Insider: Peak oil
Jeff Sanford and Thomas Watson
From: the Summer 2008 issue of Canadian Business magazine
Followers of the peak oil theory argue the world has already or soon will have used up more than half the non-renewable resource. They say current crude prices are just the beginning. Skeptics insist there is no reason to believe that carbon-based capitalism has started to run out of gas. Today’s record prices, they argue, are driven by massive market speculation. Canadian Business writers Thomas Watson (anti-peak) and Jeff Sanford (pro-peak) debate the issue below.
Commentary
I took a little time to place my assumptions to the side for a minute and figured that I would look at the ‘balance of evidence’ presented by Mr. Watson (anti-peak) and Mr. Sanford (pro-peak) to decide where I might land. It seems obvious from the stretched arguments and derogatory remarks that Mr. Watson really didn’t have much of a foundation to stand on. Just listen to just some of his anti-peak reasoning:
1) Peakers take turns dismissing technology on YouTube, then watch each other on credit-card-sized iPods more advanced than computing systems on the first space shuttle.
2) Peakers are like cultish folks who want to believe the end in near.
3) Global warming will dramatically reduce oil demand — or kill us all — before the peak show hits.
That was three slots out of ten wasted in trying to prove his argument (to not buy peak oil). It is laughable that this lack of rigor and name calling makes the editorial cut in such a prestigious business magazine. His other 7 arguments are valid but leave out important details to make his point. I took the time to address them below in italics:
1. High prices do not prove the world is running out of oil. After the dot-com market implosion, housing prices soared. After real estate crashed, the cost of oil spiked. People still have homes and Internet access.
Yeah but if peak oil was really happening it sure would look like this. Anyways most analysts pretty much agree that there will be a turbulent period with a lot of volatility (checked the stock market lately). Actually, there is some new capacity that will be coming on in the near future that may alleviate some of the pain (Chirs Skrebowski- The oil Drum) but it still does not change the fundamental observation that we better take this ’signal’ of things to come and the long term trend is downward.
2. Higher prices do mean that a lot more money will be invested in finding more oil and better recovery technologies.
50 years ago put in 10 apples and get out 100. Today put in 10 apples and get out 11 maybe 12. Don’t be so nieve. Why else would Tar Sands and Oil Shale be so salivatingly temping? 50+ billion is being invested in the tar sands but production is limited by natural gas and water supplies. Throwing money at a problem is not a panacea.
3. Peakers take turns dismissing technology on YouTube, then watch each other on credit-card-sized iPods more advanced than computing systems on the first space shuttle.
I don’t even know where to begin with this one! I’m embarassed for Mr. Watson. Translate - if you engage in using any new type of media then you better not believe in ‘peak oil’. I think the latin term for this reasoning is non-sequitor.
4. Future oil prices are lower, not higher.
Last I checked: http://futures.tradingcharts.com/marketquotes/index.php3?market=CL it was $130 a barrel in Dec 2008. So what is the point?
5. Peakers say supply is running out but demand can’t fall, even during a global recession. But the International Energy Agency has been lowering global consumption forecasts.
I have yet to see an oil production graph from any of the main proporters of the theory that have blotted out the fall and then rise after the ‘oil shock’ in the late 1970’s. Nuanced debate does not discount the possibility of a price correction due to demand falling. But at this point in our development oil is highly non-fungible. Explain how a 400+% rise in prices doen’t indicate that oil is a fungible commodity!
6. Brazil just found a supply of oil like the ones peakers claim no longer exist.
And we are likely to find more in harder to reach, more expensive places.
Like the North and South Poles. Maybe if we burn more carbon dioxide those pesky poles will open up their bounty like an oyster with a pearl and give us more ‘black gold’. With the Tupi find in Brazil, it is a good thing that all they had to do was drill to a depth of 2,140 meters, then a 2,000-meter-thick salt layer that itself is under 3,000 to 4,000 meters of sand and rocks to find the equivalent of 8 billion barrels. Hum? The world uses ~31 billion barrels a year. A little perspective makes the find less dazzling, that amounts to 100 days of supply. Hardly a sign that we should kick back with a daiquari and kiss this whole ‘limits to supply’ discussion goodbye.
7. Peakers are like cultish folks who want to believe the end in near. Industry experts like Nansen Saleri, former head of reservoir
management at Saudi Aramco, say the point of peak supply isn’t even close.
We are all a cult and we have weird haircuts. And on top of that we use credit-card sized i-pods to disseminate our message like animals. Give me a break. Nansen Saleri has no vested interest in the status quo so he must be right, I mean the Saudi’s have been so helpful with transperancy in the past.
8. According to Saleri, the world has consumed about one trillion barrels of oil. But remaining conventional and unconventional (oil shale, oilsands, coal, etc.) resources each represent six to eight trillion barrels left to be harvested.
Lets see, squeeze a water balloon and the water comes out. Squeeze a sponge and some water comes out.. Squeeze a towel and some water comes out. Squeeze a pumice stone and sweat will come out before you get any water. What part of ‘tar sand’ and ‘oil shale’ don’t you understand. The world (in its current configuration) needs flows of oil. Reserves don’t equal production.
9. According to a recent U.S. energy task force, America’s unconventional resources alone could produce seven million barrels of crude a day as early as 2035, which is about 35% of total current U.S. oil consumption.
Read a little closer. That requires a ‘dedicated effort’ and makes no provisions for climate change. There are currently 2 demonstration projects for carbon capture and sequestration…………….uh, hello Climate Change?
10. Global warming will dramatically reduce oil demand — or kill us all — before the peak show hits.
I‘d be a little more careful about that statement. Global warming has some immediate effects for the less fortunate but our priveledged world still plays cards with mobility. Cut out the cheap mobility and there goes the economy. Are you an ‘alarmist’ by suggesting that global warming will ‘kill us’? Good try Watson but the balance is not tipped in your favor.
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