The Future of the Oil Industry: Part 4
THE FUTURE OF THE OIL INDUSTRY
Part 4: Hubbert Peak Critique
So far we've been talking about the Petroleum Industry, the Hubbert Peak Theory, and its possible implications (if proven right). Today we're going to review some of the arguments of those who oppose to the Hubbert Peak Theory.
Michael Lynch
First on the list is Michael Lynch, who analyzes the mathematical inconsistencies of the Hubbert Peak Model, declaring that they're actually so many that the complete model is wrong. He says that "the current school of Hubbert modelers have not discovered new, earth-shaking results but rather joined the large crowd of those who have found that large bodies of data often yield particular shapes, from which they attempt to divine physical laws". He also says that their work is "based heavily on assumptions that the available evidence shows to be wrong. They have repeatedly misinterpreted political and economic effects as reflecting geological constraints, and misunderstood the causality underlying exploration, discovery and production".
According to Lynch, the fact that the US petroleum production curve follows a bell-shaped curve, only shows that in a closed system, demand determines production, not geology. He explains that exponential growth and decline are completely normal behaviors, and that the fact that the US curve followed that famous bell curve is not proof of the existence of any immutable, natural or scientifically-determined law.
Mark Brandly
In his article Will We Run Out of Energy?, Brandly analyzes David Goodstein's book Out of Gas: The End of the Age of Oil and, with it, the Hubbert Peak Theory. "The problems with Goodstein's conclusions, and this applies to Hubbert's followers in general, begin with his reliance on empirical findings to generate the Hubbert curves. He projects decreases in the rate of growth of oil production into the future and then estimates the date of Hubbert's peak and the resulting decline in available oil. However, empirical findings do not always support this thesis".
According to Brandly, the fact that some countries' production curves had more than one pike, or that they didn't follow an exact bell-curve, makes the Hubbert's mathematical analysis a flaw.
On the other hand, Brandly explains why he thinks that Market Forces can solve the problem:
First, higher oil prices will lead to more exploration and the discovery of new oil fields.
Second, higher prices provide an incentive to improve production and exploration technology. Better exploration technology will make it easier to find more oil and improved production technology will increase the reserves in existing oil fields.
Third, rising oil prices increase oil reserves even without any additional exploration or changes in technology. Reserves are the estimated amounts of discovered economically viable oil production. At higher prices it's profitable to recover more of the oil available in previously discovered fields. We therefore have more oil reserves simply by having higher oil prices.
Sustainable Oil / Magma Oil
The Open Source Energy Network addresses "the theory in circulation that oil is not solely of organic origin, but that there may be another mode of origin as well from deeper in the crust, involving magma". According to this site, there's plenty of evidence that Petroleum may be a renewable resource:
- Wikipedia (Hubbert Peak)
- Gas Resources Corporation
- Ludwig Von Mises Institute
- Open Source Energy Network
- Marshall Brain's Blog
- Peak Oil Debunked
- World Net Daily
- Times On Line
Part 4: Hubbert Peak Critique
So far we've been talking about the Petroleum Industry, the Hubbert Peak Theory, and its possible implications (if proven right). Today we're going to review some of the arguments of those who oppose to the Hubbert Peak Theory.
Michael Lynch
First on the list is Michael Lynch, who analyzes the mathematical inconsistencies of the Hubbert Peak Model, declaring that they're actually so many that the complete model is wrong. He says that "the current school of Hubbert modelers have not discovered new, earth-shaking results but rather joined the large crowd of those who have found that large bodies of data often yield particular shapes, from which they attempt to divine physical laws". He also says that their work is "based heavily on assumptions that the available evidence shows to be wrong. They have repeatedly misinterpreted political and economic effects as reflecting geological constraints, and misunderstood the causality underlying exploration, discovery and production".
According to Lynch, the fact that the US petroleum production curve follows a bell-shaped curve, only shows that in a closed system, demand determines production, not geology. He explains that exponential growth and decline are completely normal behaviors, and that the fact that the US curve followed that famous bell curve is not proof of the existence of any immutable, natural or scientifically-determined law.
Mark Brandly
In his article Will We Run Out of Energy?, Brandly analyzes David Goodstein's book Out of Gas: The End of the Age of Oil and, with it, the Hubbert Peak Theory. "The problems with Goodstein's conclusions, and this applies to Hubbert's followers in general, begin with his reliance on empirical findings to generate the Hubbert curves. He projects decreases in the rate of growth of oil production into the future and then estimates the date of Hubbert's peak and the resulting decline in available oil. However, empirical findings do not always support this thesis".
According to Brandly, the fact that some countries' production curves had more than one pike, or that they didn't follow an exact bell-curve, makes the Hubbert's mathematical analysis a flaw.
On the other hand, Brandly explains why he thinks that Market Forces can solve the problem:
First, higher oil prices will lead to more exploration and the discovery of new oil fields.
Second, higher prices provide an incentive to improve production and exploration technology. Better exploration technology will make it easier to find more oil and improved production technology will increase the reserves in existing oil fields.
Third, rising oil prices increase oil reserves even without any additional exploration or changes in technology. Reserves are the estimated amounts of discovered economically viable oil production. At higher prices it's profitable to recover more of the oil available in previously discovered fields. We therefore have more oil reserves simply by having higher oil prices.
Sustainable Oil / Magma Oil
The Open Source Energy Network addresses "the theory in circulation that oil is not solely of organic origin, but that there may be another mode of origin as well from deeper in the crust, involving magma". According to this site, there's plenty of evidence that Petroleum may be a renewable resource:
- Oil being discovered at 30,000 feet, far below the 18,000 feet where organic matter is no longer found
- Wells pumped dry later replenished
- Volume of oil pumped thus far not accountable from organic material alone according to present models
- In Situ production of methane under the conditions that exist in the Earth's upper mantle
Others
Marshall Brain thinks that there will not be a peak, because we will switch smoothly to other technologies as petroleum prices rise.
Chris Bennett says that the world has plenty of oil, and we're not running out of it, at least not soon.
Lee Raymond (CEO of ExxonMobil) believes that the world's supply of oil will rise (and that demand will slow and prices drop)
So, what shall we believe? Are we running out of petroleum anytime soon? Or aren't we? Are new technologies going to solve this problem on their own? Are we going to perceive the crisis? Are we going to live in a new Wild-West a la Blade Runner, fighting for fuel? Or is it going to be a smooth transition?
Well, that's a question I'm still trying to answer. I have some ideas that I'll explain on the last part of this series. But first, please, if you have any thoughts on the Hubbert Peak or in the future of petroleum, let me know about them. ___________________________________________
- Wikipedia (Hubbert Peak)
- Gas Resources Corporation
- Ludwig Von Mises Institute
- Open Source Energy Network
- Marshall Brain's Blog
- Peak Oil Debunked
- World Net Daily
- Times On Line
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