The theme of this post is: it is unlikely that the production of oil and natural gas will peak in the next half century because an upward shift of the demand curve will likely offset any downward shift in the supply curve. The net effect will be a slight increase in oil prices, but largely no change in the rate of production of conventional+unconventional oil. There are plenty of economically-recoverable hydrocarbons reserves available for us to use in our power plants and transportation vehicles. And given that the use of gasoline currently has more benefits on average than environmental costs, I am led to the conclusion that it is unlikely that there will be a sharp decrease in the production of oil unless we invent a technology can achieve higher rates of return on investment than oil in all its diverse applications, such as cars, trains, planes and the production of plastics.
Those people who are making peak oil a big deal on the internet generally fall into one of the following camps:
1) Energy insiders like the former Matthew Simmons, who are pessimistic by nature (and tend to forget either about technology advancement, growth in demand, or the fact that proved oil reserves increase when the price of oil increases.)
2) Those who want us to stop using fossil fuels regardless of whether there is peak oil. This group is a) typically concerned about the environmental impact of fossil fuel use, b) probably unaware of the short-term positive economic impact of CO2 emissions, and c) possibly just anti-technology.
3) Those people who look at data from today's well, and conclude that decreasing oil output from many of today's wells implies the onset of peak oil in the near future.
When you take a step back from the peak oil paranoia and take a look at the data available on oil production and proved reserves, you can take deep sigh of relief. There's plenty of proved global reserves to meet current global consumption for the next 50 yrs. Now, this isn't to say that there won't be peak oil production for individual wells or for individual countries, it's just that there is plenty of global proved hydrocarbon reserves to supply today's demand for the next 50 years. And interestingly, global proved hydrocarbon reserves are increasing with time...not decreasing.
If you look at any one well, or even the output from whole countries, like the Mexico & England, there is often a peak in oil production. And this can have significant effects on the economy in those countries, but not on the overall global growth rate. It's important to focus on global statistics when making predictions about peaks in global production of oil. For example, as Saudi Arabia developed its oil fields in the 1950s and 1960s, they were able to produce oil cheaper than most oil produced in the US. So, the production of oil in the US reached a local maximum in 1970, even though there were and still are plenty of hydrocarbon reserves in the US. And now that the price of oil is significantly higher than the 1990s, production of oil in the US once again increasing.
The question is: what would cause the overall production of oil to peak?
Answer: a downward shift in both the supply and demand curves. Below are the reasons why I don't expect to see a downward shift in both the supply and demand curve.
1) I expect the demand curve for oil to increase because I expect society to grow. The reason I expect society to grow is that we have the capability of building new electricity generating power plants in the US and China that can achieve >20%/yr rates of return on investment (coal power plants in China and natural gas combined cycle plants in the US.) In the US, we could still achieve ~20%/yr RROI even if the power plants have to pay between $15 and $30 per ton of emitted CO2. So, I expect to see the global GDP continue its trend of 2-4%/yr grow in GDP and this will shift up the demand curve for oil.
2) I expect that there will be a slow gradual shift from oil to electricity in some personal vehicles, but that this trend will not over take the upward shift in the demand curve due to growth. There will still be applications that demand oil rather than electricity, such a aircraft, long-haul trucks, trains, and the production of plastics.
3) While I expect to see the supply curve for light-sweet crude oil to shift downward as we tap the conventional sources of oil, I expect to see the supply curve for unconventional sources of oil (or oil-like products) to increase. Unconventional sources include natural gas liquids from tight sand formations, tar sands, heavy/sour oil reserves, and deep offshore reserves. Overall, though, when you include the fact that these unconventional sources of oil are more expensive on average, I expect to see a slight downward shift in the supply curve. (Supply vs. production rate curve probably will shift downward)
So, if the demand curve slightly shifts upward and the supply curve slightly shifts downward, the net effect will be that the price of oil will increase, but the production rate will stay nearly the same. Therefore, I do not expect to see any large change in the production rate of oil.
The problem with the typical Hubbert's Peak analysis is there's no mention of supply and demand curves. If demand is increasing for other reasons (such as a growing society), then this increase in the demand curve can offset a downward shift in the supply curve as it becomes more expensive to produce oil.
So what I want to point out now is that there are plenty of proved resources of economically recoverable fossil fuels. The following graph shows the ratio of Global Proved Reserves to Global Production as a function of time for each of the major fossil fuels. The data for the plot comes from the 2011 BP Statistical Review of World Energy. (Note that the amount of fossil fuel chemical energy in the ground is orders of magnitude larger than the 'proved reserves.')
Here are some major points to be taken from this graph: 1) The global ratio of "proved oil reserves" to "yearly production of oil" has increased nearly every year since I have data (back to 1980.) 2) This ratio is now close to 50 years, which means that proved reserves are much greater than current year production. 3) The Proved Reserves to Production ratio of natural gas is and has been greater than 50 yrs for the last twenty years. 4) The ratio for coal has dropped dramatically between 2000 (which is as far back as I have access to) and 2010. 5) The coal ratio is still greater than 100 yrs. The major cause of the drop of proved coal reserves is the fact that China has not updated its proved coal reserves since 1992, but in the meanwhile their production has increased three-fold.
In summary, we have over half a century worth of proved reserves for each of the fossil fuel exergy sources: oil, natural gas and coal.
Given that this is data of economically-recoverable resources at the average price of fuel in the year of the graph, this means that the amount of technically recoverable resources will be even greater if the price increases. Estimates of technically-recoverable resources (which still have positive rates of return on work [kWh] invested) are even larger than 50 years of today's production rates.
While it is true that we have largely tapped into all of the low hanging fruit as far as oil production is concerned, this doesn't mean that society is going to come crashing down. As I mentioned above, we still have our electricity generating power plants, and these are the real drivers of growth in our society. And given $3/GJ natural gas in the US, we will continue to achieve high rates of return on investment from our power plants.
And what is often forgotten is that we can achieve growth (even if the price of oil and natural gas increase) if we decrease our consumption of luxuries and increase our investment into the production of energy. Luxuries are those items that have significantly negative rates of return on work [kWh] invested. (Examples of luxuries are: vacations, gambling, yachts, mansions, sports cars, and many more objects that consume work without generating a positive return on that work.) Luxuries are like the peacock's feathers. As I've stated before, it's not that luxuries are necessarily bad...it's just that in order to get back to real growth rates of 4%/yr in CO2 constrained world with high oil prices, we will need to decrease our consumption of luxuries and increase our investment into techologies and processes with positive rates of return on work [kWh] invested, such as oil and gas production, electricity power plants, etc... In order to return to real growth, we need to remember that consuming just luxuries is not sustainable.
A return to growth is something that we should all be concerned with. Since the goal of life is to grow life (both here and on other planets), then we all need to be focused on growing life and investing in projects that have positive rates of return on investment. This means investing in energy production as well as investing your time and effort increasing the population of life (including human life.)
On a final note, I'll leave you with a video from Jon Stossel debunking peak oil, as well as a video on the oil boom in North Dakota, in case anybody is interested in moving there for a job in the oil industry.