Are we running out of Oil?

  Well  there is a Frenchman named Christophe de Margerie  who is starting a debate about it. He believes that the world is running out of oil in a recent Economist article.

He is in the oil business (called Total) and seems not understand economics but lets see what he has to say.

This from the Economist’s article:

"Last year he declared that the world would never be able to increase its output of oil from the current level of 85m barrels per day (b/d) to 100m b/d, let alone the 120m b/d that energy analysts predict will be needed by 2030.

His definition of peak oil is "when supply cannot meet demand."

This is so wrong because there is so much oil that we haven’t tapped into because it is too expensive. There is shale in the rocky mountains we can turn into oil and there is a tar pit in Canada that has plenty of oil for something like 200 years in today’s consumption.

The problem is that it is too costly to make those so he would be more intelligent if he were to say one day only the rich will be able to afford gas and oil.

This also from the Economist:

"…Rex Tillerson, the chief executive of Total’s larger American rival, Exxon Mobil, who argues that the world is neither short of oil, nor likely to be any time soon."

Sure some oil production has gone down but a lot of this is due to a fad in oil nationalization.

Mr. Margerie also makes another mistake in saying"

"There is not enough skilled labour and fancy equipment in the world, he believes, to ramp up production as quickly as people hope."

As people demand (hope) more gas and companies will try to make other expensive ways to dig for oil less expensive by investing in labor and equipment.

One gold star to him though, in believing this, he is turning Total towards nuclear energy. I support this move greatly even if it isn’t for the most intelligent reasons.

So the winner of this debate goes to Rex Tillerson!

Published in: on February 24, 2008 at 7:35 pm  Comments (5)  

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5 CommentsLeave a comment

  1. Dear PPC,

    I have to award you the Audacity of Delusion prize.

    (but before wasting more time, let’s test and see if the comments option works on this site …)

  2. (well it didn’t the other day … which is why I hesitated to write more)

    Let’s look at an inconvenient thing called “facts”:

    1. The Peak Oil debate (which BTW is over) started well before yesterday, it started at least as early as 1956 when Hubbert published his analysis.

    2. Many an unapologetic capitalists have come forward before you to tell geologists they “don’t understand economics”. When oil shot up from $20/bbl to $45, Steve Forbes (aka Captain Capitalism) publicly proclaimed that it would soon settle back down to $35 thanks to market forces. It didn’t. John Tierney (NY Times) put his faith in market forces when he made his bet with Matthew Simmons.

    3. Oil has recently crossed over $101/bbl. We are 6.5 BILLION souls and growing, all wanting to climb the economic ladder of success by buying cars and burning oil. This can’t go on forever and it won’t.

    4. Many of us do understand the dismal unscience of economics. We also understand Thermodynamics.

  3. To respond:

    First, thanks for comments I love debate.

    Second, all you talk about is price and you only mention quantity when you talk about people demanding more.

    Third, I agree with you as people demand more the price will increase.

    Fourth, One thing you are not accounting for is innovation. Tomorrow, we could invent a way to extract the oil from the Canadian tar pit cheaply and then you have to push your “peak oil” time back another four hundred years (on today’s consumption).

    Fifth, even if they do not innovate and the price continues to rise, it will then be not as costly to acquire this costly oil.

    Sixth, they will innovate they always have and always will. We will be driving more efficient or even different cars like that.

    Seventh, when you friend Hubbert published his analysis he only accounted for “easy oil” what I am referring to is not easy oil.

    So is there peak oil on “easy oil,” maybe but who cares? The price of oil going up will cause people to innovate. Just like the car that I am sure Mr. Hubbert and other Americans drove around in that got far less MPG then the cars we have today.

    Picture everyone driving a hummer and thats 1950.

  4. I enjoy an intelligent civil debate as well.

    1. First, you call it “easy oil”, I call it conventional crude oil (Texas sweet) and so does Hubbert. Call it what you want. We all agree that global extraction rates for “easy oil” have peaked or very soon will peak. So end of debate on that one.

    2. Second, you have shifted the debate to the question of what’s next? What happens after extraction rates for “easy oil” have peaked globally and the short fall needs to be made up by “nonconventional liquids” –what you call the “hard oil” (e.g. Canadian tar sands)

    2a. On that second question, one has to determine if nonconventional liquids can be “produced” at a rate sufficiently high to make up for the decline rate in conventional oil. The jury is still out. We don’t know what the conventional decline rate. Is it 4% per year or 8% or higher? A few percentage points up or down can make all the difference between keeping up or falling hopelessly behind.

    3. Third, you start yet another new debate on whether “we” will invent our way out of this mess either by creating new fuels or ever more efficient engines (i.e. cars). On the latter point, you can’t go higher than 100% efficiency and the laws of thermodynamics (entropy) say even 100% will never happen.

    4. On the former point, you assume three things: first that the invention can be made at all, second that the market will provide a pathway for getting there (e.g. what if all intermediates in the path are grossly uneconomical?) and finally that someone among the “we” will actually invent it.

    These are all nice wishes. I wish for it too. So we’re in agreement on that aspect. However, wishing doesn’t make it so.

    From my vantage point (and I’m in the innovation business), America is heading in the opposite direction, away from innovation. As we speak, Congress is busy dismantling the US patent system. Read up on Senate Bill S.1145. They’re threatening to stealth pass it through the Senate within a matter of weeks. The House has already done so. This is one time that I hope Bush exercises his threatened veto.


  5. I am going to continue this debate on a more recent post posted by my colleague

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