Have We Reached Peak Oil?

Over the past year, American drivers have found themselves longing for the days when two dollars per gallon seemed expensive. Oil prices are rising at an unprecedented rate, and as a result, many are questioning whether the Earth's available oil supply has reached its peak. Are there still oceans of oil awaiting our discovery? How much pain you'll be feeling at the pump in the future depends on the answer.


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I think this is really what the world is facing right now. Wars, politics, global warming theory, it all has to do with peek oil.
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Thanks for this post. I definitely agree with what you are saying. I have been talking about this subject a lot lately with my father so maybe this will get him to see my point of view
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Low Cost Oil, Is It Telling Us Something?


If the cost of a barrel of oil jumps up to $145 and then drops to $35, all in less than a year, what’s that called? It’s called peak oil. A 50 percent price increase is followed by a 76 percent price drop all in one year. What does that mean? It means we have reached a point where world demand for oil has been exceeding supply and increasing price reflects the urgency of our demand for oil. It’s simple enough; when there wasn’t enough oil for everyone, the price was bid up based only on how badly the world of buyers wanted oil, having nothing to do with what it cost to produce the oil. Price peaked. Oil is a lot more important to the world than coffee or even corn; so its price peaks much further beyond cost than most commodities.
Chuck Schumer, Bill O’Reilly and similar ‘conspiracy’ advocates look for corporate demons. Conspirators are always more fun to deal with than simple truth. Of course they found none, and now? Well, we find ourselves in a serious recession, and oil demand has declined two percent. Not much, but enough to reduce demand below available supply. Prices fall to the cost of production, collapsing 76 percent. A two percent drop in demand results in a 76 percent fall in price. I’m repeating myself for a reason; we are right on the edge of, right at the top of, peak oil. We will never produce much if any more oil per day than we are right now.
No one looks for demons as price collapses. But there is a demon, one that Bill and Chuck choose to ignore – peak oil. We have found the demon we’ve been denying for decades. The threat of peak oil is a spike in energy price creating an economic recession which results in a drop of demand for energy and low prices eventually ending the recession. The cycle then repeats and repeats; and with less and less oil remaining, each cycle is worse than the last. What does it mean? It means we are running out of oil; natural gas will be next, and we had better do something about it. It means Mr. Schumer and Mr. O’Reilly will keep looking for corporate villains without success, and the world, including you, me, and our children, is in big trouble. It means Mr. Schumer and his allies will press for ‘green energy’ like bio-fuels, wind-farms, solar arrays, geothermal and all sorts of other alternatives that have no chance of matching the energy demands the world will need without 85 million barrels of oil per day. The only option with any promise at all: nuclear, is dismissed or at best given reluctant footnote status. Why? Because, support for this earlier demon might threaten the illustrious careers of our self promoting politicians.
My ugly surprise was, and is, the recession we’re in. Looking for a recession that would be driven by run away oil prices, I wasn’t ready for or paying attention to, the housing cost bubble until it burst. The recession we’re in is driven by a ridiculous new scam for ‘affordable housing.’ In the 1930s we had equally misguided, but genuine ‘affordable housing’ in the form of low cost, minimal, high-rise, subsidized apartments. These were routinely destroyed by the tenants who felt no ownership or pride in them. They became known as ‘projects’, disasters that were eventually torn down. Now, our friend, Mr. Schumer along with Mr. Dodd, Mr. Frank, and others has developed what they still call ‘affordable housing.’ They love ‘affordable housing;’ it’s a big part of the bond between them and their constituent base and they need to find a way to offer their base something – anything. They’ve struck gold with a terrific new idea: ‘affordable money.’ If you make money affordable enough, anyone can buy anything – even ‘affordable housing.’ They managed to upstage what would have been the first of many recessions to be sponsored by the limits of our geological resources. Peak oil upstaged by political greed. Unintentionally Mr. Schumer et-all has exposed peak oil at its peak. Now it’s up to us to understand what Mr. Schumer’s low cost oil is telling us.
We are about to throw money at anyone who can spend it. Spend it on anything. How do you mentally grasp a trillion dollars – a thousand, thousand million dollars? That’s a bunch. If we could get our minds around the importance of energy to our human history and future, we could do something of historic importance. Maybe even more important than heating a big swimming pool in Hawaii, or Alaska’s famous bridge to nowhere. Who knows?


It is about supply and demand. It has nothing to do with whether we have reached our peak potential which is still and unknown factor as improved drilling and extraction methods keep increasing available supplies. The rest of your post is rambling on about all kinds of things most, to my surprise, I agree with. :-)


We have a huge surplus of Natural Gas more and more of which is being extracted using improved drilling techniques. Of course eventually, maybe in 100 or so years, we would run out of fossil fuels if our usage patterns didn't change.


U.S. proved reserves stand at 21 billion barrels, according to the Energy Information Agency of the DOE. That would last us less than 3 years. (But they cannot be produced that fast.)
http://www.eia.doe.gov/basics/energybasics101.html


Can you tell me exactly how many barrels of oil counts as "vast" in your argument? How does it stack up against 20 million barrels per day that we use? How does it match up against a _conservative_ estimate of 4% decline per year for existing mature fields?


I know we haven't started drilling in the areas where we supposedly have "vast" reserves, so you may argue that it's impossible to give a number. In that case, how do you know they are "vast" to begin with? Can't we at least come up with an estimate within an order of magnitude? If you did, you would demonstrate how little the "vast" reserves look in the big picture.


Our ONLY long-term solution is to GET OFF OIL AS FAST AS WE POSSIBLY CAN.


Though her politics are very different from mine, in the past I've not been unsympathetic to Dr. Furchtgott-Roth's work critiquing feminist exaggerations regarding pay discrimination. But being reminded that she served as Chief of Staff on President Bush's Council of Economic Advisers, I'm struck at how the economists within the Administration seem not to have received the memos about Peak Oil: within the decade "the hydrocarbon society can't be with us to the extent it is today" (Bush, 4/19/2005); "oil-hungry economies will compete for dwindling supplies of hydrocarbons" (UK Amb. David Manning, 3/2006); "the warping now of diplomatic efforts by the all-out rush for energy supply" (Condoleezza Rice, 4/2006); "We're in a race with China and so far we're losing" (Cheney aide, Insight Magazine, 5/16/2006); "If they [the Saudis] don't have a lot of additional oil to put on the market, it is hard to ask somebody to do something they may not be able to do" (Bush, 1/15/2008) - and others.


My recollection is that Dubai raised its declared reserves by some 197 percent during the OPEC quota wars of the 1980s. The other 5 countries in question raised their reserves by between roughly 50 and 100% - the range given by Dr. Schoppers.


1) Yes indeed let's stop sending our money to OPEC. But what will fuel our cars? I say much smaller cars, natural gas, electricity, maybe some (bio)diesel and propane.
2) American oil is not controlled by a cartel. America has been so drilled, there's not much left to find. Of the 41,000 oil fields known in the world, 31,000 of them are in these United States! Increasing supply is easier said than done.
3) If you believe the supply is here, or "out there" (and believe me, at these prices, people are looking), I challenge you to calculate how many days it will keep us going, consuming 21 million barrels per day. Please see the NO side's 2nd argument "As Oil Prices Rise", and my Objection item (4), for an example.


Look, oil is controlled by a cartel. Just like diamonds. Drill in America. Stop sending our money to people who hate us and the price will drop. Increase supply. Global warming is a fake science that props up the terror states and starves the 3rd world as we divert food supplies to energy. The oil is out there, let's go get it.


The reason oil is so high is because we are banning drilling in the US and buying from Middle Eastern Countries who use the money to fund the war against our troops. We should be back up in Alaska drilling the thousands of miles of oilfields up there!


I am an engineer in the energy industry. Studying the business led me to the thoery of peak oil. The arguments are very sound and I have come to believe the theory. The most persuasive chart is the amount of oil discovered over time, this peaked in the 1960's. All those big discoveries are now in decline, Cantarell being the most obvious (and frightening). Having dealt with both NOCs and IOCs, the difference in how they operate is astounding! With the exception of Brazil, the NOCs cannot move projects along except at a snail's pace. It is a wonder that they can keep their assets operating at all. And they control 80% of the reserves! The point of my headline is that economists do not understand the underlying science of oil extraction and production and are thus wrong nearly 100% on this subject. Peak oil is here, mostly thanks to resource nationalism.


Intelligent readers will not be satisfied with opinions expressed on opposing sides -- they will want to have a look at the raw data to see which side's argument the data support.


A simple on-line tool is available for looking at historical production, consumption, import and export data for all the major oil producing nations. It's called the "Energy Export Databrowser" and can be found at http://mazamascience.com/OilExport /


The data visualizations found at this databrowser go a long way to explaining what has happened, what is happening and what is likely to happen with regard to oil production and cost.


The arguments for peak oil are much more detailed and persuasive. Even the testimony of Ms. Furchtgott-Roth to Congress suggests that we are facing a long term problem with oil supplies. If there is not a debate about a protracted shortage and spiraling prices in oil, then perhaps the debate is about the finer points of when if ever there will be lasting price relief. In the meantime, action is indicated. What are the motives of the analysts and policy makers here? Unfortunately, the individual and group optimums are at odds. Its a prisoners dilemma. It makes sense that policy makers will want to keep the calm even as individuals in the know take action to protect themselves. Conservation seems like a strategy for common good, but even that may run counter to economic growth. The good news is that rising prices are forcing conservation upon us. Lets hope that short term policy designed to raise consumer confidence or cushion the inevitable does not derail efforts to conserve.


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