Peak Oil - Fact or Fiction?
In the popular press one often reads the mantra - We have reached “peak oil” - implying that we have reached the limits of our geological reserves. That is probably not the case, what we have reached however, is geopolitical “peak oil” because inefficient national companies have pushed out private companies with the know-how to exploit existing reserves. In the 70’s Western Oil companies controlled well over 50% of world oil production. Today, “BIG OIL”, the combination of Exxon, BP, Royal Dutch Shell, Chevron, ConocoPhillips, Total and Italy’s Eni produce just 13% and that will probably decline over the next two decades. Today’s ten largest holders of petroleum reserves are state-owned companies, like Russia’s Gaspron, Iran’s national oil company, Saudi Aramco and Petroleos de Venezuela. (With the possible exception of Saudi’s Aramco these state owned firms are rife with bureaucratic inefficiencies, political corruption and indifference. International oil companies are better than national oil companies at finding and extracting oil but they are fighting a losing battle as more countries follow a policy of resource nationalization.
The only hope to increase non-state production is for free countries, like the United States to open up its reserves for commercialization. That is why the major oil companies are trying to convince congress to open up more offshore drilling; it may be one of the few options they have to increase their production.
Frankly, we don’t know how much oil is offshore. Some would say there is only 90 billion barrels off the shores of the United States and since we consume about 7.6 billion barrels a year, this is not a big deal. The truth is we don’t know what we don’t know, and won’t, until we actually open up the area, of up to 200 miles from shore to deep-water exploration. Brazil did - and in one Aha moment in November of 2007 the government run Petrobras, announced a discovery in the Tupi field in the Santos offshore basin, that alone could hold as much as 5-8 billion barrels of recoverable oil, propelling Brazil from 17th place to the eight largest holder of oil and gas reserves in the world. What did Brazil do next? They withdrew 41 blocks of underwater territory from auction, reserving the most promising areas around the Tupi field for itself. We have learned in the last year that there are similar geological formations in the Santos Basin and while the ultimate potential is unknown it could be “gigantic” a multiple of figures previously mentioned. Brazil is set; it has its offshore oil to meet domestic demands and enough excess to export as well as its tropical energy-rich sugar cane for alcohol. The Brazilian lesion - you can’t know the answer until you take a hard look.
The principal issue surrounding increased offshore drilling in the United States is not environmental; high-tech American made drilling equipment has been used for decades in the Gulf of Mexico and all over the world without serious consequences. If Norway, Scotland Brazil etc. can do it why not the United States? It is not a question of need; even if our effort to use more fuel-efficient vehicles succeeds, biofuels become more abundant, and newer technologies flourish beyond any current forecast, we will still import more oil than we produce. It is not a question of confidence in our major suppliers; in fact, with the exception of Canada, Mexico and possibly Brazil we know that these are not the world’s great stable democracies.
The only relevant question that confronts us, are we willing to be held hostage by state-owned oil companies to fuel our 250 million vehicles, heat over 8 million homes, supply our petrochemical industries and provide us with jet fuel? If we are unwilling to put our fate in the hands dubious state-owned companies then we will need more domestic drilling as well as more efficient vehicles, biofuels and improved technology.
Unfortunately, to date we have not been very successful in making our fleet of 250 million vehicles dramatically more efficient, alternate fuels have proved problematic and new technology, though interesting is not yet mature enough to serve our needs.
What we really are held hostage to is petroleum based economy that has traditionally received over 75 percent of the entire research and development budget for energy which is not calculated in the price of oil to the consumer . This is only the tip of the ice berg. Other un-calculated subsidies like the entire seventh fleet that is basically deployed by the US government to protect our oil interests, along with health costs and environmental costs make up the bulk of costs not seen at the pump by the consumer. if other alternative energies like hydrogen solar geothermal etc. received even 25 percent of the national budget directly and indirectly subsidizing our petroleum based economy they would have been competitive with patrolium 15 to 20 years ago. For instance solar power, out of all the alternative energies is by far the most advanced but that is only because most of the research and development was payed for by almost an unlimited NASA budget during the 60’s and 70’s. what we need is a government no longer stacks the deck in favor of the patrolium based economy allowing other energy sources the chance show their economic competitiveness to the consumer.
January 30th, 2009 at 8:59 pm
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January 28th, 2010 at 8:35 am