The debate about âpeak oilâ flared up again following a new report from Oxford University claiming that conventional oil reserves are inflated by a third and that added reserves from non-conventional sources are giving a false sense of security.
The report from Oxfordâs Smith School, headed by Britainâs former chief scientist, Sir David King, said it is an âopen secretâ that OPEC inflated its reserve figures in the 1980s as it was seeking to claim market share, and that official sources, such as the International Energy Agency, continue to use these inflated figures.
Conventional reserves should be put at 850 billion to 900 billion barrels, instead of 1,150 billion to 1,350 billion, the Oxford experts say. They estimate that supply will âpeakâ in about 2014 â that is, demand will outstrip supply for the first time.
Deepwater discoveries such as the Tupi field offshore Brazil, estimated to hold 5 billion to 8 billion barrels of oil, do not really change the picture, the study says. Fossil fuels in oil sands and shale formations are much more expensive to recover and have yet to be proven economically viable. Moreover, the Oxford experts say, the very recovery of these reserves generates significantly more carbon emissions than traditional drilling.
The oil and gas industry disputes the notion of peak oil, arguing that new discoveries can keep pace with demand. However, based on IEA data on the rate of decline in existing reserves, new finds with the equivalent of Saudi Arabiaâs reserves would have to be found every four years just to keep steady.
The Oxford study warns that developed countries are too complacent about future supply, in contrast to a rapidly growing emerging economy like China, which is actively seeking energy resources around the globe. Industrial countries should focus more on energy efficiency, and on alternatives to fossil fuels, such as transporting freight by airships instead of conventional transportation.
In Britain, Virgin founder Sir Richard Branson and Ian Marchant, CEO of Scottish and Southern Energy, are among the leading businessmen trying to raise awareness through the Peak Oil Industry Taskforce about what they see as the coming oil crunch.
One consequence of such an oil crunch would be higher prices. Some analysts see crude oil topping $100 a barrel by the end of this year and $150 a barrel by 2014.
By. Darrell Delamaide
But even so, they could be correct. If you have studied any amount of game theory you know that the telling of lies - and in some cases outrageous lies about the future availability of oil - is now standard operating procedure. Moreover, there is a logical reason for the oil producing countries to claim more reserves than they actually have: the point is to convince oil buyers that while oil prices may occasionally escalate, there are sufficient reserves in the crust of the earth to reverse the situation...in due course. Some oil companies do the same thing, and both OPEC and the majors make a point of insisting that peak oil is a chimera. Only TOTAL does not go along with the anti-peak oil fantasy
I feel it necessary to report that I don't have any reason to believe that the people who wrote the report referred to by Darrell Delamaide are more competent than the persons who accept the existing figures for OPEC reserves. Some years ago a well known American academic told me that Saudi Arabia was in the process of greatly expanding its reserves, and I not only told him that he didn't know what he was talking about, but challenged him to a public discussion on this topic. By the same token I am not aware of any reason to shout to the house tops that we are being deceived by the reserve figures supplied by OPEC or the International Energy Agency. You see, the Smith 'experts' are not primarily energy people: their specialty is environment. And in addition, their belief that freight should be transported by airships instead of conventional means does not sound right to this teacher of applied and theoretical economics. No, it doesn't sound right at all.
I suggest that we wait a while before we accept the new Oxford estimate of OPEC reserves. We don't want our political masters to make any mistakes on this important subject.