How do we know peak oil is close?

How do we know peak oil is here?

My most thorough treatment of this subject is over at Brave New Climate in an article I called On peak oil authorities. I was going to copy it in here, but don’t want Barry’s google rankings to get messed up. So either read it at the link above or download this word file.

On this page…

  1. The Growing Gap
  2. The most funded scientific discipline except the military
  3. 64 out of 98 oil producing countries have already peaked
  4. Non-OPEC oil
  5. OPEC oil
  6. The megaprojects tell all
  7. The German and American military both confirm early peak oil
  8. Why doesn’t the USGS see this?
  9. The USGS projections do not work
  10. More geologists defect from USGS and join ASPO
  11. Many oil companies are admitting it!
  12. Even the Economist has said it…
  13. Big Oil have denied accurate peak predictions before
  14. Still not convinced?

1. The Growing Gap

I think most people would be horrified if they understood the graph above and knew that there has been a 40 year downward trend in oil discovery, and in that for the last 27 years we have burned more oil than we have found. In 1983 discovery trends dropped below consumption trends, and we started eating into old oil that our grandparents discovered, without replacing it with as much “new oil”. We now burn about 5 barrels for every barrel we find! This is even acknowledged by the peak oil denial camp such as Exxon Mobile. You can see their version of the Growing Gap Graph from Vice President Longwell’s own report (download PDF here).


“The Future of the Oil and Gas Industry: Past Approaches, New Challenges”

For 25 years we have been building vast suburban sprawl based on the lie that “there is enough oil”. It shows what an idealist I am that I expected governments would have started thinking about a post-oil plan back when it became obvious that we were not finding the oil fast enough to replace the oil we have been burning.

2. The most funded scientific discipline except the military.

Now consider this. According to the ABC peak oil documentary Crude (May 2007) more money has been pumped into oil science than any other scientific discipline — except maybe military science. Over time we are talking about a trillion dollar business that wants to maximize all areas of potential profit making — and it all starts with finding the oil fields in the first place! If they cannot find the oil… who can? We now burn oil at the rate of about a thousand barrels a second, but 80% of that is not being replaced. We are falling behind fast.

3. 64 out of 98 oil countries have already peaked.

Wikipedia tracks national oil status on their Oil Reserves page. Please check the wikipedia page on as it is updated as new developments and reports come to light. Basically, 54 of the top 65 most important oil producing nations have already peaked. For even more comprehensive detail check David Strahan’s interactive oil atlas that shows ALL oil producing nations — even the tiny insignificant producers — and clearly shows that out of ALL 98 nations, 64 have peaked.

Now, obviously not all oil nations produce exactly the same amount of oil. If they did, then logically we would have passed peak oil when 49 of the 98 oil nations had peaked.

Instead, we live in a world where just 1% of the world’s oil fields are super-giants that produce about 50% of the oil. It’s when those super-giant fields go into decline that the crisis will hit, and many of those are in the middle east.

4. Non-OPEC oil.

World oil production is roughly 50/50. OPEC provides about half the world’s oil, and non-OPEC produces the other half. So how are those 2 halves of the oil world going, when we consider that 64 nations have already peaked? Who has the oil? What do the energy officials say?

Guy Caruso put it this way (American DOE’s Energy Information Agency) — on ABC’s 4 Corners in 2006.

GUY CARUSO, US DEPT OF ENERGY: Definitely. The Gulf states will contribute by far the largest share of the increase in – in our outlook over the next 20 to 25 years. We’ve got more than 30 million barrels a day of growth in world oil demand, and about 10 of that will be this unconventional liquids, oil sands etc. But the majority of the rest of the growth will be from the Gulf countries.

To put it simply, the 20 thousand scientists at Exxon Mobile — who deny an imminent global peak — have announced that the entire world outside of OPEC is about to peak in its production of all oil categories! Listen to how the Bulletin of the Atomic Scientists reviewed this quiet Exxon announcement.

Second, the majority of non-OPEC producers such as the United States, Britain, Norway, and Mexico, who satisfy 60 percent of world oil demand, are already in a production plateau or decline. (All of ExxonMobil’s crude oil production comes from non-OPEC fields.) Third, the production peak cited by the report is quite close at hand. If it were twenty-five years instead of five years in the future, one might be more skeptical, since new technologies or new discoveries could change the outlook during that longer period. But five years is too short a time frame for any new developments to have an impact on this result.

Even Russia says they will peak by 2010! This means that the world will be utterly dependent on OPEC for any increases in production. The geopolitical and economic implications of this fact alone are quite profound, even if world peak oil were decades away. Yet how is OPEC doing, and are they telling us the truth?

5. OPEC oil

A special op-ed edition of the ABC’s 4 Corners raised serious questions regarding OPEC reliability. If anything 4 Corners illustrated one insane fact: we trust OPEC when they will not allow independent audits of their fields! (Please watch their free online 45 minute documentary.)

Guy Caruso of the US Department of Energy (DOE) highlighted our complete dependence on OPEC:

“Definitely, the gulf states will contribute by far the largest share of the increase in our outlook over the next 20 to 25 years”…. “the majority of the increase will be from the gulf countries.”

Yet as the DOE’s own oil consultant, Robert Hirsch, clearly states:

“Basically what they are asking us to do is to trust them. And frankly on something that’s the lifeblood of our civilization and the way we live, to trust somebody who won’t allow any audits is extremely risky. I personally don’t believe the numbers that are out there.”

Robert Hirsch is not some end of the world doomer. He’s a smart cookie, who has developed key strategies in fusion energy. He’s a serious, sceptical scientist keen to solve the world’s energy problems with real solutions. And he does not believe OPEC’s reports, and basically thinks we could be heading into a Great Depression. (See the Hirsch report).

As Reuters stated January 2008: Tough to pump more oil, even at $100
Oil at $100 a barrel should give exporters every incentive to pump more, but their difficulty in doing so shows the world is struggling to sustain production…. “OPEC can do little,” Shokri Ghanem, the top oil official for OPEC member Libya, told Reuters. “Most OPEC countries are producing at capacity.”

No independent audits
Why is he so sceptical? Because the USGS, EIA, IEA, DOE and other oil bodies have no way of verifying OPEC data. They just trust it. The non-OPEC world is about to go into decline, and we are OK with OPEC’s attitude?

The infamous 1985 reserve upgrades.
These countries had been thoroughly explored for 30 or 40 years when all of a sudden they practically doubled their reserves. Why? What had those geologists been doing for 4o years, playing cards? What happened? As the Wikipedia oil reserves page makes clear under the heading Suspicious official estimates of oil reserves from OPEC countries

The OPEC countries decided in 1985 to link their production quotas to their reserves. What then seemed wise provoked important increases of the estimates; in order to increase their production rights. This also permits the ability to obtain bigger loans at lower interest rates. This is a suspected reason for the reserves rise of Iraq in 1983, then at war with Iran.

In fact, Dr. Ali Samsam Bakhtiari, a former senior executive of the National Iranian Oil Company, has stated unequivocally that OPEC’s oil reserves (notably Iran’s) are grossly overstated. In a recent interview [11] he stated that world oil production is now at its peak and predicted that it will fall 32% by 2020.

What happened? The money spoke louder than the geologists. Their ability to earn was tied to the size of their books. Magically, the oil in the books grew doubled when there had already been decades of surveying the oil in the ground.

Saudi Arabia — the King of OPEC — is about to die.
The undisputed king of all oilfields was Ghawar. It’s massive. This one individual oil field was worth 10 North Sea projects — that is the whole North Sea with all it’s different oil fields. Watch this Wiki because it looks like they may have peaked. However, we may have a few years left. The former head of Saudi exploration has stated to the New York Times that he believes Saudi oil will peak at about 12.5 to 15 million barrels a day. After that point, there can be no more growth in supply no matter what the world demands! When Saudi Arabia peaks that’s it, the world has peaked! From the article…

“When I asked whether the kingdom could produce 20 million barrels a day — about twice what it is producing today from fields that may be past their prime — Husseini paused for a second or two. It wasn’t clear if he was taking a moment to figure out the answer or if he needed a moment to decide if he should utter it. He finally replied with a single word: No.”

In other words, Saudi Arabia peaks in the next few years. When Saudi Arabia peaks, that’s it, the world has peaked. “The king is dead, long live the … what?” (Nothing can replace oil as a liquid fuel in the time frames we need.)

6. The megaprojects tell all

Professor Kjell Aleklett of ASPO explains in Asleep in America:

“When the big Russian oil field went into decline, they needed 200 smaller oil fields to replace it.”

Chris Skrewbowksi, chief editor of the UK’s Petroleum Review, writes the Megaprojects review. He is alarmed. He summarises his concerns in this interview at GPM.

7. The German and American military both confirm early peak oil.

German military predicts:

# Politics in place of the market: The Bundeswehr Transformation Center expects that a supply crisis would roll back the liberalization of the energy market. “The proportion of oil traded on the global, freely accessible oil market will diminish as more oil is traded through bi-national contracts,” the study states. In the long run, the study goes on, the global oil market, will only be able to follow the laws of the free market in a restricted way. “Bilateral, conditioned supply agreements and privileged partnerships, such as those seen prior to the oil crises of the 1970s, will once again come to the fore.”

# Market failures: The authors paint a bleak picture of the consequences resulting from a shortage of petroleum. As the transportation of goods depends on crude oil, international trade could be subject to colossal tax hikes. “Shortages in the supply of vital goods could arise” as a result, for example in food supplies. Oil is used directly or indirectly in the production of 95 percent of all industrial goods. Price shocks could therefore be seen in almost any industry and throughout all stages of the industrial supply chain. “In the medium term the global economic system and every market-oriented national economy would collapse.”

# Relapse into planned economy: Since virtually all economic sectors rely heavily on oil, peak oil could lead to a “partial or complete failure of markets,” says the study. “A conceivable alternative would be government rationing and the allocation of important goods or the setting of production schedules and other short-term coercive measures to replace market-based mechanisms in times of crisis.”

via ‘Peak Oil’ and the German Government: Military Study Warns of a Potentially Drastic Oil Crisis – SPIEGEL ONLINE – News – International.

American Joint Forces command says:

The US military has warned that surplus oil production capacity could disappear within two years and there could be serious shortages by 2015 with a significant economic and political impact.

The energy crisis outlined in a Joint Operating Environment report from the US Joint Forces Command, comes as the price of petrol in Britain reaches record levels and the cost of crude is predicted to soon top $100 a barrel.

“By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day,” says the report, which has a foreword by a senior commander, General James N Mattis.

via US military warns oil output may dip causing massive shortages by 2015 | Business | The Guardian.

8. Why doesn’t the USGS see this?

Given these statements, why are the USGS so misguided?

Aleklett-and-Campbell (26 page .doc file) of ASPO (in Uppsala University, Sweden) state in their Abstract:

Extrapolating the discovery trend of the past to determine future discovery and production should be straightforward, and the size distribution of the fields should be evident. But the atrociously unreliable nature of public data has given much latitude when it comes to interpreting the status of depletion and the impact of economic and political factors on production. This has allowed two conflicting views of the subject to develop.

The first is what may be called the Natural Science Approach, which observes the factors controlling oil accumulation in Nature and applies immutable physical laws to the process of depletion. The second is what may be called the Flat-Earth Approach, in which the resource is deemed to be virtually limitless, with extraction being treated as if it were controlled only by economic, political and technological factors.

This paper will endeavour to present the evidence for the Natural Science Approach, addressing the geological constraints; the technical basis of reserve estimation, the distribution of field sizes, and the obvious correlation between discovery and production after a time lag. It will further explain the reporting practices, and present both a realistic assessment of the resource and practical model of depletion.

Peer-reviewed work from the University of Reading by Bentley et al suggest the USGS and other agencies have been mislead by poor categories. Oil fields come in a variety of descriptions, from guessed at ‘resources’ to estimates of the economically recoverable ‘reserves’. As Bentley says:

Combining geological knowledge with proved plus probable (‘2P’) oil discovery data indicates that over 60 countries are now past their resource-limited peak of conventional oil production. The data show that the global peak of conventional oil production is close. Many analysts who rely only on proved (‘1P’) oil reserves data draw a very different conclusion. But proved oil reserves contain no information about the true size of discoveries, being variously under-reported, over-reported and not reported. Reliance on 1P data has led to a number of misconceptions, including the notion that past oil forecasts were incorrect, that oil reserves grow very significantly due to technology gain, and that the global supply of oil is ensured provided sufficient investment is forthcoming to ‘turn resources into reserves’. These misconceptions have been widely held, including within academia, governments, some oil companies, and organisations such as the IEA.

In addition to conventional oil, the world contains large quantities of non-conventional oil. Most current detailed models show that past the conventional oil peak the non-conventional oils are unlikely to come on-stream fast enough to offset conventional’s decline. To determine the extent of future oil supply constraints calculations are required to determine fundamental rate limits for the production of non-conventional oils, as well as oil from gas, coal and biomass, and of oil substitution. Such assessments will need to examine technological readiness and lead-times, as well as rate constraints on investment, pollution, and net-energy return.

The USGS advise the United States DOE and EIA, which in turn advises the US Government on energy matters.  Even the international community is advised by the USGS, with the International Energy Agency relying on USGS data.

9. The USGS projections do not work

Their 2000 study projected discovery trends that were double what has actually occurred over the last decade.

USGS Projections

W. Zittel, J. Schindler, L-B-Systemtechn wrote: The Countdown for the Peak of Oil Production has Begun. This report documents the problems I’ve highlighted above. It is well worth the read as it details the fallacies behind the leading energy advisors to the world.

More on the Probability categories at wikipedia.

10. More geologists defect from USGS and join ASPO

More and more geologists and scientific celebrities are rebelling against the USGS’s rosy outlook and joining the early peakists at ASPO. ASPO also have the latest news — check ASPO international and the ASPO in your country.

Chris Skrebowski was once a critic of the peakniks. Chris is Editor of the UK’s prestigious Petroleum Review. He is now a peaknik who starred in the ABC’s Four Corners on peak oil.


11. Many oil companies are admitting it!

OPEC have already said that light sweet crude is in decline. (Only the sour stuff was still increasing in production at the time of this report, and that now may be in doubt.)

OPEC now seem to be discussing an imminent peak!!

Chevron have said it. “The era of easy oil is over!” writes the CEO at willyoujoinus.com

12. The Economist has said it

Such calculations determine estimates of when demand will begin to outpace supply, a circumstance that, just as in 2008, is likely to cause precipitous price spikes. Jeffrey Currie of Goldman Sachs reckons that demand could be “bumping up” against capacity in 18 months. Other analysts with greater doubts about global growth and more optimism about OPEC’s capacity give it four years or more. Given the havoc of 2008 neither OPEC nor oil buyers are likely to greet the moment with a party, let alone a run of special stamps.

via Oil prices: Crude awakening | The Economist.

13. Big Oil have denied other correct peak oil predictions

The charge has been made that peak oilers have made many mistakes before when predicting the worldwide production peak. However, just as some prior warnings may have been overly alarmist, does that mean all such predictions are wrong? Also, just as some peak oilers might have ulterior motives in, say, publishing a book and making some money, does that mean all peak oilers can be tarnished with the same brush?

Can you imagine a teeny weeny motive that might also bias Big Oil reports on this issue? Imagine that the international community suddenly and dramatically took peak oil warnings seriously, and started to shift entire economies off oil. Can you imagine how many hundreds of billions of dollars profit are at stake? It is in their interest to maintain our addiction at all costs. They are crack dealers hoping their users don’t go cold turkey. They are corporations addicted to the dollar now, whatever the long term cost. At least those at the top are — many working for Big Oil have no idea of the real perils involved in the world production picture.

So, have Big Oil ever tried to silence or dispute previous peaknik predictions?
America
In 1956 M King Hubbert predicted that America would peak in 1971.
Shell tried to cover up his paper and changed his conclusions, and the USGS director led a campaign against Hubbert. They played all the usual games of inflating reserves, etc to give a much later peak — but Hubbert was right. The USGS director was eventually fired for his stupidity.

The North Sea
Matt Simmons writes:-

In 1995-96, I started talking about giving speeches in Aberdeen and Stavanger at the North Sea Oil Show saying, the North Sea is just about to peak and go into irreversible decline and I get these astonished looks by senior executives of the major oil companies saying, “Matt, you don’t understand technology.” Well, it turned out that I didn’t ever say 1999, I said in the next two or three years. 1999 was the high water mark for the North Sea, and it is already down 25%.

Roger Blanchard also had a go at the North Sea. This implicates the US DOE/EIA and the USGS (whose figures the DOE/EIA based their assumptions) over estimates of North Sea URR. Denial everywhere — and yet now it’s history.

Others
For more on this please see Richard Heinberg’s comments to the USA National Petroleum Council inquiry. If you know any more such examples, please contact me.

14. Still not convinced?

Even if you still do not believe an early peak has been categorically proved, I hope that this introduction has at least given you a sense of the heated debate amongst petroleum specialists. Given the importance of oil to the world economy, I am amazed that this geological debate has not already resulted in a bipartisan international inquiry. That is what we are asking for. It makes sense, doesn’t it?

So even if you are still unsure, does not the very fact that we are unsure about the lifeblood of our economy compel action? Are we all to remain unsure about our most important resource? Are we to blunder along in the dark?

The peak oil community is asking for nations to sign the Oil Depletion Protocol, part of which calls for a full audit on ALL oil producing nations so that we can establish reserves and the expected depletion rate.

Critics often tell ‘peak oil alarmists’ that they are ‘the boy who cried wolf’. Yet there are 2 morals of that story. Yes the first moral is don’t create false alarms or people may not believe you when it counts. But many overlook the second moral of the story — when someone does cry wolf go and check or people die!

I hope that as you read the reports above you will have a curious mind with a coffee ready, and time for lots of data. Be ready to listen to senior geologists with lifetimes of experience in oil production. It is enough to convince me of the need for a massive oil audit and international agreement such as the Oil Depletion Protocol.

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