Should we be worried about ‘peak oil’?

Every now and then, in reading about global warming and other environmental issues, I come across a reference to ‘peak oil’, usually as yet another example of how humans blindly pursue their own short-term interests, scarcely heeding the crisis that is waiting for them ahead. And of course we humans do have a tendency to do just that, some of the time, at least.

Anyway, I marked down ‘peak oil’ as a subject to read about, and after some time at the computer, protected  by air-conditioning that is doubtless increasing the heat outside, offer you the results of my reading. First, ‘peak oil’ is as contentious as AGW itself. The phrase itself prompts 55,600,000 hits on Google, and there are a dozen or so variants of the phrase as well. You may not be surprised to learn that there are ‘peak oil deniers’ as well.

What is it, exactly? ‘Peak oil’ is defined as the moment of maximum production from a well or basin, when approximately half the recoverable oil is left, so there can be only a declining productivity. It’s not the same as ‘depletion’, which occurs during a period of falling reserves and supply. The term ‘peak oil’ was invented by Marion King Hubbert, a Shell geoscientist who also worked as an academic at Stanford and Berkeley and as a research scientist for the US Geological Survey. He was a serious and distinguished contributor to the geosciences.

Hubbert argued that the supply of oil was finite (no one much would now disagree), and that US production would peak in 1970, which seemed at the time to have been the case. He also predicted that global oil production would peak in 1995 ‘if present trends continue’. This prediction has been much less easy to verify, if only because the expansion of the oil industry from the 1980s onwards, both geographically and in scale terms, has made it much more difficult to say how much oil there actually is.

Both oil companies and oil-producing countries have become coy about how much of their own information they release publicly, and international agencies that monitor energy and oil have to rely on what countries and companies say. BP’s 2013 Statistical Review of World Energy provides the data for the following diagram, constructed by Willis Eschenbach, and the trends are most interesting.



Very simply, proved American oil reserves, according to this chart, have continued at much the same level for some 35 years, while production has gone onwards and upwards. At about 1988 the reserves would have seemed to have equalled total production to that point, which should have meant declining production. But no. New fields came into production that had not been known about in the past.

How long can this go on? We don’t know. In the AGW domain, the scare has moved from ‘right now’, which was the case ten years ago, to the second half of the century. In the case of peak oil, some estimates now say we may reach peak oil globally in 2035. Others say we have already passed it, or it’s next year. You take your pick. One assessment I read suggested that peak oil was an almost silly concept, because both supply and demand for oil are greatly affected by the world price (and oil is a globally traded commodity with global prices for different grades of oil). What will happen, from this perspective, is that oil will become slowly more expensive, to the point where we change what we are doing in many diverse ways: engines made more and more efficient, we shift to different forms of transportation, we bring in alternative forms of energy, and so on. You can see that these changes have occurred to some degree already.

I came to the conclusion that worrying about peak oil is probably unnecessary. It may be that most of the easily recoverable oil has already been recovered, but when a well is ‘dry’ there is still about 40 per cent left: at the moment no one knows how to get it out cheaply enough for the effort to be worthwhile. The ‘unconventional’ oil held in oil sands, shale and other forms is very much larger in volume again, and while, yes, it is also more expensive to get the oil out from shale and sands, that is a technological matter, and technologies do tend to improve, especially when there is a big money prize awaiting. Oil was once very cheap, and its very cheapness was a basic cause of industrial expansion everywhere. Now it is much more expensive, but then GDP has risen a great deal everywhere, so we can still afford it. It’s unlikely to be cheap again.

And here’s a final thought. Australia still had 3.9 thousand million barrels of oil left in 2011, according to BP, and in 1992 we only had 3.2 thousand million barrels left. So we seem to have followed the global trend, as has ‘oil-rich Brunei’, to our north. Actually, Brunei has much less oil than Australia. But there are only a little more than 400,000 people in Brunei, compared to the 23 million in Australia, so its oil-richness is simply a function of its population. You can find out all sorts of interesting things when you can get your hands on some data!

Join the discussion 13 Comments

  • Bryan William Leyland says:

    When you factor in shale oil and shale gas and then clathrates – frozen methane on the continental shelf – the amount of fossil fuel available is truly enormous.

    And if you do not like fossil fuels, then there is always nuclear power – the safest and most environmentally friendly major form of power generation in the world.

  • Mike O'Ceirin says:

    Don’t forget there is a known method that can turn coal into oil. I think the Soviet Union actually did that for some years. Vehicles can run on LPG, Natural Gas or liquid hydrogen. But do not forget that oil is used in a great many things other than heating or transportation.

  • David says:


    I am not concerned about Peak Oil either. Market forces will deal with the issue.
    The “invisible hand” will ensure demand and supply are in equilibrium. Price
    incentives will continue to encourage R&D to develop more efficient ways of
    extracting oil and/or develop alternative sources of power.

    AGW is a completely different economic issue. AGW is caused by the market’s inability to fully internalise the costs of production.

    • Don Aitkin says:


      It’s not at all clear that AGW is of any consequence whatever, and it is hard to blame the market for not having dealt with something that has not yet caused anybody any harm! Even the IPCC is now looking to the second half of the century for signs of calamity.

      • David says:

        Yes, I understand you remain unconvinced about the importance of AGW. That said though, the two issues are economically quite distinct. Peak oil is a garden variety issue of scarcity, which the private market is well equipped to deal with, while AGW, (to the extent that you accept the science) is an example of market failure.
        To illustrate, lets suppose you are accurate when you say the IPCC is looking to second half of century for signs of calamity. Economic theory predicts that their will be an under investment in preventative strategies by the free market in the first half of the century because of inadequate price signals.

        • Don Aitkin says:

          I think I am accurate: it’s there in both the SPM and WG1. Or, perhaps more succinctly, neither document proposes calamity before then.

          But long before 2051 we will know a great deal more about our climate than we do now, so if indeed there is likely to be adverse climatic conditions generally because of fossil fuel use we will be in a much better position to do something about it. Unless, of course, there is a vast amount of heating waiting in ‘the pipeline’ somewhere. But that doesn’t seem at all plausible to me.

          • David says:

            That is the point though isn’t? , if there are adverse climatic conditions because of fossil fuel etc…. “someone will need to do something” as you put it.

            If collective action is required then a government somewhere will be expected to do something.

          • Don Aitkin says:

            The key is in your phrase ‘because of fossil fuel etc’. After many billions of dollars spent on the search for the fingerprint of fossil fuel it has still not been discovered, and the longer the search, the more likely it is — at least, that is how it seems to me — that the actual contribution of CO2 (and thus of fossil fuel, though CO2 rises from other sources as well) will prove to be much weaker than was originally and so confidently stated.

            It may still be there. But the longer this goes on, the more we will learn.

  • DaveW says:

    I used to worry about Peak Oil, or at least I worried about how I was going to be able to afford to drive a car when oil scarcity made it a fuel only the rich could afford. Then there are those 6000 or so other products made from petroleum, many of which are essential parts of everyday life.

    Peak Oil seems to be a will-o’-the-wisp, but the cost of petrol has now become a significant dent in my limited budget. About a third of the cost of petrol at the pump is Excise+GST. Thanks to the CAGW crowd my electricity bill is higher too. We’ve had almost a half century to use petrol taxes to come up with efficiencies, alternative fuels and new energy sources. What have we gotten? Pink batts, subsidized solar panels, wildlife shredding wind farms, half-sized spare tires that are unsafe to drive on, a Holden fleet dominated by fuel-guzzling luxury cars, Tim Flannery … Pretty poor results in my opinion and now that CAGW (something I also once worried about) has been demonstrated a furphy the chance that significant improvements will be made seems slim.

    I suppose it is foolish to hope that there might be such a phenomenon as Peak Taxes?

  • Julian McLaren says:

    Bio fuels from Algae are a reality, it just needs to be commercialised. Thorium is 3 years from being online.

  • Julian McLaren says:

    The energy and fuel challenge is not the major issue…solutions for that are plentiful. The issue is feeding the population predicted to be 9 billion by 2050…that is the challenge.

  • Dominic says:

    Don, there may be another reason why Peak Oil is unlikely to be any more real than other scares (like AGW), and I was made aware of it in Matt Ridley’s book, ‘The Rational Optimist’ (pp 202-207). It’s unlikely to be the finiteness of oil (or any other resource for that matter) that humanity has to worry about, because (according to Ridley), it is a little known fact that “there is no country in the world that has a higher birth rate than it had in 1960, and in the less developed world as a whole the birth rate has approximately halved”. Ridley goes on to say, “The UN’s best estimate is that world population will probably start falling once it peaks at 9.2 billion in 2075”. As you correctly point out, little is known about the true state of the world’s oil reserves, but this only points to the folly and hype behind the alarmist predictions being made about ‘peak oil’, since no one knows how much oil there is. Methinks there’ll be more than enough oil to see us through to the population peak in 2075. It’s all downhill after that, and technology will have solved most of our ‘reducing’ energy needs by then.

    • Don Aitkin says:

      Yes, the birthrate is definitely on the decline. I was alerted to a lecture on gap (I think) and that was most instructive.

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