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Kurt Cobb

Kurt Cobb

Kurt Cobb is a freelance writer and communications consultant who writes frequently about energy and environment. His work has also appeared in The Christian Science…

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Why Big Oil wants us to Believe in Limitless Oil

Why Big Oil wants us to Believe in Limitless Oil

If you're still operating under the assumption that the earth's petroleum--or at least the cheap stuff--is about to run out, you're not going to thrive in the new oil era. Technology is making it possible to find, produce, and refine oil so efficiently that its supply, at least for practical purposes, is basically unlimited. -- BusinessWeek, December 14, 1998

That was the industry's story right before a decade-long climb in oil prices that ended with an all-time high in 2008. Only the oil industry would now have the audacity once again to peddle a story that it has gotten wrong for more than a decade as if it were brand new. Enlisting the media and its army of paid consultants, the industry is once again telling the public that oil abundance is at hand. And, what is doubly audacious is that it is promoting this tale as oil prices hover at levels more than eight times the 1999 low. Clearly, the industry is counting on collective amnesia to shield it from ridicule.

The industry's purpose is transparent: To ensure that the world remains addicted to fossil fuels by convincing all of us that our energy sources--more than 80 percent of which are fossil fuels--don't need to change. It's a winning strategy even if the industry's premise is wrong since the oil companies still have huge inventories of fossil fuels underground that they want to sell at top prices. And, they are only going to get those top prices if government, businesses and households fail to convert to alternatives and thus remain hostage to fossil fuels.

In a stroke of public relations genius, the industry recently sent one of its own, Leonardo Maugeri, an Italian oil executive, to moonlight as a "research fellow" at Harvard. It's hard to imagine a more prestigious name to use to propagate the industry's consistently overly optimistic pronouncements about oil supplies--even though we are told in italic type at the bottom of Maugeri's policy brief that "[s]tatements and views expressed in this policy brief are solely those of the author and do not imply endorsement by Harvard University, the Harvard Kennedy School, or the Belfer Center for Science and International Affairs." Guess how many media outlets printed that disclaimer.

You can find Maugeri's report here. What you won't find there or in current media accounts are his consistently failed predictions about rising supply in the last decade, supply that was supposed to result in a flood of oil. Here's one gem from 2006 in a piece he authored for Forbes Magazine: "A plausible forecast is that by the end of the decade the daily demand for oil will have expanded by 7 to 8 million barrels. If global production continues at present rates, it could grow by 12 to 15 million barrels per day in that period. In other words, there is more than enough oil in the ground." Maugeri's contention was that high prices would result in a supply response that would bring back the good old days of abundance. Of course, no one covering his recent policy brief bothers to mention that his 2006 prediction turned out to be wrong, and not by just a little. World oil production has been flat since 2005. His vaunted supply response never materialized.

But, it wasn't for lack of trying by the oil industry. As John Westwood, chairman of the energy consulting firm Douglas-Westwood, explained in a recent slide presentation, it is becoming exceedingly difficult to add new oil production capacity. Some $2.4 trillion in oil industry capital expenditures from 1994 to 2004 increased the worldwide rate of oil production by 12 million barrels per day. However, the $2.4 trillion in capital expenditures spent from 2005 to 2010 resulted in a decrease in the rate of oil production of 200,000 barrels per day (See slide 8).

And, yet Maugeri and the industry as a whole keep trying to convince everyone that things have now changed. Naturally, they assiduously stay away from actual data and trends which show flat oil supplies since 2005 in the face of rising prices, something that would tend to would disprove their case. And, they try to confuse the issue by adding things which are not oil to the oil supply numbers such as natural gas plant liquids and biofuels and then applaud themselves for being right about rising oil production when, in fact, they are actually wrong.

Maugeri and others argue not using facts, but fantasy. They try to sell their imagined future by conjuring vast supplies of oil from extremely low-grade sources which no one has so far figured out how to extract profitably such as oil shale (not to be confused with shale oil which is properly called tight oil). Or by projecting unrealistically low worldwide decline rates in existing fields, pretending that existing fields are somehow like factories that can be made to produce not far below current levels for an extended time instead of declining at historically observed rates. Or by engaging in fantasy projections of supply growth not based on existing data and a proper understanding of historical and technical information.

But as any good PR professional will tell you, it's the headline that counts, and Maugeri and others have gotten all sorts of headlines proclaiming a new era of oil abundance. Reporters tend to focus on the highest numbers and boldest claim in any report. And, the public often gauges the truth of such claims, especially if they are technical in nature, by how many times they hear them.

With oil still hovering above $100 a barrel in Europe, people find the stories of Maugeri and others comforting because they promise continuity. And, yet change is all around us in the oil markets and has been for more than a decade. Eventually, the volatility of those markets and the realities of constrained supply will demonstrate the truth of the matter to the public. By then, however, we may have lost another decade of preparation to the complacency created by a cleverly crafted abundance fantasy designed to lull policymakers and the public into a dreamlike trance of acquiescence.

By. Kurt Cobb

Kurt Cobb is the author of the peak-oil-themed thriller, Prelude, and a columnist for the Paris-based science news site Scitizen. His work has also been featured on Energy Bulletin, The Oil Drum, 321energy, Common Dreams, Le Monde Diplomatique, EV World, and many other sites. He maintains a blog called Resource Insights.

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  • Fred Banks on July 24 2012 said:
    What you forgot to ask Kurt was why Harvard accepted this charlatan Maugeri as a fellow. Of course, he will find plenty of half-baked company at the Kennedy School.
  • smokey18 on July 24 2012 said:
    In my opinion , you have it backwords. Its the GOVERNMENT& BIG OIL who says we are running out of oil. My belief is that oil reproduces itself on a regular bases. when an oil well dries up , in time it fills back up. The EARTH is reproducing oil as i type , there is a never ending supply of oil. PEAK OIL IS A BIG SCAM
  • Mel Tisdale on July 25 2012 said:
    @ smokey18

  • Brian on August 09 2012 said:
    Big oil does have one thing right: alternative energy is not the solution. There is no amount of any combination of alternative energy that can support industrialized civilization. The reason we use fossil fuels is that they are the most dense and versatile resources ever discovered. There is nothing that can replace it. There will not be a new discovery of a better resource. Oil is unbeatable.

    smokey18: The Earth does not just "make oil." Reserves do not refill. Oil is only made when the conditions are just right, and remain just right for a few million years. This has only happened twice in the history of the Earth. The conditions required to create oil are toxic for mankind. If another oil creation cycle starts, we'll all die of breathing in the air and only life that lives in oceans, near coastlines will survive, except plants. Plants thrive very well under high temperature and CO2 levels.

    The truth is, it doesn't matter whether or not Big Oil can convince society that oil is limitless. Production is limited and in decline. Solar panels, windmills... They're futile. It takes oil to make them. It's like going to the bank and exchanging your dollars for British pounds. It's the same amount of money, just in a different form. Sure, these gadgets may pay for themselves over a very long period of time. You can deposit your British pounds in a bank and after time, it collects interest. But inflation takes away the value of that interest, just as rising oil prices take away the capacity to create windmills and solar panels.

    Ethanol is a scam. E-85 fuel would cost more than gasoline if corn was not subsidized. The fact is, whether you buy it or not, your tax money has already paid for the ethanol. The savings is not passed on to you. Your investment in taxes is slowly and only partially returned to you at the pump. We lose 10% of the energy from petroleum by running equipment to produce and transport ethanol. Plus we pay people to perpetuate this scam. It's criminal activity and must be stopped.

    Peak oil is passed. It's not just real, but we're in the decline. It's time to tighten our belts and accept that industrialized society is running out of time. We need to abandon electricity. In time, we will. I give it no more than 250 years.

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