Some of the petroleum industry's leaders now are warning, not without self interest, we may be reaching peak global oil production.
Peak oil is a controversial theory that suggests oil production is peaking and will invariably decline over the coming years, leaving the industrial world facing short supplies.
In its own way, the theory is more controversial than climate change and rests on interpretation of arcane numbers.
Indeed, there are those who point to recent finds of giant oil reserves off places like Brazil and argue that there’s far more oil left in the ground than we can imagine. However, the peak oil advocates are now picking up support and their warnings ought to be of at least passing interest to auto industry planners, some of which have already embraced it, notably General Motors.
In the past, anyone speaking out about oil supply challenges was usually stereotyped as a fringe element with little knowledge about the oil industry, notes a Denver-based organization called the Association for Study of Peak Oil & Gas.
The ASPO-USA, however, has some new evidence to support the contention that oil supplies – and prospects for finding more oil – are not as robust as the oil and gas industry might have people believe. For motorists, shorter supplies mean higher fuel prices.
In a new report, ASPO reports that Christophe de Margerie, CEO of France’s Total SA, said earlier this year, not without self interest in maintaining high oil price sin the midst of a global recession, “World oil production may plateau below 90 million barrels a day (mb/day)” — marginally more supply than today’s 85 mb/day rate. Last month, ConocoPhillips CEO James Mulva and John Hess, chief executive of the eponymous Hess Corp., sounded similar warnings, also not without self interest, though with less specificity about the numbers, during the Oil & Money Conference in London.
At ASPO-USA’s October conference, in Denver, Ray Leonard, CEO of Hyperdynamics Corp., said, “World oil was nearing peak oil at 90 mb/day, and that isn’t changed by recent events,” a reference to such things as the big Brazilian off-shore oil discoveries.
During September, ASPO-USA representatives interviewed numerous oil industry experts from the UK, Ireland and the Middle East. Among those speaking out is Sadad al Husseini, former exploration and production vice president with Saudi Aramco, and currently a consultant. Said Husseini, “There is not enough new capacity coming on line, within say the next five to six years, to make up for global declines. And that’s assuming a very moderate level of decline.”
For groups that remain in fundamental denial about upcoming world oil supply constraints, Husseini said, “ these centers of information or knowledge that try to pacify people — telling them there is no challenge, with good intentions — are probably compromising the solutions. They’re not helping.”
Jeremy Leggett, former petroleum geologist and lead author of the UK’s Industry Task Force on Peak Oil and Energy Security, worries that “We’re dealing with dysfunctional culture in the energy industry in the same way the world had to deal with the really dysfunctional culture in the investment banking community. It’s different from the financial crisis in that this time, there are many people warning. Many people in and around the oil industry…But most governments are not listening,” he said.
Meanwhile, Great Britain’s Guardian newspapers reported earlier this month that a whistleblower from the International Energy Agency claimed the IEA has been deliberately underplaying a looming shortage for fear of triggering panic buying. “The senior official claims the US has played an influential role in encouraging the watchdog to underplay the rate of decline from existing oil fields while overplaying the chances of finding new reserves,” the Guardian said.
The Guardian also pointed out that the “peak oil” theory is gaining support at the heart of the global energy establishment. “The IEA in 2005 was predicting oil supplies could rise as high as 120m barrels a day by 2030 although it was forced to reduce this gradually to 116m and then 105m last year,” said the IEA source, who was unwilling to be identified for fear of reprisals inside the industry. “The 120m figure always was nonsense but even today’s number is much higher than can be justified and the IEA knows this,” the source said.