This story first appeared on the TomDispatch website.
Among the big energy stories of 2013, "peak oil"—the once-popular notion that worldwide oil production would soon reach a maximum level and begin an irreversible decline—was thoroughly discredited. The explosive development of shale oil and other unconventional fuels in the United States helped put it in its grave.
As the year went on, the eulogies came in fast and furious. "Today, it is probably safe to say we have slayed ‘peak oil' once and for all, thanks to the combination of new shale oil and gas production techniques," declared Rob Wile, an energy and economics reporter for Business Insider. Similar comments from energy experts were commonplace, prompting an R.I.P. headline at Time.com announcing, "Peak Oil is Dead."
Not so fast, though. The present round of eulogies brings to mind Mark Twain's famous line: "The reports of my death have been greatly exaggerated." Before obits for peak oil theory pile up too high, let's take a careful look at these assertions. Fortunately, the International Energy Agency (IEA), the Paris-based research arm of the major industrialized powers, recently did just that—and the results were unexpected. While not exactly reinstalling peak oil on its throne, it did make clear that much of the talk of a perpetual gusher of American shale oil is greatly exaggerated. The exploitation of those shale reserves may delay the onset of peak oil for a year or so, the agency's experts noted, but the long-term picture "has not changed much with the arrival of [shale oil]."
The IEA's take on this subject is especially noteworthy because its assertion only a year earlier that the US would overtake Saudi Arabia as the world's number one oil producer sparked the "peak oil is dead" deluge in the first place. Writing in the 2012 edition of its World Energy Outlook, the agency claimed not only that "the United States is projected to become the largest global oil producer" by around 2020, but also that with US shale production and Canadian tar sands coming online, "North America becomes a net oil exporter around 2030."
That November 2012 report highlighted the use of advanced production technologies—notably horizontal drilling and hydraulic fracturing ("fracking")—to extract oil and natural gas from once inaccessible rock, especially shale. It also covered the accelerating exploitation of Canada's bitumen (tar sands or oil sands), another resource previously considered too forbidding to be economical to develop. With the output of these and other "unconventional" fuels set to explode in the years ahead, the report then suggested, the long awaited peak of world oil production could be pushed far into the future.
The release of the 2012 edition of World Energy Outlook triggered a global frenzy of speculative reporting, much of it announcing a new era of American energy abundance."Saudi America" was the headline over one such hosanna in the Wall Street Journal. Citing the new IEA study, that paper heralded a coming "US energy boom" driven by "technological innovation and risk-taking funded by private capital." From then on, American energy analysts spoke rapturously of the capabilities of a set of new extractive technologies, especially fracking, to unlock oil and natural gas from hitherto inaccessible shale formations. "This is a real energy revolution," the Journal crowed.
But that was then. The most recent edition of World Energy Outlook, published this past November, was a lot more circumspect. Yes, shale oil, tar sands, and other unconventional fuels will add to global supplies in the years ahead, and, yes, technology will help prolong the life of petroleum. Nonetheless, it's easy to forget that we are also witnessing the wholesale depletion of the world's existing oil fields and so all these increases in shale output must be balanced against declines in conventional production. Under ideal circumstances—high levels of investment, continuing technological progress, adequate demand and prices—it might be possible to avert an imminent peak in worldwide production, but as the latest IEA report makes clear, there is no guarantee whatsoever that this will occur.
Inching Toward the Peak
Before plunging deeper into the IEA's assessment, let's take a quick look at peak oil theory itself.
As developed in the 1950s by petroleum geologist M. King Hubbert, peak oil theory holds that any individual oil field (or oil-producing country) will experience a high rate of production growth during initial development, when drills are first inserted into a oil-bearing reservoir. Later, growth will slow, as the most readily accessible resources have been drained and a greater reliance has to be placed on less productive deposits. At this point—usually when about half the resources in the reservoir (or country) have been extracted—daily output reaches a maximum, or "peak," level and then begins to subside. Of course, the field or fields will continue to produce even after peaking, but ever more effort and expense will be required to extract what remains. Eventually, the cost of production will exceed the proceeds from sales, and extraction will be terminated.
For Hubbert and his followers, the rise and decline of oil fields is an inevitable consequence of natural forces: oil exists in pressurized underground reservoirs and so will be forced up to the surface when a drill is inserted into the ground. However, once a significant share of the resources in that reservoir has been extracted, the field's pressure will drop and artificial means—water, gas, or chemical insertion—will be needed to restore pressure and sustain production. Sooner or later, such means become prohibitively expensive.
Peak oil theory also holds that what is true of an individual field or set of fields is true of the world as a whole. Until about 2005, it did indeed appear that the globe was edging ever closer to a peak in daily oil output, as Hubbert's followers had long predicted. (He died in 1989.) Several recent developments have, however, raised questions about the accuracy of the theory. In particular, major private oil companies have taken to employing advanced technologies to increase the output of the reservoirs under their control, extending the lifetime of existing fields through the use of what's called "enhanced oil recovery," or EOR. They've also used new methods to exploit fields once considered inaccessible in places like the Arctic and deep oceanic waters, thereby opening up the possibility of a most un-Hubbertian future.
In developing these new technologies, the privately owned "international oil companies" (IOCs) were seeking to overcome their principal handicap: most of the world's "easy oil"—the stuff Hubbert focused on that comes gushing out of the ground whenever a drill is inserted—has already been consumed or is controlled by state-owned "national oil companies" (NOCs), including Saudi Aramco, the National Iranian Oil Company, and the Kuwait National Petroleum Company, among others. According to the IEA, such state companies control about 80% of the world's known petroleum reserves, leaving relatively little for the IOCs to exploit.
To increase output from the limited reserves still under their control—mostly located in North America, the Arctic, and adjacent waters—the private firms have been working hard to develop techniques to exploit "tough oil." In this, they have largely succeeded: they are now bringing new petroleum streams into the marketplace and, in doing so, have shaken the foundations of peak oil theory.
Those who say that "peak oil is dead" cite just this combination of factors. By extending the lifetime of existing fields through EOR and adding entire new sources of oil, the global supply can be expanded indefinitely. As a result, they claim, the world possesses a "relatively boundless supply" of oil (and natural gas). This, for instance, was the way Barry Smitherman of the Texas Railroad Commission (which regulates that state's oil industry) described the global situation at a recent meeting of the Society of Exploration Geophysicists.