Daniel Yergin's "no peak for 20 years" piece in the WSJ generated quite a bit of comment last week - here's a brief selection of posts.

I'll kick off with The Oil Drum - Peak Oil - Now or Later? A Response to Daniel Yergin.

Over the years there has been significant convergence between the peak oil and business-as-usual camps, each hopefully learning from the other. Yergin, whilst attempting to debunk peak oil, appears to have been converted to a late peakist. I can certainly relate to many of the concepts described by Yergin - price influencing supply and demand, technology, innovation and new plays etc - but wonder when these are going to result in new production capacity (supply) that exceeds annual declines?

The stakes are high. Should policy makers listen to Pulitzer Prize winning historians? Or should they listen to geologists and a growing band of economists who can see the dependency of economic growth upon increasing supplies of cheap energy that quite simply do not appear to exist? Most important of all, will the WSJ publish a modified view of the oil world than that presented by Daniel Yergin?

James Hamilton at Econbrowser seems to have received the most attention - More thoughts on peak oil.

In Saturday's Wall Street Journal, Daniel Yergin, chairman of IHS Cambridge Energy Research Associates, gave his explanation of what's wrong with peak oil. Here's why I don't find his analysis altogether convincing.

Yergin does not offer a statement of exactly what he means by "peak oil", though his essay refers to it as a "fear" and a "specter". Let me therefore begin my remarks with a clarification of exactly what I intend to discuss. I propose the following three propositions as the core claims that need to be evaluated:

1. The annual flow rate of oil production from a given reservoir eventually reaches a maximum, after which it declines.
2. The annual flow rate of total global oil production will eventually have to decrease as a necessary consequence of (1).
3. This peak in global production will be reached relatively soon.

Of these statements, I honestly don't understand how a reasonable person could dispute (1). You could almost take it as tautological, and furthermore point to many, many examples of fields that passed their peak production long ago. I likewise see neither a conceptual nor an empirical basis for challenging (2). Thus it seems to me that the relevant debate is whether proposition (3) has any merit, and exactly what one means by "soon." That question may or may not be what Yergin was intending to address with his essay. But since for me it is the core question, I would like to comment here on the implications of what Yergin wrote for what I perceive to be the main question of interest. ...

Even in the absence of these facts, there's a real problem with Yergin's line of argument for the question at hand, and it troubles me because I have seen the same argument raised almost every time someone takes the skeptic's position on the question of peak oil. Suppose I was trying to convince you that you are a mortal being, and your counterargument was, "but that's what you said in 2005, and I didn't die then! You said it again in 2007 and 2009, and each time you were wrong. Why should I believe you this time?"

Perhaps acknowledging one's own mortality is a similar proposition to embracing the possibility that global oil production need not continue to rise forever.

In any case, I was not among those who claimed that the peak would arrive by Thanksgiving 2005, nor 2007, nor 2011. But I am among those who did claim, and still believe, that the slow rate of increase in annual oil production over the last 5 years has caused significant economic problems for countries like the United States.

Moreover, if having been wrong in the past were a valid reason to disregard everything someone says, it might be wise to ponder these words that Daniel Yergin wrote in 2005:

There will be a large, unprecedented buildup of oil supply in the next few years. Between 2004 and 2010, capacity to produce oil (not actual production) could grow by 16 million barrels a day -- from 85 million barrels per day to 101 million barrels a day -- a 20 percent increase. Such growth over the next few years would relieve the current pressure on supply and demand.

Michael Levi has some commentary at the CFR's blog - Peak Oil and Faith Based Energy Debates.

As for me, I find these sorts of muddled, often faith based dustups utterly exasperating. Peak oil types tend to assume that stagnant global production over the past half decade is, in itself, evidence that oil production is headed for decline, when in reality, it doesn’t predict anything by itself. (They also tend to throw in some Hubbert peak theory, but that doesn’t really work once you pay attention to economics.) They also tend to assume that any decline will be economically disastrous, when there’s actually very little analysis of what it would really imply. On the other side, those who are convinced that peak oil is nonsense tend too often to resort to a similar sort of slippery logic: people predicted peaks in the past, but they were wrong; ergo, they are wrong this time too. Peak oil proponents didn’t realize that innovation would deliver more oil in the past; therefore, it will also deliver more oil in the future. Peak oil opponents also seem to claim that since the peak oilers have mangled their economics, the opposite of whatever they predict is what will actually happen. Not exactly sound logic.

Is there a way out of this morass? Let me try. There are three different debates being conflated here. The first is over whether geological limits are bringing the world to a point where global production must soon start to steadily decline. The second is over whether political decisions will lead global production to soon start steadily declining. The third is over what the consequences will be if either of these things actually happen.

And finally, John Daly has a dissection of Yergin's piece at Foreign policy Journal - Daniel Yergin and Peak Oil: Prophet or Mere Historian?.

The essay will doubtless have widespread influence amongst prosperous The Wall Street Journal readers, but in his glib dismissal of “peak oil” theory advocates, Yergin glosses or ignores a number of issues fundamental to the larger picture, for whatever reason, and these oversights should be considered in any evaluation of the piece and the peak oil “specter.”

Yergin notes, “Just in the years 2007 to 2009, for every barrel of oil produced in the world, 1.6 barrels of new reserves were added.” But this fails to take into account the following points.

First is that for oil producing nations, reserves are like money in the bank, and inflated reserve figures are common. Even with the newest technology, oil reserve figures remain at best “guesstimates” and should not be taken as hard and fast figures.

Secondly, while the Middle East for the foreseeable future will remain the world’s top producing area, it is unhappily also one of the most politically unstable regions of the world. The “Arab Spring’s” impact is still playing out, much less the potential impact of Palestine’s incipient bid at the United Nation’s for recognition, both of which could yet still throw a major spanner in the works.

To recap briefly:

Saudi Arabia, the world’s first or second-largest producer, vying with the Russian Federation for top position, is not immune from either of the two aforementioned effects. Saudi Arabia does not allow foreign oil companies concessions and has adopted a strict conservation policy, so don’t expect to see a massive rise in production there anytime soon. As for Palestine’s impact, last week former head of Saudi Arabian intelligence and ex-ambassador to Washington, Prince Turki al-Faisal, in an essay in the New York Times warned that an American veto of Palestinian U.N. membership would end the “special relationship” between the two countries, and make the US “toxic” in the Arab world.

As for Iraq, eight years after the U.S.-led invasion, holder of massive amounts of untapped reserves, the country remains mired in a low-grade civil war and unresolved political issues between its oil-rich northern Kurdish region and Baghdad. Further east, Iran is most unlikely to boost production significantly anytime soon because of U.S. sanctions imposed in 1979.

Libya remains the wild card, with only 25 percent of the country’s oil potential explored, but it has been wracked by six months of civil unrest, and the irredentist cadre of Gaddafi supporters could easily target the country’s oil infrastructure in the future.

In the Western Hemisphere, OPEC recently announced that Venezuela’s potential reserves could top those of Saudi Arabia, but the deteriorating relations between Caracas and Washington make an increase here unlikely anytime soon.

Many optimists pin their hopes on increased offshore production, from Brazil through Western Africa, the Mediterranean and the Caspian to the South China Sea, but these regions’ output will suffer from the twin curses of both greatly increased “lifting costs”, in the billions, as well as political instability. West Africa is synonymous with corruption and civil war; Lebanon, the Republic of Cyprus, Israel, and Turkey are sparring over eastern Mediterranean hydrocarbons; two decades after the collapse of the USSR, Azerbaijan, Iran, Kazakhstan, the Russian Federation, and Turkmenistan have yet to reach a definitive agreement on the division of the Caspian’s offshore waters, and tension is rising markedly in the South China Sea, where China, the Philippines, Taiwan, Vietnam, Malaysia, and Brunei are all pursuing contesting claims.

Of the aforementioned areas, only Brazil has uncontested national sovereignty claims over its offshore deposits, and the government is sufficiently concerned about their security that it is considering building a nuclear submarine to patrol its offshore oil platforms. As for the rest, it is difficult to see how the nations involved will be able to attract large-scale investment into potential conflict zones.

Furthermore, quite aside from political wrangles, offshore drilling is both extremely expensive and comes with increased environmental risks.

Interestingly, the word “environment” appears only once in Yergin’s essay, in the sentence, “Environmental and climate policies can alter the timing and scale of development, as can geopolitics and politics within oil-producing countries.”

Given that the majority of the future’s oil production increase will come from offshore developments, the term should have been given greater prominence.

The Economist has a refreshing sensible post on Daniel Yergin's latest criticism of peak oil (having slowly modified his wildly inaccurate positions over time to "we're facing a plateau" - no doubt his views will eventually swing around to reality once no other credible options remain) - Peaks and spikes.

OVER the weekend, energy expert Daniel Yergin took to the pages of the Wall Street Journal to argue that "peak oil" is a phony concept, a "specter" that's unlikely ever to materialise. The concept of peak oil, for the unitiated, is that humanity is close to reaching peak production of the world's finite supply of oil. Most of the extractable oil has now been brought out of the ground and used, and henceforth new discoveries are unlikely to replace falling output from old fields, leading to a steady decline in supply. Mr Yergin argues that people have been warning of a looming oil crisis for over a century and have never yet been right.

Economist James Hamilton has a measured and wise reply to the piece, in which he points out that supply growth has been worryingly slow of late. He concludes:

I submit that meeting the growing global demand for crude oil over the last five years has posed significant challenges for the world economy. And those who worry that the next 5-10 years might be like the last should not be dismissed as crackpots.

I'd just note that the phenomenon of peak oil is unlikely to manifest itself as a sudden sharp decline in supply. What you're more likely to see in a climate of more or less steady demand growth is supply that first tracks demand, then lags demand as the peak approaches while still growing. If oil demand were elastic, demand growth would ease with supply while prices rose moderately with the cost of producing the marginal barrel of oil. If oil demand is inelastic, however, then supply shortfalls will generate price spikes, producing recessions and a volatile cycle of rising and falling demand. The pain of occasional spikes and the economic damage of price swings is likely to drive investment in alternatives, by consumers and governments, leading to a substitution away from oil in key sectors long before people are ever caught standing at dry petrol stations. Electric car technology and infrastructure is improving rapidly; given enough pain, societies will make the switch, drastically reducing oil demand in the process.

Of course, it isn't easy to define "enough pain"; it might well take a decade of these gyrations to facilitate a meaningful switch away from petrol. The prospect of this kind of difficult transition ought to be enough to get governments to take the issue seriously, whether or not actual peak oil output is imminent.

I'm not sure why anyone would take Michael Lynch or Daniel Yergin all that seriously, but people still get all riled up every time they publish a new article. Energy Bulletin has an article from Steve Andrews and Randy Udall of ASPO USA about their most recent pontifications in print - Michael Lynch, Daniel Yergin--The Denizens of Peak Oil Denial.

Last week Michael Lynch and Daniel Yergin pummeled the concept of peak oil in two mainstream media outlets. Lynch's feisty but nearly fact-free op-ed for the New York Times and Yergin's more scholarly reflection in Foreign Policy whipped up further discussion in the blogosphere. Although the majority of on-line responses to Lynch's piece were negative, peak oil advocates were put on the defensive.

The two critics employ distinctly different separate styles — Yergin is a Pulitzer Prize-winning historian and suave, savvy corporate schmoozer, while Lynch resembles the kind of pit bull that enjoys attacking bicyclists from behind. Both have been pounding away at peak oil since its "modern renaissance" began with the March 1998 article in Scientific American, "The End of Cheap Oil." These two masters of denial enjoy flogging peak oil. It's clearly what their paying clients in Big Oil want to hear, and sometimes the peak oil community inadvertently hands them ammo that is too good to pass up.

Yergin's case is somewhat perplexing. His shop (Cambridge Energy Research Associates — CERA) talks a good game about the need for a "rational discourse" about peak oil, and indeed CERA has published graphics in the past two years that clearly show crude-and-condensate production peaking. But in his Foreign Policy piece, Yergin once-again dredges up the tired notion that peak oilers claim "we're running out of oil" (only an unfortunate few still use that framing). He crows that if access were no problem, and pigs could fly, world reserves could support substantial growth in production, and that Canadian tar sands and OPEC natural gas liquids are the cavalry that will rescue the day. Although Lynch's oil price forecasts over the past few years have been ludicrously erroneous, in his op-ed he has the chutzpah to list some 14 flaws in peak oil analysis. While a few of the criticisms hit the mark, most are just rhetorical head banging. A full counterpoint of Yergin and Lynch is beyond the scope here. Instead, we'll highlight two points.

It isn't about "running out;" it's about "the flows"

World oil production grew eight-fold between 1945 and 2000. The peak oil story is about our inability to sustain that trend. Today's modest "excess" of oil supply — the result of shrinking demand due to the global recession plus Saudi investments — may last another year or two. But in the background resource nationalism, credit constraints, reduced drilling, armed conflict, and regional geological limits are kicking in hard. By 2012, global production will be downshifting into reverse, with a larger world population forced to divvy up a shrinking supply.

Debunking peak oil is like railing against gravity or aging. Consider the table below, based on worldwide production data in BP's Annual Statistical Review. It summarizes production trends for the world's 30 largest oil-producing nations, which account for 94% of the world’s daily output.

The track record here is ugly. A decade ago, only four of the world's top 30 oil producers were in decline; now the number is 11 and growing. The UK had been steadily increasing production during the 1990s, as had Norway. Mexican production surged in the late 1990s. Now all three are in decline and the UK is an importer, despite the use of best-in-class technology throughout the North Sea. Indonesia, a former oil exporter, became a net oil importer within the last two years.

Brazil's oil future looks promising, but Russia's oil story likely includes a plateau or worse. The Chinese admit they are near peak production, hence their push to buy capacity abroad. What's your bet that peace will break out in Iraq and Nigeria to allow production to grow? Or that Chavez and Putin will turn over a new leaf, and that Iran will make nice?

The math is straightforward and compelling. Sure, technology has helped grow deepwater supply, but that has only been enough to keep oil production flat, or "at peak/plateau," since 2005.

A Phalanx of Pros belies the Deniers

Lynch insinuates that peak oil advocates are well-meaning but misguided amateurs. "A careful examination of the facts," he writes, "shows that most arguments about peak oil are based on…ignorance of how the oil industry goes about finding fields and extracting petroleum." This is nonsense. In fact, there's a rapidly growing list of oil industry professionals who have called attention to the peak oil challenge. It includes: T. Boone Pickens; James Buckee, former CEO of Talisman Energy; Jeremy Gilbert, former chief petroleum engineer at BP; Peter Wells, Toyota’s peak oil consultant; Sadad al Husseini, former VP of exploration and production for Saudi Aramco; Ray Leonard; formerly with Yukos and Kuwait Energy; Vince Matthews, Colorado State geologist, Mike Rogers at PFC Energy; and many many others. Indeed, the number of people and organizations who have embraced the peak oil story grows each year, while the ranks of the denialists steadily shrink. As their own production drifts sideways or declines, oil companies like Total, Chevron, Royal/Dutch Shell, ConocoPhillips, Marathon Oil, and Hess Oil no longer pooh-pooh peak oil. Even a long-time denier like the International Energy Agency has sounded measured alarms, and one of the last la-la land inhabitants, the U.S. Energy Information Administration, is beginning to recognize trouble on the horizon.

Pyrrhic victories on the op-ed page won’t win the war

Yergin and Lynch are simply wrong. Crude-and-condensate are declining, and even if you expand your definition, as CERA does, to include corn ethanol, algal biodiesel, Canadian tar sands, Estonia oil shale, and a million barrels a day of Qatari ethane, global oil production will never exceed 92 million barrels a day. In the past, we have personally challenged Yergin and CERA to a $10,000 bet about peak oil. We reissue that bet here, and extend it to Michael Lynch: to wit, we wager $10,000 that all-liquids production won't exceed 92 million barrels a day by 2020. This time, we hope Yergin and Lynch will put some money where their mouth is.

Incensed by CERA's latest outlandish claim ("only we have the data", ignore those silly peak oilers and their claims that oil production will one day go into decline) Nate "The Last Sasquatch" Hagens has a look at the sorry predictive record of Daniel Yergin and co (mind you, he got one thing right).

We have been writing for almost 3 years on this site about the privatization of energy data by IHS Energy and the negative impact the lack of accuracy that CERA's historically optimistic claims are having on energy policy. The rebuttals and counteranalysis at TOD to CERAs assertions are too numerous to list. Today at the IHS Energy Conference in Houston, the CEO of IHS Energy, parent of CERA and other energy information agencies, asserted that Peak Oilers don't have the data to support their claims. This post is a brief rebuttal to this 'news' coming out of Houston, and a plea to refocus the questions to what is relevant and probable, not on what is irrelevant and unlikely.

Well right off the bat I should point out, with a track record like the one below, I'm not sure we want the data that IHS refers to**, but here are some excerpts from the Bloomberg story this afternoon. I should also state that it's not CERA's fault that the traditional media still seems to fawn over their every assurance. ...

The New York Times is quoting CERA and Daniel Yergin as saying that global warming will drive large scale investment in clean energy. No mention of peak oil, but global warming serves as a good proxy to encourage the right responses...

The oil shocks of the 1970s produced a flurry of attention to alternative sources of energy, but it faded once prices dropped in the mid-1980s. Now, with oil prices again high and climate change moving up the list of public concerns, interest in alternative energy is once again at fever pitch.

Is history about to repeat itself?

Not likely, according to a leading energy consulting firm. In a report scheduled for release Tuesday, the firm, Cambridge Energy Research Associates, concludes that multiple factors will continue pushing the world toward greater use of alternative energy sources like sun and wind power, regardless of what happens to oil prices.

“The focus today on clean energy is not a bubble or passing phenomenon,” the report says. “Unconventional clean energy is now poised to cross the divide and move from the fringes of the energy sector to the mainstream.”

What makes today different from the 1970s is growing apprehension about global warming as a threat to political security and the environment, according to the report. That is pushing governments to demand, and subsidize, greater use of alternative energy.

“Climate change and putting a price on carbon will change the dynamics of the energy marketplace,” said Daniel Yergin, chairman of Cambridge Energy Research Associates and a leading historian on the oil industry. He noted that with the Chinese and Indian economies growing rapidly, “you need renewables as part of the solution to meet this astonishing demand growth.”

The report notes that renewable fuels will remain small compared with conventional fuels for many years, and their rate of adoption will be determined by the intersection of government policies, economic growth rates and technological breakthroughs.

But the report projects that rising private and public investment in clean energy — including biofuels like ethanol; renewable power, including wind, geothermal and solar generation; nuclear energy; and techniques to capture and store carbon emissions — could surpass $7 trillion by 2030. In 2007, roughly $125 billion was invested in such energy sources worldwide, said Robert LaCount, lead author of the report, about 20 percent more than the year before.

Other analysts say there is no guarantee energy in the future will be cleaner because renewable energy is effectively in a race with other unconventional sources, like liquefied coal, Canadian oil sands and oil shale, which emit higher amounts of carbon dioxide than conventional hydrocarbons. While several major oil companies have joined smaller firms in investing in wind, geothermal and solar energy sources, they are investing far more money at the moment in oil sands.

Environmentalists at the Natural Resources Defense Council and the Pembina Institute have estimated that at least 20 percent of the pollution reductions coming from the new vehicle fuel economy standards law, which Congress passed in 2007, would be negated by the additional production and refining of oil sands in Canada by 2020.

“Producing more low carbon fuels is all well and good, but their benefits can be washed out if we don’t tackle the threat of high carbon fuels like oil sands at the same time,” said Deron Lovaas, an analyst at the Natural Resources Defense Council. ...