FYI | Sep 11 2006
By Greg Peel
Relax! There’s plenty of oil left in the ground. By 2030 conventional fossil fuels will still account for 80% of the world’s energy requirements. At least that’s the view espoused by Mark Nolan, chairman of Exxon-Mobil Australia. It is also the view of the US Department of Energy.
Now I’m not here to promote conspiracy theories, only to promulgate them. FN Arena attempts only to be an objective news service, providing food for thought. Lord knows I get into enough trouble for suggesting central bank gold price manipulation (based on the evidence collected by others), but then I’m lauded on the other side of the fence. It is with the credo of objective journalism in mind that I have delved into the great Peak Oil debate.
Put very simply, supporters of the peak oil theory believe the world’s supply of crude oil has passed its peak and will soon run out – at least in the next decade or two. Even more simply, non-supporters of this theory suggest that’s rubbish.
Earlier in the year, the ABC’s Four Corners program had a look into peak oil. There is an Association for the Study of Peak Oil and its representatives have visited every oil-producing country and every well in the world and arrived at a conclusion – everywhere a downward trend is evident. It may be that the next great oil discovery will be made tomorrow, but the truth is it was 1981 when the world last found more oil than it consumed.
Standing shoulder to shoulder with Mark Nolan at the Asia pacific oil and gas conference in Adelaide today was president of the Society of Petroleum Engineers, Eve Sprunt. Her take on the matter (as reported by AAP) is that proponents of peak oil often confused oil reserves with available resources.
"When you are talking about reserves, you are only talking about a very small fraction of the total resource base," Said Sprunt, "The reserves are the portion for which the infrastructure is largely in place, the technology is in place and that can be produced at the current oil price. But if you are planning for the long-term energy future of your country you need to understand the resource base. The whole name of the game is moving resources into the reserves category."
Nolan offered that according to the US Geological Survey, the earth currently has more than three trillion barrels of conventional, recoverable oil resources, and that to date we have only consumed one trillion.
This geological survey was conducted in 2000 and has since been the target of much derision, and even attempted legal challenges. The obvious question is: how do they know there’s still two trillion barrels somewhere under the earth? The answer is: Monte Carlo simulations.
I won’t go too far into what a Monte Carlo simulation is, but just consider that the name says it all.
There is no doubt there is vast amounts of recoverable oil left under the earth, but not just lying there saying “pump me”. There are the tar sands of Canada and Venezuela, abundant quantities of shale oil under the pristine Colorado River Valley, more oil lying deep, deep under the Gulf of Mexico, more oil than is already being plundered from the Alaskan wilderness, and who knows? – maybe even oil in Antarctica.
It comes down to a matter of cost – both economically and environmentally – and the latter is a reference to the environmental destruction involved in recovering the oil, before you even think about using it.
As for so-called “known reserves”, it is a well accepted fact that OPEC countries have been lying about theirs for years. Four Corners noted that in 1980s, Saudi Arabia claimed to have 260 billion barrels of oil under the ground. For the last 20 years Saudi Arabia has supplied 10% of the world’s oil supply. The Saudis now claim to have 260 billion barrels of oil under the ground.
According to Chevron, 33 of 48 of the world’s largest oil producing countries have passed their peak. The evidence regarding known wells having passed their peak is undisputed – the argument simply comes back to what might be still there, and that is all conjecture.
Now in attempting to maintain an objective stance, let’s consider that it is in the interests of oil producers, and governments of oil producing countries, to debunk any talk of peak oil. Hence we must take what Exxon-Mobil or the US Department of Energy declares with a grain of salt. Any panic about oil running out will only lead to a rush into alternative sources – biofuels, coal conversion, wind etc – and that will not be good for oil companies. Even if dwindling reserves in the face of spiralling demand forces oil prices up, the development of alternative sources will only force prices down again, and a mindset shift away from fossil fuels.
And guess what – it’s already happening. Probably a good time to remind everyone that casino simulations prove there’s nothing to be worried about.
As the greatest consumer, by a country mile, of oil on the planet, you’d think the US would be happy to promote alternative fuel sources. Well it is, but let’s not rush into things. China came as a bit of a surprise, and the incumbent oil giants haven’t yet had enough time to bed down their alternative production programs. And don’t forget, the greatest nation in the free world is run by oil men.
Getting a bit subjective? I apologise. The only way it seems we’ll know for certain whether the peak oil theory is right or wrong is when one day someone says “Well, that was the last drop”, or if it turns out Mars is just one big oil well. In the meantime, no one has stumbled across the next great source since about the 1960s.
And while we wait to find out who’s right, China has discovered the car.