New Oil Reserves - Why This Does Not Really Affect Peak Oil Predictions

by: EJ on 09/30/2009
Posted in: Peak Oil

In his excellent post on the Post Carbon Institute blog, Richard Heinberg responds to the New York Times article from September 24, Oil Industry Sets a Brisk Pace of New Discoveries, written by staff reporter Jad Mouawad. You can read Heinberg's entire post here.

"Jad Mouawad cites oil discoveries totaling ten billion barrels for the first half of 2009. The Tiber field in the Gulf of Mexico alone accounts for four to six billion barrels of crude that may eventually find its way into the world oil system. Indeed, this year has seen discovery results that could end up being the best since 2000. But, the article notes, the new oil was expensive to find, it will be expensive to extract, and both exploration and production are only possible because of high levels of investment and sophisticated, expensive new technologies."

EROI - Energy Return on Investment. This is one concept that anyone interested in the future of carbon-based energy needs to understand - and a concept that seems to elude many environmental reporters. Heinberg goes on to explain:

"The staggering levels of investment that enabled drilling in miles of ocean water, so as to achieve the 2009 finds, were occasioned by historic petroleum price run-ups from 2004 to 2008--with prices eventually spiking high enough to cripple the auto industry, the airlines, and global trade. As petroleum prices climbed ever higher, oil companies saw sense in drilling test wells in risky, inhospitable places. But in recent decades oil price spikes have repeatedly triggered recessions. And clearly, as we all discovered rather forcibly last year, the global economy cannot sustain an oil price of $147 a barrel: as the economy crashed in the latter months of 2008, so did oil demand and oil prices (which hit a low in December-January near $30). A review of recent economic history yields the observation that when petroleum sells above about $80 a barrel (in inflation-adjusted terms) the economy begins to stall. Oil industry wags have begun to speak of a "Goldilocks" price range of $60 to $80 a barrel (not too high, not too low--just right!) as the prerequisite for economic recovery."

According to The Oil Drum, "price is important in all of this. If the price of oil isn't high enough, reserves may not be developed. But if the price of oil is too high, it may sink the economy, and the reserves still may not be developed."

If all these graphs and technical data make you go cross-eyed, you may prefer to watch this video produced by Heinberg. He is explaining peak coal, but the concepts extend to all fossil fuels.

You can read more about all things peak in Peak Everything Waking Up to the Century of Declines and about peak coal in Blackout: Coal, Climate and the Last Energy Crisis.

Peak Everything       Blackout: Coal Climate and the Last Energy Crisis


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