Prior to coming back to school for my MBA I worked for a bank focused on the energy industry. The bank was founded by Matt Simmons, likely the most vocal advocate of the Peak Oil theory. I remember when oil was approaching $150/bbl financial news channels had someone talking about the price of oil and its impacts to the economy almost daily, during this time Peak Oil was an extremely hot topic. Now that the financial crisis hit and oil prices subsided Oil prices and Peak Oil have not been talked about as much, but when I do hear people talking about Peak Oil it still seems that what Peak Oil actually is, is misunderstood.
Many people seem to think that Peak Oil is the theory that the world is running out of oil. While oil is a finite resource and every barrel we take out of the ground reduces the amount available, the consensus thought is that the world is not running out of oil any time soon. The world is running out of easily and cheaply available oil, which is different than just running out of oil. As technology continues to advance we continue to find more and more deposits in deeper areas of the ocean, or trapped in rock, and a number of other difficult to reach places. The problem with these new finds is that it becomes extremely energy and cost intensive to recover the oil. This is the basis of the Peak Oil theory.
The world has a lot of oil, but it is getting harder and harder to reach which will lead to a “Peak” in daily production. The idea is basically that Peak Oil is the maximum level of production the world is capable of after which we will go into decline. Again this is not that we have run out of oil, but we have run out of the capacity to produce anymore. Recently the CEO of Total stated that the company believes we are coming to Peak Oil. The article can be found here. Though the exact production level is highly contested as is the question of “have we already reached Peak Oil or not?” Total predicts that 89 million bbls/day is the Peak level. Others seem to think that Peak Oil was reached in 2005 as described here.
The effects of Peak Oil and how it is likely to come about due to the bell curve production follows are discussed at http://www.lifeaftertheoilcrash.net. The Energy Bulletin also has some interesting information on the Peak Oil theory.
Maybe it’s because I was working for a company that has been touting the existence of Peak Oil long before it became fashionable, or maybe it’s because the fact that we can’t keep up with our consumption is a fact that makes perfect sense, but whatever the reason I am a believer in Peak Oil.