How not to argue against the idea of peak oil
29 Jan 2012
Last week, the highly renowned journal Nature published a bold article, “Oil’s Tipping Point Has Passed,” which argues that the world is now at the peak of crude oil production, and that this is the main reason why oil prices have skyrocketed over the past decade. What’s more, it says that these high oil prices are a major brake on the economy, and played a role in the crash of 2008. (The Nature article is subscription only, but David Biello at Scientific American had a pretty good summary of it, albeit with some flaws.)
I think this article marks a milestone in the official recognition of problems with our oil supplies, and that people will point to this article for a while to come. Michael Levi at the Council on Foreign Relations, though, tries to poke holes in the article. Some of his points are valid, but he makes a number of glaring mistakes, which I’ll run through here, since Levi’s mistakes are indicative of those who argue against the peakists. Levi’s post is titled “How Not to Argue That We’re Running Out of Oil,” so I’ve called this post “How Not to Argue Against the Idea of Peak Oil.” (UPDATE: After I made some comments on Levi’s blog post, he changed the title of it to “How Not To Argue That We’re Running Out Of Affordable Oil.”)
First off, King and Murray weren’t arguing that we are “running out of oil”—at least in the sense that we would sometime soon not have any more oil to use. Most people, I suspect, when they hear the words “running out,” they think of when they’re running out of gas in their tank, and know they need to pull over very soon and find a gas station, or else their car is going to simply stop.
But that’s not what King and Murray mean when they talk of peak oil. They’re talking about the rate of oil production, and whether we can manage to push it higher. When you equate “peak oil” with “running out of oil,” you’re pulling the same kind of switcheroo that Daniel Yergin does. (See my post on Yergin: “The Quest” Questioned #5: Peak Oil = Running Out of Oil?)
Also, it seems Levi got things upside down with the reserves-to-production ratio, which gives an idea of how much oil we could produce soon, compared with how much we’re producing now. He wrote: “If a technological breakthrough doubled our reserves tomorrow, the reserve-to-production ratio would be sliced in half.”
But he got the ratio upside down. Since the reserves are on the top of the ratio, if reserves doubled overnight, then the reserve-to-production ratio would also double. And that would be a good thing for delaying the peak of production. So lesson number one of how not to argue against peak oil would be, get your basic math right.
Another mistake is when Levi talked about the level of production in recent years, he wrote “the authors seem to have misread their reference,” referring to the EIA’s 2011 Annual Energy Outlook.
But they did read it correctly; it’s Levi who’s wrong on this. King and Murray are talking about “regular crude oil,” not “all liquids” or “all conventional liquids.” Here’s Fig. 14 from the EIA report they referred to:
It seems that when Murray and King talked about “regular crude oil,” they meant the same thing that the EIA calls “conventional crude oil and lease condensate.” You only get up over 75 million barrels a day if you also throw in natural gas liquids, which, in my understanding, most people don’t consider “regular crude oil.”
On that EIA graph, production of “conventional crude oil and lease condensate” has been flat at about 72 million barrels a day since 2005, and according to the EIA’s reference scenario projection, will remain at that level through 2025.
So lesson number two would be, don’t accuse people of misreading simple graphs, when they haven’t.
Levi also argues that Murray and King are wrong when they talk about “unidentified projects.” But here, again, Levi is the one who’s wrong.
Levi wrote: ”Unidentified projects don’t involve oil that is ‘yet to be discovered’ – they involve oil that has not been specifically targeted for extraction. In fact, as best I understand, all of the production increase that EIA anticipates comes from oil that has already been discovered.”
That’s not true, as I’ll explain in a bit of detail.
It sounds like Levi is saying that he thinks the EIA makes a projection that is led by the available supply. However, in my understanding, both the EIA and the IEA make “demand-led” projections. So then the question is, is there enough supply to meet the projected demand? We will undoubtedly continue discovering more oil—but how much more would we need to find to meet the demand?
When Murray and King mention “unidentified projects,” it seems they’re referring to a 2009 presentation by Glen Sweetnam of the EIA. It’s become sort of famous in peak oil circles for showing a huge gap between projected demand and the oil from existing and planned projects. Here’s page 8 of Sweetnam’s presentation:
This huge gap is labeled “unidentified projects.”
How much of this gap could be filled from known reserves, and how much would have to come from new discoveries? For an answer to that, we can look to the IEA’s 2010 World Energy Outlook.
There, they show production from active fields dropping off over the coming decades. Then they show production from known fields that haven’t yet been developed. Finally, they show the “fields yet to be found.”
This wedge of fields yet to be developed or yet to be found (the two wedges colored lighter blue), when added together, are very close to the same size as Sweetnam’s wedge of “unidentified projects.” So I gather that both the EIA and the IEA are talking about the same issue. To fill this gap and meet demand, we would have to discover a substantial amount of new oil.
In the IEA’s projection of this situation, by 2035, these newly discovered oil fields would be producing about 20 million barrels a day. To put that in perspective, that’s the equivalent of today’s two biggest oil producers—Russia and Saudi Arabia—combined. (Or, since these two countries produce about the same amount right now, we could say it’s the equivalent of two Russias, or two Saudi Arabias.)
So I call that wedge of undiscovered fields the “wedge of hope.” (I put that label on the graph above; it’s not on the original graph.) For more details on this, see my post “The future of oil and the wedge of hope”.
And that brings us to the final lesson: If you’re not really sure about an important point, take the time to check the facts.
UPDATE: I re-read what Murray and King wrote in Nature, and they don’t get it right, either. They said: “unidentified projects — in other words, oil yet to be discovered.” But as we can see from the IEA’s projection above, the unidentified projects would be a mix of both already discovered oil, and yet-to-be-discovered oil. It seems everyone wants to oversimplify things, and say “it’s all old oil we already know about” or “it’s all new oil we might not find,” when actually it’s both.