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, 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…and 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. It simply has not been adequately defined and named in the public square, but 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 to some extent 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 this 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.
