Peak Oil vs. Oil Plenty

There are clearly different ways the oil market may evolve over the next five to ten years. A continuation of high prices in the face of production disappointments and strong Asian growth is plausible. So is a kind of re-run of the 1980s, with new supplies, growing efficiency and intra-OPEC competition driving down prices. What is not on the horizon is a resource-limited peak in production, nor an associated economic collapse. _Robin Mills via GWPF

Can global oil producers ramp up oil production in the face of widespread claims of "peak oil?" Renowned oil economist Robin Mills considers the question in a recent essay. Here are some excerpts:

Despite Total chief Christophe de Margerie's stating in 2010 that global production would be unlikely to exceed 100 million barrels per day (bpd), and that 90 million would be "optimistic", in November 2011 supply actually reached 90 million bpd for the first time ever. This is on a broad definition - including unconventional oil, natural gas liquids and biofuels - but to the consumer, the source of the fuel that goes into the tank is irrelevant.

...After a long period of post-invasion decline and stagnation, the new investment is beginning to deliver: Iraq’s exports in March were the highest since 1989. It will probably exceed its 1979 record production this year or next, in the process overtaking Iran as OPEC's second-largest player.

In response to the Libyan and Iran crises, Kuwait and Saudi Arabia have also increased production to record highs, not matched in Saudi's case since 1980; in Kuwait's since 1973. Saudi Arabia's production capacity is tight but that is due to its post-recession decision to delay new field developments, now being reversed. This casts doubt on the famous prediction made by the renowned investment banker Matthew Simmons in 2005 that "we could be on the verge of seeing a collapse of thirty or forty percent of [Saudi] production in the imminent future, and imminent means sometime in the next three to five years - but it could even be tomorrow."

The implication that OPEC (led by Saudi Arabia) sought to maintain a fairly constant market share from 1994-2011 suggests four scenarios for the future:

Non-OPEC production remains weak, leading to a continuation of OPEC's matching policy, and high prices to ration demand. Note though, that with an actual peak and decline in non-OPEC supplies, it becomes optimal for OPEC to increase market share

Robust non-OPEC output growth resumes, forcing OPEC to match it to maintain market share, or as in the early 1980s, to cut output to defend an ultimately unfeasible price target
OPEC changes its policy and begins increasing market share because it is worried about demand destruction or non-oil technologies

Other OPEC members seek to expand capacity, most likely Iraq but possibly also Libya and a post-Chavez Venezuela, forcing Saudi Arabia and its Gulf allies to respond with increases of their own

These scenarios present a far more nuanced view of global oil production trajectories than the simplistic "peak oil" view of a resource-limited production curve. [...]

...Yet these dramatic developments and advances in our understanding appear to have been ignored by many observers, who remain trapped in a paradigm where physical availability of resources is the only significant factor.

Former UK Chief Scientific Adviser, David King, with oceanographer James Murray, published an essay in Nature 10 in January arguing that there has been a peak in 'easy access' oil (whatever that means) since 2005. Remarkably, this study mentions neither OPEC policy (including its 2008 production cuts in response to the economic crisis); Iraq, with its enormous volumes of 'easily-extracted' oil; nor shale oil.

Intellectually, the peak oil movement appears to have moved on to preparation for collapse (or at least an end to growth). Peak oil has become conflated with other real or potential crises: the recession, climate change and overpopulation.

This is very reminiscent of the 1970s, and indeed features of OPEC strategy, rising costs, new resource types and technologies are also familiar. There are clearly different ways the oil market may evolve over the next five to ten years. A continuation of high prices in the face of production disappointments and strong Asian growth is plausible. So is a kind of re-run of the 1980s, with new supplies, growing efficiency and intra-OPEC competition driving down prices. What is not on the horizon is a resource-limited peak in production, nor an associated economic collapse. _Robin Mills _ via GWPF

More at GWPF, and the full essay at Europe Energy Review with free registration.
Peak oil acolytes should take warning from the many failures of prediction by Simmons, et al. Mentally unstable persons are often drawn to conspiracy doom theories such as peak oil. For those of sounder mind, they would do well to learn to adopt a more nuanced view, which allows for a wide range of future developments in new technologies, discoveries, and an eventual breakdown of the many corrupt political obstacles to a more abundant human future.