Steve Andrews was kind enough to approach me about writing on the subject of where the peak oil community agrees with, shall we say, its critics. However, the peak oil community is itself divided in its views and cannot be addressed as a unified whole. So, this piece will include what I consider the areas of disagreement between the two communities of peak oil advocates, and the subsequent areas of agreement between resource optimists and peak oil advocates of both kinds.

The division appears primarily to be between those who focus on resources (Campbell, Deffeyes, Laherrere) and those who consider flow rates to be the key question (Rodgers, Skrebowski, Smith). The central point where these two groups tend to agree is that world oil production will likely peak sometime during the next decade, at a level below 100 million barrels/day, but the flow rate pessimists would, I think, tend to agree with most of the following statements, which contradict the beliefs of many resource pessimists:

• Bell curves are not scientific and do not produce accurate production forecasts or resource estimates;
• There is no particular reason for oil production to peak when half of the resource has been produced;
• Creaming curves are marginally useful, but have been proven to be too conservative because of conservative field size estimates;
• Hubbert linearization is not an accurate forecasting technique but simply produces a declining curve for virtually any data series that is long enough;
• Simple extrapolation of a historical data curve does not work, as many factors affect discovery and production, not just geology;
• Discovery levels for the past decade or so are largely unknown, since data is of necessity very poorly estimated until a field has been analyzed at length and even produced;
• And, new technologies are constantly allowing additional supplies to be accessed economically; they do not merely accelerate production of existing resources.

But in addressing the overlap between resource optimists and flow-rate pessimists, we must certainly agree with many common, but largely irrelevant, comments:

• It is hard to produce oil. (See “There will be Blood”)
• It costs a lot of money to produce oil.
• Government data is often unreliable, especially regarding oil and gas reserves, and especially from OPEC members.
• Forecasts are often wrong.
• Price forecasting is harder than supply forecasting because of speculation and geopolitics.

The relevant issues which all can agree to are limited to a few, I think, namely:

• Non-OPEC production has not performed as well as expected, and poorly overall, in the past decade.
• Costs have risen broadly in the industry in the past decade.
• Shortages of equipment and personnel are a major constraint on flows. 

The disagreement then comes over whether or not these problems are transient and/or cyclical in nature. The first of the three is the hardest to evaluate, but the latter two would be clearly described as cyclical by resource/supply optimists. To make some of the differences more specific, resource/supply optimists would generally accept the following:

• Increases in difficulty reflect a continuation of industry experience, not a fundamentally different situation;
• Resource nationalism and political constraints reduce available supply, but are neither permanent nor insoluble problems (as geological scarcity would be);
• Depletion is a normal part of the industry’s operations, and the evidence does not seem to suggest it has changed enough to matter;
• Future capacity additions, including the offset for the effect of depletion, do not represent a significant change in past trends; and
• Moves into harsher environments are not fundamentally different than those of the past, and are partly or largely offset by better technologies and science. 

In all likelihood, both resource and flow-rate pessimists would disagree with the above, as near as I can tell. However, recognizing the diversity of opinion on this issue, it would be nice to have at the least some of the prominent ASPO members to indicate the degree to which they agree or disagree with the various statements above.

And Now for Something Completely Different…

(Although I have certainly not predicted oil price behavior correctly in the past few years --to put it mildly--I would argue that this is not relevant to the issue of supply forecasting, and hope my views on that subject will be considered in that light.) The prospect of an oil production peak at 100 mb/d, as some in industry now believe, appears unlikely in my opinion, as most of the above-ground constraints should be overcome. Unless there are serious demand side pressures (which I don’t expect), oil production will probably pass 100 mb/d within 12-15 years. Certainly, given that we’ve produced only 10-15% of conventional oil resources and unconventional resources are larger than that, there seems no reason to consider petroleum to be a scarce resource.

And while non-OPEC supply has underperformed, it seems likely to recover soon, as it has done the past two times it plateaued. Indeed, having spent two decades writing about the Malthusian bias to oil supply forecasts, I cannot find any differences with the current set of arguments, whether from resource pessimists, those concerned about flow rates, or senior industry officials, and the predictions of a quarter-century ago.

Instead, we appear to be experiencing a financially-driven oil price bubble, which will eventually burst and leave oil prices much lower than the current $110/barrel. (Prices might not go below $80 this year, but longer term, $45 is more likely the norm.) The industry will once again lament that they “screwed up the boom,” companies with deep pockets will buy up those who are cash short, resource nationalism will recede as will upstream costs, while investors in alternative energies flock to Washington in search of ever more government support.

Michael C. Lynch is the president of Strategic Energy and Economic Research, Inc., and responsible for their global oil practice. He has worked for three decades analyzing the international petroleum industry, much of it at M.I.T., writing extensively about petroleum supply economics and forecasting. His work has appeared in six languages.

[ASPO-USA Editor’s note:
Mike has long had strong disagreements with the peak oil community over the last 15+ years. See his 96-page treatment of this subject, “Crying Wolf: Peak Oil Alarmism—Fact or Fiction.”

Additionally, we note that from our perspective, the two groups identified above—“resource pessimists” and “flow-rate pessimists”—are effectively two sides of the same coin, carrying the message forward that peak oil is a major looming problem bringing with it potentially massive economic, social and political impacts.]

(Note: Commentaries do not necessarily represent ASPO-USA's positions; they are personal statements and observations by informed commentators.)