Will civilization collapse due to running out of oil? This question was hotly debated about 20 years ago; Today, not so much. Judging by a Google search, interest in “peak oil” peaked around 2003 (the year my book The party is over was published), peaked around 2005 and flowed until around 2010 before dropping dramatically.
Well, civilization hasn’t collapsed for lack of fuel – at least not yet. Instead, oil has become more expensive and economic growth has slowed. The “tight oil” produced in the US with fracking technology has come to the rescue, sort of. For a while. This oil was more expensive to extract than conventional oil, and production from individual wells declined rapidly, thus requiring extensive drilling. Over the past decade, frackers sank deeply into debt as they built tens of thousands of wells in Texas, North Dakota and several other states, sending U.S. oil production soaring. Central banks helped by keeping interest rates ultra-low and injecting trillions of dollars into the economy. National petroleum production has grown more and faster than anywhere else in the history of the oil industry.
Most environmentalists therefore toss maximum oil into their mental bin of “things we don’t need to worry about” due to their laser-like focus on climate change. Mainstream energy analysts then and now assume that technology will continue to outpace resource limits in the immediate future, which seems really important. Much of what remains of the peak oil debate focuses on “peak demand”—that is, when electric cars become so abundant that we no longer need as much gasoline.
Still, those involved in the oil spill literature have come away with some useful insights:
- Energy is the foundation of all aspects of human society.
- Fossil fuels have enabled a dramatic expansion of energy usable by mankind, enabling unprecedented growth in human population, economic activity, and material consumption.
- It takes energy to get energy, and the ratio of energy returned to energy expended (energy return on investment, or EROI) has historically been extremely high for fossil fuels compared to previous energy sources.
- Similar EROI values for energy alternatives will be necessary if we are to maintain our complex, industrial lifestyle.
- Degradation is as important a factor as pollution in assessing the sustainability of society.
Now a new research paper has come on the scene, authored by Jean Laherrère, Charles Hall, and Roger Bentley—all top oil debate veterans and all experts with many papers and books to their credit. According to its title (“How much oil is left for world production? Comparing assessment methods, and separating fact from fiction”), the paper mainly addresses the question of future oil production. But to get there, it explains why it’s a difficult question to answer, and what the best ways to approach it are. There are a lot of technical issues, if that matters to you. For example, energy analytics firm Rystad recently cut global oil reserves by about 9 percent (from 1,903 to 1,725 billion barrels), but the authors of the new research paper suggest that reserve estimates should be reduced by another 300 billion barrels due to longer periods. Standing over-reporting by OPEC countries. This is a matter of debate, and readers will have to make up their own minds as to whether the authors have made a convincing case.
For readers who just want the bottom line, here goes. The most sensible figure for the total amount of “conventional oil” produced is basically in place (what we have already burned, and what may be burned in the future) at about 2,500 billion barrels. We have already extracted about half the amount. When this total is plotted against time as a logistic curve, the peak of production essentially occurs now, days or even years later. In fact, conventional oil began a production plateau in 2005 and is now declining. Conventional oil is essentially oil that can be extracted using conventional drilling methods and that can flow naturally under surface temperature and pressure conditions. If oil is defined more broadly to include unconventional sources such as tight oil, tar sands, and extra-heavy oil, then potential future production will increase, but the potential peak will not move very far in time. Tight oil production in the Permian play in Texas and New Mexico may still increase, but will likely decline by the end of the decade. Extra heavy oil from Venezuela and tar sands from Canada won’t make much of a difference because they require a lot of energy to process (ie, they have low EROI); Indeed, it is unclear whether much of Venezuela’s vast claimed Orinoco reserves will ever be extracted.
Of course, the logistic curve is a way of using math to describe trends, and trends can change. Will the decline in global oil production be as slow and smooth as the mathematically generated curves on these experts’ charts? This depends in part on whether countries dramatically reduce their use of fossil fuels to prevent catastrophic climate change. If the world is serious about limiting global warming, policies such as carbon taxes can make the downside of the curve steeper. Keeping most of the remaining oil in the ground would be a necessary and complex task, which could not be accomplished under a business-as-usual growth economy. We will need energy for the energy transition (solar panels, wind turbines, batteries, heat pumps, electric cars, public transportation, etc.) and most of that energy, at least in the early stages of the transition, will have to come from fossil fuels. If oil, the most important of these fuels, is supply-constrained, that adds complexity to managing investments and policies to minimize economic distress while pursuing long-range climate goals.
As a side issue, the authors note (as do others) that the IPCC’s business-as-usual projections of future carbon emissions are unrealistic. We don’t have enough fossil fuels economically to make the worst-case scenario a reality. However, even assuming a significant reduction in reserves (and thus projected emissions), burning all the oil we have will far exceed emissions targets to avoid climate catastrophe.
One factor potentially limiting future oil production that is not discussed in the new paper is related to debt. Many observers of the fracking frenzy of the past 15 years have noted that the industry’s ability to ramp up oil production depends on low interest rates, which enable companies to produce oil now and pay the bills later. Now central banks are raising interest rates in an effort to fight inflation, largely a result of higher oil and gas prices. But rising interest rates will only discourage oil companies from drilling. This could potentially trigger a self-reinforcing feedback loop of disrupted production, rising electricity prices, higher interest rates and debt defaults, which would likely culminate in a major economic crash. So, instead of a soft power descent, we get what Ugo Bardi called the “Seneca Cliff”.
So far, we are only seeing crude and natural gas shortages, high energy prices, broken supply chains and political unrest. Energy challenges are now top of mind for policymakers and the public in a way we haven’t seen since peak oil got some attention in 2008, when oil prices hit a record $147 a barrel. But now we run the risk of losing underlying, irreversible supply constraints, given the other, more immediate supply and price shocks the world is facing—such as the pandemic, the war in Ukraine, and the lingering effects of embargoes on Russian oil. and gas, and tougher demands for returns from domestic investors.
It will take more than another botched revolution to save the situation from escalating further, which has bought us an extra decade of business as usual. At this time, we have to start adapting to the limitations of nature. It means giving up sharing, cooperation and belt tightening. It means reckoning with our definitions of prosperity and progress, and getting down to the task of reshaping an economy that has become accustomed (and all too comfortable) with fossil-fueled growth.
Teaser photo credit: Active Permian Basin pumpjack east of Andrews, TX. By Zorin09 – Own work, CC BY 3.0, https://commons.wikimedia.org/w/index.php?curid=14607474