January 29, 2012
2005 Seen As Oil Supply Tipping Point

Two scientists, including David King, formerly chief scientific advisor to the British government, have come out with a paper in Nature arguing that we have a greater need to reduce fossil fuel use due to oil shortages than due to global warming. They see 2005 as the end of oil supply growth.

Stop wrangling over global warming and instead reduce fossil-fuel use for the sake of the global economy.

That's the message from two scientists, one from the University of Washington and one from the University of Oxford in the United Kingdom, who say in the current issue of the journal Nature (Jan. 26) that the economic pain of a flattening oil supply will trump the environment as a reason to curb the use of fossil fuels.

"Given our fossil-fuel dependent economies, this is more urgent and has a shorter time frame than global climate change," says James W. Murray, UW professor of oceanography, who wrote the Nature commentary with David King, director of Oxford's Smith School of Enterprise and the Environment.

The "tipping point" for oil supply appears to have occurred around 2005, says Murray, who compared world crude oil production with world prices going back to 1998. Before 2005, supply of regular crude oil was elastic and increased in response to price increases. Since then, production appears to have hit a wall at 75 million barrels per day in spite of price increases of 15 percent each year.

"As a result, prices swing wildly in response to small changes in demand," the co-authors wrote. "Others have remarked on this step change in the economies of oil around the year 2005, but the point needs to be lodged more firmly in the minds of policy makers."

I like it when prominent scientists come around to a point of view I've held for years. But my satisfaction is rather short-lived because high level recognition of the Peak Oil problem is coming too late. The coming decline in oil production is going to cause economic contraction and declining living standards until development new technologies make a migration away from oil more practical.

Production at existing fields is declining sharply. So new fields have to be found and brought online. But the rate of new field discovery is too slow.

For those who argue that oil reserves have been increasing, that more crude oil will be available in the future, the co-authors wrote: "The true volume of global proved reserves is clouded by secrecy; forecasts by state oil companies are not audited and appear to be exaggerated. More importantly, reserves often take 6 - 10 years to drill and develop before they become part of the supply, by which time older fields have become depleted." Production at oil fields around the world is declining between 4.5 percent and 6.7 percent per year, they wrote.

The result is a several year period of high oil prices (with dips on economic downturns). The high prices put a ceiling on economic growth.

Also see Scientific American coverage of this story.

An Australian government agency thinks oil supplies might peak in 2017 The Australian government tried to hide this report. For Western countries peak oil availability has already happened. Oil consumption is growing rapidly in oil exporters. So their exports have stopped growing and for many of them exports have already dropped from peak. At the same time, growing Asian demand reduces the affordability of the remaining oil for the Western countries.

See my November 20101 post Dr. James Schlesinger: The Peak Oil Debate Is Over. Schlesinger was the first US Secretary of Energy and he's also served as Defense Secretary and head of CIA, all back in the 1970s.

Share |      Randall Parker, 2012 January 29 11:25 PM  Energy Fossil Fuels

PacRim Jim said at January 30, 2012 1:54 AM:

Statistics have been politicized.
I trust nary a single statistic issued by government or academia.
Now I use the Missouri Intergalactic Statistics System: show me.

DrD said at January 30, 2012 5:28 AM:

Seriously, why isn't peak oil the only thing anyone is talking about? Why isn't it the central political issue in the Presidential campaign? Why wasn't it the central issue in the last campaign? Why do poeple who know this is going to happen continue to act as if it isn't going to happen? Seriously.

Food said at January 30, 2012 7:24 AM:

DrD - that's an easy one. Peak oil is a hard problem that our political cycle can't easily exploit. Republicans want to keep bashing alternative energy, Democrats can't point to any success stories of sufficient scale because, well, they don't exist yet (and in any case are still scared of being compared to Jimmy Carter).

In a way, the global elite see it coming, and are trying to do something - protect their own wealth. Which is why we are hearing endless austerity messages, prepping the middle class to know they won't be middle class much longer. Not that it will happen quietly, but the messaging is out there.

Jehu said at January 30, 2012 9:37 AM:

Peak oil is way too scary to make good political or media fodder. There's also, at this point, little purpose to debating it---we will simply observe it or not observe it in our rear view mirror in the oil production numbers. To maintain the era of cheap energy will require a technological 'rabbit from the hat'. Maybe we'll get one and maybe we won't. I'd be unwise to premise all of your plans on such a rabbit.

Jason said at January 30, 2012 12:24 PM:

Isn't it all a bit asinine for environmentalists to screech "Peak Oil!" at the same time they're doing everything in their power to prevent tapping much of the oil reserves still left the US?

And I don't mean that as a moral complaint, but a complaint against the blatantly circular reasoning behind it all. It's rather like actively destroying the nests of a bird, then lobbying to government to place it on the endangered species list.

LoboSolo said at January 30, 2012 3:41 PM:

Because it's a phantom problem just like overpopulation. It doesn't exist except in the minds of alarmists. We'v been hearing cries of "peak oil" for years now and yet more oil continues to be found. As the price goes up, then expect the more to come from tar sands and shale oil. That's why the radical environmentalists aren't shilling about the phantom peak oil because they know there is oil to be found if the price is right.

Furthermore, other solutions are in the pipeline. More and more cars are being sold as flex-fueled vehicles (FFV). An FFV can readily and eathly switch between different types of liquid fuels. Methanol (not ethanol) is already price competitiv with gasoline per BTU (and without a subsidy!). Methanol can be made from any biomass but is more eathly gotten from NG which means more fraccing ... Another thing that the radical environmentalists are trying to prevent.

@Food, the democrats aren't interested in realistic alternativs to liquid energy. Most oppose nuclear energy and would rather tout overly-expensiv solar and wind which cannot handle their mindsight of HSR, light rail, and electric cars. Liquid energy independence can be had but the politics from both sides get in the way.

Tim said at January 30, 2012 4:21 PM:

Yes I agree...I seem to remember that the peak oil alarmist thought that once we hit global peak oil that the declines would come fast and furious. I recall 5-10% yearly declines in global production happening once we hit peak, projecting to a 90% decline in a decade after hitting peak. Seem to be we are seeing a plateau, with US production actually increasing in the last few years. Not exactly the armagedden the alarmists said would happen.

Tim said at January 30, 2012 4:50 PM:

From your Scientific America link above: Other statistics, however, argue against a plateau. Oil company BP found in its most recent analysis that oil production was actually more than 82 million barrels per day in 2010, higher than the proposed plateau of 75 million. That difference may be the result of the increasing use of "unconventionals"—Canadian tar sands or the natural gas liquids co-produced with oil extraction. Rising production in the China, Nigeria, Russia and the U.S. also hints that technological improvements may allow greater production from existing fields than the new research suggests.

Sound like we are running out of cheap oil...which may actually be a good thing. It both encourages increased fuel efficiency and finding substitutes for oil.

Randall Parker said at January 30, 2012 7:48 PM:


We can't afford the higher priced oil. It slows and stops economic growth. The world economy has slowed to a crawl at $100 per barrel.


75 million versus 82 million: Be aware of the difference between oil production versus total liquids. Conventional oil has hit a plateau for several years running. Much of the additional liquids are less of a gain than the raw numbers imply. The Energy Return On Energy Invested (EROEI) for ethanol and methanol are low enough that 1 million barrels of oil equivalent (BOE: watch for this term when reading about reserve estimates) from biomass really means putting 600-700 thousand barrels of oil into agriculture to get back 1 million for a net gain of 300-400 thousand barrels. So most of the non-oil liquids increase is a mirage. The net energy production increase is much smaller.

Also, biomass doesn't scale. The subsidies for ethanol drove up the prices of corn and the other grains that it competes with for land. So we paid more for food in order to get more ethanol produced.

Tar sands and deep water oil face a similar (though less severe) EROEI problem. The Alberta tar sands oil producers use massive quantities of natural gas to heat the tar sands and extract hydrocarbons.

The great hope for increased US production comes from the North Dakota and Montana shale oil (not to be confused with kerogen oil shale in Colorado which is still uneconomic and likely to remain that way) production surge. Still quite small potatoes. For context see UCSD economist James Hamilton on the history of US oil production and peak production. From the PDF of the full paper:

Production from Alaska peaked in 1988. North Dakota is the only state that continues to set all-time records for production, thanks in part to use of new drilling techniques for recovering oil from shale formations. To put the new Williston Basin production in perspective, the 138 million barrels produced in North Dakota and Montana in 2010 is about half of what the state of Oklahoma produced in 1927 and a fifth of what the state of Alaska produced in 1988. However, the potential for these fields looks very promising and further significant increases from 2010 levels seems assured.

North Dakota is going to slow the US oil production decline just like Alaska did. But also just like Alaska the Williston Basin production will not bring the US back up to its previous peak of 40 years ago.

Jason said at January 30, 2012 8:43 PM:


The reason I and many others are skeptical of "peak oil" claims is because, for the past 40 years, the public has been barraged by endless doomsday predictions, NONE of which have come true. This has an effect that the purveyors of such predictions seem not to appreciate, and instead take public skepticism or disinterest as incentive to ratchet up the hysteria.

People have been predicting peak oil since the 1920's...yet here we are.

Now I agree that we need to move to a non-fossil-fuel based economy, and as soon as possible; but—and this is another reason for skepticism—many of the people pushing this agenda do so for political rather than economic reasons. Moreover, many of the technologies that would allow us to do this are either totally-unworkable (e.g. wind), unworkable in the near-term (e.g. solar), or workable but rejected for political reasons (e.g. nuclear).

So where does that leave us?

Fat Man said at January 30, 2012 10:06 PM:

Peak oil will end and fossil fuel problems will go away when the last environmentalist is strangled with the entrails of the last lawyer.

bmack500 said at January 30, 2012 10:23 PM:

When words such as "Alarmists", "Radical Environmentalists" and such are used, it is clear that your position is politically / ideologically motivated and is not to be construed as any kind of factual statement.

I.E., your opinion doesn't make it so. Is calling attention to any issue you don't agree with always "Alarmist", or is it a rational conclusion based on the facts?

David Friedman said at January 30, 2012 10:36 PM:

You don't seem to be allowing for the effect of the sharp increase in availability of natural gas, which is a substitute for oil in some uses in the short term and for most uses in the long.

Food said at January 31, 2012 6:43 AM:

The reason I and many others are skeptical of "peak oil" claims is because, for the past 40 years, the public has been barraged by endless doomsday predictions, NONE of which have come true. This has an effect that the purveyors of such predictions seem not to appreciate, and instead take public skepticism or disinterest as incentive to ratchet up the hysteria.

People have been predicting peak oil since the 1920's...yet here we are.

Yes, here we are. This current recession has illustrated Rendall's point. Graph economic productivity and the price if oil side by side. Wolfram Alpha is your friend. It isn't difficult to figure out - when you site at a production plateau, the cost structure starts flapping, which reduces investment and puts a cap on overall output. Going for ever dirtier fossil fuels doesn't change the dynamic, and contra Friedman, gas doesn't substitute for a huge amount of the industrial uses of fossil fuel. Try making plastic out of it. (You can make electricity out of it, which works for cars in urban environments. The culture warriors don't like electric cars or urban areas, though, and consumer transit is a small portion of our energy budget in any case.)

It is time to get serious about alternatives. Massive social problems are in front of us if we don't have them, and we are out of time.

jim moore said at January 31, 2012 9:28 AM:

"Peak oil will end and fossil fuel problems will go away when the last environmentalist is strangled with the entrails of the last lawyer." - Fat Man

Brilliant, who would have thought that murdering people you don't like would create an infinite supply of fossil fuels and eliminate the negative externalities that come from using fossil fuels.

You should be embarrassed by your violent, mentally challenged post.

Jason said at January 31, 2012 12:11 PM:

"Graph economic productivity and the price if oil side by side."

Graph economic productivity and the price of horses side by side from 1500BC to present. Historically there's a strong correlation, which, given how expensive they are to buy and keep these days, implies we should all be living in mud hovels.

"It is time to get serious about alternatives."

What does this mean? If we are talking about removing much of the regulation that has strangled nuclear power into oblivion, then sign me up. But that's not what you mean is it? What you mean about getting "serious about alternatives" is: 'It is time for the government to dump boatloads of money it doesn't have into unproven and economically inefficient (but oh so politically correct) wind and solar power schemes.' Well sorry, that ship has sailed. Solar is the future, but it will become so when the private sector willing chooses it over alternatives on the basis of cost alone...and not a minute before.

"Massive social problems are in front of us if we don't have them, and we are out of time."

You're making sweeping and hysterical claims based on knowledge you cannot possibly possess. People often construe this as a mark of intelligence and learning. In fact it is the opposite.

LarryD said at January 31, 2012 1:54 PM:

Wolf! Wolf! Wolf!

We could switch to natural gas, with all the new gas fields we can now economically exploit. But that's not a politically correct "alternative fuel", is it? Well, biofuels aren't even close to ready, and there are serious scaling issues there. Solar and wind are too unreliable for their cost. Obama's administration has demonstrated it can only pick losers.

bbartlog said at January 31, 2012 5:37 PM:

'until somebody can tell me how I can persuade a billionaire to fund this project: hxxp://www.hedweb.com/hedab.htm
Or until your IP address gets blocked for being an obnoxious spammer. Take it to kickstarter (..and watch it die, but that's really not our problem, it's yours).

@Jason: I'm familiar with a lot of the doomsday predictions (Club of Rome being the main one, also Jeremy Rifkin's ravings) and I think it's important to separate the 'doomsday' from the 'peak oil'. I'm well aware that there are many (Howard Kunstler, for example) who predict sudden apocalypse based on peak oil. This is an entirely separate prediction (question) than whether oil production has peaked. It's entirely possible to believe that we have peak oil and that A) we will transition smoothly to natural gas and other energy sources or B) we will have a painful decade of stagnation while we figure out how to get by with less or C) we will experience worldwide dislocations and famines. I actually think that the people of the USA will end up coming out of it pretty well, so long as we can make sure that our energy resources aren't monopolized by a small elite.

anonyq said at January 31, 2012 5:38 PM:

Horses are consumer goods today so i would be really surprised if the price of horses today would show a negative correlation between prices and economic activity like oil has

Han Ningham said at January 31, 2012 6:28 PM:

Hmmm. Peak oil collapse? I'll bet Randall believes in wind farms and photovoltaic mega-projects as well, just like Obama and his failed 12 green projects, $5 billion plus down the drain. Dumb dumb dumb.

Peak oil is shaping up as a gargantuan superstition, with many faces and interpretations. A doom for all seasons, like climate doom. Not very rigorous but grabs you by the emotional gut strings all the same.

Jason said at January 31, 2012 6:35 PM:

"Horses are consumer goods today so i would be really surprised if the price of horses today would show a negative correlation between prices and economic activity like oil has."

Yes, and horses are consumer goods rather than the basis of our economy due to their replacement by other forms of technology. My point was that almost all predictions of the future tend to simply project the conditions of the present, which is why they never pan out as expected.


I agree. Clearly running out of oil at present would be a very bad thing. My complaints are:

1) The doomsday predictions are about as reliable as stock-market predictions...and should be regarded accordingly.

2) A lot of the peak oil hysteria, like global warming hysteria, is driven not by the problem, but rather by the proposed solutions. That is to say, people push these particular scenarios mostly because they want to push what they take to be the obvious solution to them. The problems may indeed be real and serious, but, at present, they strike me as essentially political rather than real.

I think the sooner we leave fossil fuels behind the better. Yet, it must be admitted that basically all of the State funded efforts in this regard have proven costly (and corrupt) failures.

Engineer-Poet said at February 1, 2012 7:58 PM:

The people who say "production is keeping up" haven't looked under the covers to see what shenanigans are going on.

  1. The number that's growing isn't "crude oil", it's "total liquids".
  2. "Total liquids" includes lower-energy products such as natural-gas liquids and biofuels.  These are a growing fraction of the total, so the total energy goes down even as barrels plateaus.
  3. The fuel inputs for growing biofuels are not deducted, so they are double-counted.

Engineer-Poet said at February 5, 2012 2:16 PM:

Typical clueless "economic" analysis.  What matters isn't how much oil is out there, but how fast and cheaply it can be delivered.  Flow rates have been generally going down while costs have been going up.  For an eye-opener, consider how many years of oil the world will have left when the difficulty of extracting it gets so high that the price collapses those sectors of the economy that can't use substitutes.  Yup, you got it:  infinite years of oil left.  But the economy will suck.

Our best future involves substituting abundant things for scarce things.  Replacing the indium oxide conductors in flat-panel displays and solar panels with graphene increases the years of indium left, but may actually cut indium reserves because the price makes less of it economically recoverable.

Randall Parker said at February 6, 2012 7:48 PM:


You have to appreciate just how incredibly inaccurate Daniel Yergin has been over years about oil prices and production to understand how little credence I put in what he says now.

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