Environmental Engineering Reference
In-Depth Information
tain. True, no peak oil theorist in 2003 was forecasting that US petroleum production would take
off in 2011 due to the hydraulic fracturing and horizontal drilling of tight (low-permeability) oil-
bearing rock formations in North Dakota and Texas. But tight oil (and tar sands, and deepwater oil)
are substantially different from the conventional resources that drillers targeted in previous decades:
they offer a low energy return on the energy invested in production (EROEI), require high rates
of up-front investment, and imply increased environmental costs and risks. Tight-oil wells show
such steep production decline rates that a peak followed by a sharp drop in output from the Bakken
and Eagle Ford plays—which have driven the recent boom in US production—is probable in just
tional crude means that an ever-larger proportion of total supplies must come from unconvention-
al sources. Conventional oil, with its high EROEI and low production cost, fueled unprecedented
levels of economic growth during the twentieth century. That party is indeed over.
period, in which recurring economic recessions will result in lowered energy demand, which will
in turn temporarily mask the underlying depletion trend.” That forecast appears to have been spot
on. Meanwhile, Daniel Yergin (of energy consultants IHS CERA) and other petroleum industry-
friendly energy commentators now tell us that peak oil is nothing to worry about because, instead of
a peaking of crude
supply
, we are instead seeing
peak demand
, as consumption of oil in the United
efficiency, but in reality most of the reduction in oil consumption in the older industrial countries
has come about simply because fuel prices are so high that people are driving less: they can't af-
ford to fill the tank as often.
10
And prices are high because the only new sources of oil available to
the industry are ones that are very expensive to develop. Analysts critical of peak oil failed to pre-
dict that petroleum prices would skyrocket to such an extent; indeed, during the past decade Daniel
merely to be a rhetorical device that admits the reality of peak oil implicitly while denying it expli-
citly (we will return to this subject in “The Purposely Confusing World of Energy Politics” later in
this topic).
Meanwhile a comparison of forecasts by the peakists and their critics shows the former were
generally far more successful in modeling oil production and price trends.
12
The critics say peakists (like me) neglect basic economics: as oil prices go up, more supply
comes on the market. This is correct up to a point; again, no peak oiler I know specifically foresaw
the scale of the current US tight oil boom. However, Campbell and Laherrère did clearly forecast
that higher prices would promote the development of unconventional petroleum sources (that's why
Laherrère pegged the peak of “all liquids” several years later than the peak for regular crude). On
the other hand, the peak oil critics themselves showed a lack of understanding of economic reality
by ignoring the feedback between oil prices and the economy as a whole. Energy is what moves the
economy; money is just a means of keeping track of wealth. Economics 101 tells us that supply of
and demand for a commodity like oil (which happens to be our primary energy source) must con-
verge at the current market price, but no economist can guarantee that the price will be affordable
to society. High oil prices are sand in the gears of the economy.
13
As the oil industry is forced to
spend ever more money to access ever-lower-quality resources, the result is a general trend toward
economic stagnation. None of the peak oil deniers warned us about this.
