We were wrong on peak oil. There's enough to fry us all
A boom in oil production has made a mockery of our predictions. Good
news for capitalists – but a disaster for humanity
THE FACTS HAVE changed, now we must change too. For the past 10 years
an unlikely coalition of geologists, oil drillers, bankers, military
strategists and environmentalists has been warning that peak oil – the
decline of global supplies – is just around the corner. We had some
strong reasons for doing so: production had slowed, the price had
risen sharply, depletion was widespread and appeared to be escalating.
The first of the great resource crunches seemed about to strike.
Among environmentalists it was never clear, even to ourselves, whether
or not we wanted it to happen. It had the potential both to shock the
world into economic transformation, averting future catastrophes, and
to generate catastrophes of its own, including a shift into even more
damaging technologies, such as biofuels and petrol made from coal.
Even so, peak oil was a powerful lever. Governments, businesses and
voters who seemed impervious to the moral case for cutting the use of
fossil fuels might, we hoped, respond to the economic case.
Some of us made vague predictions, others were more specific. In all
cases we were wrong. In 1975 MK Hubbert, a geoscientist working for
Shell who had correctly predicted the decline in US oil production,
suggested that global supplies could peak in 1995. In 1997 the
petroleum geologist Colin Campbell estimated that it would happen
before 2010. In 2003 the geophysicist Kenneth Deffeyes said he was
"99% confident" that peak oil would occur in 2004. In 2004, the Texas
tycoon T Boone Pickens predicted that "never again will we pump more
than 82m barrels" per day of liquid fuels. (Average daily supply in
May 2012 was 91m.) In 2005 the investment banker Matthew Simmons
maintained that "Saudi Arabia … cannot materially grow its oil
production". (Since then its output has risen from 9m barrels a day to
10m, and it has another 1.5m in spare capacity.)
Peak oil hasn't happened, and it's unlikely to happen for a very long time.
A report by the oil executive Leonardo Maugeri, published by Harvard
University, provides compelling evidence that a new oil boom has
begun. The constraints on oil supply over the past 10 years appear to
have had more to do with money than geology. The low prices before
2003 had discouraged investors from developing difficult fields. The
high prices of the past few years have changed that.
Maugeri's analysis of projects in 23 countries suggests that global
oil supplies are likely to rise by a net 17m barrels per day (to 110m)
by 2020. This, he says, is "the largest potential addition to the
world's oil supply capacity since the 1980s". The investments required
to make this boom happen depend on a long-term price of $70 a barrel –
the current cost of Brent crude is $95. Money is now flooding into new
oil: a trillion dollars has been spent in the past two years; a record
$600bn is lined up for 2012.
The country in which production is likely to rise most is Iraq, into
which multinational companies are now sinking their money, and their
claws. But the bigger surprise is that the other great boom is likely
to happen in the US. Hubbert's peak, the famous bell-shaped graph
depicting the rise and fall of American oil, is set to become
Investment there will concentrate on unconventional oil, especially
shale oil (which, confusingly, is not the same as oil shale). Shale
oil is high-quality crude trapped in rocks through which it doesn't
There are, we now know, monstrous deposits in the United States: one
estimate suggests that the Bakken shales in North Dakota contain
almost as much oil as Saudi Arabia (though less of it is extractable).
And this is one of 20 such formations in the US. Extracting shale oil
requires horizontal drilling and fracking: a combination of high
prices and technological refinements has made them economically
viable. Already production in North Dakota has risen from 100,000
barrels a day in 2005 to 550,000 in January.
So this is where we are. The automatic correction – resource depletion
destroying the machine that was driving it – that many
environmentalists foresaw is not going to happen. The problem we face
is not that there is too little oil, but that there is too much.
We have confused threats to the living planet with threats to
industrial civilisation. They are not, in the first instance, the same
thing. Industry and consumer capitalism, powered by abundant oil
supplies, are more resilient than many of the natural systems they
threaten. The great profusion of life in the past – fossilised in the
form of flammable carbon – now jeopardises the great profusion of life
in the present.
There is enough oil in the ground to deep-fry the lot of us, and no
obvious means to prevail upon governments and industry to leave it in
the ground. Twenty years of efforts to prevent climate breakdown
through moral persuasion have failed, with the collapse of the
multilateral process at Rio de Janeiro last month. The world's most
powerful nation is again becoming an oil state, and if the political
transformation of its northern neighbour is anything to go by, the
results will not be pretty.
Humanity seems to be like the girl in Guillermo del Toro's masterpiece
Pan's Labyrinth: she knows that if she eats the exquisite feast laid
out in front of her, she too will be consumed, but she cannot help
herself. I don't like raising problems when I cannot see a solution.
But right now I'm not sure how I can look my children in the eyes.