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Thursday, August 29, 2013

Peak Oil: a fertile concept



This article is a reflection originated by the recent demise of the "Oil Drum" website. Some people have taken this event as a demonstration that the concept of peak oil is dead and buried. But the situation is much more complex: peak oil is a fertile concept; it provides a complete worldview that sheds plenty of light on everything that's happening in the world. Those who don't understand the bell curve are condemned to follow it.



We live in a world where scientific evidence is trashed by ideological opinion, where people who learn from experience are accused of being flip-floppers, where changing one's mind on the basis of new data is seen as admitting one's lack of moral fiber. The debate on peak oil is no exception and the recent demise of "The Oil Drum" site has been often seen as an admission that the whole idea of peak oil was wrong from the beginning.

But what is happening exactly with peak oil and why so much fuss about it? The problem may be  simply that the idea had too much success. Let's go back to 1998, when Colin Campbell and Jean Laherrere raised up again a problem that had been first noticed by Marion King Hubbert, in 1956. Oil depletion, Campbell and Laherrere surmised, will be gradual: production will go through a symmetric “bell shaped” curve that will show a peak when, approximately, half of the available resources will have been used up. According to this study, the peak, that Campbell later dubbed “peak oil,” would have occurred around 2005.

The pioneering work by Cambell and Laherrere gave rise to a whole scientific field that used similar methods to study oil depletion. Most of these these studies arrived to the conclusion that troubles with oil would start within the first decade of the 21st century, or perhaps a little later. It was a view of the future in stark contrast with the generally optimistic attitude of the oil industry up to recent times. Just as an example, in 1999 "The Economist" published an article titled "Drowning in Oil" predicting oil at under 10 dollars per barrel.

But the predictions based on the peak oil concept turned out to be spectacularly successful, at least within the unavoidable uncertainties involved. Oil production stopped its growth in 2004 and oil prices spiked up to almost 150 dollars per barrel in 2008; about a factor of 5 higher than the price that was considered normal in the early years of the decade (and more than 15 times higher than the 1999 predictions of “The Economist”). Today, oil prices remain high; in the range of 100 dollars per barrel. We aren't seeing a production decline, but certainly we are seeing evidence of serious problems for the oil industry to maintain production at constant levels. As things stand, it seems impossible that we could return to the stable growth trends and the relatively low prices that were the rule until about 10 years ago.

So, “peakers” won their bet with cornucopians. The predicted troubles have materialized and peakers were also able to approximately identify the timing of the crisis. But, not everything is well in the world of peak oil. The elegant and symmetric “bell shaped” curve at the basis of most peak oil models did not appear for the global production data. What we are seeing, instead, is a plateau or, at most, a slow increase, in large part generated by the use of the so-called “non-conventional resources”, from biofuels to shale oil. The expected decline is not appearing; at least for the time being. 

What happened? For one thing, models are never universal and the peak oil one is no exception.  The symmetric production curve has been observed in many historical cases where a declining resource was smoothly replaced by a different, and more abundant one, as in the case of the switch from whale oil to crude oil as lamp fuel in 19th century. Hubbert had predicted something similar in 1956 for global oil production assuming that nuclear energy would smoothly replace crude oil as the world's main energy source. In that case, the oil production curve would have been probably symmetric but, obviously, that didn't happen. Substitution of crude oil with different resources was far from being smooth; actually it was strongly resisted in all sectors of society. What happened, instead, was that large amounts of financial resources were invested into the exploitation of everything that could possibly be drilled, fracked, smashed, squeezed, boiled, or otherwise processed in order to get a few drops of precious, combustible liquids, and that is what has avoided decline, up to now.

But this result has come at a high price; higher than anyone could have imagined. One problem is that all this tremendous effort is simply postponing the unavoidable. When decline will start, it may well be much faster than its “natural” rate along the bell shaped curve. This faster decline can be termed the “Seneca effect,” from the name of an ancient Roman philosopher who noted that all things tend to grow slowly, but to decline rapidly.

The Seneca effect is far from being the main problem generated by oil depletion. The real trouble is rapidly emerging in terms of accelerating climate change, with all the costs and dangers involved. We are seeing today the conclusion of a debate that had started with the beginning of the peak oil movement. Is peak oil more important than climate change? And, is peak oil going to save us from catastrophic climate change by forcing us to burn less fuels? Initially, the hope was that, yes, peak oil would have saved us willy-nilly from destroying our own planet. Unfortunately, however, it is starting to appear clear that this hope was misplaced. The impending peak is actually worsening the climate problem because it has led the industry to exploit less efficient, and hence more polluting, resources.

Given this situation, peak oil is starting to appear more and more just as a blip in the path to the climate catastrophe. No wonder that people are losing interest in the concept! Curiously, it seems that peakers were not doomerish enough in their views of the future!

So, is peak oil dead? Well, no. For one thing, peak oil never was just a doomer's game where players tried to guess the exact day for the end of the world. No; it was – and it still is - a fertile concept; a way of seeing the world. It taught us a lot, and it is still teaching us a lot.

Peaking in the exploitation of non renewable (or slowly renewable) resources is a necessary consequence of the way the human economy works in the real world. It occurs with all kinds of mineral resources and with biological ones as well, as in fisheries. It is also the essential feature of the “tragedy of the commons” proposed by Garrett Hardin in 1966. It is an integral part of the dynamic world models that generated the “The Limits to Growth” study that, in 1972, changed the way we see the world.

In the end, it turns out that our planet is not an abandoned coffer out of which we can plunder treasures at will. The mineral resources we found in it should rather be seen as a gift that we should have managed much more carefully. Now, we are facing a difficult situation, squeezed in between resource depletion and catastrophic climate change. But the concept of “peak” can still help us to be prepared for the future. Remember that those who don't understand the bell shaped curve are condemned to follow it.






Image: cover of "The Limits to Growth" - 2004 edition











7 comments:

  1. Ugo
    What an excellent review!
    Just a few personal reminiscences from me:
    I remember a lecture given by Chris Vernon at CAT (Wales) in 2006.
    CV: “Oil supply is about rate not reserves”.
    I asked Chris about the shape of the curve after ‘the global peak’:
    CV: “We cannot really know” – I think we then discussed the effects on ‘economic growth’ and what difference that a slowing or a halt to industrial/economic growth might make.

    I had already read of Campbell & Laherrere but I can remember the reverberating shock of Chris’ lecture!

    I had been watching the Climate Change calculations and seen the data emerging over many years and taken note and been a fan of James Hansen (NASA) since the mid 1980s. When asked about ‘Peak Oil’ and ‘Climate Change’ by a friend in 2006, I replied that I expected Peak Oil to make its ‘hit’ first and early, and to have a more immediate effect on the world economy and thereby on ‘public perception’. (Climate change was meeting increasing denial, to my dismay.) I am still not sure. Back then – it seems a world away just now – I had thought that ‘food insecurity’ was inevitable, but still decades ahead of us – and “after my time” as I am a retired person. It was therefore a surprise to see international food prices (resulting from primary food production) dramatically affected by biofuel substitution for liquid fossil fuel, at the same time as we were seeing a sudden and very significant failure in global financial organisation.

    Climate Change seems now more likely than I previously thought to administer sudden and large shocks to agriculture. I now expect these shocks to be important in the near term, especially perhaps in their effect in the MENA region where we expect a further extension of war in the next few days!

    Thanks again Ugo
    Phil

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  2. Ugo, One of the things I don't think you mention enough explicitly (though sometimes you do imply it) is that all models are built on a certain set of assumptions. It would be like biologists throwing out Hardy-Weinberg Equilibrium because it does not truly exist in nature. It is not about a model being wrong or right, it is about a model being correct under certain conditions, admittedly that most likely won't happen perfectly in the real world. Though certain tests/experiments may prove a specific model wrong. What I think the bell shaped curve has as one of the assumptions is that: if you want to extract a finite energy resource optimally so as to obtain the maximum amount of energy from it, this is what the production function would look like. And I don't feel that the Seneca Effect addresses this, because you have said the Seneca Effect is about system maintenance and pollution of certain types. I think our current "overproduction" (compared to the bell shaped model) is different because it represents a capital burn/destruction in the form of natural gas, water, roads and materials in the case of fracking and of ruining the ability to pump the maximum total overall volume of oil out of places like Cantrel. It might be better termed Seneca Effect Plus (maintenance/pollution plus capital burn).

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  3. Excellent summary! I am just curious for how long will mainstream economics ignore whole concept of "peaking" and overall role of natural resources in economic process. Problem is that this acknowledgement is like a trojan horse pulled in the walls of economic theory...it threatens and invalidates many standard assumptions, debilitates so called models of economic growth...will it ever happen?

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  4. Excellent commentary without question. Our feckless leaders haven't a clue about what is happening to the rest of us regarding peak oil and what it portends as demand increasing outstrips supply, something unimagined in America's notion of happy motoring and endless supplies of a resource on the downward side of things.

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  5. "Those who don't understand the bell curve are condemned to follow it." Great.

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  6. I notice they are counting biofuels as "oil production"?!?

    One of those renewables, that the oil-a-plenty and pro-nuclear people have said are just a scam and will never work.

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  7. How can we not follow the curve? Is it not hopeism to think that peakers can change history and are not doomed to stand beside their our all history and watch. Watching our fate coming true and people still dreaming their fantasy of a happy end. But after this long unique boom it is understandable that most people are ignoring all peak scenarios or collapse or eitheir runaway climate change. No one wants to be awaken from this beautiful and naive dream? Should we wake up, or keep dreaming of a middle class Hollywood style escape or should we accept our biological and cultural programming. It might be possible that the ape is not so smart as popular Science try to sell us. So this naked mamal just keeps his habbits until his extinction like so many species before, so this evolutional experiment will just end.

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