Has the world reached economic peak oil?

[4dsc]

Not that it was ever easy. The amount of oil produced by existing fields is always in decline because as oil is extracted, pressure in the reservoir falls and the oil comes out more slowly. As a result, every year the industry must drill new wells capable of supplying around 3 mb/d – or 30 per cent of Saudi Arabia’s production – just to stand still. Satisfying the growth in global demand, at least when the economy is expanding, requires roughly another 1.5 mb/d annually.

Filling these holes gets more difficult as the “easy oil” gets scarcer. Companies are now exploring to the ends of the earth – from the Falklands to the Arctic– and are drilling reservoirs that are deeper, hotter and higher pressure than ever, all of which raise new engineering challenges. That has pushed costs up massively, with effects that have yet to be widely understood.

http://www.davidstrahan.com/blog/?p=1321

These paragraphs explain exactly what the problem is concerning peak oil.

[jwirr]

1. I am not an expert on this subject but want to watch what is happening. It sure looks like we

have reached some critical point when we are taking so many risks with our environment.

[gyroscope]

2. the era of cheap oil is coming to an end.

the world's supply of easy conventional crude is nearly depleted. in a few years, what we'll have left is only the shale oil found in the tar sands and in the deep oceans, the kind of low quality oil which is dirtier and more polluting, much harder to extract and much more costly to mine. just a matter of time before oil prices begin to double again. that we are already well into the phase of mining for shale tar sand oil should be an indication of the desperation to keep the oil flowing, like a crack addict looking for his last fix. the era of cheap oil is coming to an end.

[robertpaulsen]

3. Great analysis, especially this point.

But oil is so useful that nobody cuts back voluntarily, meaning prices must rise to excruciating levels to force rich western consumers to economise. The first “peak oil recession” started in 2009, says Kopits. It took oil at $147 a barrel and the deepest recession since the 1930s to prise oil from the grip of consumers in OECD countries. Since early 2008, OECD oil consumption has fallen by 4 mb/d, while non-OECD consumption – mainly inChina– has gained 6 mb/d. Global oil production rose 2 mb/d during that period, so developing countries have consumed all the additional supply plus that given up by industrialised economies. “China is bidding away the OECD oil supply,” says Kopits, “and recessions are the mechanism by which that oil is being transferred from weaker economies to faster growing economies.”

With China embarking on rapid “motorisation” – car sales in China leapfrogged those in the US in 2010 – the outlook is for repeated oil price spikes and recessions. We appear now to be entering the second peak oil recession, says Kopits, and others will follow. For the time being this is a problem for the west, but prices could rise to levels that are unsupportable even for China. On this view, peak oil is as much an economic construct as a geological one.

This is a point that I've seen in the writings of John Michael Greer, that than one huge cataclysmic collapse, Peak Oil will provide a series of contractions that in the long view of time show as a downward spiral. Richard Heinberg talked about it in the documentary The End of Suburbia as a series of recessions, each one consecutively worse than the other, until the civilized world finally realized that we are locked in a permanent depression. As long as our economic infrastructure is predicated on infinite growth, that seems to be where we are headed.