The peak oil debate is over  

Energy Bulletin has a transcript of a speech by James Schlesinger at the recent ASPO USA conference - The peak oil debate is over.

May I start with a bromide: a resource which is finite is not inexhaustible. If you think that over, it should not be a revelation. That was a bromide… some people think a keynote should never rise above a bromide….

Some five years ago in Italy I concluded a talk by saying that like the inhabitants of Pompeii, who ignored the neighboring volcano, Vesuvius, until it detonated, the world ignores the possibility of peak oil at its peril.

Two years ago in addressing ASPO in Cork, Ireland, I argued that the peakists had won the intellectual argument, except for some minor details about precise timing, but that by and large everyone recognized that there were limits on our capacity to increase the production of crude oil as we have steadily since World War Two.

[I also argued] that peakists were no longer a beleaguered minority, that they had won, and that consequently they should be gracious in victory.

There’s an old spiritual that is relevant here. The walls of those who doubted the peak seemed to be impregnable. Nonetheless, you marched around the walls seven times and then blew the trumpets and the walls of Jericho came tumbling down.

But acceptance by knowledgeable people is not enough. The political order should respond. Nonetheless, our willingness, let alone our ability, to do anything serious about the impending inability to increase oil output is still a long way off.

The political order responds to what the public believes today, not to what it may come to believe tomorrow. It is also resistant to any action that inflicts pain or sacrifice on those who vote. The payoff in politics comes from reassurance, perhaps precluded by a rhetorical challenge.

Still, the challenge is clear in both logic and in the evidence. Let me start briefly with the logic,

If something cannot be sustained, it will eventually not be sustained… ultimately it will shrink.

Secondly, you cannot produce oil unless you first discover it (a contribution by Colin Campbell).

Third, a resource that is finite cannot continually have its production increased.

What is the evidence?

First, we remain heavily dependent on super-giant and giant oilfields discovered in the 50s and 60s of the last century… I might add, of the last millennium. Only rarely in recent decades have discoveries equaled production. Mostly, it’s been one barrel discovered for every three barrels produced.

Second, old super-giants like Burgan in Kuwait and [Cantarell] in Mexico have gone into decline earlier than had been anticipated… and going into decline have been Alaska, the North Sea, western Siberia and the like.

Third, while it is not yet “Twilight in the Desert” (as you may have read) still we are well into the afternoon, even in Saudi Arabia. Even the Ghawar oilfield is increasingly hard to sustain.

Fourth, in 2004 we experienced our first demand-driven price spike, as opposed to the previous price spikes driven by supply interruptions. We still operate at about the level of production capacity of 2004.

Next, given projected decline curves running from 4 to 6 percent, and the projected increase in demand during the next quarter century, we shall require the new capacity equivalence of five Saudi Arabias.

Even the International Energy Agency, which previously had been sanguine, now suggests that we can no longer increase production of conventional oil in the course of this decade.

Note that it is conventional oil: that is all that Hubbert talked about. Somewhat disingenuously, the debate has been turned on him by talking about fuel liquids in general, throwing in tar sands, heavy oil, coal liquids, oil shale and so on.

But clearly, large conventional oil production is increasingly no longer part of the future unless there is a technological breakthrough, which Mr. Gilbert talked about just a few moments ago, raising the ultimate recovery rate from existing fields, which at this moment we cannot expect.

Of course, there are uncertainties which make timing predictions with regard to the peak risky. Iraq, which has been held back for a variety of reasons, may come along as one of those five new needed Saudi Arabias.

Offshore Brazil and offshore oil elsewhere are promising. Shale gas, which is apparently coming in abundance (but is not, of course, oil) may somewhat alleviate the pressures on liquid fuels.

But in general we must expect to get along without what has been our critical energy source in expanding the world’s economy for more than half a century.

Can the political order face up to the challenge? There is no reason for optimism.

We are likely to see pseudo-solutions, misleading alternatives and sheer sloganeering: “energy independence,” “getting off foreign oil” and the like. All of that sheer sloganeering we have seen to this point.

The political order (which abhors political risk) tends to rely on the Biblical prescription, “Sufficient unto the day is the evil thereof.”