Misc Resource Wars Impact

Peak Oil

Defense

No Peak Oil

High oil prices promote market solutions for peak oil – new technology, recycling, and efficiency

Watkins (2006) criticizes the definition of URR as a fixed, final or fundamental fact. He shows oil production increased by 30% between 1973 and 2003, with reserves to production ratios rising over the same period from 31 to 40 years (i.e. reserves increased faster than production). Watkins (2006: p. 512) argues that the exact estimate of URR, optimistic or pessimistic, would include the knowledge of future science and technology. URR are thus unknowable. Critics of the peakoil vision emphasize the large quantities of non-conventional oil in tar sands and oil shale (Table 1) (Hall et al., 2008).

Peakoil critics mostly share an optimistic view on discoveries. In 1994, Odell (1994) spreads the view that most regions are under-explored because the global oil industry experiences a lack of maturity compared to the USA industry, retarding the exploration of new reserves compared to quick and intensive exploration in the USA. Also high reserves to production ratios retard exploration. Maugeri (2006a: p. 1) argues that during the last 25 years more than 70% of exploration effort took place in the USA and Canada that probably hold only 3% of the world’s crude oil reserves. The Middle-East region only experienced 3% of global exploration during the same period while holding around 70% of the earth’s crude oil reserves. In the Persian Gulf, less than 100 exploration wells (out of a total of about 2000 wells) were drilled between 1995 and 2004, while 15,700 exploration wells (out of a total of more than one million wells) were drilled in the USA during the same period. Although OPEC countries such as Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates own the largest oil reserves, these countries are still relatively underdeveloped and under-explored (Maugeri, 2006b: p. 150). After the 1970s, most Middle-East countries nationalized their oil industries causing a decline in the regions geological and exploration know-how. Today, Western oil companies only control 8% of the global oil reserves while more than 90% of the world’s reserves are located in countries not allowing foreign access and unwilling or being unable to develop new reserves on their own (Maugeri, 2006a: p. 1). Maugeri (2006b: p. 152) emphasizes most oil producing countries pump from old fields, most being in production since the first half of the 20th century, still using 50–60-year-old technology and equipment. Next to OPEC countries, the capacities of the Russian and Caspian regions are seriously underestimated. Maugeri believes current limited spare production capacity is the result of 20 years inadequate investment in exploration. The price collapse in 1986 made OPEC countries worry about overproduction causing several OPEC countries not to develop new fields and only exploiting those already in production to maintain steady production levels. Low prices in the 1990s, limited growth in demand and another price collapse in 1998–1999 reinforced the principle of minimizing excess capacity. Between 1986 and 2005, global spare oil production capacity dropped from 15% to 2–3% of global demand (Maugeri, 2006b: pp. 151–154). High prices are the result of economic disturbances, not of geological limitations. High prices are a prerequisite for greater investment. (Maugeri, 2006a: p. 2) concludes with: ‘In other words, there is more than enough oil in the ground’.

Odell shows that between 1950 and 1989 only once the annual use of oil exceeded the annual addition to reserves by the global oil industry and states: “the world is running into oil, not out of it” (Odell, 1992: p. 285). We updated Odell’s graph, based on BP Statistical Review data for the post-1990 period, and show that Odell’s findings hold for the post-1990 period until 2007 (latest data available). From 1990 onward, the 5 year moving average of gross additions to reserves always exceeded yearly production.

No peak oil – new reserves and technological advancements

Helm, ’11 - economist specialising in utilities, infrastructure, regulation and the environment, and concentrating on the energy, water, communications and transport sectors primarily in Britain and Europe. He is a professor at the university of Oxford and a fellow of New College, Oxford (Dieter, “Peak oil and energy policy—a critique”, Oxford Review of Economic Policy Volume 27, Winter 2011, http://oxrep.oxfordjournals.org.proxy.lib.umich.edu/content/27/1/68.full.pdf+html)//AY
Contrary to the view of the peak-oilers, new reserves keep on being discovered (Lynch, 2002), with recent new finds in the Mexican Gulf and off Brazil. Promising findings off the Falkland Islands and new information from the Amazon basin give the chance of yet more discoveries to be added to the results of greater exploration in Russia. Even in the well developed North Sea, new reserves are being found. The BP disaster in the Gulf of Mexico only temporarily limited offshore development. Onshore, the great success of the last decade has been in Africa, with, in particular, the emergence of Angola as a key supplier to the US and China. Following Hubbert, peak-oilers take the yield from existing fields as given. It is typically

assumed that a field will yield less than 50 per cent of its capacity. This, however, is only true if there is little technical progress and the costs limit extraction. Change these variables, and then the depletion level itself becomes a variable. Put another way, at least half of all the oil extracted in the industry’s history is still in the ground. Of more relevance for reserves is the depletion number—a small increase in the amount of oil extractable may have much more significance to total recoverable reserves than

a new big oil-field find. As with abandoned coalmines, some combination of technology, costs, and price may make more of this recoverable. The importance of this point is that peak oil claims are ultimately economic ones—there is no relevant physical peak. Rather, it is argued that the economics of oil extraction dictates that only some (small) parts of the physical reserves are worth exploiting. Hence the claim that there is a production ceiling is based upon assumptions about costs—and these, in turn, rest on given (current) technologies. In much of the peak oil literature, the scope for technical change in fossil fuel production is downplayed. Yet there is very little basis for this assumption: indeed, more resources have been devoted to fossil fuel technologies than renewables for some considerable time. The development of offshore oil is recent, spurred on by the OPEC price shocks in the 1970s. Much of this is not based on exogenous discoveries, but on investment. Looking ahead, it is to be expected that there will be significant results in the new areas of unconventional gas and shale oil, and in offshore E&P. Work on the Shtokman field off the northern Norwegian and Russian coasts, deep drilling off Brazil, and managing the conditions in Yamal are together likely to yield significant advances. The scale of the challenges faced by BP in the Mexican Gulf has led to a live experiment with frontier technologies. It has been a massive exercise in R&D.

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