How much oil is left? Are we looking at a looming supply crunch? This is one of the biggest questions in geopolitics now, and it's partly a question of petroleum geology. The problem is that arriving at an estimate of how much oil might be left to produce is extremely difficult, because there are so many factors to take into account, and most of those factors are subject to large uncertainties. Improvements in technology mean more oil is recoverable. Changes in the price of oil affect which fields it is economical to produce from. The fact that supply is partly controlled by the OPEC cartel, itself subject to political and economical considerations, is an important factor. Various countries have been less than truthful about what reserves they have. Advances in producing from unconventional sources (e.g. shale oil, gas hydrates) will increase potential reserves, but not without environmental cost. Replacements such as biofuels may be able to take up some of the demand (again, subject to political factors).
A recent Hedberg conference of the American Association of Petroleum Geologists (AAPG) tried to address this issue. The AAPG reported the results at their conference in sunny Long Beach, CA, where I happened to be lugging an enormous poster around. You can find a summary of the results here. Three types of additions to future reserves were addressed: improvements in recovery from existing fields, new discoveries, and new unconventional resources. The conference didn't look at gas-to-oil or coal-to-oil conversions, or oil substitutes such as biofuels.
It makes for uneasy reading. While the conference concluded that peak oil was not 'imminent', it was not far away either. Oil production was predicted to reach a plateau sometime between 2020 and 2040, lasting for 25 to 30 years. Production will then inexorably fall. Because consumption is now so high, even this would require a mammoth effort from the oil industry. And a supply crunch is likely even earlier, as demand continues to increase and the rate of increasing production falls off before the plateau.
This is good news for petroleum geologists, who are not going to be out of work (although we are probably going to have work in more politically unstable and inaccessible areas), but it isn't particularly good news for anyone else. I don't see any evidence for western governments having a plan B that is going to be of much help before 2020.
I think this is interesting, because the 'peak oil' hypothesis is often dismissed by oil industry insiders (but generally not by petroleum geologists). Here's a large group of experts coming to the conclusion that peak oil (or at least plateau oil) is real.
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5 comments:
Hi Paul,
Very interesting blog. Could you explain a bit about industry insiders' arguments for rejecting the 'peak oil' hypothesis? I don't understand how anyone could reject the idea that oil supplies are finite and therefore production will start to decline at some point in the future!
(Found you via Bad Science; I'm a 2nd year undergrad geology student at the Open University, by the way)
Ha, I knew my self-promotion would bear fruit eventually...
As for the industry, it's a problem because you don't really get reasons why 'peak oil' isn't right. I recall some eminent twit being interviewed in AAPG Explorer. He said 'I tend to blow off peak oil...', but he didn't explain why. It's something I need to do a bit of research on.
I suspect it's likely to be a supply/demand explanation. As oil becomes scarcer, it gets more expensive, so previously uneconomic deposits become economic. I think there's also a current of opinion that suggests that peak oil is real, but it isn't as imminent as some have made out.
I'll pursue this further, and write something proper about it, eventually...
Ah right, I see what you mean. Still, re: the economic argument, it doesn't really address the fact that oil supplies are ultimately finite. Would be interesting to hear more, if you have time/inclination.
Kate:
I found this useful:
How to talk to an economist
Interesting because it recognises that geologists and economists are talking past one another on this issue.
Thanks Paul, that's really interesting. From an analytical point of view, the best way to assess it is by looking at the assumptions in the argument, and I'd say this is the biggest one:
"What economists would therefore expect to see under the n-year scenario would be for the oil price to rise steadily over all these n years"
I can get alongside most of what the piece says, but I think the above quote is an assumption that's not borne out by observing market behaviour. For example, look at the recent credit crunch. In retrospect we can all agree that it was obvious an organisation like Northern Rock would be screwed once short-term cheap credit became scarce. The financial markets' participants definitely knew that well before the organisation actually got into trouble. But little actually happened until the Bank of England did what everyone had known it was going to have to do, and bailed the organisation out. We didn't see a slow, steady decline in that case, we saw a rapid change in conditions. It's possible to argue that this would also be the case in oil - we tick along nicely, despite knowing the inevitable is going to happen, until some straw or other breaks the camel's back, prompting the usual sheep-like panic-driven behaviour in the markets. Hmmm.
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