
Why Peak-Oil Predictions Haven't Come True - tokenadult
http://online.wsj.com/articles/why-peak-oil-predictions-haven-t-come-true-1411937788
======
tunesmith
"Peak Oil" as a phrase always seemed like a way to stumble into some really
simplistic conversations. I never really quite understood it. I've been in
conversations where people have described it as a peak "moment" where
overnight our life will turn into one of those bad ABC tv shows that gets
canceled mid-season.

If you've got a steep price curve, such that a little bit of extra demand
means that the cost goes way up (because of constrained supply), then it also
means that the price curve is also steep on the way back down.

What that means is that if a demand spike makes the price skyrocket, then all
sorts of alternative fuels become economical when they weren't before. And
then, as more people switch to them and the demand for oil relaxes even a
little bit, the oil price can fall dramatically as well, until some of those
alternative choices don't seem as economical.

Even just a simple model like that can explain all sorts of brain-numbing
conversational patterns. Like the certainty that big oil has had the knowledge
of clean, cheap energy and that they keep it secret to make money on oil... or
that they'll pump up oil prices to lure the alternative energy people to make
business risks, and then purposely flood the market in order to put them out
of business, etc.

~~~
beefman
No. In the case of oil, there's low elasticity of substitution. Trillions of
dollars of infrastructure run on oil, not alternative fuels. That's why spikes
in the oil price cause recessions.[1]

The price of energy matters too, not just its derivative. We can make
synthetic fuels that existing infrastructure can use but they're too expensive
to support our civilization.[2]

Imagine your robot vacuum can run an hour on a charge and takes 15min to make
a roundtrip to its charging station. If you move the charging station so the
roundtrip takes 30min, you'll get dirty floors, and they'll still be dirty a
year later. The robot's EROI has gone from 4 to 2 and it can only handle a
smaller house, or one that sees less activity.

The EROI of a commodity like oil is approximately inversely proportional to
its price. For commodities, competition brings price to the marginal cost of
production, which is the cost of the embodied energy (so for fuels, this cost
is unitless). The synthetic fuels are expensive because their synthesis is
energy-intensive.

It's something policy makers should understand when they advertise energy
projects as creating jobs. Manifestly, the more jobs an energy source
requires, the worse it is. Energy is a means to an end not an end in itself.

[1]
[http://econweb.ucsd.edu/~jhamilto/oil_history.pdf](http://econweb.ucsd.edu/~jhamilto/oil_history.pdf)

[2]
[http://www.inscc.utah.edu/~tgarrett/Economics/](http://www.inscc.utah.edu/~tgarrett/Economics/)

~~~
AlexDanger
>No. In the case of oil, there's low elasticity of substitution. Trillions of
dollars of infrastructure run on oil, not alternative fuels.

Is this elasticity of substitution quantified? I'd like to read more about it
if you have a link. My gut feeling is that this elasticity is improving
(despite increasing oil consumption) due to general technological advancement
and a high-speed globalised economy.

How well can we respond to a price spike now versus 30 years ago? Can we
mitigate the economic impact of a price spike faster than we could 30 years
ago? These are the trends I am interested in investigating.

~~~
beefman
In 2013, the world average price per GJ of coal was $3.63, of natural gas
$6.81, and of oil $18.22. That's a factor of 5 ready for arbitrage in a $5T
industry, sitting there for years at a time.[1]

The average age of cars on the road is 11 years, and apparently rising.[2]

Technology itself is notorious for lock-in effects. Windows 10 was announced
today... I use a Dvorak keyboard (1936) but most still use QWERTY. You can
ponder when Bret Victor's dreams will come true. In teaching technology, we're
arguably no further than Papert was in 1980.[3][4]

In Garrett's model (op. cit.) the value of civilization's accumulated wealth
in years of current production (GDP) does fall over time. In 1980 it was about
60 years. Today it's about 45 years. (In 1820, it was about 300 years.)

[1] [http://www.bp.com/en/global/corporate/about-bp/energy-
econom...](http://www.bp.com/en/global/corporate/about-bp/energy-
economics.html)

[2] [http://www.latimes.com/business/autos/la-fi-hy-ihs-
automotiv...](http://www.latimes.com/business/autos/la-fi-hy-ihs-automotive-
average-age-car-20140609-story.html)

[3] [http://el.media.mit.edu/logo-
foundation/logo/](http://el.media.mit.edu/logo-foundation/logo/)

[4] [http://logothings.wikispaces.com/](http://logothings.wikispaces.com/)

------
CookieMon
> The real constraints we face are technological and economic, they say. We're
> limited not by the amount of oil in the ground, but by how inventive we are
> about reaching new sources of fuel and how much we're willing to pay to get
> at it.

This is exactly what the peak oil people have been saying, you can't claim
they're "looking at it the wrong way" and then restate exactly what they were
claiming. Peak oil was never about running out of oil, it was always about the
rate and economics of extraction. "the size of the tap, not the size of the
tank" etc.

This "recent boom" in the US remains cash negative - about 600b capex for
about 500b in oil. And we don't know yet whether that's going to change.

Currently "geology is not only winning, it is crushing technology"
[http://blogs.platts.com/2014/07/30/peak-oil-
forecasts/](http://blogs.platts.com/2014/07/30/peak-oil-forecasts/)

~~~
spikels
I thought the peak oil people were saying we are running out of oil and that
production would peak then decline relatively soon. If they were saying that
prices would simply rise encouraging new technology to allow continuing
increased production then I think they were very poor at communicating their
ideas. More likely they actually believed what they were clearly saying: oil
production would peak in X years.

See for example:
[http://en.wikipedia.org/wiki/Peak_oil](http://en.wikipedia.org/wiki/Peak_oil)
[http://www.nytimes.com/2010/06/06/us/06peak.html](http://www.nytimes.com/2010/06/06/us/06peak.html)

~~~
tsotha
They certainly got the shape of the curve wrong, but the fact that you'll
eventually have to stop using a finite resource is axiomatic, isn't it?

~~~
spikels
Agreed - it is either wrong or a contentless axiomatic statement. My sense is
many "Peak Oil" people were predicting something dramatic would happen (not
just price increases) and were simply wrong. What is strange is the strong
appeal of the idea to some people.

------
AReallyGoodName

      He predicted that U.S. oil production would peak, probably in the early 1970s, and then decline. It would resemble a bell curve.
    
      If M. King Hubbert were alive today—he died in 1989—would he admit defeat? Probably not
    

No shit he wouldn't admit defeat. He was absolutely 100% correct. US oil
production did peak in the 70's.

[http://en.wikipedia.org/wiki/Oil_reserves_in_the_United_Stat...](http://en.wikipedia.org/wiki/Oil_reserves_in_the_United_States#Production)

~~~
desdiv
It's still a little premature to make that prediction. This graph
([http://upload.wikimedia.org/wikipedia/commons/a/a0/US_Crude_...](http://upload.wikimedia.org/wikipedia/commons/a/a0/US_Crude_Oil_Production_and_Imports.svg))
from that Wikipedia article shows a dead cat bounce. It's still too early to
say whether that bounce will top the record production number in the 70's.

~~~
AReallyGoodName
I just see it from the other point of view. I see it as being too early to say
that he was wrong.

The article seems way too harsh on someone who made a prediction over 50 years
ago that has stood the test of time flawlessly. He was objectively correct
when looking at actual data.

The only counter point actually given in the article to peak oil is that it
might be theoretically possible for production to beat those 1970's levels
which isn't much of a counterpoint.

------
thaumaturgy
The U.S. imported more oil for a while, decreasing domestic production, and
then recently began importing less oil and increasing domestic production
again in areas that had been left as reserves or hadn't been commercially
feasible before the record high per-barrel prices of oil a decade ago (see
e.g. [http://www.aei-ideas.org/2013/01/us-drilling-boom-brings-
net...](http://www.aei-ideas.org/2013/01/us-drilling-boom-brings-net-oil-
imports-to-a-20-year-low/) ; there are other sources available online if you
don't like AEI).

So we have to look at world oil production, not just domestic. And, although
world oil production is still growing, that growth is clearly in decline as
most new sources for oil require far more effort to extract than in the past
(e.g.
[http://en.wikipedia.org/wiki/File:World_Oil_Production.png](http://en.wikipedia.org/wiki/File:World_Oil_Production.png)).

I'm not a peak oil alarmist. It's entirely sensible to expect that as oil
becomes more difficult to extract, its price will go up, and as its price goes
up, new sources of oil will become more feasible to engineer.

 _But_ , so much of oil production and consumption and everything associated
with it is horrible and disgusting and a potential ecological and economic
disaster waiting to happen. (...Deepwater Horizon...)

We shouldn't need peak oil scaremongering to move us off of oil dependence
quickly. It should make sense to do so anyway, especially as other
technologies continue to improve.

~~~
maxharris
_But, so much of oil production and consumption and everything associated with
it is horrible and disgusting and a potential ecological and economic disaster
waiting to happen. (...Deepwater Horizon...)_

What about all the good it makes possible? Fossil fuels made it possible to
build and run the hospitals that save our lives. Try running an ICU on wind
and solar power alone, without a huge, expensive and _very_ uneconomical
battery. Think also of the food we eat - while you can quibble about the
merits of particular diets, there's no way that the 7 billion people alive
today could get the calories they need to stay alive without tractors,
fertilizer, etc. These two examples are the the beginning - our lives are made
possible by oil.

While burning fossil fuels may have a negative effect on climate, is that
effect so bad that we should abandon them? Fossil fuels give us such good
control over our climates that climate-related deaths (everything from storms
to hurricanes, etc.) have dropped precipitously over the past century: in the
past 80 years, there has been a 98% decrease in deaths due to climate. Couple
those facts with the abominable track record that everyone has about
predicting the severity of future conditions (remember the shrill predictions
of the 60s and 70s?), and fossil fuels come out ahead of everything else out
there, short of nuclear.

~~~
thaumaturgy
Do you allow any room at all for a compromise? Or must you assume that I mean,
"completely and totally abandon fossil fuels even where it doesn't make sense
to do so"?

> _Fossil fuels give us such good control over our climates that climate-
> related deaths ... have dropped precipitously over the past century..._

What? Are you sure this isn't due to better construction materials and
practices? I haven't heard this before.

> _...and fossil fuels come out ahead of everything else out there, short of
> nuclear._

This _probably_ isn't true, although it depends a lot on how you measure
"ahead" and which numbers you choose to run with. If we're looking at EROI (or
EROEI -- I guess it's lost a letter recently), then oil is somewhere between
10:1 and 5:1, and falling, and that puts it behind wind and hydro, but ahead
of nuclear and solar. (I was surprised by the numbers on nuclear years ago
when I first looked at this.) e.g. [http://spectrum.ieee.org/green-
tech/solar/argument-over-the-...](http://spectrum.ieee.org/green-
tech/solar/argument-over-the-value-of-solar-focuses-on-spain)

There are also some strong arguments for the adverse health effects of burning
coal and oil (e.g. [http://www.ucsusa.org/clean_energy/our-energy-
choices/coal-a...](http://www.ucsusa.org/clean_energy/our-energy-choices/coal-
and-other-fossil-fuels/the-hidden-cost-of-fossil.html), or just go live in
Beijing for a year and try not to get a respiratory infection).

I am all in favor of continuing to produce and consume oil where it makes
sense to do so. I am also all in favor of continuing to develop replacements
for oil as expediently as practical.

Do you think that's an unreasonable position?

~~~
maxharris
> Fossil fuels give us such good control over our climates that climate-
> related deaths ... have dropped precipitously over the past century...

 _What? Are you sure this isn 't due to better construction materials and
practices? I haven't heard this before._

Construction materials and practices, made possible by what fuel? What powers
the excavators, drives the furnaces to used to make steel that goes into
everything from rebar to Catepillar tractors to the steel toe in the foreman's
boot? What source of energy do people use to get a log from a mountainside to
the mill, through it, and then to your backyard? What are the hardhats that
everyone wears made of? (Plastic, which is made from oil.) Need I go on?

This same energy source is very cheap. That means that more people can afford
new(er) homes. Homes which are equipped with better features that help them
resist natural disasters, such as earthquakes, hurricanes, extreme heat, cold,
etc.

Suppose energy were 50% more expensive. It doesn't take an economist to
predict that under those conditions, many homes wouldn't be as nice, new and
safe. How many more people would have to do without air conditioning? Clean
drinking water? How many more people wouldn't be able to afford fresh fruit
and vegetables in the winter?

~~~
thaumaturgy
I think you're reaching quite a bit here. Oil is demonstrably more than 50%
more expensive now than it was anytime before 1974, even adjusted for
inflation. (I just double-checked.)

You seem to be saying that the price of energy not only underpins the entire
world economy, but that it is the greatest factor in the world economy almost
to the exclusion of everything else. I cannot believe that would actually be
your argument, so I must be misreading you.

While the cost of energy is certainly a big factor (and I'd readily agree that
cheap energy is largely responsible for the industrial age), the world
civilization would have collapsed already if it were tied that closely to the
barrel price of oil.

------
themgt
Crude oil actually has peaked (note the chart including shale/tar sands/LNG),
it's just that the demand has been offset both by the ongoing global recession
and the growth of other sources.

However, I still have a hard time seeing this as a sustainable path forward.
In energy terms it may give us enough time to transition to renewable sources,
but the main sources of remaining new carbon are tar sands, fracked shale, and
deep-water/arctic drilling, all of which have huge and increasing opposition
from local citizens and environmentalists, all of which have a far worse EROEI
than traditional crude oil plays, and especially in the case of fracking
appear to have absurdly short well lifetimes.

All of this combines I think to demand a fair amount of skepticism for the
idea that these alternate sources of carbon can long offset the ongoing peak
and eventual decline of crude oil - the EROEI if nothing else seems to
metaphysically fuck the idea of transitioning increasing portions of our
energy needs to those sources.

------
Animats
Current oil price (NYMEX): $94.57. It was in the $20-$40 range for most of the
1990s. (All numbers inflation-adjusted.) For "new oil", that's near the price
of extraction too, not markup from Saudi Arabia. We hit "peak cheap oil" a
while back.

------
hindusach
There's a much better article covering the topic of 'peak oil' here:

[http://earlywarn.blogspot.com/2013/08/what-oil-drum-
meant.ht...](http://earlywarn.blogspot.com/2013/08/what-oil-drum-meant.html)

I don't think the more intelligent people who argued that peak oil was a
reality ever thought it was about anything other than the economics of
extracting oil. Most of the discussion on the oil drum focused on what
happened when the cost of energy outpaced economic growth.

While I think fracking has been a reprieve, and that natural gas can supply
our electricity grid, I still think that there are a number of long-term
issues we may face as there are no direct substitutes for cheap oil and all of
the infrastructure we have invested to it (let's call it the oil grid).

It's not cheap to replace or retrofit an infrastructure of 250 million cars /
trucks / etc in the US that run on gasoline. Or retrofit the gasoline stations
for natural gas for that matter. Natural gas may be an alternate source of
electricity, doesn't mean it is a perfect or necessarily cheap substitute for
oil.

Similar techniques to fracking have been in the industry for many years btw -
they started out with nitrogen injection. It did have the effect of
temporarily boosting production in declining fields. The unintended
consequence however was that instead of a gentle decline, when the fields
using nitrogen injection did finally decline in production their 'curves' went
very sharply down (instead of a gentle gaussian curve). The rate of decline
after nitrogen injection has been extreme in many oil fields around the world.

See what happened to the super giant oil field in Mexico - Cantarell.

[http://en.wikipedia.org/wiki/Cantarell_Field](http://en.wikipedia.org/wiki/Cantarell_Field)

I think like Hubbert's peak - which attempted to sum the aggregate harvesting
of oil at the time given what technology he was aware of - has been a fairly
good approximation until very recently of what actually happened. In my
opinion, while new technology may have turned the curve back upward for oil
production, I think the aggregate use of fracking may also result in a curve
that on the global level also declines sharply (just as in individual fields
with nitrogen injection).

~~~
Daishiman
That's actually a pretty scary prospect.

------
jwallaceparker
When I was a kid in the 70's we used to visit my great-grandfather every
summer on his ranch in Texas. He owned several oil wells in the area.

I remember at nights the family would sit around a bonfire and talk. The
elders would smoke cigars. I still can remember the feeling of the dry summer
heat and the star-filled sky.

Sometimes the topic would come up of what would happen if great-grandfather's
oil wells dried up.

He always laughed and said the same thing, "Every time they say we're running
out of oil, the price goes to the moon."

Then he'd ash his cigar and stare into the fire, "They've been saying it for
sixty years. But those wells just keep pumping."

Great-grandfather isn't around anymore, but his wells are still pumping.

This last part isn't related to oil, but one year my great-grandfather tossed
a box of fireworks into the bonfire. It was epic. I never laughed so hard in
my life. Still haven't.

------
fapjacks
These are very brave words for and by an industry that is still using primary
and secondary methods for extraction. Primary means the pressure is high
enough that it literally shoots out of the ground. That's pretty easy oil.
Secondary means employing a mechanism -- like a pump -- to get it out of the
ground. We're just now beginning to toy with new tertiary methods of
extraction, and they are expensive. Yes, innovation marches on. However, we
probably won't innovate planet-scale hydrocarbon supplies out of thin air in
the next twenty five years. The price will keep getting higher, the methods
more and more creative, but at some point, capitalism as a mechanism for oil
extraction becomes ineffective (and eventually impossible), and the flow of
oil stops. Whether or not we have another equally "free" source of energy
standing by to take over is another issue altogether.

~~~
eru
Nuclear is basically ready.

~~~
fapjacks
While I tend to agree, you can't spray your fields with nuclear energy (or
solar, or wind, or whatever). Oil plays an enormously fundamental role across
a broad spectrum of uses in our civilization.

~~~
eru
Yes, but with some extra energy input any old source of carbon atoms will do.
(Oil and coal just come with carbon _and_ energy, which makes them very
convenient.)

------
vonnik
I'm not afraid that we have too little oil. I'm afraid that we have too much.

~~~
galago
In 1994, a chemistry professor told me with a grave expression, that "we have
more than enough coal to destroy the world." My current concern is that we're
now in a gold rush to extract fossil fuels before it inevitably must be
stopped.

------
beatpanda
I really enjoy how articles and conversations like this tend to take place in
a universe parallel to the one where the extraction and burning of fossil
fuels, especially from "unconventional" sources, has grave environmental and
social consequences. As if we can compartmentalize the economy and our
environmental and social ecology as separate, non-intersecting concerns.

~~~
wazoox
Exactly. The "boon" of unconventional oil looks like a catastrophe to me:

[http://photo.capital.fr/l-enorme-desastre-ecologique-du-
petr...](http://photo.capital.fr/l-enorme-desastre-ecologique-du-petrole-
bitumeux-2658)

Actually it should remind us of "the limit to growth" book: the meeting point
of pollution and lack of resources will destroy us.

------
Spooky23
They haven't come true because they aren't relevant predictions.

Oil extraction costs have risen. Cars have shrunk and alternate energy sources
have thrived as a result. If oil supplies continue to be challenged, prices
will rise again, and you'll start to see truck fleets switch to natural gas
(which is ridiculously abundant).

Society isn't going back to the 19th century.

------
insaneirish
Peak oil assumes the price p of oil is a function of the supply s of oil: i.e.
p = f(s).

It doesn't really account for the fact that as the price of oil increases,
people get a lot more innovative at finding new supplies of oil. In other
words, s is not some constant, but itself some other function, at the minimum
dependent on p: s = g(p). Therefore, p = f(g(p)). Lo and behold, we have a
_way_ more complex relationship between price and supply than some naively
assume.

The fact that the earth has a finite amount of petroleum is irrefutable.
Whether or not that matters on any "real" timescale is up for debate.

~~~
Dylan16807
It does account for that fact.

------
spikels
Why do certain phrases, such a "Peak Oil", make so many people have such
strong opinions based on so little information and expertise? It must simply
be one of those ideas what captures the public imagination and makes everyone
feel they must have an opinion no matter how little they know. I wish there
was a better explanation. The human mind is a very strange and fascinating
thing.

------
aaron695
Peak oil will never happen.

If we have to we can convert coal to oil, which we wont since other oils aka
all the other fossil fuels are pretty plentiful given current tech.

I can't see energy costs going up by a factor of 10 changing my lifestyle much
for $ reasons, so harvesting natural gas, oil, coal will be always viable.
Even if that 10 times increase is only for a while my net worth's will be so
high through technological innovations another 10 fold increase won't matter
to me either by that time.

Part of those technological innovations will be cheap energy though so it
won't really mater, oil aka fossil fuels won't run out, they will just become
redundant.

