The Sedco 709 offshore oil rig at Davis Straight between southwest Greenland and Baffin … [+]
Peak oil, a hypothetical point where global oil production peaks and enters an irreversible decline, has been the holy grail of resource economics for decades: prized and equally elusive. Recently, technological development, including increased digitization, has altered conventional understandings associated with “peak oil”. Like other consumable resources, peak oil is rooted in reality: oil is a finite natural resource produced over a geological period as demand continues to climb. However, Peak Oil could also become a self-fulfilling prophecy, inadvertently misinforming the public.
When this author was about 10 years old (over 50 years ago), his father, who had a doctorate in oil and gas. geologist, told him that we were going to run out of oil, because all the main deposits have already been discovered.
How we react to this prophecy will determine a lot about decarbonization and the energy transition.
No one can quite agree on when we will reach the point of peak oil or even what will cause it. Norwegian state oil company Equinor and energy researcher Rystad Energy predict a peak around 2028 due to low investment in oil supply and increasingly effective competition from renewable energy projects. McKinsey Consulting and French oil and gas company TotalEnergies estimate peak oil in the early and mid-2030s respectively due to weak growth in chemical industries as well as peak transportation demand.
OPEC’s long-term global oil demand forecast
A recent OPEC outlook report estimated that demand will steadily increase, leading to peak oil around 2040. The International Energy Agency and the U.S. Energy Information Agency forecast a ” plateau” in oil demand and recommend exploring alternatives immediately to support energy needs. BP’s outlook says international oil demand could double as the developing world buys more ICE cars and builds Western-style consumer societies, and peak oil won’t hit until 2050 based on oil resources known with the application of today’s technology.
Extremely knowledgeable professionals cannot agree on the basic mechanics or the timing of peak oil. It’s not a new trend. American geoscientist Marion King Hubbert predicted that world crude oil production would peak in 2000. Sadad Ibrahim Al Husseini of Saudi Aramco predicted that peak oil occurred in 2006. A British parliamentary task force concluded that it was in 2013. There are hundreds of other incorrect predictions. you could list them, but the common flaw in all of these predictions is failing to recognize oil production as inherently political, and providing geological answers is vital but not sufficient.
A long-billed curlew walks in oily water near a containment dam as a 3,000 barrel oil spill, … [+]
Beliefs and faith in this prophecy guide policy far more than any detached analysis. Peal oil skeptics point to extraction revolutions leading to the production of more oil than ever before, including hydraulic fracturing, Canadian tar sands, Arctic reserves more accessible with climate change and reserves of extra heavy crude from the giant Orinoco basin, the largest in the world. . Proponents argue that peak oil creates scarcity, reduces demand for oil dependence, and predicts public unrest and economic hardship.
If peak oil is already here and we have not yet achieved our decarbonization goals, the implications for energy and the economy would be significant. This new economy has essentially changed the way we operate after the pandemic, with many continuing to work from home, travel less and switch to battery-powered vehicles. Growing demand for rare earth minerals needed for rapid transition as oil fades may create a new set of rare commodities and alter the geoeconomics of energy with new strategic controversies.
If peak oil is to arrive in the near future, then our current decarbonization strategies, while not ideal, may be sufficient to meet the Paris Agreement targets by 2050 with a rise in temperature. much less than 2ohC compared to pre-industrial levels. However, decarbonization strategies need to be extended to all emerging economies through increased investment, technology transfer and knowledge sharing from developed economies in order to achieve the desired outcome.
While peak oil is a long way off, decarbonization and environmental strategies face huge oil market hurdles and political pressure from the OPEC+ cartel. The recognition that oil is abundant is changing the global oil market as well as the much-needed transition to clean energy. If oil-producing countries dependent on oil revenues accept a “higher volume, lower price” strategy to take advantage of an asset of decreasing value, then they will have to restructure their economies once oil supplies begin to decline. and revenues will fall.
Skeptics indifferent to environmental issues will often dismiss peak oil by pointing to past prophecies that never materialized and use them to unfairly diminish environmental issues. Instead, environmentalists will cling to peak oil theories hoping that a greater natural force will justify their activism and propel them forward. It remains a fantasy. The Stone Age did not end because humans ran out of stones.
Debates about peak oil do not serve people who care about the environment or the economy. Peak Oil will occur when technology will make ICE too expensive compared to electric motor for transportation, and environmental regulations will make dirty gasoline obsolete. As we seek justification for the prophecy, voter values and the regulatory environment will continue to change, so basing environmental or energy planning on the existence or absence of this magic inflection point is bad policy. The energy transition will take place when alternatives to hydrocarbons can supplant it.
Not sooner, not later.
