Knocking peak oil  

The FT has a post on peak oil and the recent article in The Independent - Knocking peak oil.

We’re not averse to peak oil around here - in fact many of our favourite energy writers are peak oilists.

For some, the phrase provokes an image of mad survivalists, but the peak oil debate is really much more nuanced than this: will there be a peak or a plateau? Will there simply be a gradual shift towards higher energy prices (which is arguably already under way), or will prices shoot up quickly enough to have catastrophic consequences for those who are ill-prepared?

And above all, it’s a debate about timing: when will it happen, irreversibly and definitively?

But something has always bothered us a little about it. It’s not the technology argument (oil extraction techniques are advancing all the time, therefore the peak/plateau keeps getting extended), and it’s not the economic argument (we will simply adjust to higher oil prices, because that’s what economies do).

No, it’s this: is declining oil the most important issue here? John Kemp says no. Peak oil, he reckons, is ‘the right answer to the wrong question‘.

He points out a few well-known facts: fears of peak oil are almost as old as the oil industry itself; US production peaking gave a big boost to the peak oil argument, as did, more recently, decline in Mexico’s supergiant Cantarell field. At the same time, he says, the recent huge natural gas finds should give adherents of the Hirsch report pause for thought.

He also argues peak oil overly focuses on ‘conventional’ oil, the definition of which changes over time:

First, the definition of “conventional” changes over time as a result of price and technology. Deepwater oil only became conventional 20 years ago, and ultra-deepwater in the last decade. In future, higher prices and technology changes could eventually shift ocean and arctic output into the “conventional” category and increase the reserve base substantially.

Kemp argues that in contrast, there are plenty of other sorts of hydrocarbons around:

Second, the focus on conventional oil obscures the much larger reserve base of other hydrocarbons — natural gas, coal, bitumen (oil sands), and kerogen (oil shale), let alone methane hydrates (natural gas trapped in ice formations at the polar ice caps, in the permafrost zone and on the ocean floor).

And most of these aren’t even in the Middle East, he says. What is now considered unconventional oil, he says, is expensive but not necessarily too expensive. He puts the range at $40 - $120 a barrel, and this compared to conventional oil in Middle East countries, where our figures compiled late last year put the figure at less than $10 toward an upper range of about $30/barrel.

But Kemp maintains the cost is still significant. This is his parting shot:

Blinded by their obsession with physical availability of conventional oil, peak oilers miss the much larger questions: how much will these alternative hydrocarbons cost and what happens to the environment if we combust them all and don’t find a way to trap the CO2?

The topic of cost however has gained a lot of coverage recently: Christohper Steiner and Jeff Rubin have recently published well-publicised books about this very topic. Rubin says we will move from a world of ‘wage arbitrage’, where cheap transport costs made it economic to import goods from low-wage countries, to a very different sort of world in which localised production and trade plays a much greater role. We haven’t read Steiner’s book yet but he appears to be making a similar argument.

On the topic of environmental challenge, again he might slightly mischaracterise the peak oil movement - environmental issues are mentioned pretty regularly at places like The Oil Drum - and in fact TOD’s reader survey earlier this year shows there are quite a range of views on what declining oil supplies and/or more expensive oil might mean.

One of the other interesting arguments Kemp makes is that peak oil is really quite mainstream. Even the Green Group in his small village, he says, is hosting a talk on the subject. The massive interest in the Independent’s story on Monday either shows how mainstream it is, or how mainstream it isn’t (as much of it has already been said).