Peak Oil is You
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Page added on October 17, 2015
Is Peak Oil Just A Myth?
As Niels Bohr famously said: “predictions are difficult, especially about the future.” And they are doubly difficult if you are talking about the future of oil.
The more uncertain the future, the more vehemently each side presents its case. For years a debate has raged about peak oil, the dreaded moment when we start running out of accessible oil reserves, a debate made only more heated by suspicions of vested interests. So environmental campaigners have been crying out that modern society is about to be plunged into darkness, while oil industry experts have blithely assured us that the oil is there, and they will fetch it for us. Even if it lies several miles under the Arctic seabed or has to be stripped from tar in Canada.
Down Dale
Now BP chief economist Spencer Dale, a former Bank of England policymaker, has thrown his reputation into the fray by claiming we will never exhaust the world’s reserves of oil. Concerns about carbon emissions and climate change mean that most of it will have to be left in the ground.
Burning existing reserves of oil, gas and coal would emit more than 2.8 trillion tonnes of climate-harming carbon emissions, much more than the 1 trillion threshold scientists have set to limit global warming to 2 degrees, he says. If he is right, this has major implications for troubled Footsie-listed oil giants such as BP and Royal Dutch Shell, and stricken explorers such as Premier Oil and Tullow Oil. This means the relative price of oil may not rise much over time. Oil at $50 a barrel could be here to stay.
Up Shale
There is another factor changing the dynamics of the global oil industry: the shale revolution. This has weaned the US off energy imports and effectively made wildcat drillers global swing producers, usurping Saudi Arabia’s traditional role. Shale production has soared from zero to 4.5 million barrels a day — about 5% of global production — in just five years. Iran could add another 500,000 barrels as soon as US sanctions are lifted (assuming they are), then an additional 500,000 within six months.
The future of renewables is another energy battleground, again, with lines drawn between left and right. Some claim China could save the world by becoming a renewables powerhouse, others see this as pie-in-a-smoggy-sky. Personally, I expect solar to break through in the next 10 years, with major implications for oil companies. We will never hit peak sunshine.
Peak And Troughs
Supply is just one side of a very complex equation. Demand is another. Both are pointing at the same worrying direction for oil investors banking on a rising price. The International Energy Agency’s October report has just predicted that global demand growth is expected to slow from its five-year high of 1.8 million barrels a day this year to 1.2 million barrels next year.
Spencer Dale is correct. We will never hit peak oil. There will always be reserves out there, but they will either be too inaccessible or politically controversial to extract. Just look at how Shell was forced out of Alaska by a combination of costs, campaigners and regulatory pressure.
Oil stocks could continue to struggle in this climate but with Dale also predicting that global energy demand will rise 37% by 2035, I don’t expect them to fall off a cliff.
BP and Shell may offer juicy dividends today but they could come under threat if oil stays at $50 for the next few years. There may be safer dividend stocks out there.
54 Comments on "Is Peak Oil Just A Myth?"
MSN Fanboy on Sun, 18th Oct 2015 9:42 am
LOL Short, Fantastic Comment.
John Orr on Sun, 18th Oct 2015 6:59 pm
That’s about three recent articles saying peak oil is a myth or not correct and each has had a lot more comments than usual and it’s the same die hards making the same comments in a frenzy panic that their thoughts are being criticised….we need to start looking at other views now, peak oil has run its course. I remember the first scientists saying that solar activity was causing climate change and they got jumped on by old timers…..what now for volcanic undersea heat activity and mini ice age coming….peak oil has run its course!
apneaman on Sun, 18th Oct 2015 7:29 pm
MEGACANCER ~ Exploring the pathology of industrial civilization.
Sunday Salvo
“As the energy-return-on-energy-invested (EROEI) falls for energy sources and in order to procure the energy necessary to support the metabolism of technological society, there are only a few courses open: 1). Competitively acquire high EROEI sources of energy by force if necessary, 2). Find a new, higher EROEI source of energy. 3). Make available to society much greater volumes of low EROEI energy. We’re currently are involved in all three strategies. First, the Middle-East still maintains many of the legacy high EROEI oil and gas fields which must be controlled. Second, there is some switching to solar and wind power, even though these are currently below the EROEI of oil and natural gas and coal. And third, we’re trying to maintain high volumes by accessing low-grade sources (oil-shale, tar-sands) and maintaining volume through fracking small pockets of oil.
A combination of these efforts should maintain BAU for a few more years and at least the illusion of growth. Once EROEI begins to fall and/or volumes fall, growth will only occur at the expense of maintenance in some other region of the existing system. The cessation of growth in energy, the reduction in worker compensation and therefore ability to service debt can be compensated for with things like zero-percent interest rates and/or reducing variable costs of new growth like low wages to compensate for the increasing cost of energy. Unfortunately, by lowering wages to offset the cost of energy, one deficiency is substituted for another in the economy overall. Once free loans and free workers are tapped, and available energy is still falling, the economy is likely to stall with a gross maldistribution of wealth.
Eventually the workers, the RNA within technological cells, will have difficulty completing their tasks, getting the kids to school for training, showing up at work, maintaining the car, paying utilities and also paying all of the debt. Many will succumb in this effort. Many will be put out of work, their respective cells bankrupted while others will earn minimum wage or have only part-time work. Because falling energy EROEI and growth can no longer service loans made in the past, they will be serviced by taking more of the worker’s disposable income if they have any. Likewise, students will be tapped for their earning as soon as they graduate and enter the workforce and then will be tapped again when they buy a home and car. If falling worker income is compensated with debt to make ends meet in expectation of future good times, then they will be trapped when the good times fail to appear. Good times do not reappear when net energy is falling and therefore the typical RNA will be trapped in debt.”
more
http://megacancer.com/2015/10/18/sunday-salvo/
GregT on Sun, 18th Oct 2015 7:32 pm
“I remember the first scientists saying that solar activity was causing climate change and they got jumped on by old timers…..what now for volcanic undersea heat activity and mini ice age coming….peak oil has run its course!”
That is without a doubt one of the most stupid comments I’ve ever read on this site. With the likes of Planter and Boat constantly lowering the bar, you should be proud of your achievement John Orr. You are a real champion!