Oil expert and geological consultant Art Berman returns to the podcast this week to address head-on the question: Was the Peak Oil theory wrong? With the world “awash” in sub-$50 per barrel oil, were all the warnings about persistently higher future oil prices just a bunch of alarmist hand-wringing?
In a word: No.
Art explains how the current glut of oil created by the US shale boom — along with high crude output by both OPEC and non-OPEC producers — is a temporary anomaly. Fundamentally, we are not finding nearly as much oil as we need to continue the trajectory of our demand curve. And at the same time, we’re extracting our reserves at a faster rate than ever. That’s a mathematical recipe for a coming supply crunch. It’s not a matter of if, but when:
I’m not interested in spreading any kind of false ideas that we’re running out of oil. We’re not running out of oil. We’re not running out gas. The problem that we’ve had now for the past twenty years is that we seem to have run out of inexpensive oil and gas — and that’s where the so-called shale plays, the offshore deep water kinds of ventures that have dominated the industry now for much of the last twenty years come in.
So, you can always find more. The question is: At what cost? That’s I think an issue that we don’t really want to talk about very much.
The second piece of that is the idea that somehow technology is always going to save us. I think that theme goes way beyond oil and gas and energy. But, it’s certainly prevalent in my line of work which is oil and gas and so the problem there is that people seem to lose the distinction between technology and energy. Technology does not create energy. Technology is simply a way to convert energy, or to convert resources, into work. So, you can improve the technology and basically it allows you to turn the faucet on harder. It doesn’t create any new energy and it certainly doesn’t help you conserve what you already have. In fact quite the opposite. The better the technology the quicker you run through what you have left.
So, yeah, we can always find more oil and gas. But will be able to afford it? Is our global economy capable of managing that cost? That’s really the issue.
We’ve been looking at diminishing returns as far as the size of what we’ve discovered now for the last 40 or 50 years. This was a trend that was of concern long before shale plays came onto the landscape. It’s an endemic problem and the reason why we went into things like tar sands and ultra-deep water.
We’ve got a hundred and fifty years of history of producing oil and gas wells and oil and gas fields around the world. So far, I have not seen the laws of physics give unconventional/shale plays a pass. There’s just nothing unusual about the fact that you should expect to see things grow, then peak, then decline. That’s just the way that natural systems work. All natural systems. Why should an oil field be different than any other natural system?
So, it all comes down to what we are willing to pay for that additional fix of energy? Unless we somehow figure out how to scale back our use of energy, there’s a day of reckoning which isn’t that many years out. Nobody knows exactly when, but soon we’re just not going to be able to do this anymore — not at $40, $50 or $60 dollars a barrel. The big question is: What are the implications of that?
Click the play button below to listen to Chris’ interview with Art Berman (48m:47s).