Wednesday, June 4, 2008

What if Hubbert Was Wrong but Nobody Cared?

It is a mantra of the Peak Oil movement that oil production in the United States peaked in the 1970’s, and that this production peak has, or soon will occur in worldwide production of oil. M King Hubbert, of course, is the prophet of this movement, his legendary status enshrined by his uncanny and correct prediction that production in the U.S would reach a peak. Hubbert, so to speak, is the “Jesus Christ” of the Peak Oil movement.

But anyway, what if Hubbert was wrong? How would that impact the Peak Oil movement, and indeed Hubberts own messianic status in that movement?

According to the Department of Energy web site, domestic oil production peaked in 1970, at 9.6 million barrels per day. On a Monthly basis, it peaked in November 1970, at 10.4 million barrels per day. However, this doesn’t tell the entire story. While it is true that domestic production has been in an inexorable decline since then, with 2007 production at 5.1 million barrels per day, the following is also true:

1) Production in 2007 was flat with 2006, the first time this happened since 1991.

2) During a four-year period, from 1982 to 1985, domestic production grew every year, a legacy of increased oil exploration while prices were high in the late 1970’s and early 1980’s. The total percent increase in domestic production was 4.65%.

3) Domestic oil production also increased in 1977 and 1978, including a whopping 5% in 1978.

4) Domestic oil production increased 8.8% from 1977 to 1985.

5) Recently, sequential production has increased for four straight months (December 2007 to March 2008), although still down on a year over year basis. And yes, I understand that four months does not a trend make, just thought I would mention it.

So why am I writing this? Two reasons:

The pundits used to say the same thing about Natural Gas production domestically – that it was impossible to increase production, that the entire country was drilled over, and that high decline rates on new discoveries would work to keep production flat or in decline forever. Well guess what? Domestic gas production as measured on a gross, marketed or net basis is rising and has been for a while.

So if we can increase natural gas production domestically, due to increased exploration and development, when new wells decline 50% after the first year, why can’t we increase domestic oil production due to increased exploration and development when decline rates are much lower?

The second reason is that I want everyone to understand that just because you hear something repeated over and over on television and on the Internet doesn’t make it true. Most of the people saying it have a financial interest in seeing it come true. Do your own research for yourself and then decide.

Now please don’t jump all over me for this article, I am not making a broad statement on the validity of Peak Oil, just the narrow point that domestic oil production can, and has increased during a long term decline, and that this can impact supply and therefore the price of Oil. OK, that’s it. Let the name-calling and data mining begin.

1 comment:

Dividends4Life said...

That was an interesting read!

Best Wishes,
D4L