The debate about “peak oil” flared up again following a new report from Oxford University claiming that conventional oil reserves are inflated by a third and that added reserves from non-conventional sources are giving a false sense of security.
The report from Oxford’s Smith School, headed by Britain’s former chief scientist, Sir David King, said it is an “open secret” that OPEC inflated its reserve figures in the 1980s as it was seeking to claim market share, and that official sources, such as the International Energy Agency, continue to use these inflated figures.
Conventional reserves should be put at 850 billion to 900 billion barrels, instead of 1,150 billion to 1,350 billion, the Oxford experts say. They estimate that supply will “peak” in about 2014 – that is, demand will outstrip supply for the first time.
Deepwater discoveries such as the Tupi field offshore Brazil, estimated to hold 5 billion to 8 billion barrels of oil, do not really change the picture, the study says. Fossil fuels in oil sands and shale formations are much more expensive to recover and have yet to be proven economically viable. Moreover, the Oxford experts say, the very recovery of these reserves generates significantly more carbon emissions than traditional drilling.
The oil and gas industry disputes the notion of peak oil, arguing that new discoveries can keep pace with demand. However, based on IEA data on the rate of decline in existing reserves, new finds with the equivalent of Saudi Arabia’s reserves would have to be found every four years just to keep steady.
The Oxford study warns that developed countries are too complacent about future supply, in contrast to a rapidly growing emerging economy like China, which is actively seeking energy resources around the globe. Industrial countries should focus more on energy efficiency, and on alternatives to fossil fuels, such as transporting freight by airships instead of conventional transportation.
In Britain, Virgin founder Sir Richard Branson and Ian Marchant, CEO of Scottish and Southern Energy, are among the leading businessmen trying to raise awareness through the Peak Oil Industry Taskforce about what they see as the coming oil crunch.
One consequence of such an oil crunch would be higher prices. Some analysts see crude oil topping $100 a barrel by the end of this year and $150 a barrel by 2014.
By. Darrell Delamaide
Disclosure: No positions