Fracking and other breakthroughs added to world supplies. That's not necessarily a good thing.
When I started writing this column here a decade ago, I laid down several markers that might shove us sideways. Long before the word became a tech commonplace, I called the sum of these trends the Great Disruption.
One was peak oil.
This didn’t mean “the world about to run out of oil.”
Instead, it was shorthand for the point when we had burned half of the petroleum in the planet, and the other half would be harder and more costly to discover, extract and refine. At the same time, demand was rising higher than ever.
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The concept was first developed by Shell geophysicist M. King Hubbert, who accurately predicted the U.S. peak in the 1970s. By the 2000s, peak oil was hardly a crank theory. Many of the “elephant fields” were past their prime years. Major oil companies were discussing it, too. The debate was over when that peak would hit.
Then came unconventional means of production (tar sands) and technological breakthroughs (fracking) that produced a relative gusher. Prices dropped dramatically in 2014. By last year, U.S. crude production was close to the 1970 high.
I’m very willing to say I was wrong about peak oil. Although an old saw about columnists is that they are “frequently wrong but rarely in doubt,” I want to get it right.
Better to follow John Maynard Keynes, who when confronted by a man demanding to know why he had done an about-face on a certain position, reputedly said, “When the facts change, I change my mind. What do you do, sir?”
But the situation is more complicated.
Even though President Donald Trump withdrew the United States from the Paris climate accords, 194 nations and the EU are still parties. Many are seriously moving ahead. A combination of public policies, corporate pushes and technological advances in green energy is making assumptions about oil use shaky.
Earlier this month, the British asset manager Sarasin & Partners published a report questioning whether big oil companies were overstating their long-term assumptions about oil prices and corporate performance. It was based on a review of financial statements from eight European-based oil companies, including Shell and BP.
“We believe there may be a problem of systemic overstatement of capital and profits linked to overly optimistic long-term oil price assumptions that fail to take account of the international commitment to phase out fossil fuels,” the report states.
Now insiders are talking about peak oil demand. With electric vehicles, better fuel efficiency and renewables, Bank of America earlier this year predicted that it could happen in 2030, a decade or two before the major oil companies expect.
Of course, electric cars and even solar and wind energy require plenty of fossil-fuel “inputs” for their manufacture or, in the case of vehicles, their ultimate power source. But despite the fierce efforts of the administration — and it will hold us back — we’re not returning to the circa-1960s paradigm.
Oil was always a growth industry. That’s possibly coming to an end sooner than the boosters would have you believe.
A second caution is that the oil business is famously unpredictable. Prices fell dramatically in mid-decade, but now are rising. Brent crude was about $73 a barrel last week, up about $30 from three years ago.
This is already crimping the profits of transportation companies. See another rise of $10 or $20 a barrel and the economy could get mauled. Not enough peak-demand options and efficiencies are online. And considerable debate remains about when peak demand will hit.
Sure, higher prices make such sources as low-output stripper wells viable again, but it takes time to get the upstream downstream, as they say in the “awl bidness.” In other words, ultimately to the gas pump.
But in the near term, according to the International Energy Agency, production gains from the United States alone will cover 80 percent of global growth in demand. Canada, Brazil and Norway can handle the rest. OPEC has lost its commanding heights.
The facts change and I change my mind.
But it doesn’t give me peace of mind.
The biggest disruption I worried about 10 years ago was climate change. That’s turned out to be more severe than feared, happening faster than scientists anticipated, and in large part a consequence of burning fossil fuels.
When future generations look back and curse us for our inaction, they will also note how such innovations as fracking were among the worst events to befall us. And don’t forget those nice, progressive Canadians with their environmentally disastrous tar sands.
More abundant oil convinced many Americans that they could go on with the “lifestyle” of happy motoring, sprawl and trips to Walmart — and people in developing nations wanted to emulate us. And that we could slow-walk investments in transit — even in supposedly progressive Seattle — and high-speed passenger rail (hey, Elon Musk would save us!).
All the while, temperatures kept rising, forests burned, weather became more extreme, sea levels rose, species died off. The storm of catastrophe gathered. Peak oil demand can’t come fast enough, but it may be too slow to avert the worst.
It is a genuine existential crisis. God, if only I had been wrong there.