As efforts to find more 'black gold' become increasingly difficult, a debate is raging over the true extent of reserves worldwide
Growing chorus says oil has peaked
DALLAS, TEXAS // Jim Baldauf, a former oilman, remembers the days when it seemed like you could punch a hole in the ground just about anywhere in Texas and hit a gusher. Now explorers in the southern US state of Texas find themselves drilling down further, and then turning horizontally for a while, and then back down again before they hit black gold. And with every passing year, the task of finding oil becomes more and more complex.
"All of the low-hanging fruit has been plucked," said Mr Baldauf, who has 22 years in the business of oil and gas exploration. And that is not a problem unique to Texas. As a co-founder of the Association for the Study of Peak Oil, Mr Baldauf is part of a growing chorus of petroleum industry analysts and scientists who believe global oil production is about to peak - and may have already done so. Many "peakists" believe global oil production reached its pinnacle in 2008.
"We are not claiming that the world is about to run out of oil but that we will probably produce less and less crude oil from now on forever," he said. "Essentially what we are saying is that cheap energy is a thing of the past." That is a frightening thought for a planet that guzzles down more than 80 million barrels of oil every single day. And whether it is true is a matter of raging debate within the oil industry.
Critics insist there remain billions of barrels of untapped reserves and accuse the "peakists" of fear-mongering. They argue that increased efficiency, technological advance and the growth of alternative fuels could actually mean this petroleum-addicted planet has instead passed its moment of peak oil demand. "It is clear that the much higher levels of support for innovation - along with considerable government incentives and subsidies - will inevitably drive technological change," Dan Yergin, who heads the Cambridge Energy Research Association, wrote in a 2009 report in Foreign Policy magazine that cautioned against peak oil panic.
Both the peakists and the sceptics agree on two things: global energy use is expected to climb about 50 per cent in the coming two decades, driven mainly by soaring demand in such developing countries as China and India. Meanwhile, oil is a finite resource and no one really knows how much petroleum is left underground. That is in part because there are only rough estimates about offshore and oil shale reserves that have not previously been touched for environmental and relative cost reasons. Moreover, Opec countries, including Saudi Arabia, the world's leading oil producer, do not reveal their field data, nor allow independent studies of their oilfields. Instead they just release unaudited claims for their petroleum reserves, numbers that some experts suspect are manipulated for economic and political reasons.
Once confined to the fringes of the energy industry, the peak oil theory has gained traction in recent years as more and more large oil firms, including the Royal Dutch/Shell Group, were forced to revise their known reserves sharply downwards. And in November, a senior official at the International Energy Agency (IEA) admitted to a British newspaper that US authorities had been pressuring the monitoring agency to cook the books so that known reserves would appear larger than they actually are. The whistleblower, who would not be named, appeared to suggest that the "peakists" were right.
"The IEA in 2005 was predicting oil supplies could rise as high as 120 million barrels a day by 2030, although it was forced to reduce this gradually to 116 million and then 105 million last year," the official told The Guardian newspaper. "Many inside the organisation believe that maintaining oil supplies at even 90 million to 95 million barrels a day would be impossible, but there are fears that panic could spread on the financial markets if the figures were brought down further."
In addition to below-ground considerations, there are growing above-ground issues that could affect oil supply, including political instability in the Middle East, Venezuela and Nigeria, and the fast growing demand in Russia, a major producer, which may prompt Moscow to curb exports to meet domestic needs. Peak oil theorists push for more investment in renewable fuels such as solar and wind, but say it is critical to realise that renewables still only provide about three per cent of all the energy used in the United States.
Many alternative fuels that have been touted as a magic bullet - biofuels, for instance - remain net energy losers, costing more energy to make than they produce. "There is still nothing drop for drop that can match crude oil in price," Mr Baldauf said. "This problem is going to hit us before climate change does." @Email:email@example.com