The Peak Oil Paradox

Back in the mid-noughties the peak oil meme gained significant traction in part due to The Oil Drum blog where I played a prominent role. Sharply rising oil price, OPEC spare capacity falling below 2 Mbpd and the decline of the North Sea were definite signs of scarcity and many believed that peak oil was at hand and the world as we knew it was about to end. Forecasts of oil production crashing in the coming months were ten a penny. And yet between 2008, when the oil price peaked, and 2015, global crude+condensate+NGL (C+C+NGL) production has risen by 8.85 Mbpd to 91.67 Mbpd. That is by over 10%. Peak oilers need to admit they were wrong then. Or were they?


It is useful to begin with a look at what peak oil was all about. This definition from Wikipedia is as good as any:

Peak oil, an event based on M. King Hubbert’s theory, is the point in time when the maximum rate of extraction of petroleum is reached, after which it is expected to enter terminal decline. Peak oil theory is based on the observed rise, peak, fall, and depletion of aggregate production rate in oil fields over time.

Those who engaged in the debate can be divided into two broad classes of individual: 1) those who wanted to try and understand oil resources, reserves, production and depletion rates based on a myriad of data sets and analysis techniques with a view to predicting when peak oil may occur and 2) those who speculated about the consequences of peak oil upon society. Such speculation normally warned of dire consequences of a world running short of transport fuel and affordable energy leading to resource wars and general mayhem. And none of this ever came to pass unless we want to link mayhem in Iraq*, Syria, Yemen, Sudan and Nigeria to high food prices and hence peak oil. In which case we may also want to link the European migrant crisis and Brexit to the same.

[* One needs to recall that GWI was precipitated over Kuwait stealing oil from Iraq, from a shared field on the Kuwait-Iraq border, leading to the Iraqi invasion of 1991.]

The peak oil debate on The Oil Drum was a lightning conductor for doomers of every flavour – peak oil doom (broadened to resource depletion doom), economic doom and environmental doom being the three main courses on the menu. The discussion was eventually hijacked by Greens and Green thinkers, who, not content with waiting for doomsday to happen, set about manufacturing arguments and data to hasten the day. For example, fossil fuel scarcity has morphed into stranded fossil fuel reserves that cannot be burned because of the CO2 produced, accompanied by recommendations to divest fossil fuel companies from public portfolios.  Somewhat surprisingly, these ideas have gained traction in The United Nations, The European Union and Academia.

It is not my intention to dig too deeply into the past. Firmly belonging to the group of data analysts, in this post I want to take a look at two different data sets to explore where peak oil stands today. Is it dead and buried forever, or is it lurking in the shadows, waiting to derail the global economy again?

The USA and Hubbert’s Peak

The USA once was the poster child of peak oil. The Peak Oil theory was first formulated there by M. King Hubbert who in 1956 famously forecast that US production would peak around 1970 and thereafter enter an era of never-ending decline (Figure 1). Hubbert’s original paper is well worth a read.

Figure 1 From Hubbert’s 1956 paper shows the peak and fall in US production for ultimate recovery of 150 and 200 billion barrels. The 200 billion barrel model shows a peak of 8.2 Mbpd around 1970 that proved to be uncannily accurate.

Looking to Figure 2 we see that Hubbert’s prediction almost came true. US production did indeed peak in 1970 at 9.64 Mbpd while Hubbert’s forecast was a little lower at 8.2 Mbpd. The post-peak decline was interrupted by the discovery of oil on the N slope of Alaska and opening of the Aleyska pipeline in 1977 that was not considered in Hubbert’s work. Herein lies one of the key weaknesses of using Hubbert’s methodology. One needs to take into account known unknowns. We know for sure that unexpected discoveries and unexpected technology developments will occur, it’s just we don’t know, what, when and how big.

Figure 2 In red, US crude oil production from the EIA shows progressive growth from 1900 to 1970. The oil industry believed this growth would continue forever and was somewhat aghast when M. King Hubbert warned the party may end in 1970 which it duly did. The discovery of oil in Alaska created a shoulder on the decline curve. But apart from that, Hubbert’s forecast remained good until 2008 when the shale drillers and frackers went to work. Hubbert’s 1970 peak was matched by crude oil in 2015 and exceeded by C+C+NGL that same year.

Following the secondary Alaska peak of 8.97 Mbpd (crude oil) in 1985,  production continued to decline and reached a low of 5 Mbpd (crude oil) in 2008. But since then, the rest is history. The shale drillers and frackers went to work producing an astonishing turnaround that most peak oil commentators, including me, would never have dreamt was possible.

Before going on to contemplate the consequences of the shale revolution, I want to dwell for a moment on the production and drilling activity in the period 1955 to 1990. 1955 to 1970 we see that total rigs* declined from 2683 to 1027. At the same time  crude oil production grew from 6.8 to 9.6 Mbpd. It was in 1956 that Hubbert made his forecast and in the years that followed, US production grew by 41% while drilling rigs declined by 62%. No wonder the industry scoffed at Hubbert.

[* Note that Baker Hughes’ archive pre-1987 does not break out oil and gas rigs from the total.]

But then post 1970, as production went into reverse, the drilling industry went into top gear, with operational rigs rising sharply to a peak of 3974 in 1981. But to no avail, production in the contiguous 48 states (excluding Alaska) continued to plunge no matter how hard the oil and its drilling industry tried to avert it. Hubbert must surely have been proven right, and his methodology must surely be applicable not only to the US but to the World stage?

The oil price crash of 1981 put paid to the drilling frenzy with rig count returning to the sub-1000 unit baseline where it would remain until the turn of the century. The bear market in oil ended in 1998 and by the year 2000, the US drilling industry went back to work, drilling conventional vertical wells at first but with horizontal drilling of shale kicking in around 2004/05. Production would turn around in 2009.

Those who would speak out against peak oil in the mid-noughties, like Daniel Yergin and Mike Lynch, would argue that high price would result in greater drilling activity and technical innovation that would drive production to whatever level society demanded. They would also point out that new oil provinces would be found, allowing the resource base to grow. And they too must surely have been proved to be correct.

But there is a sting in the tail of this success story since drilling and producing from shale is expensive, it is dependent upon high price to succeed. But over-production of LTO has led to the price collapse, starving the shale drilling industry of cash flow and ability to borrow, leading to widespread bankruptcy. In fact informed commentators like Art Berman and Rune Likvern have long maintained that the shale industry has never turned a profit and has survived via a rising mountain of never ending debt. Economists will argue, however, that improved technology and efficiency will reduce costs and make shale competitive with other sources of oil and energy. We shall see.

Herein lies a serious conundrum for the oil industry and OECD economies. They may be able to run on shale oil (and gas) for a while at least, but the industry cannot function properly within current market conditions. Either prices need to be set at a level where a profit can be made, or production capped to protect price and market share. This of course would stifle innovation and is not likely to happen until there are queues at gas stations.

2008-2015 Winners and Losers

BP report oil production data for 54 countries / areas including 5 “other” categories that make up the balance of small producers in any region. I have deducted 2008 production (barrels per day) from 2015 production and sorted the data on the size of this difference. The data are plotted in Figure 3.

Figure 3 The oil production winners to the left and losers to the right, 2008 to 2015. The USA is the clear winner while Libya is the clear loser. About half of the countries show very little change. Click chart for a large readable version.

What we see is that production increased in 27 countries and decreased in the other 27 countries. One thing we can say is that despite prolonged record-high oil price, production still fell in half of the world’s producing countries. We can also see that in about half of these countries any rise or fall was barely significant and it is only in a handful of countries at either end of the spectrum where significant gains and losses were registered. Let’s take a closer look at these.

Figure 4 The top ten winners, 2008 to 2015.

The first thing to observe from Figure 4 is that the USA and Canada combined contributed 7.096 Mbpd of the 8.852 Mbpd gain 2008-2015. That is to say that unconventional light tight oil (LTO) production from the USA and LTO plus tar sands production from Canada make up 80% of the global gain in oil production (C+C+NGL). Iraq returning to market in the aftermath of the 2003 war makes up 18%.  In other words expensive unconventional oil + Iraq makes up virtually all of the gains although concise allocation of gains and losses is rather more complex than that.  Saudi Arabia, Russia, The UAE, Brazil, China, Qatar and Colombia have all registered real gains (5.258 Mbpd) that have been partly cancelled by production losses elsewhere.

Figure 5 The top ten losers, 2008 to 2015.

Looking to the losers (Figure 5) we see that Libya, Iran, Syria, Sudan and Yemen contribute 2.828 Mbpd of lost production that may be attributed to war, civil unrest or sanctions. I am not going to include Venezuela and Algeria with this group and will instead attribute declines in these countries (0.979 Mbpd) to natural reservoir depletion, although a slow down in OECD technical assistance in these countries may have exacerbated this situation. That leaves the UK, Mexico and Norway as the three large OECD producers that register a significant decline (1.687 Mbpd) attributed to natural declines in mature offshore provinces. Let me try to summarise these trends in a balance sheet:

Figure 6 The winner and loser balance sheet.

We see that these 20 countries account for 8.463 Mbpd net gain compared with the global figure of 8.85 Mbpd. We are capturing the bulk of the data and the main trends. In summary:

  • Unconventional LTO and tar sands + 7.096 Mbpd
  • Net conventional gains + 2.592 Mbpd
  • Net conflict losses -1.225 Mbpd

The sobering point here for the oil industry and society to grasp is that during 8 years when the oil price was mainly over $100/bbl, only 2.592 Mbpd of conventional production was added. That is about 3.1%. Global conventional oil production was all but static. And the question to ask now is what will happen in the aftermath of the oil price crash?

One lesson from recent history is that the oil industry and oil production had substantial momentum. It is nearly two years since the price crash, and while global production is now falling slowly it remains in surplus compared with demand. This has given the industry plenty time to cut staff, drilling activity and to delay or cancel projects that depend upon high price. In a post-mature province like the North Sea, the current crisis will also hasten decommissioning. It seems highly likely that momentum on the down leg will be replaced by inertia on the up leg with a diminished industry unwilling to jump back on the band wagon when price finally climbs back towards $100 / bbl, which it surely will do one day in the not too distant future.

For many years I pinned my colours to peak oil occurring in the window 2012±3 years. Noting that the near-term peak was 97.08 Mbpd on July 15 2015 it is time to dust off that opinion (Figure 7). The decline since the July 2015 peak is of the order 2% per annum (excluding the Fort McMurray impact). It seems reasonable to presume that this decline may continue for another two years, or even longer. That would leave global production at around 92 Mbpd mid 2018. It is nigh impossible to predict what will happen, especially in a world over run by political and economic uncertainty. Another major spike in oil price seems plausible and this could perhaps destabilise certain economies, banks and currencies. Should this occur, another price collapse will follow, and it’s not clear that production will ever recover to the July 2015 peak. Much will depend upon the future of the US shale industry and whether or not drilling for shale oil and gas gains traction in other countries.

Figure 7 The chart shows in blue global total liquids production (C+C+NGL+refinery gains+biofuels) according to the Energy Information Agency (EIA). The near term peak was 97.08 Mbpd in July 2015. The decline since then, excluding the Fort McMurray wild fire impact, is of the order 2% per annum. In the current low price environment, it is difficult to see anything arresting this decline before the end of next year. In fact, decline may accelerate and go on beyond the end of 2017. The dashed line shows the demand trajectory and scheduled balancing of supply and demand by the end of this year. By the end of next year the supply deficit could be of the order 3 Mbpd which on an annualised basis would result in a stock draw of 1.1 billion barrels. But remember, forecasts are ten a penny 😉

Concluding Thoughts

  1. M. King Hubbert’s forecast for US oil production and the methodology it was based on has been proven to be sound when applied to conventional oil pools in the USA. When decline takes hold in any basin or province, it is extremely difficult to reverse even with a period of sustained high price and the best seismic imaging and drilling technology in the world.
  2. On this basis we can surmise that global conventional oil production will peak one day with unpredictable consequences for the global economy and humanity. It is just possible that the near term peak in production of 97.08 Mbpd in July 2015 may turn out to be the all-time high.
  3. Economists who argued that scarcity would lead to higher price that in turn would lead to higher drilling activity and innovation have also been proven to be correct. Much will depend upon Man’s ability to continue to innovate and to reduce the cost of drilling for LTO in order to turn a profit at today’s price levels. If the shale industry is unable to turn a profit then it will surely perish without State intervention in the market.
  4. But from 2008 to 2015, oil production actually fell in 27 of 54 countries despite record high price. Thus, while peak oil critics have been proven right in North America they have been proven wrong in half of the World’s producing countries.
  5. Should the shale industry perish, then it becomes highly likely that Mankind will face severe liquid fuel shortages in the years ahead. The future will then depend upon substitution and our ability to innovate within other areas of the energy sector.

Related reading:

From Rune Likvern:

The Bakken LTO extraction in Retrospect and a Forecast of Near Future Developments

Bakken(ND) Light Tight Oil – Update with Sep – 15 NDIC Data

Are the Light Tight Oil (LTO) Companies trying to outsmart Mother Nature with their Financial Balance Sheets?

From Enno Peters:

Visualizing US shale oil production

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63 Responses to The Peak Oil Paradox

  1. Stephen Brown says:

    Very interesting article, thank you.
    Just to emphasise the difficulty of forecasts, I am going to mention gas to liquid technology. This was getting more interest when oil prices were in the $100 range, but is still there in the background.
    As an example the British company Velocys,which specialises in small scale gas to liquids, says on its website “Velocys provides smaller scale GTL solutions that address an untapped market of up to 25 million barrels of fuel per day.”

    Pie in the sky at the moment, but so was shale oil not so long ago.

    Who would be a forecaster? 😉

    • Grigoriev Albert says:

      One should not forget about CTL and coal-to petrochemical technologies.
      USA has huge deposits of low rank coal.
      So in future it will be possible to process pet coke, asphaltenes and coal to feed existing petrochemical facilities and motor fuel sector.

    • Euan Mearns says:

      25 Mbpd from small-scale GTL 🙂

      • Stephen Brown says:

        Seems improbable, but the application of small scale GTL at lower capital costs and therefore lower risk would make monetisation possible of a lot of currently flared or stranded gas. If you can put truck portable processing plant near the well head and produce liquids it could be a winner. Lots of companies trying to do it.

        • robertok06 says:

          “If you can put truck portable processing plant near the well head and produce liquids it could be a winner. Lots of companies trying to do it.”

          If you are thinking about the USA… EPA won’t let anybody do that, “too polluting”…

          • DrTdoom says:

            it’s mainly cost not pollution. CTL and GTL and NG to L are currently too expensive.

  2. polarscientist says:

    Excellent post.

    It may have escaped the public’s notice that the UK’s oil production peaked in 1999 and gas in 2000, since when decline has set in – as expected from a mature oil province (the North Sea). The consequence for the UK Treasury has been declining tax income from the petroleum industry, following a tax take peak from that source in 2003. Much of the UK’s recent malaise, including its need to borrow, the incurring of a significant current account deficit, and the resulting calls for austerity whose demands fell mainly on the poor and the middle class, can be directly attributed to this declining income. All oil states face much the same problem. You can live high when incomes are good, without making much effort to increase productivity, but once that income dries up you are back where you started, or worse. This will be a progressively increasing problem for the new leader of the Conservative party.

    • Hugh Sharman says:

      @ Polarscientist!
      Nail on head!
      Great analysis! So much to think upon!

    • robertok06 says:

      “Much of the UK’s recent malaise, including its need to borrow, the incurring of a significant current account deficit, and the resulting calls for austerity whose demands fell mainly on the poor and the middle class, can be directly attributed to this declining income.”

      Mmmmh!… I can’t buy this, in light of this…

      … you forgot the impact of the 2008-2009 bank crisis and bailout paid, in the end, by the taxpayers.

      • Greg Kaan says:

        Plus how it continues to be paid with the bubble in “investments” in economically unsound green technologies fuelled by quantitative easing and interventionist government policies (ie The Third Way).

        Peak Oil definitely adds to the lowering of wealth but I see the diversion into this bubble that only benefits traders and profiteers as having the larger effect.

    • Willem Post says:


      ….”or worse” is right. It is also called “Dutch disease”.

      People living in lah-lah-land, instead of setting aside for a rainy day, as did Norway with its nearly 1 trillion dollar pension fund for about 5 million people.

      • Alex says:

        Norway has a huge oil resource for a tiny population. Of course it makes sense to have a sovereign wealth fund. It’s a bit like someone who earns £20K per year is given a £1 million bonus over 20 years. .

        The UK is much bigger and has less oil. It’s like someone on £20K being given £20K over 20 years. The best thing to do is pay down the mortgage, which was happening up until about 2003.

    • Euan Mearns says:

      I have written dozens of posts on UK energy security, declining N Sea production and impacts of all this on UK trade balance etc over the last 10 years. These did get the attention of DECC at highest level (David MacKay). But nothing ever happens.

      We should have begun to build a new generation of nukes 10 years ago. And we should at least be cracking on with some exploratory drilling for shale oil and gas. The public need to understand the comfort that home-grown energy provides and we all need to accept the costs that go along with those benefits.

      • Euan,

        while energy security issues are important, climate change (impacts) are not less important or serious (localy, or globally).

        Civil war in Syria was triggered by combination of rising population, oil extraction decline AND drought. That drought was made worse by climate change. Peak oil, AS WELL AS climate change pose a limit to (economic) growth. If Turkey is destabilized…

        Continuing with shale/oil gas is not sustainable. Not for UK, not for anyone else. Best scientific evidence tells us that warming of more than 1,5-2°C compared to pre-industrial is highly dangerous for large number of people.

        “To avoid multiple climate tipping points, policy makers need to act now to stop global CO2 emissions by 2050 and meet the Paris Agreement’s goal of limiting global warming to 1.5 °C above pre-industrial levels, a new study has said”

        We cannot solve energy security issued without taking into account climate security as well.



  3. Rob says:

    Euan have you calculated reserves of non-conventional oil. How long will shale gas last, people assume nuclear no longer needed and we have everlasting supplies of shale oil.

    • Aslangeo says:

      several estimates exist – a good discussion in

      also worth checking art berman’s blog

    • Euan Mearns says:

      I’ve not looked into reserves since these are dependent on price. This from the FT yesterday:

      The Eagle Ford is just about break-even at current price. The Bakken and Niobrara not. I don’t know what Bone Spring and Wolfcamp are. But since they are producing, presumably they are shale oil plays. Maybe someone can enlighten. So it doesn’t really matter what size the resource is. If it can’t be produced at a profit its going to stay in the ground.

  4. Mike Mellor says:

    Euan and Roger, any time you’re bored you might think of writing about the fracking moratorium in South Africa. Proved reserves of trillions of cubic feet but blocked because of the ecological sensitivity of the Karoo. Shell etc. have abandoned the project because of low world prices but thanks to the collapse of our currency, the Rand, it could be viable now. We desperately need affordable energy and the government is doing its best to exacerbate the problem by introducing a carbon tax.

  5. Cheshire Brough says:

    RE: GTL

    The only sizeable GTL plant is the joint venture Qatar Petroluem/Shell Pearl project which started production in 2012. As with anything from the gulf the production figures and profitability are under a vail of secetcy. As they are concentrating on the high value markets of lubricants and petrochemicals, I guess it is very expensive process seeming they have methane on site at almost cost.

  6. Professor Tony Trewavas FRS says:

    Hubberts formula fitted coal mining in the UK very exactly. This peaked at about 1900 and then declined rather exactly with his formula. But that is not the end of coal use. Theoretically there is plenty of coal underground in the UK and it can be burnt in situ and should be. Different technologies extend the lifetime use. But like oil there is only a finite amount and the end must come at some stage. The figures I have seen indicate 270 years worth of coal underground at reasonable rates of use. Carbon capture is far easier to use at the well head than on top of power station chimney and would mitigate much opposition from green activists. One advantage of Brexit however might be that our government might actually listen to those who have experience of energy generation rather than those that have none which the EU seems fond of doing. Long overdue that Greenpeace should limit itself to protecting whales and WWF looking after rhinos and pandas

    • Euan Mearns says:

      Some years ago Dave Rutledge gave a talk at your University in Edinburgh on UK and global coal reserves. I’ve never been enthusiastic about in-situ gasification of coal or CCS – but am prepared to give the idea some thought.

      In situ gasification presumably makes CH4, CO, CO2 and H2 – ?? So you could capture the CO2 at the well head and combust the remaining town gas. What then happens to the C from the CH4 and CO?

      I will be interested to see who gets appointed to the energy portfolio. I would like to see energy security, affordability, total environmental impact and trade balance at the top of the list of priorities. Rudd was maybe getting there, but as David MacKay noted in his final interview, it is devilishly difficult to get anything changed. I think the climate change act will need to go in order to re-prioritise the way we think about energy.

  7. Ajay Gupta says:

    Mason Inman has a new book out on life of Hubbart: “The Oracle of Oil.” I’m not finished but great read so far.

    Also, …EROI.

  8. John F. Hultquist says:

    When in ’56 Hubbert wrote of peak US production autos were made of steel, they were heavy, and they got about 10-12 miles per gallon. Plastics, carbon fiber, and Aluminum are now common and autos get 30+ miles per gallon. The urban-horse problem of the mid-1800s has been written about. The claim is that when the issue became significant, its solution was on the horizon. Today we note the looming problem but fail to see the solution. But failing to see it is not proof that it isn’t there. Besides, electric/+ autos, better intra-urban transport, and many other innovations means the f-fuel based future will have a long tail.

    You wrote of yourself: “… including me, would never have dreamt was possible.

    I dream of a future I won’t see – unless science finds a way to double my expected life time. I’ll check out long before 2050.

    Think of peak Copper:

  9. Erica says:

    As an Alberta girl, my father started as a mining geologist after serving in WWII after he graduated from University of British Columbia in 1954. With the discovery of oil in Leduc in 1959/60 he switched to oil and gas and worked as a well site geologist his whole life. He was never employed by a big major except at the start of his career and by the mid seventies had gone independent selling his plays for gas etc. I grew up with wild surges in income and my parents always fighting over money. In the 1980s, the Liberal Party under Pierre Eliot Trudeau, yes, the pretty boy’s father, gave Alberta the finger, literally and figuratively, and as a province we suffered under an energy policy that gave subsidized oil and gas to all of central and eastern Canada and they would not allow us fair market value All US investment high tailed it out of Canada and Alberta suffered under a very long depression from 1981 to 1997. Getting any drilling done was very difficult but pipelines were built and gas was exported south during the US peak oil crisis, but only after we subsidized the East.

    In 1981 I was 21 and had just completed my 3rd year of Chemistry at University. My older brother had graduated the year before with honours geology. The carnage in the industry was huge, it was almost wiped out in Alberta as an industry. I did not get a single job until I was hired by Shell Canada to work on heavy oil discovered in Peace River country in 1988. When the jobs started to disappear out of Ontario and Quebec (those people had those gold plated pensions from the car industry) eastern Canada started to get a taste of what Alberta was suffering under.

    From 1988 to 1996, I was laid off 7 times, I would just get going and then lose my job from the up and downs in the patch. My husband was in IT at Shell so he always managed to hang on. By 1996, things were starting to turn around and I was offered a job in cement chemistry for a fracking company, I would have been their first female hire. But at age 36, I had just got pregnant so I turned it down and Shell sent us to England.

    I can’t tell you how many skilled people they lost. University of Calgary numbers into the faculty of geology was extremely tiny by 1987. In 1986 they graduated nobody.

    We came back to Alberta in 2002, just before the boom started. And the oil industry was punished as nobody was trained, and they did not have enough experienced geologists, chemists etc. They were trying to refine that tar that would seep up from the ground in the Mackenzie Delta, trying to build infrastructure in Fort Mac etc. I was 40 by the time I came home, and most of the people my age had left the patch long ago as they were forced to and retrained into something else.

    This time (2002) the oil industry promised they wouldn’t gut it if a downturn came, as they said they learned the hard way. But it has been carnage once again and with the Fort Mac fire, the drilling for oil and natural gas is almost nil and you should see how much projects that were 1/3 way done with all these expensive assets that were purchased at peak prices and delivered were just trashed. Millions of feet of pipeline, generators etc. And the companies just wrote it down and it became garbage! It was truly astounding to see.

    So Euan you absolutely got it right. Alberta will never produce more than what they have now, I would say that June 2015 was our peak oil. With Obama refusing Keystone XL pipeline into the US, and the US discovering fracking (a good ole Alberta development) and then went crazy and developed lovely natural gas fields and oil fields in their own country),they don’t need our product any more. Alberta has been held hostage by the green terrorists in B.C. and Ontario east and has refused all pipeline expansion in our own country and to top it off our Central and Eastern Canada are buying up all that cheap foreign oil from the US and Mexico and refining down east to sell. Alberta has no access to tidewater to export our oil to other places other than the US and now we have a carbon tax starting in January that will only punish our poor province and the industry even more.

    The job losses in the industry have been staggering. around 75,000 jobs gone in a year. And it is getting worse not better. The oil industry is just hunkering down. I am 55 now and have a tax payer job, I work for the municipality as I got fed up and moved out of the patch 8 years ago. After 27 years with Shell, my husband is losing his job to an Indian in India, the work isn’t going, they are just taking the job from Alberta to India, saving on the labour. My older brother’s oil company went belly up, and he is now working for the pension fund that bought all the assets for song and is babysitting the assets 3 days a week. Our unemployment rate in Alberta is around 10%.

    So the only thing we can look forward to nuclear energy and at least Saskatchewan has lots of uranium.

    I have an 18 year son in Mechanical Engineering and a 15 year old daughter. All the kids my son’s age thought the energy field would be where they could make a living but I have no hope. My oldest brother says by the time we come out of this rout, oil patch jobs will be paying 1/2 of what they pay now, production will be very small, exploration will be extremely conservative and will probably only serve a very small domestic market.

    All that investment and training and skills down the toilet. I am sick of this industry and I am sick of those stupid green terrorists who swallowed Al Gore’s bullshit like it was mother’s milk. I just can’t comprehend people anymore. Cheap energy should be there for all of us, but the way the world is going is that it is only going to be for the rich and they rest of us will be trying to make a stupid windmill spin in -30 degree winter weather with a blowtorch melting the ice and in the summer chopping up all the songbirds as the migrate to the artic. Yay!

    • Steve says:

      Horrible, simply horrible. What you describe is the real impact on real lives on the ground caused by unstable oil/gas markets and the machinations of national and international politics.

      Thinking longer term, I am advising my kids (12 and 15) to study nuclear engineering. If the world is to double energy demand by 2050 to meet the legitimate aspirations of the developing world, while cutting global CO2 emissions by 80% at the same time, I can say with near mathematical certainty that there is simply no practical alternative to nuclear.

      If we are to thrive collectively toward a brighter future, nuclear science and technology must be embraced. Nevertheless, “we” are collectively scared of nuclear energy and the politics against it remains terrible. All of this in spite of overwhelming scientific evidence and observable fact pointing to it being is one of our safest, cleanest energy options. How long it will take for public opinion to catch up to scientific reality, and hence the shifting of the political winds, is the only wildcard, IMHO. A matter of “when”, not “if”.

      In the long run, politics must to bend toward reality, or so I assume. For my kids’ sake, it would be nice if this shift started sometime over the next decade.

      Good luck to us all…

    • white says:

      “Cheap energy should be there for all of us”. Why? The world doesn’t owe you a living or anything else. Why do you think you are entitled to cheap energy? Where does this entitlement mentality come from? Its like saying that a mobile phone is a basic human right.

    • Euan Mearns says:

      Erica, I’m 58 years old. Our lives have been “blighted” by the 1998 and 2014 oil price crashes. Its a cyclical industry. The trick is to make and store hay when the sun shines.

      I’ve never been a fan of the tar sands developments. The main energy input is Canadian nat gas and the energy return is about 3:1. It would in fact be better to put the nat gas straight into the gas tank of US and Canadian cars and by-pass all that unnecessary employment in the tar sands projects. The energy costs would be lower as a result and the economy better for it – with more proper jobs!

      The last thing I want is to sound unsympathetic. But lets face it . The global economy and politics is up to its arm pits in shit. Something is wrong! Time to fix it! Nuclear engineering sounds like a good career path.


      • robertok06 says:

        “Nuclear engineering sounds like a good career path.”

        … agreed… but, sadly, only in China and Russia… EU and USA are off to another track.

  10. Willem Post says:


    On a separate note, here is an article with interesting information regarding hourly and weekly solar generation by a 3.3 kW PV solar system in the UK.

  11. Dave Rutledge says:

    Hi Euan,

    “One needs to recall that GWI was precipitated over Kuwait stealing oil from Iraq, from a shared field on the Kuwait-Iraq border, leading to the Iraqi invasion of 1991.”

    This seems tendentious. Did the Iraqis ever demonstrate that their accusation was correct when they controlled Kuwait? It sounds like the pot calling the kettle black. If this really was the most important thing to Hussein, and it really could not be resolved by diplomacy, then they could have simply occupied the offending oil wells and negotiated from there.


    • Euan Mearns says:

      It was the reason given at the time. It was at a time of quota wars in OPEC and Iraq accusing Kuwait of over producing their quota by pumping oil out of Iraq resulting in the oil price being dumped. Whether its true or not is another question.

      But the eventual outcome is an Iraqi oil industry largely in the hands of OECD companies pumping oil at record levels.

    • Willem Post says:


      Kuwait was using US technology to drill horizontally into the Iraq part of the oilfield.

      Sadam told them to stop it, but the US was in Kuwait’s corner.

      Eventually Sadam invaded.

      He had not expected, the US would use the phoney WMD excuse to start the first Iraq war, which ultimately led to the present situation; the US spent over $2 trillion for Iraq 1 and Iraq 2, and counting.

      • robertok06 says:

        “the US spent over $2 trillion for Iraq 1 and Iraq 2, and counting.”

        by some accounts, between 300 and 350 million US $ per war day… including external costs (mostly health of the injured, killed, maimed, etc…).
        At a conference, few years ago, I’ve heard a US physicist claim that the experiment he was proposing would cost “only 2 and 1///2 days of Irak war”… in response to the objection raised by a member of the audience who questioned the complexity and cost of the proposal.

  12. Dave Rutledge says:

    Hi Euan,

    “Peak oilers need to admit they were wrong then. Or were they?”

    I was just watching a 2004 peak oil movie today, “The End of Suburbia.” There are familiar stars: Kunstler, Heinberg, Campbell, Andrews, Simmons, Darley, Deffeyes.

    All smart, thoughtful, articulate people. From today’s perspective, they were too confident that they could see our future. The world is not turning out as bad as they said it would be. The suburbs are still there, and families still want to buy SUVs and live in them.


  13. Professor Tony Trewavas FRS says:

    My understanding of the gases produced by burning coal underground are that methane is of course natural gas, H yes to be burnt probably with methane but if necessary separated for other uses but CO is reactive and can be used by Ineos to make plastics and other chemicals. Perhaps we need a guest contribution on burning coal underground so that we all get clear on what is produced and what and how is the rest used.Its not a new technology but has been around for at least 60-70 years if I remember correctly.

  14. ristvan says:

    If the IEA data are correct, conventional global oil did peak in ~2007. Essay IEA Fictions in ebook Blowing Smoke analyzes the data. Conventional defined as API>9, from a reservoir with >5% porosity and >1 darcie permeability.
    So the global peak question becomes unconventional oil.
    Clearly, The Athabascan bitumen sands are crude price sensitive; the mining or SAGD plus upgrading costs are high and the resulting syncrude is of lower value. Probably new production only over $100/bbl. But rate of increase willl be low even at those prices, compared to now 5-7% annual decline in conventional fields accounting for >2/3 of conventional production, so ~negative 4Mbpd.
    Harder to say about Veneuela’s Orinoco tar sands. My swag is similar to Athabasca, ignoring that Venezuela is also a basket case.
    That leaves LTO. EIA has published TRR estimates for all major global shales. These are biased quite high because of technical mistakes. The largest, the Bazhenov, was treated geologically like Bakken. It is anything but, and likely has less TRR than Bakken. Essay Matryoshka Reserves. California’s Monteray has nothing horizontal to drill. EIA revised TRR from 15-18 to less than 1 in 2014. Recovery factors of 3-5 % were used. Todays actuals (Bakken, Eagle Ford, Permian shales) average about 1.5%. It is credible that they might reach 3-4.5 (double to triple) as a combination of better synthetic ceramic proppants, closer lateral spacing (early fears about interference were not justified), and closer frack spacing with plug and perf. There are also indications that these things ameliorate the very steep decline curves, meaning less crude price sensitivity than before. As evidence, Permian rig count has gone up slightly at $50/bbl.
    But, one still has to look at that potential production in light of total realistic TRR. And whether logistics or gamma functions are used for the calculation, it seems the overall peak in crude production is likely by about 2023. (Sometime after 2020 and before 2025). Essay Peeking at Peaks provides the sources and does the calculations in the third section. Second section does the economics and estimates that this will be at prices somewhere north of $100/bbl, because The tar and bitumen sands TRR are included. The book was published in 2014, and the current glut induced price slump has provided no information that would lead to a change in that prediction.

  15. Erica says:

    I still don’t understand the implications of PEAK OIL. Does it matter that production peaks in 2023 to 2025. Wouldn’t all the subsidized money generated from these carbon taxes towards newer green technology be paying dividends by then? I was somewhat astounded by one of Euan’s earlier posts regarding the electricity generation from Obama’s green efforts to be so small after all that investment? Is it the general belief then that we will be in an energy crisis by 2025 or is it that it doesn’t matter because the decline of fossil fuel use will occur at a slow enough rate that we will not even notice, despite the over exuberance for a green economy?

  16. Robert Honeybourne says:

    If we had even built a second lot of AGRs we could have retained the skills, the manufacturing, and a robust electricity supply. They could have done as their predecessors, quietly sitting keeping the lights on

    The saddest thing to me in this ‘hi tech’ world where nothing works properly, is the betrayal of the engineers who made the ‘things that were really rather good’ and did the basics… and still do the basics forty years later. A lot of immensely clever tech has now blinded people to the need for the basics to be kept up

    • robertok06 says:

      Robert: in green-speak 90% capcity factor baseload nuclear is “obsolete technology”, while 10% CF intermittent photovoltaics is “the wonder kid” in the energy town… go figure.

      This is what happens when incompetent people are placed in power… and we must be happy of this, because this is what “democracy” is all about.

  17. Javier says:

    “it’s not clear that production will ever recover to the July 2015 peak”

    The most probable situation is that 2015 has constituted Peak Oil.

    Peak Oil analysis is incomplete without analysis of production costs and debt.

    Production costs per barrel have been on a rising trend since the beginning of the century, as Steven Kopits has highlighted.
    From 2004-07 the cheap to produce oil (a.k.a. conventional oil) reached a peak, and since then the cost to produce oil has been increasing. This coincides with a reduction in the new oil found. The days when one could poke the land and oil would come out are gone, and this has consequences.

    Nothing can grow indefinitely on a limited world, and since the 80’s the OECD economies have been growing supplemented by increasing debt that brings expected growth from the future to the present.

    These two factors collided in 2008. From 2004 to 2008 crude oil production barely increased, and spare capacity decreased. Consequently oil prices increased and indebtment accelerated to maintain economic momentum in the face of energy costs increase. The economy peaked in 2007. In the summer of 2008 oil prices reached unaffordable levels. A slowing economy with high oil prices and increasing interest rates suddenly made the debt scheme unsustainable triggering the financial crisis of 2008. The OECD had reached private debt saturation. Governments went to the rescue through money printing, zero interest rates policies (ZIRP) and massive public debt increases that two years later would lead to several countries reaching debt saturation (2010 European debt crisis).

    On the oil front 2007 marked the Peak in Oil Exports. China and South Asia responded to their customers crisis with an amazing debt increase that prevented them from falling into a deep crisis. Their debt increase maintained oil demand from 2009 at levels high enough to sustain high oil prices through 2010-14, increasing their share of oil consumption at the expense of OECD (mainly Europe and Japan).

    Expensive to produce oil (LTO, bitumen, deep sea) was the response to sustained high prices that could be afforded by the world’s economy only through increasing levels of public debt and unconventional policies (ZIRP and quantitative easing) that can bring dire consequences if maintained and essentially cannot be reverted without trashing the global economy.

    The retirement party for oil came to an end in 2013 when the economic cycle started to be long in the tooth, and China started to show a reduction in its growth rate. China has reached OECD debt levels in just a few years, fueling all sort of bubbles (Chinese stocks, housing, infrastructure) that are bursting one by one. The increase in oil demand started to lag respect the increase in oil production.

    OECD has not recovered from the 2008 crisis. There is barely economic growth, and the people that have taken the brunt of the crisis are manifesting their anger (political crises in Europe, rise of populism, rise of nationalism, immigration social crisis, Brexit). With an imbalance between demand and supply growth the oil price collapsed in the fall of 2014.

    The crash in oil and commodities prices has delayed a new global crisis that was looming, while throwing into crisis the economy of commodity countries (Venezuela, Brazil, Canada, South Africa, Australia).

    So far the present. What about the future? I disagree that we cannot say anything. The world will have a new economic crisis within the next few years, as economic crisis are a recurrent feature of the economy. ZIRP and quantitative easing are here to stay as they cannot be unwind without an economic and monetary collapse. The world economy cannot sustain a high oil price like we saw in 2010-14 because now every significant economy has reached overindebtness. Mismatches between oil production and demand are likely to produce oil price volatility unlike the current pricing mechanism on the margin is abolished. Oil price volatility, if allowed will have very destructive effects both on the economy and oil production.

    Peak Oil has been reached in 2015. The investment gap in exploration and production is going to haunt us for years with a decreasing production ceiling. The economic conditions that could make expensive to produce oil affordable are not going to happen. In less than a decade depletion will become such a force that it will not be easy to revert even during “good times.”

    The world will have to make with less oil. That is the part that we cannot say because we haven’t been there. Seeing how people have reacted to sluggish growth I cannot be optimistic about how we are going to react to “degrowth”. People have come to expect that they have to be provided for and will come to see their governments, even if democratically elected, as part of the extractive classes they have always been.

  18. jacobress says:

    1. You ave to consider oil, gas and coal together, because they are interchangeable.
    2. There is no scarcity of oil, gas and coal.
    3. There will be no scarcity in the next few decades.
    4. Making predictions beyond that time range is impossible.

    So, the “peak oil” scare mongering was premature in 1956, and is no less silly now.

    • Javier says:

      1. No you don’t because they aren’t. Liquid fuels are used in transportation. Conversion of gas or coal to liquid is more expensive and consumes energy.
      2. Scarcity only defines a situation when demand exceeds supply. It has nothing to do with Peak Oil. Peak Oil only has to do with production, and production has been falling since July 2015. Future demand is a lot more difficult to predict.
      3. For those that can pay any price, there will always be oil, but periods of demand > supply that trigger price spikes that make oil unaffordable to many are quite common. The last one in 2008.

      It is in the nature of many things long awaited that when they finally come they do so in a form that makes them difficult to be recognized. Peak Oil has arrived but not because we need oil and we don’t find it, but because we lack the economic strength to extract and pay the expensive oil that is left. Therefore oil demand might go down together with oil production with most people failing to realize that it is a Peak Oil problem, or more correctly lack of sufficient cheap oil to run the global economy.

      In practical terms Peak Oil has taken place in the summer of 2015. It will continue being so until production raises above that level. You think you can predict that it will happen in a few years at most, so it is a temporary peak. But you don’t know that. You deny the possibility of the peak in oil production that has taken place being Peak Oil based on faith alone.

  19. donb says:

    You describe King’s original thoughts on peak oil without mentioning later expansions of the concept by, e.g. Juvkam-Wold & Dessler 2009 World Oil, and others. In particular, plots of annual oil production divided by cumulative percent production versus cumulative oil production seem to be a particular useful technique for analysis of the characteristic of a particular field. A straight lie decreasing trend on such a plot describes decreasing field production and an approximate exhaustion date, whereas introduction of a major new recovery technique displays as an uptick in the trend, which may or may not persist. In principle, one could sum such curves for all major fields and get world oil trends for the moment. Introduction of unpredictable and major new reservoirs or recovery techniques show up in the analysis, but distort the long-term prediction.

    The false presumption made by many is that future oil recovery and exhaustion depends only on recoverable reserves. Demand and price can play a major role, as you indicate. National political and economic status can also, as you suggest. Conceivably oil may one day face a similar situation to US coal production, where political unpopularity and competition from natural gas and renewables are reducing production and not coal availability.

  20. Stilgar Wilcox says:

    Thank you Euan for that superb summarization. It is a very good question whether 7/15/2015 turns out to be the oil production peak. It seems we are in a post 2008 mortgage meltdown period in which CB’s are willing to radically tweak the system to keep BAU in tact (in spite of low growth numbers), fearful of another deep recession. We’ll see how long they can hold off the next recession and what happens to oil production numbers once it does occur.

  21. simon oaten says:


    thankyou, that is an excellent summary.

    ability to pay, as you highlight, will be important in the future. Sadly, “free money” has discouraged conservation.
    rgds from Oz

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