Peak Oil in the Times

PEAK OIL IN THE TIMES….You can never get tired of peak oil, can you? Peter Maass has a pretty good New York Times Magazine article today about peak oil that covers a lot of familiar ground for regular readers, but also makes an important point more directly than I did in my piece a couple of months ago. It comes from Sadad al-Husseini, who retired last year after serving as Saudi Aramco’s top executive for exploration and production:

“You look at the globe and ask, ‘Where are the big increments?’ and there’s hardly anything but Saudi Arabia,” he said….”The problem is that you go from 79 million barrels a day in 2002 to 82.5 in 2003 to 84.5 in 2004. You’re leaping by two million to three million a year, and if you have to cover declines, that’s another four to five million.”

In other words, if demand and depletion patterns continue, every year the world will need to open enough fields or wells to pump an additional six to eight million barrels a day ? at least two million new barrels a day to meet the rising demand and at least four million to compensate for the declining production of existing fields. “That’s like a whole new Saudi Arabia every couple of years,” Husseini said. “It can’t be done indefinitely. It’s not sustainable.”

That’s the key issue. There’s no argument that there are new oil fields waiting to be developed and new technologies waiting to be deployed. The question is whether new drilling can produce an extra 6 million barrels a day of production every single year for the next 20 or 30 years. Past history suggests probably not.

On the other hand, I think Maass pays too little attention to another key issue: the convergence of supply and demand. Even if we’re close to peak oil, it’s true that supply and demand will be brought together in a natural way by higher oil prices ? and high oil prices are only bad, not disastrous. At the same time, market forces will also keep supply and demand in lockstep, and that means that even a modest disruption in supply has the potential to cause an oil shock. We can live with high oil prices ? in fact, a gradual but steady rise in oil prices is probably a good thing ? but an oil shock is a different matter entirely, and it’s something that the free market can’t deal with. Speaking for myself, I’d just as soon not go through 1979-82 again. Those weren’t fun times.