Peak oil myth goes bust

June 27, 2012 07:29

Net additional production capacity by 2020 could be 17.6 mbd, yielding a world oil production capacity of 110.6 mbd by that date – This would represent the most significant increase in any decade since the 1980s.


By Mark J. Perry

The global oil boom underway represents the most significant increase in any decade since the 1980s.

In the tradition of resource economist Julian Simon, here are some of the conclusions and predictions from new research just published by Harvard Research Fellow Leonardo Maugeri, titled “Oil: The Next Revolution; The Unprecedented Upsurge of Oil Production Capacity””

1. Contrary to what most people believe, oil is not in short supply and oil supply capacity is growing worldwide at such an unprecedented level that it might outpace consumption. From a purely physical point of view, there are huge volumes of conventional and unconventional oils still to be developed, with no “peak-oil” in sight. The full deployment of the world’s oil potential depends only on price, technology, and political factors. More than 80 percent of the additional production under development globally appears to be profitable with a price of oil higher than $70 per barrel.

2. The shale/tight oil boom in the United States is not a temporary bubble, but the most important revolution in the oil sector in decades. It will probably trigger worldwide emulation, although the U.S. boom is difficult to be replicated given the unique features of the U.S. oil (and gas) arena. Whatever the timing, emulation over the next decades might bear surprising results, given the fact that most shale/tight oil resources in the world are still unknown and untapped. China appears to be the first country to follow the U.S. example. Moreover, the extension of horizontal drilling and hydraulic fracturing combined to conventional oil fields might dramatically increase world’s oil production and revive mature, declining oilfields.

3. In the aggregate, conventional oil production is also growing throughout the world, although some areas (e.g. the North Sea), face an apparently irreversible decline of the production capacity. In most traditional producing countries, old oilfields go through a production revival thanks to better techniques and knowledge, or advanced exploration and production technologies, so far used only in the U.S. and in the North Sea. Huge parts of the world are still relatively unexplored for conventional oil (for example, the Arctic Sea or most of sub-Saharan Africa).

4. Over the next decades, the growing role of unconventional oils will make the Western hemisphere the new center of gravity of oil exploration and production.

5. Based on original, bottom-up, field-by-field analysis of most oil exploration and development projects in the world, this paper suggests that an unrestricted, additional production of more than 49 million barrels per day (mbd) of oil is targeted for 2020, the equivalent of more than half the current world production capacity of 93 mbd.

6. After adjusting this substantial figure considering the risk factors affecting the actual accomplishment of the projects on a country-by-country basis, the additional production that could come by 2020 is about 29 mbd. Factoring in depletion rates of currently producing oilfields and their “reserve growth,” the net additional production capacity by 2020 could be 17.6 mbd, yielding a world oil production capacity of 110.6 mbd by that date – as shown in Figure 1 above. This would represent the most significant increase in any decade since the 1980s.

MP: Peak what?

Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota.  He blogs at Carpe Diem.

Editor’s note:

“Peak oil” is the theory that oil is running out and that the world’s production has peaked. This has been used as justification for the leftists war on oil and energy.

Obama buys into this theory. Obama’s radical environmentalist “science” czar John Holdren said in his 1971 Sierra Club book, Energy: A Crisis in Power, that “it is fair to conclude that under almost any assumptions, the supplies of crude petroleum and natural gas are severely limited. The bulk of energy likely to flow from these sources may have been tapped within the lifetime of many of the present population.” [emphasis added]

Holdren also wrote as late as 2006 in an article “The Energy Innovation Imperative” published in the Spring 2006 issue of Innovations:

“there is little agreement among specialists about whether peak oil is 5 years away or 50, and even less agreement about whether its occurrence will precipitate a shift away from fossil fuels or just a shift among them.” and went on to use this as justification for “I suggest that for purposes of energy-policy planning today it does not really matter very much who is right about peak oil. The economic and security perils of the world’s current and growing dependence on oil tell us that we need to move smartly to reduce that dependence no matter whether peak oil is close or far away. And the looming danger of unmanageable climate change tells us that we must choose ways to do this that reduce rather than increase the energy sector’s emissions of CO2.”

Obama’s anti-energy secretary Chu reflects this same ideology in his comments that we need to get gas prices higher like those in Europe. Chu admitted to congress that the energy department’s goal was NOT to lower gas prices but to reduce oil consumption.

This leftist ideology is behind Obama’s war on energy and his wasting of billions of borrowed taxpayer dollars on “green” energy schemes that have turned out to be expensive boondoggles.


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