Tuesday, October 28, 2008

Peak Oil, and Oil Companies

The degree with which many people in the oil industry are in denial just hit me. I went to a talk by a Vice President at Exxon. She was actually not willing to admit that the United States had hit peak oil. She made the tired old claim that it was not the geology that was the problem it was the politics and environmental controls banning them from drilling oil. This becomes a pretty laughable case when you think about it. This wasn't the map I was hoping for, but it makes the point pretty clearly:

There are only three major regions off limits to Oil companies. One is off the coast of California, another is off the eastern coast of Florida, and the third is the northeast part of Alaska. Now, looking at the map there is a little gas off the coast of California. But it is insignificant compared to the United States as a whole. There is almost no known oil off the east coast of Florida. The northeastern section of Alaska does have a fair amount of oil, but far less than the much larger parts of Alaska they have been drilling in for decades and not enough to make up for the loss.

Even if they were allowed unlimited access to this resource, what effect does it have on the graph of United States Oil Production? Maybe they could stop the decline for a couple of years, but even bringing production up to 1960 levels is wishful thinking.

Today United States oil production has dropped to the levels it was in the mid 1940s. Since the only region formerly producing oil that the government stopped from drilling was the coast of California it is safe to say that almost all of the drop was good old fashioned resource depletion rather than politics. They can whine about the areas they cannot drill all they want, that wasn't what caused us to hit peak production, and we did hit peak production.

If it was just the United States it might not matter. But we keep adding country after country to this list, Libya(1970), Indonesia(1991), England(1999), Norway(2000), Mexico(2004) and so on. The world is just waiting for peak oil in either Russia, or Saudi Arabia before the countries that haven't hit peak cannot produce enough extra oil to make up for the rapid decline in production from those who have and world output begins to decline. Even if it fails to happen because of some amazing technology(unlikely since the United States has the best technology in the world and still hit peak) since population growth since 1980 has happened faster than oil production has increased we hit peak oil per capita decades ago. We must find a way to maintain civilization off of other resources.

This is a huge opportunity. Fortunes will be made and lost off of bets related to this. Peak oil is almost certain not to be peak energy. We have dozens of options. It will however be the driving force behind some of the biggest changes since we got our oil from Whales. Exxon is paying a shockingly small amount of attention to this however.

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