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Peak oil really could destroy the economy – just not in the way greens think

28 January 2012

If the global economy goes seriously tits up — as I believe it is about to do — the important thing is that we understand the actual reasons why it went tits up. Otherwise the drastic remedial action we’ll inevitably take to ensure that it never happens again may well result in the exact opposite.

Consider, for example, that disturbingly tentacular collective of self-righteous hippyish busybodies Transition Towns. Here is an ideological movement which senses, as most of us do, that there’s something seriously amiss with western industrial civilisation. It senses — again, wisely and correctly, I believe — that we urgently need to form networks, build stronger and more self-reliant communities, grow more of our own vegetables, and so on, if we’re to weather the storm.

Where the Transition Towns movement couldn’t be more wrong, though, is in its analysis of why these emergency actions are necessary. Transition Towns thinks the problem lies in the greed, wanton resource-depletion and yearning for growth which drive the capitalist system. In fact, the problem lies with the mentality which gave us Transition Towns.

Transition Towns is a ‘community project’ whose aim is to ‘raise awareness of sustain-able living and build local ecological resilience’ in response to the ‘dual challenges of climate change and peak oil’. A jolly admirable aim, too, I’m sure we would all agree, if either of those ‘challenges’ were genuine.

But they’re not. Today, skipping lightly over the first of those two alleged challenges, I’m going to focus on peak oil. Perhaps you’ve heard of it. Perhaps you’re even worried about it. Peak oil is the notion, hugely popular in environmentalist circles, that any time now the oil is going to run out. And when it does run out, so the theory goes, there’s going to be mayhem: massive hikes in the price of energy will send the cost of living skyrocketing and push the global economy into a major depression, leading to civilisational collapse; and a post-apocalyptic scenario in which the only transport is gyrocopter or camel-drawn wagon, everyone wears terrible 1980s haircuts, and we are forced to fight for our lives in a giant dome presided over by an elderly Tina Turner.

All right, maybe not Tina Turner. But the rest is what peak-oilers actually believe. It is one of the key tenets of the global green religion: ‘scarce resources’ are running out; they must be preserved for ‘future generations’; ergo, we must reduce our consumption of them either through self-abnegation or through state intervention ranging from market manipulation (e.g. taxes and subsidies to drive us all from fossil fuels) to full-on rationing. If you refer back to the previous paragraph, you may detect a certain irony here.

Yes, in the name of averting global economic disaster, concerned greens have been pushing the very policies most likely to cause it. Driving up energy prices, discouraging consumption, increasing regulation, rationing resources: these are not, I think we can all agree, methods traditionally associated with getting an economy out of a depression.

Still, what other option do we have? I know. Let’s ask an expert: a physicist of such distinction he even had a temperature scale named after him. Here’s what Lord Kelvin had to say on the subject of another scarce resource, back in 1902: ‘The enormous amount of coal required to run our great ocean steamships, our leviathans of the deep, and the innumerable factories of our cities is making such inroads upon the available store that nature cannot forever supply the demand. When all the coal of the earth is used, what then?’

Twenty years later, the situation had grown more dire still. US president Warren Harding’s Coal Commission, having consulted 500 experts, concluded: ‘Already the output of [natural] gas has begun to wane. Production of oil cannot long maintain its present rate.’ Then in 1956, another renowned expert called M. King Hubbert declared that oil reserves were far more limited than was generally recognised; in the US supplies would peak between 1965 and 1970. Sure enough US oil production did indeed peak in 1970. Woah! How spookily prescient was that?
Actually, not very. Last year, for the first time since the 1940s, the US became a net exporter of oil — helped by such discoveries as the Bakken shale beneath North Dakota, which is reckoned to have between 4 billion and 24 billion barrels of recoverable oil. Around the world, despite a drilling rate of around 93 million barrels of oil a day, the quantity of known reserves at the end of each year is increasing, not decreasing.

Here’s Daniel Yergin, Pulitzer Prize-winning author of The Quest, putting it into perspective: ‘The world has produced about one trillion barrels of oil since the start of industry in the 19th century. Currently, it is thought that there are at least five trillion barrels of petroleum resources, of which 1.4 trillion is sufficiently developed and technically and economically accessible to count as proved.’

And that’s just oil. We haven’t got on to the miracle of shale gas yet, found in such abundance in the US that energy costs have plummeted — as they would do in Britain too, were we properly to exploit our own bounteous reserves (the Bowland shale alone, beneath Blackpool, has 200 trillion cubic feet of the stuff) and abandon our vainglorious pursuit of ‘renewables’.

My beef with the green movement is not that it cares too much about the ‘environment’ — I do too — but that its strictures and Weltanschauung are so often divorced from reality. If those green fundamentalists can get it so badly wrong on ‘peak energy’, why should we trust anything they have to say on anything else?

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colin powis

January 26th, 2012 6:55am Report this comment

The ''green movement'' is quasi religious and like any other true believers will distort reality to suit their worldview and bogus predictions ....global cooling , acid rain , ozone layer and global warming were/are all hysterical exaggerations , but these eco fascists have cried wolf waaay too many times for their own good ...the hysteria and alarmism is finally petering out as it is finally dawning on the general public that global warming is the scam of the century and that windturbines are a waste of money ...this is what comes from an incestious relationship between pseudo science and political ideology

Chris Enkia

January 26th, 2012 6:47pm Report this comment

But James, why should we trust you? Here's a direct quote from your facebook page:

James Delingpole
Maybe I should move to Canada rather than the Cotswolds, then. Are there any Big Shale Oil companies that need a troublemaker? If the money's right, I'm there...

You're just a big ol' gun for hire, ain't you?

James Delingpole

January 31st, 2012 3:02pm Report this comment

@chrisenkia. Here's the great thing: I really don't have to make people like you believe me. That's because there will always be a certain proportion of the population, of which you are unfortunately part, who will cleave to their green religious views regardless of the evidence, and who will always wheel out straw man arguments and non sequiturs like "well Delingpole said he wants to go work for a shale gas company. Therefore that must mean that he's in the pay of big oil and wrong about everything." Bask in your warmist faith while you still can: the global temperature record is increasingly against you.

Mark Cooper

February 2nd, 2012 4:51pm Report this comment

It's going to be a long, long time before we exploit the UK shale gas reserves.
Greens are against it because it will lower energy prices and make alternatives even more non-viable.
The government is against it as there is now a huge amount of money as well as reputations invested in wind farms.
But mainly, the big oil companies hate shale gas-it could easily replace oil as our main energy source, and none of the majors have invested in it- they are actively supporting lobbyists who are trying to stop shale gas developments...

Peter Nolan

February 2nd, 2012 5:33pm Report this comment

A pretty interesting article to read. Although what a ridiculous conclusion at the end, just because the green's are 'badly wrong' does not mean they cannot be trusted. This comment at the end of the article is excacterbated by the fact of your rightiousness and seemingly bipolar view of the issue, whereby when criticised for your own leanings you immediately brand them as being part of the opposing side in the issue. All the person did was point out that you yourself may have a biased take on the issue, and only follows similar logic to that which you expouse at the end of the article. The logic you use at the end of the article and in response to criticism is absolutely baffling considering that the article is for the most part well written.

colin powis

February 3rd, 2012 8:55am Report this comment

Nolan ...Delingpole's logic is quite correct ....if the eco-twits are wrong in their predictions , they should lose credibility, FAST ...even true believing religious ''prophets'' lose their followers when their predictions turn out to be bogus

There's a whiff of jim jones -david Koresh around these shysters

David Veale

February 3rd, 2012 3:49pm Report this comment

Mr. Delingpole -- you have made a serious factual error. The US has become a net exporter of OIL PRODUCTS, not OIL. What's that you say? We now have an excess refinery capacity -- a rare occurrence as a result of our declining domestic demand. We're still importing the vast majority of our crude oil to feed the refineries (approximately 2/3rds of the oil).

JH

February 3rd, 2012 4:04pm Report this comment

"the US became a net exporter of oil"

Did you research this article at all?

The US is not even close to a net exporter of OIL, in fact we still import over 50% of our OIL consumption.

The only thing we are a net exporter of is some refined oil products - like diesel.

Joshua Bober

February 3rd, 2012 4:35pm Report this comment

Of course we won't run out of oil. No one's claiming that, nor will we ever. There will always be oil in the ground. The real question is will there be oil in the economy? And, most importantly, since it is now obvious to anyone with a brain that supply responses to the price of oil are growing more inelastic, at what price will we be functionally out of oil to use for fuel anyway?

Really, this piece started out with an interesting premise, and you could have turned it around, but your logic took what could have been a beautiful swan dive and made it a belly flop.

I'd also take a look at Yergin's work again, especially the presentations of IHS CERA, the firm he runs. Despite being widely cited by the media, Yergin has not really been held accountable to over ten years of wildly overoptimistic oil price predictions.

Mark Spence

February 3rd, 2012 4:45pm Report this comment

I read your article with interest.

It is clear you have little insight into the issue.

Your article falls at the first hurdle.

Peak Oil is not about running out of oil as you claim. Peak oil is about maximum production. This can apply to individual oil fields, national production and utlimately global production.

Production at all oil fields follows the same bell shaped curve. When the sum of World fields is tallied you have the global production curve.

As you righlty point out Hubbert correctly predicted Peak Production in the US, he was able to do this because Amercian production data was accurate and trust worthy.

Unfortunately we cannot say the same for published Russian or Saudi Arabian data. We have to take their word for it. Many studies have been published on this issue.

You sloppily attempt to discredit his work by claiming the US was a net exporter of oil products last year. This is a meaningless statement, you are comparing apples with oranges. You do realise that to produce those petroleum products the US had to import most of the source petroleum!!!

If you are going to prepare a report on a technical issue I would advise you fact check before publishing. I expect better.

jim bethel

February 3rd, 2012 5:10pm Report this comment

Sorry to intrude on your cornucopian fantasyland, but having wrong facts leads to very dubious conclusions. The US became a net exporter of only refined petroleum products (mostly due to weak internal demand). It still imports more than half of its crude oil. Since 1970 it has been and remains a net crude oil importer.

Tx Chem Eng

February 3rd, 2012 5:48pm Report this comment

Your "belief" that the U.S. is now a net exporter of oil is ludicrous. And that makes the rest of your article ludicrous.

The U.S. had to import about 8.6 million barrels of oil each day last year in order to keep things going. That is because the production rate of oil in the U.S. peaked in 1970-71 at close to 10 million barrels per day and is now down to 5.6 million barrels per day - despite a frenzy of new drilling.

All of this information is easily available on the U.S. EIA website - the production data, the import data - the drilling activity data.

And I am not part of the "green movement" that you seem to think is related to peak oil in some nefarious way.

If you want to disprove peak oil it is quite simple. Just plot the global conventional oil production for the last 15 years or so and show that it is still increasing like it did all through the 20th century.

Unfortunately when you do that you will see that the production rate has been stalled for the last 7 years. That is what peak oil means. It has nothing to do with "running out of oil".

Peak oil is not some environmental movement. Peak oil is very simply an observation of the global production rate of oil. And if you are not talking about the production rate you are not talking about peak oil.

You seem to think it is something else - which indicates you have probably never even studied it.

chrissy

February 3rd, 2012 7:29pm Report this comment

what a poorly written, even more poorly thought out, premise for an article.

Greg

February 3rd, 2012 9:30pm Report this comment

While you're on the US Energy Information Administration's web site researching the correction to your piece, James, take the time to look at two other charts that they make available: cost per foot of well drilled in the US over time, and returns per foot of well drilled over time.

Peak oilers don't believe in apocalypse, as you seem to think. Nor do they believe that technology is a magical cure-all. They believe in two other things: the law of the market (supply and demand), and the law of diminishing returns (investors pick the low hanging fruit first).

Ric Merritt

February 3rd, 2012 9:34pm Report this comment

Groan!!...!! The US a "net exporter of oil"? If you believe that, you're too incompetent to tie your own shoes, let alone write for publication. If you don't believe it, then please devote a column (better, a year of columns) to sackcloth and ashes and explanations of how such a clinker got into this one.

Eric

February 3rd, 2012 10:21pm Report this comment

God help us, another wanna be journalist who does cut and paste with no fact checking. Do us all a favor, invest some time in actual research on your chosen topic before you post an article.

Omri

February 4th, 2012 2:44am Report this comment

Mr. Delingpole, future generations will use this column in their history classes when they study Lysenkoism.

Randle

February 5th, 2012 11:09pm Report this comment

Talk about a straw man argument. Your assertion that peak oilers think oil will run out in the near future is as ridiculous as creationists saying that evolutionists believe that humans evolved from chimpanzees. No one who has any sway in either of these debates has ever proclaimed such a thing.

You claim that because a number of people have warned about resource shortages in the past that never came to fruition it means that current warnings can also be disregarded. I'm not sure what your understanding of logic is but it's obvious you haven't applied any here.

What an embarrassing article.

Gus

February 6th, 2012 2:40am Report this comment

Is this the same Daniel Yergin who predicted that oil would fall to $40/barrel in 2007/2008, and has a whole string of similarly failed predictions?

Brian H

February 17th, 2012 1:53am Report this comment

Oil companies prove about 40 yrs of supply, at all times. When demand or pricing changes, they adjust their exploration or extraction technologies and processes.

As for maximum flow rates, that's a result of demand. If more had been pumped, would more have been used? The real "peak" that would be of concern would be Peak Energy. Since there are many substitutes and replacements (NG, LNG, fuel from coal, etc.) it makes no sense to focus on one. It's only the sum total that matters.