Is the idea of peak oil a false projection or impending reality?

Materials World magazine
,
1 Sep 2013

A mixed panel deconstructs the hyperbole. Ledetta Asfa-Wossen reports.

Professor Charles Hall, Emeritus Professor at State University of New York, College of Environmental Science and Forestry, USA

The world has recently been exposed to many optimistic estimates on the future of oil production and the media has eagerly picked up these projections. International Energy Agency estimates that by 2020, the USA is projected to become the largest global oil producer, to the extent that it is to become a net oil exporter by 2030. These perspectives are offered as an alternative to the pessimistic Hubbert curve projections that imply we are at, or near, maximum global production of oil. But if you dig into the rationales for this optimism, it is based principally on two concepts. There are new developments in the oil industry, specifically directional (horizontal) drilling and fracking, principally in the Eagle Ford play of Texas and the Bakken region of North Dakota and Montana. And, stated less frequently, the addition of other fluids to what is called oil, most importantly natural gas liquids, which are expected to increase as a result of fracking for gas. In fact, there has been little, if any, increase in the global production of conventional oil since 2005, and most of that has been in the USA.

Peak oil is the point at which the maximum rate of petroleum extraction has been achieved, after which production enters a terminal decline. It is based on the idea that oil is a finite resource. Marion King Hubbert introduced the model.The basic issue is that there is a huge difference between the quantity of oil left in the ground (a lot), and the amount of high-quality oil that can be extracted and refined at a significant energy profit (not so much). My research with colleagues has shown that global energy return on investment (EROI) of oil is declining. Oil that used to be extracted at a gain of 20–40 joules per joule invested is now being extracted at 10–20 joules per joule or less, as we have depleted the best resources. Hence, oil prices must rise.

The oil that we are exploiting now is deep, offshore, tight and heavy, and gives far less EROI. If current trends continue, it will take a barrel of oil to extract a barrel of oil. Economic profitability will presumably cease at an EROI of something like 6:1.

Dr Jörg Friedrichs, Lecturer in Politics at the University of Oxford, UK

I don’t think liquid fuel has peaked quite yet, but conventional crude oil certainly has. Increasingly, less easy oil is gushing from the ground. Given the world’s unquenchable thirst for liquid fuels, oil in the widest sense of the term will peak only once difficult and expensive sorts of unconventional oil like biofuels, tar sands, and shale oil cannot make up for the shortfall any longer. The question of when oil will peak, or has it already peaked, depends on whether the definition includes or excludes such expensive sorts. Prices for crude – especially Brent, but also West Texas Intermediate – have been hovering above $100 a barrel for quite some time. Despite all the enthusiasm about expanding oil production in the USA, shale oil is expensive to produce. Coal and gas can be liquefied, but this requires even higher oil prices not to mention the greenhouse gas emissions. If people were more consciously aware of the situation, prices would climb even higher. But few people are aware, and pump prices cannot be attributed to peak oil panic. Apart from short-term fluctuations, they largely respond to market fundamentals like supply and demand. Most people have short time horizons and prefer denial to worrying about fuel scarcity.

Mr Simon Snowden, Lecturer in Operations and Supply Management at The University of Liverpool, UK

The idea that the rate of production of oil will slow is, I believe, true for a non-renewable resource, and is proven by the current fad for non-conventional sources. This is not to deny the abundance of hydrocarbons in Earth’s crust, as some argue, but it is possible to have scarcity among abundance. The reason for this is that peak oil is not just a geological phenomenon, it is a fundamentally economic question.

It is often reported in the press that the USA is set to produce as much oil as Saudi Arabia. Production costs are somewhere in the region of US$52–$113 a barrel for shale oil, and US$6–$28 a barrel for Saudi oil. So, even if there proves to be similar volumes, which is by no means clear, the difference in the cost of producing those barrels is significant. The market price for oil will need to remain high to induce production of these non-conventional sources, or governments will need to find ways of subsidising production.

There is an urgent need to address peak oil. However, the impact won’t always be negative, as companies will try to find new materials and reduce the impact of the price of energy on their operations.

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