The Wall Street Journal has a delightful editorial today on Peak Oil. That prompted me to pull together several articles I’ve been wanting to talk about.
Just in case you wondered, the devotees of Peak Oil are alive and well. Many of the big names are reportedly in hiding. Do a few minute search on the ‘net and you can still find a lot of them. I’ve had a dialogue over the last few days with one gentleman on my blog.
Haven’t pointed out the foolishness of Peak Oil doctrine since July, so it’s time to look again. Here we go…
12/5 – Wall Street Journal – ‘Peak Oil’ Debunked, Again – And again. And again.
Gotta’ love the opening paragraph:
It has been 216 years since Thomas Malthus gave birth to the idea that mankind’s appetite for natural resources would outstrip nature’s capacity to supply them. There have since been regular warnings that the world is running out of soybeans, helium, chocolate, tunsgsten, you name it—and that population growth has become unsustainable. The warnings create a political or social panic for a while, only to be proved wrong.
Peak Oil is the current fad of ‘we will run out by the day after tomorrow.’
The run up in oil over the last several years to a high of around $112 this past summer has encouraged entreprenuers, or perhaps we should call them petroprenuers, to figure out how to get massive amount of shale oil out of the ground.
Production in the US has been surging for years.
Editorial says the Saudis are fine with letting prices fall since it will hurt their geopolitical foes, such as Iran and the drillers in North Dakota and Texas.
Editorial takes a shot at Paul Krugman’s prediction in 2010 that Peak Oil had arrived, but points out that criticizing him is like shooting fish in a barrel.
Such false predictions have been around a loooooong time. WSJ quotes Daniel Yergin relaying this story:
… in 1885 the state geologist of Pennsylvania warned that “the amazing exhibition of oil” was “a temporary and vanishing phenomenon—one which young men will live to see come to its natural end.”
Um, check with John D. Rockefeller on production levels and his grandchildren on that timeline.
There are so many fallacies in all the Malthusian tales. I’ve spent time on this blog going into some detail in general and great detail on the Peak Oil variation.
Here’s yet another way to explain the errors, from the editorial:
The happy ending is that the notion that the world is running out of resources always fails because the ingenuity of entrepreneurs, spurred by necessity and incentive, always exceeds the imagination of doomsayers. So we are learning again, and let’s hope memories will be longer this time.
11/5 – Forbes – Lessons from the U.S. Energy Miracle – Steve Forbes describes the highlights of a speech by Daniel Yergin. The vast and rapid expansion of shale energy puts the daily production of oil in the US ahead of every country in OPEC except Saudi Arabia.
Entrepreneurship trumps all. … But entrepreneurs are never constrained by what is.
Governments kill innovation.
Mineral rights, the U.S.’ not-so- secret superweapon.
Private ownership of what’s underground is a huge part of the change. Hmm. Private ownership. Economic progress. They are tightly linked.
Energy is a tough business with tight margins.
It is tough to make money in oil, but when you do, there are fortunes to be made. Lots and lots and lots of people fail. I’m fine with that.
9/24 – Carpe Diem – Peak What? The shale revolution is just getting started – Prof. Perry points out that innovation and expertise have driven the shale revolution. Not only have innovation and expertise not stopped, they are accelerating.
Check out his comments on innovation, expertise, and competition:
There are two important reasons why the shale pessimists are wrong: innovation and expertise. The shale revolution was launched because of breakthroughs in a range of technologies, most notably advances in horizontal drilling paired with advanced hydraulic fracturing.
Competition and innovation drive the oil and gas industry, particularly in the U.S. The innovation that unlocked the nation’s oceans of shale resources hasn’t stopped but instead has actually intensified. New ideas, technologies and ways of cracking the shale code emerge daily. And America’s amazing “petropreneurs” have obviously gotten very good at what they do.
Article says efficiency is increasing in Bakken. And Eagle Ford. And Marcellus Shale. Time to drill a well is falling and the output from each well is rising. Think about what that does to the breakeven point. I dare say the Saudis are not taking that into consideration.
Just read a comment in the last few days at Million Dollar Way (won’t bother to find link) that one driller just put in a three section well. That means a horizontal lateral around 15,000 feet long after drilling down 8,000 or 10,000 feet. That will be an amazing payoff for drilling in relation to total oil that will be produced.
It is a long shot, but Mexico recently reformed their energy laws to allow something resembling free markets and private property rights. That could open up their shale resources. I do hope they follow through. The blessings to the people of Mexico would be incredible. Blessings to the rest of the world would be wonderful too.
Mexico just passed groundbreaking energy reform after 75 years of a state-run energy monopoly and our neighbor to the south is now poised to join the shale revolution.
Prof. Perry foresees the shale revolution continuing. He says
…rapid gains in production and drilling efficiency, and the steady march of technological innovation all tell a much different story of a new, unprecedented era of energy abundance. Instead of moving toward its twilight, the shale revolution is likely only in its opening act. Stay tuned.
So yet again, we ask: