It has been interesting to note how the subject of 'peak oil' has gained ground over the past five years. In 2003 when the subject first gained some kind of exposure - on the BBC's Money Programme in the UK, on Al Jazeera's English-language Internet service and occasional other articles the response from the industry was a furious one. Peak oil did not exist and never would do.
How times have changed. Christophe de Margerie, the Chief Executive of Total in France, says the world will never produce 100 million barrels per day of oil; we currently produce around 85 million barrels per day of oil. He thinks we are in an era when high costs, geo-politics and the decline rate of existing fields will simply stop any attempt at getting to 100 million barrels per day of oil. It will stop the world hitting the kinds of levels of production we are told the global population will imminently need.
At Shell the chief executive Jeroen van der Veer openly uses the catchphrase 'the era of easy oil is over.' He is more hopeful that oil sands and oil shales can produce the amount of energy needed by the planet. But he will not give any guarantees of future production; he also is forced to admit that his company will see production decline this year, as it has done for the last two. Shell will not admit that there is a peak, but that there will be 'several peaks' which basically amounts to the same thing.
The head of ExxonMobil, one Rex Tillerson, says that non-OPEC production will peak sometime in the middle of the next decade. Although he would like to get his hands on some of the oil in Alaska currently out of bounds, a few extra billion barrels here or there will not make a huge difference. What OPEC will end of producing is hard to guess. Nigeria and Angola will peak next decade, Indonesia has already peaked, Venezuela may never again make 3 million barrels per day and Kuwait's oil reserves look about as believable as the dollar equalling one euro by the end of the month.
In the U.K. the government and the oil industry has given up trying to argue that the north sea will somehow rebound and get back to the levels of even five years ago. It is now widely understood by the general public that the U.K. is going to be a net importer of energy from now on. It is not understood that the concept of 'free market economics' have thrown away the valuable hydrocarbons offshore the U.K., in return for huge profits for a tiny amount of people. But let us be grateful that at least part of the message is getting through.
One of the reasons the message has found such stony ground on occasions has been the antics of peak oil 'believers'. We use the word 'believer' in brackets because, although peak oil is a reality, the 'believers' take it to a whole new faith-based level. Anyone with a whacko axe to grind, be they the 9-11 crowd, the fascist BNP in the U.K., the back to the cave greenies and others have latched onto peak oil as a crutch for their existing views.
The reality of peak oil is in fact closer to that of Christophe de Margerie, with some caveats. Firstly, if you produce a lot of oil you have a bigger decline rate. If you have a bigger decline rate you need to find and bring on stream a lot more oil, every year, every month, every week. If the demand for that oil is exacerbated by -- for example China -- the cost of it rises and so does the cost of extraction.
Those costs mean that long term planning, needed for all but the tiniest oil fields, becomes harder and slower to do. Then of course, on the sidelines, we have all the various vested interests. The banks who own the corporations, the executives who pocket giant sums each year on the back of an expensive commodity and the national oil companies piling up cash of their governments. Few of whom have any interest in producing a glut of oil to bring down the money they make.
Peak oil is a reality. It may take a generation for all the effects to be played out but they will be played out. They will never be solved by current economic thinking, because it was current economic thinking that caused it. Welcome to the peak.
