New Scientist: We're still on the slippery slope to peak oil

[Paul Mobbs]

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Hi all,

As I've outlined previously, contrary to the PR-led efforts to down play 
current trends (which many climate-fixated environmentalists have swallowed 
hook, line and disinformation), peak oil is still "in the post"!

P.



http://www.newscientist.com/article/mg21528786.300%2Dwere%2Dstill%2Don%2Dthe%2Dslippery%2Dslope%2Dto%2Dpeak%2Doil.html

We're still on the slippery slope to peak oil

David Strahan, New Scientist (no.2878), 20th August 2012


IN 2007 former US energy secretary James Schlesinger claimed the arguments 
in favour of peak oil - the key theory that global production must peak and 
then decline - had been won. With production flat and prices surging towards 
an all-time high of $147 per barrel, he declared, "we are all peakists 
now".

Five years on and production has risen by 2.7 million barrels per day to 93 
mb/d, prices have recently slumped to around $100 a barrel and those who 
dismissed the idea that the rate we extract oil from the ground must 
inevitably decline jeer in delight.

In June a much-touted report by Leonardo Maugeri - an Italian oil executive 
now at the Geopolitics of Energy Project, based at Harvard University and 
part-funded by BP - forecast that far from running out of oil, this decade 
will see the strongest growth in production capacity since the 1980s and a 
"significant, stable dip of oil prices".

So is that it, panic over, as some commentators who once agreed with the 
peak view have declared on the basis of Maugeri's report? Ironically, such 
shifts come just as some economists - traditionally hostile to peak theory 
- - were coming round to it. Peakonomics, if you will. Unfortunately, any 
reasonable reading suggests Maugeri is wide of the mark.

The recent hysteria rests heavily on the rise of shale oil in the US, which 
was unforeseen and is significant. After four decades of decline, US oil 
production turned in 2005 and has generated the bulk of the global supply 
growth since then. But to brand this a "paradigm-shifter", as Maugeri does, 
is wrong.

He forecast that this boom will lead to an astonishing 4 mb/d of additional 
US shale production capacity by 2020. By contrast, the US Department of 
Energy, usually optimistic, predicts total US shale oil production will 
peak at just 1.3 mb/d in 2027.

One reason Maugeri's forecast is so high is that he assumes production from 
existing shale wells will decline by just 15 per cent per year.

Industry consultant Art Berman puts decline rates at around 40 per cent. 
Analysis by Bob Bracket of US market analysts Bernstein Research shows 
similarly steep declines, and also that the average shale well takes just 
six years to become a "stripper well" - producing just 10 to 15 barrels a 
day. Such declines are far higher than for conventional wells, effectively 
meaning the industry must drill furiously just to stand still. It is this 
factor that will limit future production growth.

It is distressing that Maugeri's report - which appears to contain glaring 
mathematical mistakes - got so much attention, but he insists the gist of 
his report is right. In contrast, an excellent International Monetary Fund 
working paper in May received much less attention.

The IMF's paper sets out to test the idea that the recent 10-year rise in 
the oil price - it hit a low of $10 a barrel in the late 1990s - can be 
explained by geological constraints. The team took an approach which 
expresses mathematically the idea that oil becomes harder to produce, the 
less there remains to be produced - the basis of peak oil theory. This is 
clearly right: why would we be scraping out tar sands if there were easy 
oil left?

When they combined this with the impact of global GDP and oil price, the 
results were striking. By testing their model against historical data, they 
found their production forecasts were more accurate than those of both peak 
oilers, who are traditionally too pessimistic, and authorities such as the 
US Energy Information Administration, which is generally far too 
optimistic.

Their price forecasts were also far more accurate than traditional economic 
models that take no account of oil depletion, predicting a strong upward 
trend that closely fits what has happened since 2003. "When you look at the 
oil price [over the past decade], the trend is almost entirely explained by 
the geological view," said Michael Kumhof, one of the authors, when I 
interviewed him earlier this year.

The IMF paper also slays the belief that rising oil prices will liberate 
vast new supplies and vanquish peak oil. The team found that production 
growth has halved since 2005, and forecast that even the lower rate of 
growth will only be sustained if the oil price soars to $180 by 2020. "Our 
prediction of small further increases in world oil production comes at the 
expense of a near doubling, permanently, of real oil prices over the coming 
decade," write the authors. In this context, shale oil is not a "game-
changer" but a sign of desperation. "We have to do these really expensive 
and really environmentally messy things just in order to stand still or 
grow a little," says Kumhof.

It is true that global oil production has not yet peaked, but that is 
almost beside the point. The people who fixate on this need to wake up and 
smell the fumes we are reduced to running on. The IMF paper shows clearly 
we are supply-constrained. The oil price itself ought to be a clue: 
persistently above $100 per barrel, 10 times higher than it was at the eve 
of the 21st century.

Price spikes in recent years and recessions are the inevitable outcome of 
rising competition from fast-growing developing economies for limited 
supplies. Domestic consumption among major producers such as Saudi Arabia 
is also soaring, reducing supply to others. While global production rose in 
the five years to 2010, global net exports fell by 3 mb/d, according to 
independent US geologist Jeff Brown. How much worse would you like it?

In the film No Country for Old Men, two lawmen find the aftermath of a drug 
deal gone bad, with corpses strewn about the desert. The deputy remarks, 
"It's a mess, ain't it, sheriff?", to which the sheriff replies: "Well, if it 
ain't, it'll do til the mess gets here."

Likewise, if peak oil has not yet arrived, what I call the last oil shock 
certainly has. It'll do til the peak gets here.


- -- 

.

"We are not for names, nor men, nor titles of Government,
nor are we for this party nor against the other but we are
for justice and mercy and truth and peace and true freedom,
that these may be exalted in our nation, and that goodness,
righteousness, meekness, temperance, peace and unity with
God, and with one another, that these things may abound."
(Edward Burrough, 1659 - from 'Quaker Faith and Practice')

Paul's book, "Energy Beyond Oil", is out now!
For details see http://www.fraw.org.uk/mei/ebo/

Read my 'essay' weblog, "Ecolonomics", at:
http://www.fraw.org.uk/mei/ecolonomics/

Paul Mobbs, Mobbs' Environmental Investigations
3 Grosvenor Road, Banbury OX16 5HN, England
tel./fax (+44/0)1295 261864
email - mobbsey at gn.apc.org
website - http://www.fraw.org.uk/mei/index.shtml
public key - http://www.fraw.org.uk/mei/mobbsey-2011.asc

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