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| Fig. 1: World Oil Production in millions of barrels per day from 1996 to 2012. [5] |
"The age of oil is ending ... the supply will soon begin to decline, precipitating a global crisis." [1] Peak Oil is the theory that sources of crude oil have already reached or are about to reach the maximum production capacity in the early 21st century. The contention is that worldwide oil production will diminish significantly in volume by the middle of the century. The reality is, however, that Peak Oil is not something that will happen in the near future at all. In 2013, Forbes named Exxon Mobile as the most profitable company in the world, with Gazprom, Shell, and Chevron following closely in the top ten. [2] We will see that these companies will continue to be profitable by looking at our current state of oil reserves as well as our rate of improving technologies for getting oil into real economic resources.
For one, the U.S. Energy Information Administration's Annual Energy Outlook for 2014 predicts that our "lower 48 end of year reserves" will actually increase from 25.10 billion barrels in 2010 to 35.45 billion barrels in 2040. [3] The 2014 Annual Energy Outlook also predicts that with a High Oil and Gas Resource case, crude oil prices in 2040 will only be $125 per barrel, as opposed to $141 per barrel as was found in the reference case. [3] With the price of oil going down due to plentiful supply, the appeal of oil in the market will remain high. Figure one below shows us the daily production of oil in the United States since 1996.
A major oversight from the proponents of peak oil was the underestimate of new and improving technologies. [4] With the use of fracking, there has been significant growth in crude oil production as a result of our developing ability to utilize tight oil and shale formations. As a result of these new technologies we have seen a significant increase in tight oil production: it accounted for twelve percent of crude oil production in 2008, compared to thirty five percent of crude oil production in 2012. [3] Oil is being extracted from shale formations in North Dakota and Texas so quickly that the United States is now the world's largest source of natural gas liquids and oil, surpassing Saudi Arabia and Russia. [4]
In addition to the plentiful supply of oil, the demand for oil has been shrinking, making Peak Oil even less of a scare. In October 2014, the International Energy Agency cut its predictions for growth of Oil demand for the next two years. [4] Because of increased supply and lowered demand, we see that the prices are going down. [4] This is keeping oil in the market as a still very competitive and available source of energy.
New and cleaner energy resources are a very important thing, and I look forward to when they will takeover. Unfortunately, however, the infrastructure is simply not there for it yet. As a result of our plentiful supplies, and rapidly improving technology, the oil industry will be profitable all around the world for a very long time in the future.
© Rachel Marincola. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
[1] P. Raeburn, "They're Not Making More,", New York Times, 8 Feb 04.
[2] "The Most Profitable Companies in the Global 500," Fortune, 8 Jul 13.
[3] "Annual Energy Outlook 2014," U.S. Energy Information Administration, April 2014.
[4] M. Geewax, Predictions of 'Peak Oil' Production Prove Slippery, National Public Radio, 17 Oct 14.
[5] "BP Statistical Review of World Energy," British Petroleum, June 2014.