Wednesday, October 19, 2005

Peak Oil

The debate over whether or not we're running out of oil is the kind that makes one's head spin. The problem is that there are smart people on both sides of this issue.

Last August, journalist Peter Maass wrote in the Times Magazine that essentially, the Saudis are the ballgame when it comes to oil. Saudi Arabia has by far the biggest known reserves in the world with about 25% of known oil. He says that the Saudis themselves think they can move from their current production of 10 million barrels a day up to about 12.5 million barrels/day. The US has them slotted up to 20 million barrels. Privately, the Saudis say "Uh-uh." Moreover, Maass writes that we'll run into supply problems, well before we start to run out of oil, because the geology of oil wells means you can only pump out so much, so fast. Moreover, he says that those Saudi production estimates to which Michael Lynch referred during the show may be overly optimistic because Saudi officials don't want to see alternative energy sources developed, which would kill the goose that laid the golden egg.

On the other hand, Daniel Yergin, author of the Pulitzer Prize winning history of oil, The Prize, says that his firm's analysis indicates an additional 60 million barrels of oil/day coming online in the future. He says that the tar sands in Canada will be a major source of petroleum, as will the Caspian Sea, Azerbaijan, Russia, West Africa (offshore), Brazil (offshore) and Libya. It will be more costly and difficult to get the oil out, but the issue isn't a lack of oil under the ground. He notes that, in the 1920s, the US geological service estimated that the supply of oil would run out in just over nine years, and that this current discussion of peak oil is about the fifth time in the last century that we've worried the gas would run out. He says that additional capacity along with greater efficiency in the use of oil will preclude the sort of "long emergency" James Kunstler predicts.

So... who to believe?

After listening to author James Kunstler and energy analyst Michael Lynch duke it out on PRI's Open Source, I found myself unpersuaded by either side. Host Chris Lydon was right on in sussing out Kunstler's agenda: he hates the 'burbs. Kunstler's argument was based on external events he thinks indicate that oil is running out: price spikes, wars in the Middle East, etc... I think Yergin would say that Kunstler is responding to the geopolitics of oil, rather than the geology.

I got no comfort from Lynch, though. Chris summed up the most common sense argument for peak oil: they're not making any more of it, and we've got over 2 billion people in India and China singing "zoom, zoom, zoom." Lynch's response, "China has been coming online for 20 years now and production keeps going up," was absurd. We haven't scratched the surface with India and China. It seems ridiculous to think that there won't be enormous repercussions. Lynch's perspective basically adds up to "Well, things have always worked out before..."

This debate reminds me of the show Chris did on the housing market. Some people think it's a bubble. Some don't. What I wrote then about housing applies, I think, to oil: it doesn't have to be a bubble (or a peak), before it's really bad news. Yergin's analysis seems fairly solid. We probably will get oil from the tar sands and develop hybrids, yadda, yadda. But it's going to cost more and more to get that oil out of the ground. And anybody checked out the cost of a Prius lately? Increased demand for a limited natural resource will have a huge impact on geopolitics and, more practically, how we live on a day-to-day basis.

Personally, if it means no more aircraft carrier sized SUVs on my ass when I'm trying to bike someplace, I'm okay with it.


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