Anyone recall the massive economic plight wrought by the Great Horse Manure Crisis of 1894? It’s ok if you don’t because it turned out to be…well…a pile of manure. And no, this isn’t made up. In the late 19th century, growing global urbanization led many to extrapolate then-present trends into the future ad infinitum and ad ridiculum. At the time, most local transport was horse powered—cabs, buggies, and wagons conveyed the bulk of goods intra-city. Seeing this, many who failed to fathom the power of human ingenuity believed London and New York would, in a handful of years, be buried in nine feet of dung. It’s easy to look back now and realize the flaw. But underpinning those beliefs was a Malthusian, doomsday-ish belief in a finite world to which we humans, as a group, are susceptible even today. Here’s one example: Peak Oil.
For those new to peak oil, this isn’t a theory simply stating oil prices will rise because demand growth outstrips production growth. Peak Oil holds that, at some point (many proponents argue in the next couple decades), global oil production will peak then steadily decline—ultimately and utterly depleting oil reserves.
Oil’s initial US discovery in northwestern Pennsylvania didn’t immediately show it to be much of an economic necessity. Instead, it was a nuisance—it polluted the local farmers’ water supply. But as its economic utility grew, people began an ever-widening search for reliable and productive energy sources. During this search, it’s been apparent the force that creates oil—nature—doesn’t move according to the economic needs of man. So in the sense that oil can’t be easily or cheaply replicated via a human process on the scale needed to power our economy, there is, in fact, a theoretical point of peak oil.
Just when that occurs, however, is where you get two camps—those who acknowledge oil is a finite resource, and those who believe in Peak Oil (sometimes called “Hubbert’s Peak” after M. King Hubbert, a geophysicist who first posited a way to predict the point of peak oil in 1956). There’s nothing wrong with the concept of peak oil itself. The difficulty is determining where and when that point is with any accuracy given the vast technological gains (which increase the amount of oil we’re able to find then extract) and productivity gains (which decrease our reliance on crude) we’ve seen over the past few decades that are likely to continue.
But those who believe in Peak Oil fear it’s imminent—with dire economic consequences. That we won’t discover an alternative to oil and it will simply run dry—very soon. As in, just a few years from now. Googling “peak oil preparations” yields websites where folks share thoughts on life after peak oil—like learning to live off the land and make your own ammunition. Some even believe this will so hamstring the global economy that the world will largely revert to an agrarian society.
There are a few problems with Peak Oil. First, that point has already wrongly been predicted a few times—the first supposed Hubbert’s Peak was 1970. Every time we approach the next predicted date, Hubbert’s Peak doomsayers are forced to move the date out. A bigger problem? Why would anyone assume that, knowing peak oil is on the way, human ingenuity is helpless to counteract the impact? That, as a society, we’d just throw up our hands, and say, “Oh well. That was fun while it lasted”?
Humans have a tendency to think we know more about the world today than we’re proven to later. (Earth is the center of the universe, the world is flat, mold is icky instead of being penicillin, communism works.) This is a real problem for those believing peak oil is close at hand. Why? Because as oil’s economic value has increased, companies and brilliant engineers globally become more incentivized to search for oil reserves previously unfound. For example, in recent years, huge finds off Brazil’s shores and the harnessing of Canadian oil sands have added greatly to known resources with enormous future production potential—the two are currently estimated to hold roughly 150-200 billion barrels of recoverable oil combined. In the 20 years between 1989 and 2009, global proved reserves of crude oil (including unconventional sources) have grown over 45% to nearly 1.5 trillion barrels. Think about this fact for a moment: Even after all the pumping during those 20 years, the amount of recoverable oil in the ground globally has grown. Of course, it’s not nearly so easy to extract deep water and shale oil. But the right and noble quest for profits also motivates the development of technology.
Technological advances now facilitate the extraction of oil people weren’t even aware of just a few decades earlier. Though the Gulf oil spill was a tragedy, the fact is we’re now safely drilling in water depths thought impossible not long ago. And in oil-rich fields no less! While deepwater production didn’t exist until 30 years after the birth of Hubbert’s theory, it yielded nearly 5 million barrels of crude per day in 2009. So even as production may decline from traditional oil regions like the Middle East, it’s largely offset—plus some—by other sources. In fact, following decades of US oil production decline tied to slack conventional production, 2009 and 2010 showed growing US oil output—which the US Energy Information Administration attributes mostly to deepwater and shale formations.
US Domestic Oil Production (Millions of Barrels Per Day)
Just 15 years ago, many thought US natural gas production had peaked. This led (predictably) to Peak Gas theories. But consider: The Peak Natural Gas website (here) hasn’t been updated in years. Why? Because technological advances in hydraulic fracturing (“fracking”) have allowed drillers to access massive reserves that simply weren’t economically viable earlier. At 2009’s close, accessible natural gas reserves were at levels not seen since the early 1970s—and peak gas alarmism suddenly seemed ridiculously untimely.
This technology isn’t limited to gas—drillers in North Dakota’s Bakken shale (a massive rock formation sitting atop huge gas and oil reserves) use these unconventional techniques now to harness existing oil reserves. In 2009, North Dakota’s proved reserves of crude oil increased 83%. The result? A massive boom in North Dakota’s oil production (see a chart here). We are now successfully extracting large quantities of oil from previously unknown fields using technology that didn’t exist a few short years ago. Imagine that. (Yes, there are some environmental concerns—true of any technological advance,including solar and wind power. But if these concerns prove true on some level, improving technology over time can alleviate them.)
Moreover, the cars we drive and other engines we run are now more energy efficient than their earlier counterparts. While growing wealth and global populations have increased total consumption despite this, increased efficiency has slowed the growth rate per user. And there’s little reason to think innovations on both the production and consumption side won’t continue. Perhaps even a different source of energy will ultimately become economically viable on a scale large enough to power a greater share of our economy, relieving stress on oil—maybe forestalling peak oil altogether. (Those fearing mountains of horse dung certainly didn’t envision the combustion engine either.)
A primary reason we aren’t relying more heavily on solar, wind, and other sources of renewable energy is cost—so even if one assumes we’ll ultimately run out of oil, the economics of energy means other sources would likely become more desirable. That means society as we know it wouldn’t likely cease to exist because, in a true peak oil (small caps) scenario, it’d simply shift to other sources—made relatively cheaper by the hypothetical scarcity of oil.
The logical fallacy of dire, premature Peak Oil theory is it places too much confidence on what we think we know and not nearly enough on what we have the power to create. This is neither the first nor the only end-of-the-world-as-we-know-it theory floating about society. But when hearing of theories projecting today’s technology, knowledge, and consumption far into the future without improvement or discovery, I encourage you to think of horse manure.