From WTRG: Peak Oil and Political Reality
To illustrate the problems with the typically simplistic look at Peak Oil, which uses the U.S. as a prime example of the theory, we will illustrate with some counter-examples. In most cases, we pose obvious questions which must be addressed for each individual country before predicting peak oil for that country let alone the world. We will address peak oil to a greater extent in a separate series, but this should serve to illustrate the problem.
Was the 50% drop in oil production in the former Soviet Union due to peak oil or the political collapse of the USSR? Is the slower rate of growth in Russian production in the last few years due to limited prospects for oil in Russia or increased nationalism and limitations on participation by international oil firms?
Was the decline in Venezuelan production due to political events or peak oil? If due to peak oil why did Venezuela have two peaks separated by 25 years? Do higher taxes and the nationalization of the oil industry have anything to do with the continued production decline? How can Hugo Chavez claim that Venezuela will be increasing production capacity to 5 million barrels per day?
How much do higher royalty and tax rates have to do with oil production? Is it reasonable to assume that peak production for any country would occur at the on the same date if tax policies were more favorable or less favorable to the exploration and production industry?
Canada's production has been growing steadily but that growth rate is under threat as the Alberta government is attempting to raise royalty rates on oil and gas. The change in the tax treatment of royalty trusts has already had a negative impact on Canadian drilling activity.
Has oil production in Iraq or Iran peaked? Was so much damage done during the Iraq/Iran war that neither country can return to its previous level of production? How much did economic sanctions against both countries impact production? Is there any doubt that removal of sanctions against Iran and peace in Iraq would result in higher levels of production in both countries? If so, is the peak oil wrong or at least incorrect in its timing?
Since the Libya's move toward détente with the West and the subsequent removal of sanctions, there has been a marked improvement in production. It it now at a peak?
Nigeria's production has increased for two decades. Only recently, has it seen a decline. Most, if not all, of the decline is associated with the problems in the Niger Delta region. Will this area ever know peace again? If so will production increase or did it peak two years ago?
Obviously, there are no definitive answers. Despite headlines in the news this week, "peak oil" did not occur in 2006. Furthermore, the straight forward insightful and useful model of King Hubbert is insufficient to identify either the year or the decade when will oil production peak. Can Newtonian physics explain physical behavior at near light speed? Einstein would say no. All models at best are an approximation of reality.
Peak oil advocates are seldom clear on the definition of oil. Usually they seem to define it as conventional oil production. What is conventional? A water flood to push the oil out was at one point unconventional. In the early 1980s a CO2 flood was unconventional. Horizontal wells were unconventional in 1986. Is oil produced from tar sands unconventional? These technologies were not available when King Hubbert developed his module. Which technology limitation he acknowledged. The question is, what oil is peaking?
High prices make unconventional conventional. Consumers use products not crude oil and care little whether the source of the product is conventional crude, tars sands or even a coal to liquids process.
The questions we posed have neither predictable nor definitive answers. Some of the countries with political unrest may have peace in a year. Some in a decade or two.
Most of the government leaders and politicians imposing higher taxes for political advantage will eventually be replaced. The higher taxes leading to lower investment in new production may prove counter productive. Politicians will continue to play on the fiction that the energy industry is not subject to the laws of supply and demand. This is has a mid-term impact on supply growth and almost without exception results in higher prices.
If prices remain high enough and long enough unconventional becomes conventional. One day canola oil may be called conventional and it's renewable.
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Leave it to James Williams to put the Peak Oil debate into proper perspective. My takeaway from all this is that, due to the high degree that geopolitics enter into the picture, it is impossible to predict when Peak Oil will occur. If you asked someone 5 years ago whether they thought Libya would ever get their act back in gear, the answer would likely have been "no". |
