Someone please call the English Department to come save the world's oil
analysts. Words are failing them.
On one side of the net are analysts looking at graphs of oil production and
saying something along the lines of Boone Pickins' recent summary of world oil:
we need 87 but can only produce 85. I'm not sure where Boone gets his numbers
since last I looked (see below) the all liquids graphs were showing 87 mb/d
being produced in recent months. But that's not the point. The point is that a
lot of people are running around saying "peak oil is here" because the fact is
that there has been more or less of a plateau in both light sweet and all
liquids production since about mid-2006, give or take a little.
On the other side, looking at the same graphs, is a group yelling "it's not
peak oil, it's speculators! speculators!!" Their point is that even though
there has been a production plateau, that has nothing to do with the earth's
ability to yield higher flows of oil. In fact, they say, plenty more oil could
be produced if it weren't for hoarding, violence, and incompetence on the parts
of various national oil companies…speculators.
This is one of the few arguments that can be easily adjudicated. In fact,
group number 2 is correct. As
I pointed out recently, many oil exporting countries could produce more oil
if it were not for "resource nationalism policies" - which I call "hoarding" -
or violence or apparent incompetence. Is say "apparent" because some
countries, like Venezuela, could be feigning incompetence to hide a deliberate
strategy of hoarding. Moreover, many oil importing countries are hoarding in a
manner called "strategic petroleum reserve."
But the victory of group 2 in the "peak oil" argument should not end the
discussion. Even though the Hubbertian "peak" is not yet here, we seem to have
reached some other sort of peak, which simply has not been adequately defined
and named in the public square, but which puts a cap on the flow of oil that the
world is going to produce just as surely as will ultimately be the case when we
reach the geologically possible peak that Hubbert defined and named "peak oil."
I'm not sure what to call the peak we have now reached. Maybe it should be
called "Peak Practical Production." Or "De Facto Peak Oil." Or just,
"Th..Th..That's All, Folks." It is a mixture of things. A lot of it is oil
fields around the world that in fact have peaked. You know the names by now.
The fields in some 38 or so countries have peaked in the Hubbertian sense. A
lot of it is countries - or national oil companies - that have decided not to
produce in certain fields. Some is countries that have adopted hoarding
policies that effectively keep adequate exploration and production resources
from being applied to reserves. Some is violence, particularly in Nigeria and
Iraq, that physically prevents oil from being produced.
The mixture of all these human and natural phenomena which together result in
an effective peak in global oil flow, as clearly defined in the chart above,
needs a name. Let me call it De Facto Peak Oil. (If anyone has a better name
please let us know it. We need one.) My sense is that the components of the De
Facto Peak will change over time. Countries will change policies, some to
encourage more production, others to stop it. More countries will reach the
Hubbertian Peak of possible production and begin to decline. And some, I fear
that as the price of oil stays high and probably goes higher, more countries
with weak governments will become subject to violence and potentially to falling
into the category of "failed states."
This De Facto Peak is not as neat and clean as the Hubbertian Peak. Since
human events are a key part and since they can and do change over time,
sometimes for the better, there is no way to "prove" that as things change the
actual De Facto Peak may not be further off. But my guess is that it is here
now. One reason is that the Hubbertian Peak is inexorably drawing closer with
more countries peaking every year. Just as important, though, is the fact that
the increasing value of oil will bring increasing illegal force to bear on the
ownership of oil in countries with weak central governments. In that way,
violence against the oil production assets of various countries will become an
increasing fact of life.
That's just my opinion. But I offer the following article from The Wall
Street Journal as Exhibit A in my defense. It describes the increasing
theft and violence surrounding oil assets in the United States. These events
are not having a significant impact on U.S. or, certainly, global production.
But they suggest that if violence against oil production assets can grow in the
U.S., then no country is immune.