New Report Adds Fodder to Peak Oil Debate
Posted February 23, 2010 at 6:43 am 
Filed in: Since the 1950s, when M. King Hubbert correctly predicted a 1970s peak in U.S. oil production, the “peak oil” debate has roiled industry and policy groups as different stakeholders try to prove that either we are rapidly running out of accessible oil or that there is plenty to last for the coming decades and, perhaps, beyond.
Last week, new evidence was added to the melee, with the release at the Royal Society in London of the latest report from the UK Industry Task-Force on Peak Oil and Energy Security (ITPOES), a group of six companies spanning a range of business sectors.
The report, titled “The Oil Crunch – a wake-up call for the UK economy”, forecasts that “peak oil” is close at hand, if it has not already been reached, and that “the UK must not be caught out by the oil crunch in the same way it was with the credit crunch.” After examining global oil reserves and extraction rates, the report finds that peak production rate will likely occur in the next decade, and possibly within five years at no more than 92 million barrels per day (mmbd). The highest extraction rate in history was 87 mmbd in July 2008. The primary arguments for extraction rates falling after 2011-13 are the lack of giant field discoveries, high exploration costs with relatively low yields, OPEC overstatement of reserves, and general underinvestment in the industry.
The coalition members are Richard Branson, founder of Virgin Group, Ian Marchant, CEO of Scottish and Southern Energy, Brian Souter, CEO of Stagecoach Group, Philip Dilly, Chairman of Arup , and Jeremy Leggett, Chairman of Solarcentury.
The prospect of a peak and then a rapid fall in production rates in the 2015 timeframe, just as demand from China and India ramps up, is indeed a frightening prospect for both the United Kingdom and the United States. However, the evidence is controversial, with other industry experts, such as Michael Lynch at MIT, arguing that peak oil is nothing more than a Malthusian myth. Daniel Yergin, Chairman of IHS Cambridge Energy Research Associates, points out that political peak oil, when above-ground carbon constraints and energy security concerns combine to reduce oil demand, is far more likely than geological peak oil.
Historically, oil companies have provided comforting assurances that there is plenty of oil for the next fifty years or so. BP maintains there is plenty of oil to last at least until 2040, and the “peak” will be a demand-driven one sometime after 2020. However, over the past few years a number of CEOs have discussed the possibility of peak oil. The CEO of Petrobras stated in January, 2009, that oil supply will peak in 2010, and the Total CEO believes that oil supply will never reach beyond 89 mmbd.
The International Energy Agency, on whom many governments and companies rely for their baseline forecasts, has steadily revised down its oil supply forecasts. In 2005 they predicted a possible 120 mmbd of oil supply in 2030, a figure that was reduced to 116 mmbd and then 105 mmbd in 2008. Yet some researchers, such as a Swedish group at Uppsala University, suggest that it is impossible to get anywhere near 105 mmbd, and in fact argue that oil has already peaked and will likely be around 75 mmbd in 2030.
For some impressive graphics, see here.
Regardless of whether it is due to above-ground or below-ground forces, we are likely headed for increasingly high and volatile prices, particularly as costly unconventional and deep water oil from overseas form a greater share of consumption.
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