Despite the arguments that once raged and the considerable volumes written to advocate certain viewpoints and disparage others, interest in peak oil is at an all time low. Indeed some commentators have confidently declared that peak oil is dead and that the theory has turned out to be nonsense.
But this attitude stems largely from the explosion of tight or shale oil production in the US. This oil, trapped in shale rock formations in the same way as shale gas, and similarly extracted by fracking, was almost unheard of just over five years ago. Yet recent projections suggest production of it could exceed 7m barrels per day by 2035. Despite this, some analysts maintain that tight oil has no bearing on peak oil, and others claim that it is a point we have already passed.
So we are in the strange position where both sides of this debate claim victory. It’s worth noting that there is not a true dichotomy of opinions on peak oil. While many analysts’ positions lie somewhere in the centre of the spectrum spanning the extremes of the debate, the more nuanced opinions tend to get clouded or ignored in the ensuing shouting match (so often the case with energy policy).
A question of definitions
Why both sides feel they have been proven correct is down to their different interpretations of peak oil. The original interpretation, which dates back to the 1950s, was that global production of oil, a finite resource, would at some point rise to a maximum and subsequently decline. Analysts therefore focused on future projections and estimating the date by which the peak level would be reached.
But future projections by both advocates of peak oil (so-called “pessimists”) and by those who dismiss the idea (“optimists”) have tended to be somewhat off the mark. There are various reasons for this, not least the uncertainties that significantly frustrate any effort at predicting the future. For example, assumptions on the effects of future CO2 mitigation policies, the growth in global population and GDP, how much oil can be economically recovered, and future oil field discoveries all have massive implications.
So it’s very hard to have any confidence in a single estimate of future production levels. When, or if, there will be a peak level is very unclear and infinitely debatable, and so the discussion reaches an impasse.
Too much oil, not too little
There are other definitions with which to continue the debate, however. One is that in the future there will be a gap between shrinking supply and growing demand. Another is that the world is simply “running out of oil”, or more specifically, “running out of oil that can be produced easily and cheaply”.
The first definition is most commonly found in the popular literature, since if it occurred the resulting oil price hikes would cripple the world’s economies, and so it is usually accompanied with varying degrees of dystopic doomsaying.
But this is and always has been nonsense: it is not possible to have a “gap” between supply and demand. Similarly, the idea that we are “running out of oil” doesn’t stand up to much scrutiny. The evidence suggests that we actually have far too much oil. For example, if we are to have a chance of staying below the 2°C average global temperature rise agreed on by politicians, we need to use by 2035 less than two-thirds of our current reserves. And this is not to mention all the additional oil in fields yet to be discovered, for example in the Arctic and Antarctic, and huge volumes of “unconventional” oil, such as the extra-heavy crude and tar sand bitumen in Venezuela and Canada.
However, the idea that we are running out of economically viable oil is more interesting, and it is this interpretation that has been most affected by the emergence of tight oil. “Cheap oil” is usually taken to be oil that can be bought at the prices seen from the mid-1980s to mid-2000s, around US$30 a barrel (in 2010 prices).
If, as bullish commentators suggest, the arrival of tight oil had killed this interpretation, one would expect the oil price to gradually return to this level. The most respected authority on such matters, the International Energy Agency (IEA), suggested in its 2009 world energy outlook – before tight oil and shale gas – that oil prices would rise to above US$115 a barrel by 2030. It’s most recent 2013 outlook, which reflects the results of a major ramp-up in tight oil production and huge fields such as the Bakken formation, projects an oil price in 2030 that is again just over US$115 a barrel. All that hype, all that oil, but no difference to the oil price.
So, were the dystopian predictions of what would occur after peak oil nonsense? Of course they were. But does that mean that peak oil itself is nonsense? Certainly not – we find ourselves in an era of high oil prices for many of the reasons that the peak oil proponents always advocated.