Thursday, March 20, 2008

The Peak Oil hyperlink to watch (and I'm finally a believer)

Courtesy of the always-informative Peak Oil site, The Oil Drum, is this quarterly-updated link to liquid fuels production figures. Oil production is virtually unchanged since mid-2004, even though oil prices have quadrupled since 2002.

I finally found somewhat long-term comparison figures for oil prices and production, also at The Oil Drum (scroll to slides 12 and 13). Basically, production rose about 2% annually from 1983 to 2004 while price stayed the same in nominal terms and declined in real terms (the one exception is flat production from 1990-1994, but prices declined 30% then). It's very hard to look at those figures and not conclude that something different is happening to production now. I think we've hit the peak and I doubt we'll ever exceed these recent figures, barring some amazing technological breakthrough.

This doesn't necessarily mean a Mad-Max style future in a year or two though. If I owned oil reserves, which I unfortunately don't, I might look at this same info and conclude I could earn more money but slowly extracting my oil and letting most of it appreciate in the ground, than I could earn by opening the spigots and seeing what investment return rate I could get from the sale value of the oil. In other words, peak oil might be right about the end of increasing production, while being wrong about an immediate and accelerating dropoff in production. This scenario could still be painful though.

Peak oil could pose real risk to climate change solutions if coal-to-liquids gets off the ground. So far that seems like a pipe dream (pipe nightmare?), but we'll see.

UPDATE: Good comments attached to this post. In particular, Troy found a more current production update. It seems to show some recent production response to higher prices. I may have overstated things by saying production has already peaked, but I still think we're at least close to the peak, and consistent 2% increases in oil supply are part of the past.

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