A lot of otherwise normal, well-functioning persons are firm believers in the idea that global oil production has irrevocably peaked — or is soon to peak irrevocably. Whether such a peak will result in total global collapse, or simply lead to widespread economic hardship, is a point of contention within the peak oil community itself.
(Bonus: A Primer On Peak Oil –>)
But the essential reasoning upon which most peak oil believers appear to base their quasi-ossified expectations is inherently invalid. The past production rates of national oil companies cannot reliably be used to predict future production potential for wells that are controlled by national sovereign oil companies — and yet that is exactly what is being done by peak oil prognosticators and associated grifters.
True, oil production is likely to decline, causing oil prices to rise. But the reasons for the decline are critical to understand, if one wants to comprehend what is happening.
From an interview with Rick Rule:
The most important theme that people need to understand with regard to conventional oil is that most conventional oil that is produced in the world and sold for export is not produced by companies like Shell or Exxon or Total, in other words it’s not produced by major oil companies. It’s produced by national oil companies, where the shareholders aren’t public shareholders but rather sovereign governments, and that’s important to understand.
It’s important for investors because most of the national oil companies have been, for some period of time, diverting substantial amounts of the cash flow from their domestic oil industries into other domestic spending programs that aren’t oil related, thereby starving their domestic oil industry of sustaining capital. I think this has gone on for so long that several of these national oil companies have production decline curves that are irreversible for the next decade.
The consequence of that is that several countries, particularly Mexico, Venezuela, Peru, Indonesia and perhaps Iran, will cease to be oil exporters within 5 years, even if they start spending now, which they aren’t able to do. The impact of that is that as much as 20% of world export crude will come off of export markets and that could lead to a truly precipitous increase in price.
The only hope that oil import countries have is that sustaining capital investments have increased in Saudi Arabia, the United Arab Emirates and Kuwait. These three countries, with the help of a resurgent Iraq (if it does resurge), are the importing countries’ only hope for moderated oil prices in the next 5 years. It’s my belief that production declines as a consequence of a lack of reinvestment will be greater than the production adds and I suspect we will see sharply higher world oil prices in the next 5 years. _GoldSeek
Many peak oil disciples will claim that it makes no difference whether oil production declines due to lack of investment, or due to lack of oil. Clearly, however, they are being disingenuous when making that assertion.
More from Rick Rule on Peak Oil:
Peak oil is more an economic and political phenomenon than it is a geological phenomenon. I think we’re past $40 peak oil but I don’t think we’re past $200 peak oil. There are technologies, as an example, miscible CO2 flooding to recover oil from allegedly depleted oil fields. There are new basins, albeit remote, frontier basins. There are new technologies that allow dry gas or LNG to be substituted for liquid oil. It’s an economic function because these technologies and substitutions require higher energy prices. At $200 oil, we’ve got lots of oil. _GoldSeek
Again, many peak oil proponents will claim that it makes no difference why oil prices climb higher. The very fact of higher oil prices will vindicate their beliefs, according to the true believers and disciples. But again, clearly, they are wrong. If prices are high, but oil is plentiful, either the world will move on to cheaper forms of energy and fuel, or technology will be spurred by higher prices to achieve more efficient economies of production in the more difficult oil (and oil equivalent) fields.
If a nuclear renaissance does come about, demand for fossil fuels will decline precipitously across most of the world — except for specific applications as engine fuels. But at the rate that biomass and microbial fuels are progressing, it is likely that demand for oil and oil equivalent for fuel will begin to decline quickly after the year 2030.
Peak oil is a religion. And like most religions, the majority of followers do not have a clear understanding of exactly what it is they are supposed to believe. They only know that they believe it, and they are right, dad-blame-it! Meanwhile, the world keeps turning.