For those who aren’t ready to buy into the concept of world oil production going into decline in the next few years, there is a less worrisome subset making the rounds known as “peak oil lite.”
Those adopting this outlook have rightly noted that gasoline is selling for unheard of prices and don’t subscribe to the idea that evil speculators, evil oil companies, or evil OPEC is the cause of this unfortunate happenstance. They also correctly recognize demand for oil, especially from China, India and oil producing states, has outstripped the ability of the oil industry to increase supplies fast enough.
Notably absent from peak oil lite, however, is the notion world oil production has not increased appreciably in the last 3 or 4 years and is poised to start dropping very soon. Thus “peak lite” believers readily acknowledge there is a supply/demand problem pushing up prices, but do not go so far as to internalize the serious consequences of declining world production.
A good example of peak lite appeared last month in a front-page Washington Post series on the current world oil situation. After many years of writing around the problem, the Post finally bit the bullet and tackled the coming storm head on by examining “the economic forces that have unhinged oil prices.”
In the first story, entitled “This time it is different,” the Post concludes that, unlike in the 1970s, the problem is “world demand increasing faster than supply.” No argument so far.
For peak oil lite adherents who don’t want to believe or at least not admit publicly that the world is reaching geological constraints on how much oil you can produce, you immediately point out the lack of adequate investment and political constraints.
You start by explaining that “low oil prices in the late 1990s dampened the impetus for finding new oil supplies.” Then you say that “too few drilling rigs were built” and that “refineries weren’t expanded or upgraded.” This, of course, leaves the impression that if there were just enough money invested all would be well, not that the bottom of the barrels is in sight. To be fair, the Post does tell us that “investment slackened just as finding new supplies was becoming more difficult and costly. Most of the world’s big, easy-to-tap fields have already been discovered and largely drained.”
By paragraph 23, however, the Post’s story does get to the heart of the issue – world oil production, and with it our economy, is about to go into decline. “Some analysts argue that peak oil production has already been reached. Others say the peak remains a ways off but perhaps not very far.” This is indeed an artfully crafted sentence that marks a great breakthrough in the Post’s coverage of the issue, for it not only mentions the words (peak oil); it leaves the reader with a slight, but not emphatic flavor of imminence.
The second Post story dissects a key factor in the course of oil prices – increasing Chinese demand. On reading the piece one is left with the impression that China’s economy has built up such a head of steam it is not going to slow its oil consumption until it looks like America or there is no affordable oil left. As looking like America requires that Beijing increase its car fleet from 14 million to 900 million vehicles, it is not hard to predict which is coming first.
The next piece of the Post’s series starts with a discussion of a depleted oil field in California and makes the point that US oil production peaked nearly 40 years ago and that we are now importing the bulk of our oil.
The story makes many points among the usual arguments for peaking world oil production – deep offshore oil is expensive and depletes rapidly, with the exception of Iraq most of the “easy” oil has been used up, Mexico is in decline, “the North Sea is plummeting,” “Russian output is hitting a plateau,” heavy oil from Canada and Venezuela is “expensive and energy-intensive to develop.”
To this point in their series, the writers, researchers, and editors at the Post have done a fair job in laying out the current world oil situation. But there is one more step – connecting the dots by telling us what all this means and what is in store for us. Here is where the “lite” comes in, for there is no conclusion that fits the cited evidence.
For example, the Post cites the CEO of the French oil company, Total, that an “optimistic case” is for oil production to increase by another 14 million barrels per day (b/d) and peak around 100 million b/d in another seven or eight years. They then report that the International Energy Agency has just announced that it will take 3.5 million b/d of new production just to offset depletion at existing fields and keep the world oil production level.
Now, the obvious conclusion is that the world is going have to come up with 40 million b/d of new oil production in order to keep even and reach the “optimistic” 2015 projection of 100 million b/d. This would require the discovery of four new Saudi Arabia’s. Nothing remotely close to this amount of new production can possibly start up in the next seven years.
The series concludes by citing peak oil evangelist Matthew Simmons of Houston, that world production has already peaked and that higher prices will be here shortly; Saudi Oil Minister Naimi, that “Saudi Arabia will be able to meet the world’s rising demand for years to come”; and the inevitable expert-in-the-middle, who points out there will be a lot of problems in increasing production.
The Post is to be congratulated for a tour d’horizone that touches most of the bases relevant to peak oil. They acknowledge the problem, use the words “peak oil,” discuss much of the evidence and cite the differences of opinion as to the imminence of a crippling problem.
Reading between the lines, one can sense an editorial debate, for the obvious conclusion is one no reader wants to hear. It is probably unrealistic to expect more at this time, for the series itself is a major step forward in spreading the word as to where we are all going. There is still much more to be told.