Peak Oil
A recent WSJ editorial page article, “The
Oil Bubble,” put all fears to rest regarding the emergence of peak oil, casting
all such pronouncements into the ash heap of similar Chicken Little like
statements regarding such predicaments. While
not disputing that technology can, and has, overcome similar past problems, the
current situation is both unique as well as mischaracterized by this article.
The article states categorically that
“…the world is not running out of oil.”
It would be interesting to hear their explanation for just who, then, is
currently making it. When geologists
talk of MESO-CENOZOIC basins, I suppose they are referring rather to the middle
and new lives of our existing fields that new technology is creating by
extracting every last drop of the precious commodity, only to have those same
fields precipitously run dry, rather than the geologic time scales required to
produce the oil we are extracting. Approximately
70% of today’s production comes from fields that have been in use for 30
years. Improved hydraulic fracturing,
seismic exploration, monitoring and directional drilling techniques are
ensuring maximum exploitation of existing wells, but few new field discoveries. Estimates are that nearly 6 trillion dollars
in new investment will be required between now and 2030 to sustain and further
increase production.[1] The fact is, neither we nor natural processes
are producing even what we would consider as far time deposits of oil reserves
for extraction. That oil is a limited,
non-renewable resource is not disputed.
The only question is whether technology will advance sufficiently
rapidly to render the cost of extraction of alternate oil resources economically
feasible. This, in fact, is what the
article refers to when it claims that we are not running out of oil. That is different from the assertion that we
are not at peak oil, or where production is in decline in traditional fields due
to the current economics of extraction.
With the high investment requirements to sustain and increase
production, as well as the environmental impacts of continued reliance by ever
expanding populations on this energy source, 6 trillion dollars could go a long
way to fund a transition to alternative sources, which transition we know we
will eventually have to make.
That we are at or quickly approaching peak
oil is attested by both government and industry sources.[2] Increasing demand is expected to continue its
present course, with China’s 1.3 billion people consuming a larger and larger
portion as they enter the age of mass car consumption and continue their
industrialization, this at a time when oil production is in decline in 33 of
the 48 largest oil producing countries.[3] Considering the exponential increase in
energy demand, and the finite nature of this source, it is foolhardy to rely
predominantly on oil supply, be that traditional supplies or non-traditional,
to fuel our futures.
The article goes on to explain how the
free market will fix this problem.
Although the free market is the most efficient means ever implemented
for production and distribution of product to meet demand, it is not the most
effective means of ensuring other things just as needful such as justice,
equality of opportunity, not to mention the continuance of our nation, our
communities and our way of life. Free markets
take time to adjust, and these adjustments are based solely upon market forces,
not social imperatives. It is evident to
anyone who has studied history that free markets unrestrained produce social
ills.[4] Government still has a function to play in
ensuring that free markets do not reduce us to the slavery of the marketplace
or worse. To maintain that the free
market system alone should be left to solve the problem of peak oil is both irresponsible
and unthinking, especially in light of the lead time required to begin
transition, the social impacts, and the costs involved.[5]
The article goes on to assert that the
current price of oil is actually cheaper than historical costs. That we have increased our efficiencies of
extraction and production since 1900 is undoubted; however, the costs we are
paying at the pump are a fraction of the total costs for ensuring energy
access. Our military deployments in
While it is true that oil shale and tar
sands are a non-traditional source that should be pursued, the article’s
admission of this is also an admission that the high oil prices we are
experiencing are not a market perturbation, but are rather long term impacts of
shortages in traditional sources. Were
this not the case, the non-traditional sources would remain uneconomical. To maintain that this oil crisis is analogous
to previous oil crises is to discount the real differences which exist in terms
of both technological challenges and well as geopolitical circumstances. I for
·
[1] Andrew
Gould, “Extending Field Production Life,”
Retrieved on
[2] Alexander’s Gas and Oil Connections, Retrieved on
[3] Chevron, Retrieved on
[4] Necla Tschirgi, “The Paradox of Development,” Retrieved
from the World Wide Web 10 October 2005: http://www.idrc.ca/en/ev-29607-201-1-DO_TOPIC.html
[5] For a discussion of peak oil predictions, consequences,
and mitigation see “Peaking of World Oil
Production, Impacts, Mitigation, and Risk Management,” SAIC, Retrieved on