Insider Secrets

Insider Secrets

Learn how the PROs are making money from the oil and energy market.

Loading, please wait

What Aren't we Being Told About Peak Oil

Posted on Thu, 18 August 2011 13:06 | 4

Peak Oil will be one of the defining events of this century. Forecasts by professionals in energy-related fields fall in a large range between 2006 and 2025+, with most forecasts by institutions in the later half of this range. Estimates vary widely due to two very different kinds of factors.

Factor #1:  Known Unknowns

• We know so little about many factors that experts can only guess at their effects over the next 20 years.
• Economic growth. Today growth in global real GDP of 5%/year increases oil consumption by about 1% – 2%/year, although this relationship varies over time.
• Technological progress improving efficiency of energy use (e.g., hybrid cars) and production. Possible new energy sources include cellulosic ethanol, coal to liquids, gas to liquids, solar, fusion, kerogen (AKA “oil shale”).
• Rate of adoption of new technology, which depends on many factors but especially government incentives and the cost of oil.
• Growth of production from new conventional oil fields (e.g., Iraq).
• Decrease in production from mature (post-peak) fields. Ten years ago 3% was a typical assumption, based on history of US (e.g., Texas) fields. Today many large fields (e.g., UK’s North Sea, Mexico’s Cantarell) have decline rates in the low teens.
• Growth of production from unconventional sources of liquid fuels, such as Venezuela’s heavy oil, Alberta’s bitumen (aka “oil sands), deep-sea oil, Artic natural gas, and biofuels.

Factor II:  Known Knowns – known to some, but not by us.

The above “known unknowns” are dwarfed in importance by these State secrets of the major oil exporting nations:

• When will production peak at the great Middle Eastern fields, especially Great Burgan (Kuwait) and Ghawar (Saudi Arabia)?
• How much can production increase at the giant fields of the Former Soviet Union (FSU), and how long can it be maintained at such levels?

Typical of the debate about these secrets is the book Twilight in the Desert, written by Matthew Simmons (2006). He reveals a fragmentary but intriguing mosaic of data suggesting that Ghawar’s production will peak soon. On that day world production also peaks. It is good work by an amateur expert. Unfortunately an investment banker – even from Texas – is not the best authority for information on such a momentous question. To follow-up Simmons’ insights urgently requires work by a team of well-funded professionals. The nature of our crisis is seen by the fact that no such effort has been started – or even publicly discussed by American decision-makers. All we have is lots of guessing and “back of the envelope calculations” by both sides of the debate.

The elephant is great and powerful, but prefers to be blind.
— David Halberstam, The Best and the Brightest (1972)

The owners of these fields have the data we lack. The Gulf sheiks and FSU governments can make reliable forecasts (plus or minus a few years) – while we can only guess.

Simmons calls for “transparency.” Oil exporters should share information about their oil reserves, since we are all in this together. The major oil-rich nations see things differently. Rather than all singing together, they see us playing poker together. Rather than showing us their cards, their official response is “trust us, we have lots of oil.”

See both sides of the debate by reading both presentations at the seminar “The Future of Saudi Arabia’s Global Oil Supply” held by the Center for Strategic and International Studies (CSIS) on 24 February 2004.

What do the KGB and CIA know?

History shows that secrets sometimes can be kept from the public for decades. For example, the public learned of the WWII allied code-breaking program ULTRA only in 1974 – an impressive accomplishment considering the hundreds of people involved in producing and disseminating this information. But keeping such secrets from intelligence services is far more difficult.

The Gulf states hire geologists and engineers to run their oil industry, a large fraction of who come from western nations. Over the past 20 years that adds up to thousands of people who have learned key data about the world’s great oil fields; many of them probably know their estimated peaking dates.

Have the CIA and KGB obtained these secrets over the past twenty years, or even penetrated senior levels of the Gulf’s national oil companies and governments?

Inductive Reasoning – are these secrets the foundation of US energy policy?

The US government might have good forecasts about the peaking of global oil production, but has not shared this information with us. Can we infer the answer through inductive reasoning? Consider the three possible scenarios.

Scenario #1: global oil production will peak soon, probably before 2017.

The Department of Energy commissioned a team of top experts, lead by Robert Hirsch, to determine the requirements for America’s adaptation to peak oil and how long it will take. The report’s (PDF) conclusion: at least 20 years. So if the CIA determined that we have only half that time – or less – than our Executive and Congressional leaders would have initiated crash programs to conserve energy and develop new sources.

Today America has no crash energy programs. We barely have any energy policies. Can we therefore conclude that the CIA has NOT determined that Peak Oil is imminent? Not quite.

Scenario #2: global oil production will peak only after 2017

Peaking more than ten years in the future – almost three election cycles – might seem too distant for immediate political action, especially considering the fallibility of long-range forecasts. In this scenario we would expect weak government energy policy, especially vs. other competing threat scenarios – such as global climate change and the War on Terror.

This fits actual government policy quite well.

Scenario #3: gross negligence by either our intelligence agencies or leaders

There is one more scenario. Evidence might show that one or more of the major Middle Eastern oil fields will peak soon, but…

• Our intelligence agencies might not have learned this – or even be looking for this data.
• They might not recognize its significance, or reported it to senior government officials.
• Our senior governmental leaders might have this data, but through incompetence not yet acted on it.

Scenario #1 is alarming, #2 is comforting, and #3 is terrifying. If #3 is correct, key aspects of our government are deeply dysfunctional. Failure to adapt to peak oil, whenever it occurs, might be the least of our problems.


Draw your own conclusions. This is a speculative analysis, and only time will tell the truth.
Please email me at fabmaximus @  if you have any relevant data or analysis – and say if I can share it with others in a future report.

By the way, geological peaking of oil production is only one aspect of the Peak Oil problem.  And perhaps not the most likely or the most pressing aspect of Peak Oil.

By. Fabius Maximus

This article was published with permission by:

Join the discussion

Special Reports

8 Mega Trends

8 Mega Trends

By Oil & Energy Insider Analysts

Here's what our 400 global energy assets are telling us to be prepared for right now...

LNG Technology

LNG Technology

By Oil & Energy Insider Analysts

This company's incredible tanker technology could eliminate many of the world's offshore pipelines...

Subsea Production

Subsea Production

By Oil & Energy Insider Analysts

This disruptive market will grow 84% to 270% over the next five years: Discover the 6 equipment suppliers set to profit.

Related Articles

Leave a comment

  • Anonymous on August 19 2011 said:
    Well said. The issue is we're running to less intensive energy forms that aren't as good as oil..... it's all about the energy you get in return on the energy you invest...MrEnergyCzar
  • Anonymous on August 19 2011 said:
    I would like to point out a wikipedia article on "The Abadan Crisis" - a geopolitical event that explained the importance of Oil geopolitically from WW2 onwards...the mid-east Was divided up for geopolitical reasons...
  • Anonymous on August 22 2011 said:
    I would like to point out that ONLY one of the scenarios is "okay". That would be #2. If we're going with chance here, what are the odds that #2 is true? Are there sizable odds that #2 is NOT true?To the second question, I would answer: yes. And then I would say, we would be wise to consider preparing ourselves and our communities for the coming turbulence.Also,
  • Anonymous on August 27 2011 said:
    demand peaking is the main worry in growth economies....thus the oil price volatility in the past 11 recessions -

Martin tiller