Scientists, philosophers, and engineers have been predicting the eventual peak of oil production for decades, but each estimate has been incorrect. Was 2019 the year of peak oil? What are factors contributing to a decline in production? What are the newest estimates for peak oil? All of this and more in the first episode of an educational series from RARE PETRO.
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Hello everyone and welcome back to the RARE PETRO podcast! This will be the first episode in our educational series where we consult experts in the field on many different technical disciplines. You’ll hear about topics covering production, completions, drilling, you name it! We want to get the experts in here delivering the technical answers to your questions. Fortunately this first episode revolves around a topic that I am familiar with through research, so you will be hearing from myself and my friend Colin Fitzgerald who also works here at RARE PETRO. But moving down the road, you won’t be hearing so much from me, so be sure to follow along with this content as it will easily give you a leg up on the rest of the workforce.
But, without further delay, it’s time we get into the topic of this podcast: Peak Oil. Now when I say that, I’m not talking about producing from the tops of mountains, but more the concept of reaching a maximum rate of production, before eventually declining as we fully exhaust existing reserves. For example, if you were to try and do your own research on peak oil you may find this page on Bloomberg. Pretty shocking huh? My problem with this page is the use of the word, suddenly. It is rather misleading as it implies we have finally reached a point to be concerned about oil after years of gluttonous consumption. That is not the case. People have been worried about exhausting oil supplies ever since we found out how to refine the stuff. Consider Victor C. Alderson, the man who inspired the name for Alderson hall on the Colorado School of Mines Campus. He was president of the school first in 1903, and again in 1917. In 1921, or exactly one hundred years from when this video was being recorded, he wrote this statement in an issue of Mines Quarterly:
“The average middle-aged man of today will live to see the virtual exhaustion of the world’s supply of oil from wells.”
Now, excuse my morbidity, but the average middle aged man from 100 years ago is likely not alive today, yet we continue to produce oil. All I’m trying to highlight here is that the idea of peak oil is not a new one like the Bloomberg article might lead you to believe.
If we jump forward to the year to the 1940s, we encounter a famous geologist and geophysicist known as Marion King Hubbert, but most people just call him King Hubbert. He was instrumental in demonstrating that the rock in the earth’s crust is plastic, predicting migration paths, and his predictions of peak oil and gas production. Here you can see him in an interview explaining his chart that predicts peak oil, an idea he originally suggested in 1956. As you can see, he predicted by 2000, we would hit peak oil at roughly 12 billion barrels produced every year, before starting a slow decline over the following 100 years. It is a sound mathematical theory, but as I’m sure you can tell, oil production didn’t exactly slow in that time. Here is a more modern graph showing peak oil production, and that peak keeps getting lifted. How is this possible? Technology got better and better, and more resources turned into reserves as it was now economically profitable to extract these materials. Each time we discover better ways to extract the oil, the new peak continues to get shifted, just like we saw in the more modern figure. While Hubbert may have been incorrect, I believe he had a good reason to predict what he did, and I think the model will fit a bell shaped curve later, but that is far out into the future.
I’m sure by this point some of you are wondering about the more modern claims of peak oil. With more and more push to incorporate renewable energy resources into our everyday lives, surely, oil doesn’t stand a chance. Well, that is only from a perspective of energy, and let’s assume that the entire world stops using fossil fuels for energy tomorrow. I’d like to bring in my good friend and RARE PETRO associate, Colin Fitzgerald to talk exactly about this subject.
*Interview with Colin Fitzgerald.
Colin hit the nail on the head. We don’t just rely on oil for fuel, we can manufacture with the stuff. I hate to say it, but you cannot turn sunlight and wind into tennis shoes, cell phones, and food packaging. I’m sure some of you have seen this figure before, but it shows just how much can be done with a little bit of oil. Even most glasses use plastic lenses today. I know some of you watching are college students and have had your fair share of fun with red plastic cups. Oil’s use in manufacturing will guarantee our use for quite some time, and there is nothing wrong with that. We use it to make products that enhance our quality of living. This is something that Bloomberg article neglects. Remember that big scary “PEAK OIL IS SUDDENLY UPON US” headline? A huge portion of that article focuses on the use of oil as a fuel, and even then it neglects to mention that many people won’t be able to afford one of these cars that replaces demand for hydrocarbon fuels. The more affordable VW ID.4 and Ford Mustang Mach-E will cost you roughly $40k. Other cars like the Lucid Air, Rivian R1T, and GM Hummer start closer to $70k at base, but can be configured to over $100k. I don’t know about you folks listening to this podcast, but I am a young guy who hasn’t been out of college that long, and I couldn’t afford one of these Tesla Cybertrucks, even if I wanted one. I can confidently say it will still take at least several more years before we see a significant number of these vehicles on the road. Something else worth mentioning is that there is a lack of publicly available charging ports, so when plugging your vehicle into the garage outlet to charge, you are likely charging that vehicle with hydrocarbons.
While we talk about some of the things that promote the potential of peak oil, let’s talk about renewable energy. The idea for many is that the use of solar and wind power will offset our use of hydrocarbons so that we can phase out fossil fuels in the future. Right now, infrastructure is kind of lacking in the United States, and that is something even president Biden has tried to target with his infrastructure bill. The cost to transition will not be cheap, and some estimates predict as little as $15 trillion could be required. Higher end predictions estimate closer to $40 trillion. When we do pour that money in, what does it mean for oil and gas? Well, lots of minerals need to be mined so that we can build solar panels, wind turbines, and hydro turbines, and those minerals will be mined and transported by machines running off of oil and gas. The factories refining those minerals and manufacturing the tech will be powdered mostly by oil and gas. The construction crews prepping an EV parking lot will move earth, and build infrastructure using oil and gas. Even if we wean off of our use at one point in the supply chain, it still exists in another. I know that eventually this won’t be the case, and we will have battery operated machines that will be charged with the wind and sun, but unfortunately, we are quite a ways out from that being a reality.
We’ve considered the past, present, and future of peak oil and determined that there is still time for its use within the United States. What of the rest of the world? There are billions of people living in developing nations all around the world, and the idea of renewable energy may not be enough to bring everyone in their population to a level of comfort observed in the United States. Well, if we have cheap and affordable energy, and it can allow others to live well, what is to stop other parts of the world from producing oil to export to those countries? Nothing really. The rest of the world wants to have a refrigerator in their house along with a thermostat, and that all requires a good deal of energy.
Everything comes down to this: the theory of peak oil is legitimate, but too many variables keep changing. Any resource will exhibit a peak use bell curve in some shape or form. The early adopters make up a minority, a majority of people use it in the middle of its life cycle at the peak of its popularity, and fewer people use it as a new alternative is found, and the life cycle will repeat with that new material. The question with peak oil is not if, but rather, when. Fortunately for us users of hydrocarbons, it seems like it will not be for a long time. There are trillions of barrels of oil, and underground oceans of natural gas, and that is only of the reserves we have explored so far. So much of the world has not been explored yet, and that includes its subsurface. We have loads of oil, and it is cost effective. Usually things with those 2 traits stay around for quite some time. We likely haven’t hit the peak yet, which means there will be demand for many decades to come. I’d like to play you a short clip from an old oil and gas minister of Bahrain. He tells a story of a man visiting a sultan with his donkey. (Play story) There are just too many unknowns. Instead of a main character dying, the industry can develop a new method of extraction that allows more and more oil to be produced economically. The truth of the matter is that no one knows when peak oil is coming, and there’s reason to believe that more of the world will need more energy in the future. This has been Tavis Kilian with RARE PETRO. Thank you for your time.