The big debate behind today's current high oil prices is the concept of Peak Oil: That world oil production has nowhere to go but down, meaning the price is likely to continue going up. Democracy Now! rounded up two experts to debate the debate.
We're joined in our Firehouse studio by Julian Darley, founder and director of the Post Carbon Institute and Global Public Media. He's also author of High Noon for Natural Gas: The New Energy Crisis, co-author of the forthcoming book, Relocalize Now!: Getting Ready for Climate Change and the End of Cheap Oil. On the phone from Amherst, Massachusetts, we are joined by Michael Lynch, President of the Strategic Energy & Economic Research. Previously, Michael was Director of Asian Energy and Security at the Center for International Studies at M.I.T. We welcome you both to Democracy Now!
Julian Darley, let us begin with you. Can you explain the concept of peak oil?
JULIAN DARLEY: Peak oil is essentially quite a simple idea. It comes about because when you have a reserve of conventional oil, either in a single reservoir or more particularly in a nation, when you get roughly halfway through, as you said, roughly halfway through that reservoir or that nation's stock, if you like, of conventional oil, then you see a decline in that oil. In other words, the production rises over a period of time — that depends partly on how much effort you put in and also, to some extent, on the geology in the reservoirs themselves — rises up.
When you get roughly halfway through — in fact, the world averages about 53%; there's nothing magical about 50% — when you get roughly halfway through, then, because of a mixture of technical, economic and geological factors in the structures of reservoirs themselves, you go into a decline. There are no exceptions to this for reservoirs, unless you apply very powerful so-called secondary and tertiary recovery techniques, which means pushing in water or carbon dioxide and things like that. Even so, you can hold some reservoirs at a plateau for a while, and then they go into decline. They still go into decline. One of the dangers is when you do that, your decline is even faster and difficult to predict.
AMY GOODMAN: And what makes you think it's happening now?
JULIAN DARLEY: Well, history has shown — the most dramatic example being that of the U.S., which its own oil production peaked in 1970 — history shows that this happens to all nations. Now, when it happened to the U.S., it was able to import yet more oil. It was already an oil importer in 1970. It was able to yet import yet more oil. Now it imports approximately 60% and rising. So when this happens to a nation, it turns to other oil-producing nations. The trouble is when it happens to the world, and the world is roughly halfway through its conventional oil, there are no other planets to turn to to import from. So then, you get this phenomenon of global oil peak. There's no one else to import from, so the decline begins to happen.
And it does look as if we're about halfway through the conventional oil reserve of some two-and-a-bit trillion barrels. We've used a bit more than a trillion now. And so it's absolutely inevitable that it will happen. There are corroborating data from various other sources which suggest it's happening around about now. And there's some more technical data — we can go into them if you'd like. So, it's not just the fact that production figures suggest we're about halfway through, there's lots of other corroborating data, as well.
AMY GOODMAN: Michael Lynch, your response?
MICHAEL LYNCH: Actually, I think the problem here is that Julian and a lot of the people making these arguments are not that familiar with the technical terms in the oil industry. The estimates that there's about two trillion barrels of oil resource are actually done by some very simplistic models, which have not always failed, but almost always failed on both the national and a global level. The oil conventional oil resource base, the oil in place, is about eight to ten trillion barrels. And right now, most estimates are that about 40% of that will be recovered, in other words, about three, three-and-a-half trillion. But the amount we'll recover will grow over time. So we're not — we're really not even close to halfway through the conventional oil resource base.
AMY GOODMAN: Your response?
JULIAN DARLEY: Most estimates don't say that we've got about that much, and the oil reservoirs don't grow in time. Give it a billion years and you might see quite a bit more oil in the ground, but I don't think we have a billion years. So I'm afraid I disagree with both those statements on factual grounds.
MICHAEL LYNCH: Well, actually, I think the problem is that most of the people who write about peak oil have not been reporting the recent estimates done by geologists and firms and so forth. And in fact, although you see many claims that the amount of reservoirs — the oil in the reservoirs don't grow over time, that is, the amount you can recover don’t grow over time, there's a huge amount of data and a lot of research that shows this is true, and I've challenged the peak oil theorists on this. And, in fact, their own research says that it's true, but they've chosen to ignore those numbers. You really can't find anything other than claims and assertions that they don't grow. If you simply look at the trade press and the engineering articles, you see hundreds and hundreds of examples of this.
AMY GOODMAN: Julian Darley?
JULIAN DARLEY: The amount of oil in the ground simply doesn't grow. What happens is the amount of reported oil can grow, but most geologists now accept and have long admitted privately, that they know roughly what's in the ground when they make the discoveries, but it's not wise or convenient for integrated oil companies, the large oil companies, to report those early numbers. So they report a much lower amount. They're forced to by the S.E.C. and other reporting regulations, so it makes legal sense for them to report less than they believe to be there. The nice thing about that, from their point of view, is let's say you find a billion barrels and you only report half of it — and it's perfectly legal to do so — that means next year, when you, say, don't find very much, you can report a bit more, and then the same thing the next year after that. So it's been very convenient for the oil companies, but it doesn't mean the amount of oil in the ground grows, and this is very, very important. It simply doesn't.
What is there is there from about a billion or so years of geological and plant activity. There were two large charges about 150 million years ago and about 90 million years ago, ironically from two periods of enhanced global warming. There have been several other periods, although those look like the biggest periods of deposition and creation, production of oil in the ground. That doesn't grow. What makes some difference is new technology, which has been in place for the last 20, 30, 40 years, although there is considerable evidence that even new technology doesn't really increase the recovery factor very much, at least not very much in the last 20 to 30 years. It helps you to get it out more quickly, doesn't increase that recovery factor, which varies between about 25% and 40% normally. It can be a bit higher.
So, what you're looking at is, number one, real oil that we can really get out does not grow, just the reporting of it. And now, as you see from Shell a couple of years ago, they were forced to admit that their reserves were not nearly as big as they said. Very complex issue. It's true, that this is a matter of reporting. And ultimately, it's molecules that people need to put in their cars and to feed the petrochemical industry, not just reports of molecules.
And so, what you find is that you can, for instance, tell — you can be creative with how much you've got in your bank account, for instance. But there comes a point when you have to be honest about it, because the bank will say to you, “You haven't got that much, and you can't spend that much.” And to some extent, this is what's been going on with global oil companies. It's not that they've been lying. They have been forced to behave like this, but it's been convenient, as I say. And now we're reaching the point where the truth is coming out. These so-called replacement ratios, for instance ExxonMobil reputedly replaced 117%. Many of the other oil companies haven't done so well, of their oil supplies, year-on-year. But in point of fact, when you look at it, they include gas, as well as oil in that, and more and more, it's been gas that's been making up for oil in terms of replacement and reserves. So —
AMY GOODMAN: Let's get Michael Lynch's response to that.
MICHAEL LYNCH: Yeah, I mean, the point is that we're both talking — neither of us is talking about the oil, the molecules in the ground. We're talking about reported molecules in the ground. And Julian thinks that when he sees the numbers of two trillion, that that's the molecules in the ground, not the reported. The estimates, when he talks about the two trillion, the people who make those estimates have raised their estimates over time by about 400 or 500 billion barrels.
I mean, I've dealt with the people who have done the original research that he's relying on, and, you know, I’ve pointed out the flaws in their arguments and the fact that they have had to repeatedly revise their estimates and research. It's the claim that is often made by people like Matt Simmons or Colin Campbell that you can't increase the recovery factor much, you're just getting now faster. But if you look, you'll find that they say this over and over again, and they don't give you any real evidence to back it up. If when you talk to the industry, and I've debated with Matt in front of the Society of Petroleum Engineers, and you tell them that Matt says this — he doesn't say this to the engineers, because they would laugh at him — that's the reaction. I mean, these guys are working all the time to raise the amounts that they can get out of the ground.