An excerpt from

The Powers That Be

Global Energy for the Twenty-first Century and Beyond

by Scott L. Montgomery

The Great Debate:
When Will the Wells Run Dry?

Our ignorance is not so vast as our failure to use what we know.
—Marion King Hubbert

I dislike arguments of any kind. They are always vulgar, and often convincing.
—Oscar Wilde, “The Importance of Being Earnest”

Limits and History

The basic concept of limits is a healthy one. It teaches modesty, control of appetite, evaluation of actual need—old-time virtues with a stoic but sensible appeal. The idea also lies at the heart of a sustainable society, one able to use its Earth-born resources with intelligent self-interest, in a manner that encourages progress without degrading the planet, and allowing future generations to do the same. Feeling there are inevitable constraints on growth seems like common sense; no society, under any scenario, can expand indefinitely unless it takes into account the finitude of commodities.

Clear enough. But then again, perhaps not. Not everyone, it turns out, agrees. In fact, there are two fundamental worldviews at issue here, deeply opposed in their longstanding contribution to Western self-analysis. One sees growth as bearing the seeds both of advance and destruction; the other sees only progress, unmitigated. Neo-Malthusian is the title sometimes given the first position, after the nineteenth-century British philosopher Thomas Malthus, whose followers have often proclaimed coming exhaustion and deep decay of la condition humain. On the other side are the Cornucopians, who find in the last 200 years an unbroken rise in abundance and benefit, such that, in the words of a most ardent proponent, Julian Simon, “the more [resources] we use, the better off we become—and there's no practical limit to improving our lot forever.” Here is good news indeed, if we choose to believe it. And, until recently, the facts, viewed from an appropriate altitude, seemed to bear it out, if we ignore such wrinkles as world wars, genocides, religious fundamentalism, and the like. Of course, the tale is not yet fully told. Human history hasn’t yet ended, despite a few rumors to the contrary.

The battle between Neo-Malthusian and Cornucopian beliefs is thus a war of faith, fear, and perception, and since the Great Depression, Western nations have shifted between dilute versions of these two positions. In the postwar era, the 1950s seemed to many the opening of an “endless frontier,” impelled by science, but by the 1960s and ‘70s, this came to look naïve in the wake of environmental damage and oil crises. Beginning in the 1980s, pro-growth and laissez-faire attitudes once again took over and ruled for a generation, but climate change, a new oil shock, and global economic crisis have, in the late 2000s, brought a shift back toward worries over limits. There are again deep doubts about where humanity is headed and how long its resources may last. In the lands of energy, this notion has found a specific embodiment in the idea of “peak oil”—and its lieutenant, “peak gas”—defined as the moment in history when global production reaches a halfway point, having used up 50% of all the recoverable resource, and then begins to fall. According to this hypothesis, no matter how many new wells may be drilled, no matter what techniques or new technologies are applied, production will decline; not enough new oil can be found to replace what is being consumed. At this moment, therefore, terminal depletion begins, and the era of “cheap oil,” on which so much depends, is over. But before we talk about the peak concept itself, a bit of background is very much in order.

William Jevons and the Fate of Britain

Such an idea, in various guises, is not new. Ever since the gloaming of the Industrial Revolution, we have been running out of fuel. Indeed, diviners of depletion have been with us all along, throughout the modern and postmodern eras, like a gauntlet of bony, nagging fingers. This has been good in one way. It has reminded us, in our narcotic tendency to forget during good times, that certain resources are indeed finite, and that we need to think about, and plan for, the time when their plenty is no more, when replacements become imperative. But worries haven’t stopped here. Ideas about limits can sometimes be taken too far.

Malthus certainly set the tone early on, as prophet of depletion. His subject was food, not energy. His famous Essay on the Principle of Population (1798) found much gloom in numbers; people appeared to be increasing geometrically (doubling every so-many years), mainly due to the poor, while food production grew only arithmetically, by a fixed amount, thus far more slowly. This meant a reckoning was inevitable, via famines. Yet Malthus’ final conclusions were anything but mathematical or a matter of class prejudice. “The vices of mankind,” he wrote, “are active and able ministers of depopulation.” Human appetite, not just for food, was destructive.

It wasn’t long before such ideas came to be applied to coal in Britain. Worried by the rise of German and American power, England feared for the longevity of its industrial might and the basis for it. The topic was taken up in the daily press, and before long by William Stanley Jevons, economist and philosopher, whose 1865 book, The Coal Question: An Inquiry Concerning the Progress of the Nation and the Probable Exhaustion of Our Coal-Mines, delivered a shock. Jevons, in fact, did not conclude that British coal would soon be gone, only that cheap reserves would deplete, bringing a sharp rise in prices. Yet this was bad enough. Due to its very success as a colonial power, the demise of England’s supremacy was near at hand, the author suggested; its “mainspring” would soon “run down” due to high consumption. Indeed, in his final lines, Jevons delivered a sobering pill to his readers:

The alternatives before us are simple. [B]y our plantation of new States, by our guardianship of the seas, by our penetrating commerce, by the example of our just laws and firm constitution, and above all by the dissemination of our new arts [technologies], we stimulate the progress of mankind in a degree not to be measured. If we lavishly and boldly push forward in the creation of our riches, both material and intellectual, it is hard to over-estimate the pitch of beneficial influence to which we may attain in the present. But the maintenance of such a position is physically impossible. We have to make the momentous choice between brief but true greatness and longer continued mediocrity. [italics in original]

As much as anything, Jevons was a storyteller. His tale, like that of all forecasters, was a narrative of the future. Britain, light of the world, would soon run its course and pass the torch, he said. And a major reason would be the depletion of cheap coal. The effect of this narrative on the English public was, for a time, electric. With Germany’s rising power, its crushing 1871 defeat of France so soon to smoke in Europe’s eye, The Coal Question cast dire shadows on England’s sense of security. A “coal panic” briefly ensued, extending to the highest levels of government, with William Gladstone, then Chancellor of the Exchequer, including Jevons’ conclusions in his speeches. Several Royal Commissions were dispatched to carefully review the evidence from British mines, and, eventually, yielded reassuring estimates of future reserves. A modified story emerged; Britain would not so quickly fade from view, though its dominance might be less than before.

In the U.S., the focus of fear has always been oil. This reflects the fact that America stood at the origin of the modern petroleum industry and remained there, as the globe’s greatest supplier, for over eighty years. In the early days of the first boom, the 1880s, nail biting began when wells ran low in Pithole, Pennsylvania, site of some of the earliest production. This seemed to show that supplies would soon give out, that petroleum (then an illuminant) would be but a temporary gleam on America’s industrial floorshow. A generation later, in the wake of World War I, at the beginning of the auto age, the oil industry perceived a “gasoline famine” in the offing. The head of the U.S. Geological Survey, David White, helped deliver the news in 1919 that the nation, after a wartime surge in use, would begin to run low on oil in a mere nine years. Congress then opened new lands to exploration, and when gigantic reserves were found in Oklahoma and California, the sigh of relief was audible, but again brief. World War II brought yet another round of resource anxiety—the huge draw on American oil fields, the onset of Cold War demand, worries over the status and future of U.S. power. It was Roosevelt’s Secretary of the Interior, Harold Ickes, who put things in no uncertain terms: “So far as I can see, the future depends upon oil more than any other factor,” he said to his boss in 1941. And the problem, as with English coal eighty years earlier, was a rising rate of demand and a declining rate of discovery. Gasoline and fuel oil shortages occurred in 1942, due to diversion of crude to war products and to Europe (the U.S. carried the entire burden of petroleum supply to the Allies). Perceiving in 1943 that the nation had a mere fifteen years’ worth of oil left, and wishing to apprise the public of the danger involved, Ickes wrote an article for American Magazine with the nuanced title “We’re Running Out of Oil!”

More recent times have seen the same alarm bell over depletion sounded with no less fervor. During the 1970s, the Arab Oil Embargo brought a round of virulent dread. This extended to natural gas and led to the passing in 1978 of the Fuel Use Act, restricting gas use and thus encouraging coal. Then, in 1979–80, with onset of the Iranian Revolution and the Iran-Iraq War, the case for the “end of oil” reached full panic proportions; fears of soaring demand and low supplies (both unfounded) led to overbuying, stockpiling, long lines at the pump, and the conviction that petroleum, once again, would not long be ours. Predictions made at the time suggested that before the twenty-first century began, we would face the Twilight of Oil and the dawn of Energy Armageddon.

The Club of Rome and Its Legacy

In each of the cases just described, pessimism had its origin not in depletion, but in shortages, real or perceived. This is very different from there not being enough oil in the ground. Shortages are a supply problem and can have many causes: lack of exploration and new discovery; insufficient development of reserves; hoarding; restrained production; breakdown in transportation networks. Yet each time, the leap was made; temporary scarcity translated to resource exhaustion. The pattern is not without meaning. It taps a deeply rooted sentiment in Western, Christian culture, sleeping in the quotes from Malthus above, that holds nature to be ultimately punitive to the blind greeds of prideful civilization. By this calculus, and its moral sermon, loss of plenty becomes a measure of the sins of the modern world—scarcity as an indictment of society for its excesses.

In 1972, this type of sensibility found a new apotheosis. On the eve of the Arab Embargo, the famed Club of Rome, a global think tank made up of scientists, business leaders, educators, and other power brokers, released an epochal report: Limits to Growth. The fundamental problem addressed by the club was this: on a planet with finite resources, what happens if populations and economies try to keep growing indefinitely? Employing a computer model known as World3, pioneered at MIT, it produced a series of possible outcomes that came back to a single, immensely influential conclusion—Western society had expanded too rapidly, in an often blind and wasteful fashion, and, if continued, such rates of growth would bring resource depletion and industrial collapse by the middle of the twenty-first century. Such an idea matched very well the cultural moment, with its criticisms and uncertainties about industrial progress. Support arrived from other popular works of the day, including Paul Ehrlich’s The Population Bomb (1968) and E. F. Schumacher’s Small Is Beautiful (1973). Limits to Growth did not make actual predictions per se. Instead, it showed that if trends in the use of nonrenewable resources remained unchanged, doomsday was the most logical outcome, and not far away. Unchecked growth would bring the beginning of depletion for oil and other commodities by 2000. An unprecedented global crisis would arrive.

Such growth didn’t happen. What did occur, in the early 1980s, was recession and a tumble in oil demand; massive conservation efforts coupled with heavy fuel taxes (in Europe and Japan); then new oil from Alaska, West Africa, and the North Sea; and a market flooded by undisciplined Soviet and OPEC producers. History, in other words, interceded. The idée fixe of a runaway world offered little help to understand actual events—though one of its main conclusions, that demand must be managed to extend the life of critical resources, remains wholly untarnished. For over twenty years, the book has since served as whipping boy to the Cornucopian cause.

None of this, however, weakened demand for the forecaster’s art. On the contrary, Limits to Growth helped reinvigorate the tradition begun by Jevons. Since the 1970s, modeling the future has become something of a veritable industry, one part of which has been crisis prediction focused on energy resources. Indeed, even as oil prices fell in the late ‘80s, a seemingly new form of such prophecy arose, intellectually cogent, media savvy, backed by numbers and geology. Yet “peak oil” was in fact by then a thirty-year-old concept, harking back not to Jevons only, but to a scientist who made one of the few major predictions in the energy business that have ever come true.

M. King Hubbert: Peak Prophet

Let us first admit the obvious: oil is a finite resource and, as the world’s dominant fuel, will not last forever. A tendency to cry wolf over depletion must be admitted, of course. Yet there is meaning, too, in that particular tale; eventually the wolf does make an appearance—a rather dramatic and fatal one. The limitations to our resources are real, and it would be of great benefit if we could accurately define them with a cool head and a firm method.

In 1956, when oil flowed aplenty and anxiety over depletion ran dry, Marion King Hubbert, a geophysicist with Shell Oil, presented to the American Petroleum Institute a paper bearing a startling, unacceptable conclusion. Hubbert said U.S. production of conventional crude in the Lower 48 states would peak by the late 1960s or early ‘70s and fall thereafter, never to rise again. He made his forecast from industry estimates of recoverable oil and how fast it was being withdrawn. Most areas in the Lower 48 had been heavily drilled and were already in a mature state, with a lot of information about oil volumes. This was partly true of British coal mines in the 1860s, too. But where Jevons caused a sensation, no one paid much attention to Hubbert.

Yet in 1970, as we now know, his forecast came true. How true? Well, not perfectly by any means, but impressively—as we can see in Figure 9. His figure (actually the higher of two different estimates, based on fixed ideas of ultimately recoverable reserves) showed U.S. production reaching a peak at 8.2 Mbbls/d, or roughly 3 Bbbls/year. The actual figure was much higher, about 9.6 Mbbls/d.9 In short, the date was right, but the volume was not. Hubbert did not include oil from Alaska, naturally, as Alaska wasn’t a state until 1959 and Prudhoe Bay wasn’t in production until 1977, nor from the deep offshore Gulf of Mexico, inaccessible to technology before the late 1980s. Because of these, U.S. production reversed its decline in 1980 and climbed to a second height of around 8.7 Mbbls/d in 1989—still higher than Hubbert’s original estimate. Oil flows did not peak in a true geometric sense, therefore, but rambled over a rugged plateau for about twenty years. Hubbert also forecast that gas production would crest in 1970 at 14 Tcf/yr.10 Again, he was roughly correct in timing, but Lower 48 gas in 1970 reached 24.5 Tcf, a full 75% above his prediction. Even more, there was no final decline thereafter. Beginning in the late 1990s, gas flows began to rise and then surged to new heights after 2004, as improved technology and higher prices brought more reserves online, especially from unconventional reservoirs. Indeed, by 2007, gas production in the U.S. exceeded the 1970 “peak,” and kept on rising until demand fell as a result of economic recession. Even Hubbert’s model for Texas gas (onshore only) ran into similar problems, predicting a 1975 peak and 50% decline by 2000. In fact, production reached a first summit in the late ‘70s, then climbed steadily all through the ‘90s and 2000s, reaching a level above the first peak by 2007.

History of U.S. oil production, 1945û2006
Figure 9. History of U.S. oil production, 1945û2006, showing curves both for the Lower 48 and the Lower 48 + Alaska. Overlain on these curves is the prediction by M. K. Hubbert made in the 1950s (dotted curve). Data from the U.S. Energy Information Administration.

Nevertheless, Hubbert’s original oil forecast stands, timing-wise. To many, therefore, his words and method have seemed prophetic. Do we then have a means with which to gauge the future, a mathematical crystal ball? Peak oil believers, after amending the method a bit, have often thought so. Yet the irregularities of Figure 9 and the inaccuracy of the predicted volumes suggest otherwise. In the first place, as Hubbert himself admitted, his approach takes no account whatsoever of geology, reservoir engineering, economics, politics, or technology—it seeks a mathematical law that rules all production, based on the assumptions of fixed final recovery, unrestricted flow, and ever-rising demand. Yet U.S. production was itself artificially constrained for many years; Lower 48 oil flow through 1970 was deeply affected by the policy of the Texas Railroad Commission to issue “allowables” to wells and fields, putting a ceiling on what could be produced (in order to better preserve reservoir pressure and maximize long-term recovery). Thus, any method claiming to show “natural” patterns for production everywhere runs into a wall. Comparisons of Hubbert’s model with others that incorporate such things as oil prices and production costs, as well as the Railroad Commission’s policy, suggest a single conclusion: “Hubbert was lucky.”

Like other forecasters of depletion … Hubbert was the creator of a special kind of narrative. His methods, powerful as they seem, provide a story of mathematical fate, a beautiful bell-shaped curve of rise and fall, that replaces the messiness and unpredictability of actual history. Of course, if we squeeze the horizontal axis of Figure 9 tight enough, making the time interval twenty or thirty years instead of five or so (Hubbert used twenty-five-year intervals), then all irregularities begin to vanish and a bell-shaped curve looks possible. This isn’t cheating; it’s a strategy of averaging, an often-used one. But smoothing data from 1975 to 2000 liquidates an entire generation of crucial changes and events that tell us much. Indeed, these years make it entirely clear that demand does not keep rising unabated as Hubbert stipulated—from 1980 to 1984, it fell nearly 30% throughout the Western world, due to political and economic events. Moreover, we understand today that there could yet be another era of major growth in U.S. production if new areas of the North Slope and also the offshore of Alaska, California, and eastern Florida were opened to drilling—areas that together may hold 60 Bbbls of technically recoverable oil.15 Whether this will happen is an open question—but open because of human factors, not mathematical ones.

In 1980, Hubbert tried again, adding to his narrative. “World Petroleum Availability: 1980–2000” prophesied that U.S. production would continue to fall—despite new oil from Alaska. Not only did the opposite happen, but by 2000 conventional flows were still at nearly twice the level Hubbert had predicted. More oil had been found and developed than he’d thought possible.

Through it all, Hubbert was never an alarmist about depletion. Unlike that of many of his followers, none of the work by this brilliant and thoughtful, if also reputedly cantankerous, man gives off an aroma of Armageddon. He spoke of the need for “prudent planning” and “better resource allocation,” not the collapse of civilization. His famous 1956 paper begins in celebration— “for the petroleum industry, the last century has been a period of bold adventure and discovery”—and ends by stating that humanity needs a new source of energy, which he thought would be nuclear power. With eminent sense, he never tired of reminding his readers, including the U.S. Congress, that fossil sources were not forever fuels. In the eventual span of real human history, oil would be a bright flame over a couple of centuries, like a match struck in a long night. There seems little doubt that in this prediction, Hubbert is ultimately the victor.

No one knows how much oil the world may eventually be able to recover. The situation in OPEC tells us that there is “political oil”—liquids that may exist more as ink than as petroleum. But there is also “economic oil” and “technological oil,” if we are speaking in realistic terms. If other costs don’t rise too much, companies can afford to do a lot more to get oil out of the ground and to invest in new technology at $100/bbl than at $25. If costs do rise a great deal—say, for steel, construction materials, labor, and so on—then profit margins even at $100 shrink and possibly even disappear. At that point, new oil won’t get developed. What this says is that global production could plateau for reasons that have nothing to do with “reserves.”

Moreover, the amount of petroleum a nation produces can also be a function of policy. Nations that lock out investment in their reserves by foreign companies, yet can’t develop these reserves on their own, have essentially limited their future production. If their infrastructure is old and leaky and little is done to fix it, this adds another limit on what can be supplied. Finally, production limits can come from international policies. Take the case of Iran, which combines all of these factors. Long-term sanctions against the country because of its support for terrorism make it uncertain when new discoveries might be developed. Meanwhile, Iran’s existing fields desperately need upgrading—the country was producing over 5.5 Mbbls/d in the 1970s, but this has never been equaled or approached since the Revolution of 1979 (the figure in 2009 was around 4 Mbbls/d). Politics, too, in other words, impact the level of global oil supply.

Within the Hubbertian universe, all of this is secondary. Everything tends to return to reserves, a single number for what can ultimately be recovered, no matter what effort is expended. But as noted in chapter 4, reserves are dynamic, inexact, temporary. Even the boundary between “conventional” and “unconventional” is fluid; in 1950, offshore oil was nonexistent, “unconventional”; by 1980, such oil accounted for 20% of all U.S. oil production and was booked as “conventional.” Higher prices motivating improvements in technology played the central role here. Evolving innovation and economic reality have repeatedly brought the cost of developing “marginal,” expensive reserves to the “conventional” level. What determines how much oil the world can supply depends on more than a few marmoreal numbers and a single, fixed method.

The Central Issue: To Peak or Not to Peak?

We come back to our main question, a pressing issue for our time. Are we headed into an era of resource depletion? Is peak oil an inevitability, a distant possibility, a misperception? Will the ghost of William Stanley Jevons have its revenge after all?

It turns out that the peak concept is only one narrative about the future. Today there are several such stories, variably embodying neo-Malthusian and Cornucopian beliefs. Each has its supporters, not only among geoscientists and economists, but also pundits, politicians, and more. I will risk many slings and arrows by trying to distill each position to a few points. Summary, however, can be the soul of service, if not always wit.

The Pessimists: Peak Oil Believers

Peak oil followers are the heirs to Hubbert, though seldom his epigones. Many have updated and refined his methods, using other techniques. All remain true to the Jevons mindset, with its worry over imminent limits. More than a few have taken this into the realm of doomsday prediction. Because they tap into some of our darkest anxieties, and often play to media attention, the peakists have gained the lion’s share of public attention. The numbers they produce and the claims they make have persuaded many outside the energy industry, where understanding of the realities are much less.

The primary spokesman for this position over the past twenty years has been Colin Campbell, a petroleum geologist with significant industry experience. Campbell makes four main claims: (1) oil production follows a set pattern that depends on “the immutable physics of the reservoirs”; (2) Hubbert’s work revealed a law of nature that says production must mirror the pattern of discovery, with about a thirty-year lag; (3) the global peak in oil discoveries came in the 1960s, and we have since been finding less while consuming more, so a reckoning is due; (4) the world is thoroughly explored and remaining reserves are now known with some certainty, so there is little chance for any large additions.

Of these claims, only the third is undisputed. All the others are hotly debated, and probably wrong. Campbell has often compared depletion to the draining of a glass (“Think of a pub full of happy people,” he is reputed to have once said, “their pleasure at the first sip from a full glass. Think of the frowns that begin to cross their faces when their glasses are half-empty…We need to think of closing time”). In his less congenial moods, he calls his opponents “flat-earthers” and insists the peak is just around the corner, or has even begun. Some of his colleagues, like Jean Lahèrrere, are more moderate in their prognostications, and more generous in their incorporation of economic factors, but still see the peak upon us soon, and with terrible consequences. A typical claim holds that “an unprecedented crisis is just over the horizon…There will be chaos in the oil industry, in governments, and in national economies. Even if governments and industries were to recognize the problems, it is too late to reverse the trend.”

In the peak oil universe, Hubbert’s sense of adventure and progress are gone. A discourse of threat, even paranoia, tends to rule. Once production begins to decline, prices will rocket, economies crumble, and catastrophe descend. Peakists emphasize the world’s absolute dependence on oil that is “cheap and plentiful”—conventional petroleum readily available at low prices. But as already discussed, “conventional” is itself an elastic idea. So is “cheap.” In 2002, no one in their right mind would have accepted $40 or $50/bbl oil as fit for this rubric. Yet by 2008, after prices had gone beyond $100 for nearly six months, $50 was redefined as inexpensive indeed. The price rise, meanwhile, had nothing to do with declining reserves, but came from a mixture of supply and refining constraints caused by lack of development and speculative futures trading. Moreover, economies around the world, from Malta to China, didn’t fall into shock and chaos, but absorbed the new prices and, up to a point, kept growing (China’s GDP, in fact, grew an annual average of 9% in 2008, when prices reached their maximum). The world had become rich enough to afford $50, even $70, oil without breaking stride.

Of course, there are limits here (our theme): what would $200/bbl bring? But in fact, we know what would happen. People’s behavior would change; they would drive less, favor smaller, more fuel-efficient vehicles, cry out for alternatives to oil, while industries would scale back and governments would impose new conservation measures and expand energy R&D, lowering demand throughout the economy and looking for ways to hurry substitutes along. There would be hardship, no doubt, as well as unemployment and recession. But the end of civilization? Even when financial crisis struck in 2008 (due to forces other than oil prices), the world shuddered but hardly expired. Indeed, demand dropped still further, bringing the free fall in prices back to $50 and gasoline down from over $4 to “cheap” levels around $2.50. Predictions about the death of cities, $20/gallon gasoline, and future living in caves have been greatly exaggerated.

Beyond this, there is the simple fact that le fin has been foretold by the peakists so many times before. It was supposed to have arrived in the late 1980s, then 1990s, then in the 2000s, now 2010–20, and so on. The date of doom has rolled forward, as each wave of prediction breaks upon the shores of the present. An ability to employ new and better data does not seem to help. In the early 2000s, peakists believed Saudi Arabia was near its limit of production and would soon roll over into decline. Yet by 2009, Saudi Aramco had grown the country's capacity no less than 50%, from 7.5 Mbbls/d in 2002 to over 11 Mbbls/d. It is hard to feel confidence in a method—and the outlook behind it—that have spoken the language of absolute certainty (“This time for sure!”) yet proven routinely wrong. The sky remains above us.

And yet, despite these problems, Campbell and Co. have a vital cause, without doubt, and have done a great service—this must be said, and stressed. They have brought the question of resource limits to the forefront of attention, where it belongs. Big parts of Western society, the U.S. particularly, and now Asia too, continued to develop in the ‘80s, ‘90s, and early 2000s as if there were no boundaries to oil use, despite the lack of good reserves data. Fundamentally speaking, this is irrational behavior. Peakists have also made it a point of needed knowledge that a big portion of what remains on Earth, however large it may be, lies in remote, difficult, and expensive regions, like the Arctic and deep offshore. Exhaustibility and access are real, long-term issues. An era of growing scarcity most certainly lies somewhere in our future (though there is very likely to be more oil in the world than the peakists admit). These are imperative truths. Unfortunately, peak oil ideas do a disservice to these truths by too often distracting debate into arguments about whether we will all die tomorrow at midnight or next Tuesday at high noon.

Optimists: A Happier Tale

A counter view is held by the optimists, who would have us look to basic economic principles and thus remain measured in our worries, while still avoiding total complacency. This group represents a mild strain of Cornucopian belief. Few among them would agree with “the more we use, the better off we are” dictum, for example. A spokesman here has been Michael C. Lynch, an energy economist whose arguments against Campbell and Co. come back to two ideas we have already noted. First, oil reserves are actually dynamic, not fixed. Second, the ability to extract them is also dynamic, related to demand levels, technology, policy, investment—in short, the degree of effort and invention devoted to the task, or put in its way.

Lynch points to the fact (and it is a fact) that the ultimate amount of oil we believe can be recovered has never stood still. Legitimate estimates have grown from about 980 billion bbls in 1990 (the figure Campbell still tends to use) to a range of 1.3–3 trillion bbls today. Close study of these estimates over time reveals an interesting pattern: numbers have tended to dip in the wake of each major supply crisis (1973, 1979, and 1991) and then rebound to greater heights soon after, suggesting a cycle of reactive gloom followed by renewed confidence. There may also be, in other words, a psychological dimension to resource prediction—the best and worst of times can affect facts and figures.

Is there any reason to accept current numbers as a final guide? Of course not. These may well prove too high—or too low; it is impossible to tell. The most recent global analysis, completed in 2000 by the U.S. Geological Survey, suggests remaining recoverable reserves are on the order of 2.2 trillion bbls, including about 650 billion yet to be discovered (the world is not yet flat) and 612 billion that can be added by improved technology, through reserves growth. Peakists call these estimates pie in the sky. True enough, we can’t go on increasing our estimates forever, as if oil were somehow replicating itself underground (leave that to Hollywood). But there are really two questions here: how large is the total oil resource—what’s in the ground, in all forms? and how much of this is extractable, as reserves? Peak oil thinkers are fond of stating that economics and politics can’t create new reserves. Yet, as we have said, they can and do.

The optimist position also puts a good deal of stress on policy decisions. We’ve talked about this from both the demand and supply sides, how importers can choose to limit their oil use and how exporters can discourage or encourage investment, thus constraining or accelerating exploration and development. The price shocks of the 1970s led to measures in the West that dramatically curbed, even reversed, oil demand and thus affected production. The optimists point out that we don’t need panics for this to happen. Major consuming nations like China and the U.S. can choose among many policy measures (discussed in chapter 4) to control consumption through taxes, fuel efficiency standards, and more. Long-term choices by big-time governments have global effects.

Petroleum, the optimists point out, is no ordinary commodity, but one where political and economic rules apply. Or, to use Campbell’s pub analogy: town legislators can always decide to extend closing time, limiting the number of drinks allowed per hour, whereas drinkers, perhaps remembering they must work in the morning, can choose to sip, not guzzle, or even call it a night. There is also the matter of taps and kegs. Actual production rates depend directly on how much oil a country can physically deliver through its pipeline system. The case of Iraq, in this regard, is most striking. In 1980, at the outbreak of war with Iran, Iraq was producing over 2.5 Mbbls/d, a rate that quickly fell by 60% after hostilities began. When the war ended and Iraq was desperate for funds to rebuild, it lifted oil volumes to nearly 3 million bbls/day, only to have them collapse in the Gulf War (1991) to less than a fifth of this. A third cycle saw a high of 2.6 Mbbls/d in 2000 plunging by half after the U.S. invasion of 2003, rising again to about 2.2 Mbbls/d by 2007. Thus: three decades, three peaks, and three deep valleys—hardly a Hubbertian bell curve. Iraq has huge reserves in known fields and billions of bbls yet to explore. Estimates of what the country could produce, given peaceful stability and a modern pipeline system, range from 4 to 10 Mbbls/d. Production capacity really does matter. Reserves are not always the limiting factor.

Optimists, therefore, find reason to believe that oil will be around in quantity for some time, at least for several decades. They do worry about how quickly, or even whether, it might be developed. But they have no specific prediction to offer, no precise forecast. Some accept the great rollover idea of the peakists, but put it off to around midcentury. Most, however, hold back from even this degree of prediction, because (they would probably say) the vagaries of human behavior are too involved.

Yet the optimist position tends to ignore or overly downplay two key factors. These are the rate and content of global depletion. Analysis by the IEA suggests depletion of 4%/yr for crude oil from existing fields, which means, at a production rate of about 83–84 Mbbls/d, the world has had to bring on no less than 3.3 million new bbls/d (roughly, a new Mexico) each year just to stay level. Moreover, based on an accounting of the world’s major fields, the IEA indicates that production of crude from all sources will be able to keep global flows rising through 2030 by only a tiny amount; any big increases in the future will come from natural gas liquids and unconventional oil. If true, this is sobering. It suggests that, unless demand falls and stays lower, a plateau in crude oil production may have already begun. Second, there is the matter of quality. Thicker, higher-sulfur (“sour”) crude is more difficult to produce and more expensive to refine and so is usually left until later for development. Thus, the overall quality of the petroleum resource base could well degrade over time; globally speaking, it will take more money, more energy, and will create more emissions to produce a million bbls/day in 2030 than in 2010. Economics and policy, related to carbon regulation, may well work in a negative way to limit oil development for these reasons, too.

Cautionists: A Production Plateau

The third view on depletion takes these and other considerations to heart, and offers a kind of compromise. Instead of a near-term peak or nebulous future, cautionists foresee a distinct plateau in world production, extending over decades, as various sources, conventional and non, are brought online and maximized over time. Cautionists reject the peak oil idea for a number of reasons, but mainly because it implies a sudden, simultaneous decline in all elements of oil availability—in new discoveries, reserves growth, unconventional sources, and the capacity to produce them. There is simply no final basis to say this, cautionists maintain. Too much possibility remains for finding and developing new oil, as long as the economics allow for it, and for bringing on new production from upgraded infrastructure. It makes far more sense to see the world achieving a kind of bumpy ceiling, or perhaps a slow, gradual decline, before any steep tumble sets in. The social implications, they point out, are not trivial. Instead of bedlam or unnerving uncertainty, a plateau offers the prospect of time to firm up alternatives, which would become economical by default.

A growing number of energy professionals have joined the cautionist camp. An important gathering on the topic occurred in 2006, when the American Association of Petroleum Geologists, the world’s premier organization of its kind, held a prestigious Hedberg Conference on world oil depletion. Organized by Richard Nehring, an authority on U.S. reserves (and past coauthor of Hubbert’s), the conference concluded that a plateau in world petroleum liquids production is not imminent—but foreseeable. Global flows, it was partly agreed, may well climb toward a plateau that could start as soon as 2020 (at a daily 92 Mbbls) or as late as 2040 (at 101 Bbbls), and last for twenty-five years, then drop steeply. Nehring also constructed a middle estimate, lasting from 2030 to about 2065, at around 98 Mbbls/day. Such numbers, because so variable, may seem like darts thrown at an unlit target. But they act as a palliative to the doomsday view.

A deeper and important meaning emerged from the conference. The idea of limits seems very much here to stay; Campbell and the peakists have had a profound effect in the energy world. Nearly everyone in the industry, even those who reject “peak oil” (in its orthodox form) as myth, agree that global oil production will indeed reach some kind of a maximum, probably in the next several decades.

Some scientists in the cautionist camp, such as Thomas Ahlbrandt, who led the recent USGS 2000 assessment of global resources, have another interesting point to make. Hubbert’s success in predicting the Year of the Peak for the Lower 48 has made him into an icon and his curve a form of gospel, the touchstones to which all debate must return. This fact, plus “the end is here” decibel, often distract attention from the limits question itself. By early 2009, the world was witnessing a rollback in demand on a scale not seen in a generation, since the recession of the early 1980s. This may take pressure off the debate about whether the wells will run dry in a week or a month. The real issue, long-term depletion, is now with us now for good and deserves continual, updated attention more than the fears of Chicken Little.

A Few Final Words: What Simon Said

In the dark days of 1980, when oil prices were skyrocketing and the diagnoses of Limits to Growth seemed about to be confirmed, Julian Simon, an economist at the University of Maryland, arrived to make a public wager that has since become the stuff of legend. Simon bet anyone from the Limits community that things were getting better, not worse. Choose any five resources, Simon said, metals for example, and during the next ten years their abundance will grow and their price will drop, just as surely as the sun would rise and set. Future scarcity, he said, was delusion; this wager would prove it. Famously enough, his bet was taken by biologist Paul Ehrlich, author of The Population Bomb and a contributor to Limits. Ehrlich agreed to choose for his indicators the metals copper, chrome, nickel, tin, and tungsten. When 1990 arrived, the result was inarguable; production of each metal had clearly risen and prices had indeed declined, by an average of 40% (the range was 4%–72%). Simon had won. Ehrlich wrote him a check.28 A happy ending, it would seem, for Cornucopians everywhere.

But perhaps not. Ten years is not much time to prove so profound a historical pattern. Had the bet been extended to twenty-five years, until 2005, and oil added to the mix, Simon would have held the pen and Ehrlich would have collected. By then, the price of everything would have been much higher—abundance had increased, just as predicted, but demand roared ahead still more. And if the wager went on for another ten or twenty or fifty years? We can talk about commodity price cycles and supply/demand factors, but at some point, physical limits will come into play.

Simon and Ehrlich, doyens of Cornucopian and Neo-Malthusian beliefs, embody deeply differing philosophies and, yes, narratives too, about the nature of resource use, social action, and responsibility. To Ehrlich, the first and final resource is the Earth, from which we draw all sustenance, and the story is that we don’t always do so in the wisest of ways. For Simon, on the other hand, humans are “the ultimate resource”; a polluted Earth can be mended only by innovation, the infinite story of ingenuity. Both narratives have their own limits; if the one can lead to visions of self-loathing, the other can encourage arrogant faith in capitalist enterprise as the solution to all problems.

For now, it makes sense to combine insights from both thinkers. The world’s heated relationship with oil is not sustainable, and the criticality of this one, finite resource to all of global transport isn’t going away any time very soon. But human invention has the power to deal with this situation in several ways. One way is to develop more oil, from all conceivable sources. Another is to control demand—policy can also be an area of ingenuity and innovation. And the final way is to create true replacements. It seems more than likely that all these paths, however windy and weedy, will be needed to get us to the end of the present century.

Copyright notice: Excerpt from pages 111–26 of The Powers That Be: Global Energy for the Twenty-first Century and Beyond by Scott L. Montgomery, published by the University of Chicago Press. ©2010 by The University of Chicago. All rights reserved. This text may be used and shared in accordance with the fair-use provisions of U.S. copyright law, and it may be archived and redistributed in electronic form, provided that this entire notice, including copyright information, is carried and provided that the University of Chicago Press is notified and no fee is charged for access. Archiving, redistribution, or republication of this text on other terms, in any medium, requires the consent of the University of Chicago Press. (Footnotes and other references included in the book may have been removed from this online version of the text.)

Scott L. Montgomery
The Powers That Be: Global Energy for the Twenty-first Century and Beyond
©2010, 408 pages,, 12 halftones, 1 table
Cloth $35.00 ISBN: 9780226535005

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