Thursday, February 23, 2012

Peal Oil

A few years ago the theory of Peak Oil was popular, especially on the Left. Peak Oil is hit when most of the easily recoverable oil from an oilfield has been pumped. After that, production declines quickly. According to this theory, the formula for figuring production from an oilfield is valid for an entire nation or even the entire world. The originator of this theory, M. King Hubbert, correctly predicted that the US would hit peak production between 1965 and 1970. Because of this success it was assumed that his prediction for the world would also be true. According to this, we passed peak production almost a decade ago in 2004.

The Left, especially the eco-wing has been cheering this on. They figured that Peak Oil would solve all of the world's problems. Once oil production starts to fall rapidly we will see major changes to civilization. As gas becomes more expensive, people will travel less. Eventually food production will start to decline. Governments will change. There will be a major reduction in population due to starvation. Eventually humanity will emerge with a smaller, sustainable population based on green energy (because there will be no alternatives).

But Peak Oil hasn't happened. In fact, the US is producing more oil than ever even though we were supposed to have passed Peak Oil 40 years ago. So what happened?

Economics. What Peak Oil was actually measuring was production of easily recoverable reserves, known as conventional oil. The assumption was that unconventional oil was either too scarce or too difficult to recover to make a difference.

Let me make an analogy with fruit. Conventional oil is the low-hanging fruit. Someone finds a new orchard and starts picking fruit. Others join in and production climbs. But eventually more than half of the low-hanging fruit has been picked. It becomes harder to find a tree that has not been picked. Some additional fruit can be recovered by jumping up but it is not significant. Most of the fruit pickers move onto an other orchard. Eventually most of the orchards have been stripped of low-hanging fruit. Does that mean an end to fruit gathering? Not at all. Someone goes out and buys a ladder. Some others pool their resources and buy a cherry picker (there is a reason these things have that name). Suddenly the fruit reserves have grown enormously. The amount of fruit that is recoverable with cherry pickers dwarfs what can be recovered from the ground. There is more overhead, the cost of the cherry picker is passed along, but it is offset by the increase in supply.

That is what we are seeing now with unconventional oil. Some of it comes from tar sands. Some of it comes from hydraulic fracturing. It costs more to recover but there is a lot of it - a lot more than conventional oil. There is more on the subject here.

But what about that group that was cheering for Peak Oil to solve the Earth's problems? What will they do? Or, more accurately, what are they doing?

They are trying to stop unconventional oil, of course. Suddenly fracking is dangerous. It contaminates the water supply. Tar sand is unacceptable. There are thousands of oil pipelines criss-crossing the country but adding this one more will be an environmental disaster.

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