Heresy of the week: The spectre of peak oil still looms over us

The Syrian conflict is full of complicating factors, but oil isn’t one of them. Syria accounts for less than half of one per cent of global production, most of which is consumed domestically. That said, Iran and Saudi Arabia stand on opposite sides of Syria’s civil war – and of the world’s most important oil and gas shipping lane. Fears of a wider regional conflict are therefore putting upward pressure on energy prices.

Still, at least we don’t have to worry about ‘peak oil’ anymore. Though we may face serious threats to security of supply, fears of an imminent decline in the world’s capacity to produce oil are subsiding. 

In an article for IEEE Spectrum, Bill Sweet says that this new confidence has been engendered by technological advances: 

• “A recent report from analysts at Lux Research, 'Evaluating New EOR [Enhanced Oil Recovery] Technologies in Oil Industry Mega-projects,' proposes that by means of EOR, the industry may be able to tap up to 10.2 trillion barrels of unconventional oil, over and above 1.4 to 1.6 trillion barrels of conventional oil...
• “[Michael] Klare, a professor of peace and world security studies at Hampshire College in Massachusetts, seems to be in general accord with Lux's view that the age of oil is far from over. Writing in the Huffington Post, the left-liberal online publication, Klare said that ‘humanity is not entering a period that will be dominated by renewables. Instead, it is pioneering the third great carbon era, The Age of Unconventional Oil and Gas.’”

Not every expert agrees:

• “An article that appeared in the July 13 issue of Eos (the transactions of the American Geophysical Union) presented a radically different view of things. Taking a more economic view of what it means for oil to be recoverable, scientist James W. Murray and analyst Jim Hansen suggest that oil prices—and with them oil production—already have arrived at the limit of what consumers worldwide are willing to pay.”

This is a crucial point that many people miss in the debate over peak oil. No one doubts the fact that most of the world’s oil remains in the ground. But the question that matters is whether we can continue to extract it at a reasonable price. The true limiting factor in the most credible peak oil scenario is not so much our capacity to produce oil as our capacity to pay for it: 

• “‘Global production of crude oil and condensates…has essentially remained on a plateau of about 75 million barrels per day since 2005 despite a very large increase in the price of oil,’ say Murray and Hansen… In effect, they suggest, prices have reached a level where consumers seek alternatives or conserve, rather than pay more…”

Huge sums are being invested in new extractive technologies, but it remains to be seen whether these efforts can shift oil prices downwards or whether such investment depends on oil prices remaining high.

Meanwhile, it’s worth remembering that conventional oil production will continue for some time to come. In particular, major oil fields in countries like Saudi Arabia and Iran have yet to be exhausted. Thanks to high oil prices they provide their owners with a fat profit – and a means of funding the slaughter of Syria’s unfortunate people.