Ten years ago, for each person who searched for “too much oil” on Google, 100 people searched for “peak oil.” Today, searches for “peak oil” have dwindled so much that there is very little variation between the numbers of searches for the two terms. The question many people are asking themselves following the shale revolution, is, “has peak oil become irrelevant?”
The concept of peak oil stemmed from the notion that the Earth was surely going to run out of oil, its prime non-renewable fuel. In the 1950s, every expert high and low was trying to make forecasts of when the last barrel of oil was going to be extracted from the world’s last reserve.
That was the key to profitable speculations about the price of oil. As supply decreased, prices were expected to skyrocket. And they did, but that too had to end.
Peak Oil Theory: M. King Hubbert – Applicability to Shale Oil Reserves
The man responsible for the peak oil theory was M. King Hubbert, a geophysicist who accurately predicted the 1970 oil production peak in the US. In his 1956 paper, Nuclear Energy and the Fossil Fuels, Hubbert proposed that oil production in any specific region resembled a bell curve, rapidly increasing in the early stages of production, peaking when about 50% of an oil field had been extracted, and then beginning to decline.
It’s clear looking at the graph above, that Hubbert did a pretty good job of predicting peak oil, that is, up until the shale revolution. A question we might ask now is, “can we re-apply Hubbert’s peak oil theory to shale oil reserves?”
Hubbert’s calculations were comparatively simple if we consider all the variables we have to take into account to analyze the matter today.
EROEI: Energy Return on Energy Investment
I believe one of the most critical issues is the variation in Energy Return on Energy Investment (EROEI). In the early days of the oil industry, the EROEI was 200 to 1. In the case of shale oil, it is estimated at 5 to 1. This poses a tremendous problem for substituting non-renewable with renewable energy.
We need to have access to sufficient and cost-effective energy in order to produce energy.
T. Boone Pickens, a billionaire and peak oil proponent, believes that if we want to transition to renewables, we should focus on producing high EROEI, such as fracked natural gas, regardless of whether other cleaner energy sources are available. Congress rejected a 2008 proposal by Pickens, which involved using natural gas to fuel the development of wind farms.
Some experts think the new peak oil will be reached sometime around 2020. Personally, I believe that with the rapid development of new technologies, such as microwaves-powered oil shale extraction, and the discovery of new deposits of oil and gas, it is difficult to predict peak oil at this point, and in fact, the concept may have become as irrelevant for our industry as the scarcity of Google searches reveals.