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Why Peak Oil Might Matter

by Michael Levi
November 7, 2013

Peak oil has never been a popular theory among market analysts. After all, the peak has been prophesied repeatedly, but still hasn’t come to pass. Time after time, new areas have been opened to development and new technologies have come to the fore, putting off the peak for another day.

Yet the specter of peak oil has had beneficial consequences. In recent years, fears of peak oil energized efforts to improve efficiency and promote alternatives. The threat of peak oil was conflated with the risk of dangerous climate change, encouraging more people to support policies that tackle greenhouse gas emissions. Many of these actions were valuable even if their impetus was unsound: greater efficiency and more abundant alternatives are largely good economic and security news, and smart climate policies are good for the environment.

So perhaps we should be at least a little worried that booming U.S. oil production, along with discoveries elsewhere in the world, seems to be killing off the peak oil narrative. Don’t get me wrong: better understanding of our energy predicament is generally a good thing. But it’s difficult to escape the conclusion that there are some troubling wrinkles here. In particular, I’ve recently heard more than one European analyst emphasize how important the specter of peak oil was in pushing Europe to diversify its energy supplies and improve its energy efficiency. But now, they say, the shale oil boom has helped kill that meme. The upshot, they fear, is that interest in climate and efficiency policies — some of which were foolish but many others of which were valuable — are weakening.

To be certain, Europe may be an outlier. The fear of peak oil was never as much of a policy driver in the United States. And Chinese efforts to improve efficiency seem to have been driven more by basic economic and security concerns. Still it’s worth keeping an eye out for changes in the offing. If the stories from Europe are accurate, they’re a useful reminder that the consequences of the U.S. oil boom will be felt in all sorts of odd ways.

Post a Comment 12 Comments

  • Posted by Dashui

    Why do we have to keep using crappy ethanol ?

  • Posted by James Hawley

    1/ Peak oil is not a theory. It’s an observation.
    2/ Peak oil HAS come to pass in many countries. USA for one.

  • Posted by Ian Cooper

    So what this argument seems to be saying is that Peak Oil is wrong, but we’d better diversify, because Peak Oil is going to happen.

    Make up your mind.

    Peak Oil is not a theory: it’s a mathematical certainty. Only the timing is variable.

  • Posted by Maitre Folasse

    “To be certain, Europe may be an outlier. The fear of peak oil was never as much of a policy driver in the United States.”

    What about the war in Iraq ?

  • Posted by Asher Miller

    Crude oil production has increased an average of 0.3% globally since 2005, despite a doubling of CAPEX and a tripling of prices. If that’s not peak oil, I don’t know what is. High oil prices have had a drag effect on the economy, leading some to straight-facedly say that peak oil is dead but peak demand is alive and well, when the truth is that the latter is largely a result of the former.

    The tight oil boom is a temporary respite which has no chance of making up for the ~4mbd declines in conventional fields. It’s been a nice story in the US, much like Prudoe Bay was, and much like Alaskan oil this temporary bump will never get the US past its all-time peak production in 1970.

    We have lousy memories and love to hear positive news. That’s very unfortunate if the perception that the problem has been solved leads to further complacency.

  • Posted by Mason Inman

    That’s really interesting that some European analysts said concerns about peak oil had helped drive efforts to diversify supplies and improve efficiency. I’d always had the impression that peak oil worries hadn’t made a dent in policy, neither in the U.S. nor in Europe.

    Would you be willing to say who the European analysts were who made those comments about peak oil?

  • Posted by Athronydd Groegaidd

    If this piece is coded speak for “Heads up, guys, US tight oil growth will be history by 2020,” then well said. As for peak oil not happening, first deduct the gas liquids and refinery gain from total liquids growth since 2004. Then you don’t get much if any real growth in liquid transport fuel. Then divide the massive growth in liquid fuel users – planes, plant, trains and autos – into flattish production of petroleum. Less and less to go round every year. Please don’t set too much store by the idea that we Euros are much taken in by the fracking ‘revolution’ as the answer to energy needs – though I daresay that the financial industry is hoping to make as big a killing on it as Wall Street did.

  • Posted by Nagesh K Ojha

    Though, theoretically, fear stops free thinking and makes halt for new, but in energy sector fear of peak oil always has paved the way for new innovations and will remain so.

  • Posted by Guillermo

    “I’ve recently heard more than one European analyst emphasize how important the specter of peak oil was in pushing Europe to diversify its energy supplies and improve its energy efficiency. But now, they say, the shale oil boom has helped kill that meme.”

    Citation needed.

  • Posted by B fudim

    There is always some relationship between anticipated cost increases, and the consideration of alternatives. The higher cost of alternative non carbon energy is not because of greater efficiency of such alternative fuels but because of the projection that a carbon tax appears more likely.We therefor seek other sources of energy and that by itself induces the suppliers of carbon fuels to reduce or avoid increasing costs, because those suppliers will naturally attempt to slow down the economics of non-carbon impending competition.

  • Posted by Ronald Cooke

    A projection for oil production and consumption can be found at ;
    http://tceconomist.blogspot.com/2012/05/how-much-oil-do-we-have-left-really.html

    I have researched this subject extensively. As some have alluded in the above discussion, we will never run out of oil, but we will run out of affordable oil.

  • Posted by MQS

    Conventional Sweet Oil has Peaked.

    Production of the most profitable, potable oil peaked in 2005/06 and has been on an undulating plateau ever since. The data bears this out.

    Demand for more oil is being partially met by unconventional production, the Bakken Oil Shale etc while the rest is suppressed by oil prices. The annual minimum for WTC inches higher every year.

    When sweet crude goes into decline we are in trouble. Unconventional will not support the economy when conventional production declines by 2-5% per annum.

    Keep watching the data.

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