Friday, January 18, 2008
Peak oil - a detailed rejoinder
Posted by David Smith at 12:30 PM
Category: Thoughts and responses

When I wrote about peak oil recently - saying we were nowhere near it - some people responded by saying that a mere economics writer either should not delve into this territory or should bow to the weight of the geological evidence. Well here is the most detailed study of that evidence, from Cambridge Energy Research Associates, and its conclusion is the same as mine; we are a long way from the peak. It sees global liquids capacity, currently 91m barrels a day, rising to 112m bpd by 2017. Its press release is here.


I think this report misses the point about peak oil because it is not simply absolute production that matters but a few other things such as demand and the return on investment IE if it take more than one unit of energy (whatever the price of a unit) to get a unit out the ground then there is no point in extraction.

The BRIC group are on target to give world growth of 4% so we are told by Goldman Sachs. So from the present low level of world demand India and China will each expect 17% or so of world oil demand. I see no mention in that report of future demand which is on trend to go up.

I just don't see how the sums will add up.

Posted by: IanG at January 20, 2008 09:03 AM

The difficulty I have with this is that CERA is not a truly independent observer of the oil industry/markets. It relies on the patronage of oil companies and oil states to conduct its own operations. There's also evidence to suggest that CERA has made consistent errors in forecasting world oil prices in the years 2002 - 2007 - consistently low that is. For every CERA report declaring that Peak Oil is not a serious or shorter-term problem, there seem to be more observers (like Leggett, Kunstler, King, Simmons) who argue the opposite. The real problem in this area is indeed the lack of reliable information on reserves. Google Matt Simmons' presentation "Are We Nearing The Peak Of Fossil Fuel Energy? Has Twilight In The Desert Begun?" to get an alternative to the CERA view. I suppose you pay your money and take your choice.

Posted by: MarkN at April 23, 2008 10:04 AM