Wednesday, January 6, 2010

Peak Oil Refuted

We will never run out of oil.

This according to Peter Davies, Chief Economist at BP. Why?
...ideas of peak oil supply are not true. Doomsayers have exaggerated the issue. The bell-shaped curve of production over time does not apply to the world's oil resources.
Because the rules don't apply to oil! Apparently you just can't use up all of the stuff, even if it is in finite supply and even if, as he admits, "a barrel can only be produced once."

The reason of course is faith in technology and markets. Davies believes that as long as demand doesn't slacken, the economic benefit of increased production and the marvels of ever-better (and ever more feasible) extraction technology imply that there will always be supply to meet any demand:
Those who believe in peak oil tend to believe that technology and economics don't matter, and I think this is false. The application of technology, the innovation of new technology and economic forces especially mean that recoverable oil resources can increase. If there is a peak in oil, it will come from the demand side.
Well, of course technology and economics matter, but then, so does geology.

Future technological advances and oil selling for $500 per barrel have a high likelihood of allowing more production from reserves not currently feasible. But so what? They won't, as Davies laughably asserts, increase "oil resources." There is only so much oil in the ground, and no amount of money or technological innovation will create more to meet relentlessly and arbitrarily increasing demand. It's a bit like Peak Buffalo.

Perhaps Davies misunderstands the concept of peak oil. (This is not unlikely given his antiquated economist's viewpoint that EROEI is "meaningless.") It is not about using up the last drop. Instead, we pass (or have passed) the point where the easy oil has been had, and what remains is increasingly hard to find, hard to reach, poor quality, in smaller concentrations and, critically, enormously expensive. The limits of technology are pushed and the economics become infeasible, but the driver is geology--there's a finite amount of oil, only a fraction of which will ever be plausibly produced and used. The idea that future technology will enable a never-ending cornucopia is absurd. Moon rocks can be obtained using technology, but no one will ever bring them to Earth to make a garden wall.

Peak oil will not be caused by demand. Slackening of demand will occur, but as demand destruction, a symptom of soaring prices caused by shrinking production at escalating cost.

I found Davies' rationalizations in a piece from Emirates Business 24/7 (via). The author, one Nadim Kawach, clearly also a true believer in a permanent Age of Oil, dismisses claims of any eventual peak:
...such scenarios have been refuted by most oil producers, mainly the Arab countries on the grounds their region actually contains much more oil, which could be extracted by advanced technology in the future.
Can more oil be produced in future? Quite possibly. At endlessly affordable cost? Unlikely. Peak oil refuted? Only if you believe in magic ponies.
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