine the inevitable, reflexive effort to blame economic unraveling on handy scapegoats. Also, the future will be better if we protect at least some species, some habitat, some wild places, some water, and some topsoil before the energy-led crash of the economy, so that we have an ecological basis for ongoing existence in the absence of cars, planes, iPads, and cheap, abundant fuel.
In short, things will go better for us if we resist denial rather than engaging in it.
Energy Bulletin

9 Comments on "Heinberg: Peak Denial"

  1. dsula on Mon, 2nd Jul 2012 12:16 pm 

    Where is this doom? WHERE IS IT? We got plenty of NG, oil is cheap, proposals to power europe and usa with 90% renewables. It’s not funny anymore. Growth everywhere. I want doom. How long do I have to wait?

  2. Cloud9 on Mon, 2nd Jul 2012 1:56 pm 

    Just past the elections you should see another leg down.

  3. Red Cloud on Mon, 2nd Jul 2012 2:04 pm 

    Oil wells deplete. It’s only a matter of time. Just hang in there, no matter how long it takes. We’ve got a sound model and we just need to stick to it until its inevitable conclusion. Ten years, twenty, thirty, stay strong. You’re doing the right thing.

  4. Beery on Mon, 2nd Jul 2012 4:59 pm 

    @ Dsula: “Oil is cheap”? Based on what criteria? I guess, in Fantasyland, $82/bbl is considered cheap, but here on Earth, its long-term price is more expensive than it’s ever been.

  5. ian807 on Mon, 2nd Jul 2012 5:05 pm 

    These stories are coming out now as a way of creating “brand awareness” for the “peak oil is nothing to worry your little heads about” meme. Nothing more. They will continue, and even increase when oil prices jump again in a few years.

  6. draffen on Mon, 2nd Jul 2012 5:50 pm 

    Conventional oil has peaked, hasn’t it? If I read the charts right, that was back in 2005. The oil companies are struggling to make up the difference with unconventional oil, which is super expensive and has a very low ratio of energy returned to energy invested.

    There are signs of “doom” everywhere – if doom is defined as the collapse of modern air-conditioned society – not to be confused with the collapse of traditional society which still exists in various, remote places in the world.

    The collapse of the spoiled-rotten American way of life, supposedly non-negotiable, with air conditioning in every room, two SUV’s per family, health clubs, vacation getaways, fast food, etc, etc, is well under way. The same goes for most of Western Europe.

    This is being driven by high fuel costs, driven by Peak Oil and global climate change. Peak oil deniers will continue to “debunk” peak oil as long as crude oil prices are “kept in check” at $80 to $100 per bbl due to severe economic recession. Forget that quite recently crude was trading in the range of $10 to $20 per bbl.

    The effects are relatively small right now – this is just the beginning. More extreme weather events, failing credit and wrecked financial systems, scads of forclosed homes, high unemployment, frazzled public servants, degrading infrastructure, high electricity prices, brownouts, soaring cancer deaths, broken, dysfunctional families, soaring deficits and so on, it is happening.

    This “doom” happens slowly at first then begins to pick up speed and ferocity like a little snowball that starts down a huge, snowy mountain, gaining power from so many out of control feedback loops.

    This is just the beginning, you see. Things look bad but just not THAT bad. The optimists will look and hold up the few remaining remnants of the recent technological boom era and say everything is running and progressing OK even with black storm clouds on the horizon. It takes a mad, insane amount of fossil energy to run this modern industrial society and there is only so much fossil energy remaining, period. And boy, does the CO2 and pollution fly when it is burned, right into our one and only thin atmosphere.

    Wait a few more years and check and see gasoline prices north of ten dollars a gallon and serious environmental issues and economic ruin on a massive, global scale. Oh yes, not to forget, 110 plus degree heat and no air-conditioning anywhere.

    The simple villagers in remote parts of the world, still using mules or bullocks to plow their farms and living in straw huts may not notice much difference, except it may be a good bit hotter and the sky may be darker at night, thanks to less glow from industrial society.

  7. Oz Man on Tue, 3rd Jul 2012 4:18 pm 

    This is an interesting article, and there is a lot of gloating out there. About a year ago I read someone fro the oil energy financial side exlcaiming that there loks like a solution to Peak Oil, and that is demand reduction engineered through world recesson. Who would want world recession or a full blown decline? It may be that those in the know see that as the only viable option. Wow. Sorry I cant find the article.

  8. dennyC on Wed, 4th Jul 2012 3:19 am 

    After Iran is burning the entire scope of reality as we’ve known it will change dramatically, no matter how much oil is claimed to be flowing.

  9. C. Paul Davis on Thu, 5th Jul 2012 10:01 pm 

    July 5, 2012

    Anyone following the “Peak Oil Debate – True or False” closely over the past seven years or so, as I have, should not be shocked to learn that we now have a new source of lot of “new oil” called “Unconventional oil”. Two of the most important types are tar sands and oil shale. All of us should be very happy with these recent developments, but we should also make sure we know what they really mean.

    I feel it is fair and accurate to state that “conventional oil” has already peaked or will peak very soon. We call this Peak Oil.

    Before we all get carried away, we should know some of the new ground a rules in this new “Unconventional oil. First and foremost this new oil is a LOT more expensive. A better and more precise word might be new “unaffordable oil”. Remember that conventional oil has been “cheap” for the past 150 years and today is considered by most to be affordable – marginally affordable even at $4 a gallon. With today’s new rules this is fast becoming a serious challenge. A good analogy might be having lots of “unconventional water”,

    but it is too expensive for the normal person (98% of the world) to buy, have and drink. Only the rich can afford it.

    The same with unconventional oil. With prices in the $65 to $85 per barrel range and gasoline costing $10 to $12 a gallon who can afford to buy it? Only the well off 2% of the world. Today, the average working man can’t afford to drive his car to work, but less take a trip because of the cost of gasoline today.

    So, new unconventional oil will be VERY expensive. Its impact on most people’s lives will be devastating.

    After the higher price of oil that affects gasoline and many other products we take for granted, including the 300,000 consumer products made from oil. Ouch!

    Now you have to make sure we add in the amount of energy needed to produce the unconventional oil. This is called, Energy Returned on Energy Invested (EROEI) Cheap or affordable oil has a an EROEI of about 250 to one (1) whereas the the unconventional oil has an EROEI of under three (3) to one (1).

    Not to be over looked is the amount of water needed to recover unconventional oil – millions, if not billions of gallons of water per day.

    The next issue is that is showing signs of being considered as serious consequences due to the fracking
    of oil reservoirs with water, sand, and chemicals under immense pressure. The jury is still oil as to whether these processes are safe to use.

    We also must address how long these new unconventional sources of oil will be able to produce oil. Some say the the life cycle will be very short. Right now we don’t know.

    We must also understand better the danger issues of the pollution of the environment – air, water, and land devastation.

    There are other issues, but these are some of the major ones that must be addressed near term.

    I have always been a strong proponent of affordable oil and whatever it takes to accomplish this.

    One must also consider EOR and MEOR projects underway today that can provide a substantial conventional oil at well under $20 per barrel

    Today, there are over 6.2 trillion barrels of oil trapped in global oil fields. A 10% recovery rate provides 620 billion barrels of new oil or enough oil for another 20 years at 31 billion barrels of oil per year.

    I know first hand that Titan Oil Recovery’s MEOR technology is currently producing oil for under $10 per barrel.

    Let’s recover all of these additional conventional sources of oil before concentrating exclusively on expensive unconventional oil plays.

    C. Paul Davis
    Titan Oil Recovery

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