I don't get it, I guess. There's the school of thought that the production of oil is either about to peak, or has peaked, or is at its peak as we speak. That's the theory known as 'Peak Oil'.
In Time Magazine, there's an article about how some of the diplomatic cables leaked reveal that Saudi Arabia is overstating its oil reserves by 40%.
A cable from December 2007 tells the story. U.S. diplomats in the Saudi capital of Riyadh met with al-Husseini. The American representatives had been told earlier by current Aramco executives that the company had 716 billion barrels of total oil reserves, of which just over half were considered recoverable. ("Recoverable" oil means that petroleum that is economically worth the cost of getting it out of the ground.) Current Aramco executives believed that in 20 years the company would have over 900 billion barrels in reserves, and that advances in technology would mean that 70% of it would be recoverable—good news for those who want to keep oil prices from rising in the future.
But al-Husseini, the former Aramco exec, told the U.S. diplomats that his successors were far too optimistic. He said that Aramco was overstating its reserves by as much as 300 billion barrels. He believes that Saudi Arabia has approximately 360 billion barrels of proven reserves—meaning oil that has already been produced or which can be exploited with current technology. Al-Husseni said that once 50% of those reserves had been produced, the country would reach an inflection point, resulting in a slow and steady decline in output. He also believes that inflection point would be reached in 14 years at current rates of production (12 million barrels a day), and that it would be followed by a plateau in output and then a decline. Al-Husseini also told American diplomats that Saudi Arabia lacked the engineers and other resources to push production to the max.
That all fits the theory of Peak Oil that's been bandied about since the late 1990s.
Yet at the same time, I read this article on the very same day.
A new drilling technique is opening up vast fields of previously out-of-reach oil in the western United States, helping reverse a two-decade decline in domestic production of crude.
Companies are investing billions of dollars to get at oil deposits scattered across North Dakota, Colorado, Texas and California. By 2015, oil executives and analysts say, the new fields could yield as much as 2 million barrels of oil a day — more than the entire Gulf of Mexico produces now.
This new drilling is expected to raise U.S. production by at least 20 percent over the next five years. And within 10 years, it could help reduce oil imports by more than half, advancing a goal that has long eluded policymakers.
"That's a significant contribution to energy security," says Ed Morse, head of commodities research at Credit Suisse.
Oil engineers are applying what critics say is an environmentally questionable method developed in recent years to tap natural gas trapped in underground shale. They drill down and horizontally into the rock, then pump water, sand and chemicals into the hole to crack the shale and allow gas to flow up.
Because oil molecules are sticky and larger than gas molecules, engineers thought the process wouldn't work to squeeze oil out fast enough to make it economical. But drillers learned how to increase the number of cracks in the rock and use different chemicals to free up oil at low cost.
"We've completely transformed the natural gas industry, and I wouldn't be surprised if we transform the oil business in the next few years too," says Aubrey McClendon, chief executive of Chesapeake Energy, which is using the technique.
So it seems there's more oil to be squeezed out of the earth, depending on the technique. The previous theory was that it was hard to access but this is being turned on its head. Presumably if these can help America find more oil, then surely the same techniques can be used to extract more oil in the Middle East. This would then account for this article.
The reality is that we are in uncharted waters. The world has never, ever seen anything like the rise of major developing countries like China and India—over a billion people growing into the middle class, demanding meat, cars, planes, electricity. Just because we proved smart enough to innovate our way out of periods of past growth doesn't mean we'll be able to handle a world with 9 billion plus people by 2050, most of them richer than now. We may already see that impact on the U.S., which will likely have to dig its way out of recession with the added burden of high energy prices thanks to healthy demand from the developing world.
It's actually hard to see if 'Peak Oil' will play out the way the theory predicts. If they keep finding oil, and in the case of Russians - they're finding them in odd places but they do find them - it seems we'll have more than plenty. The question is how are we going to control all that carbon getting emitted. I guess that's another problem altogether.
For those who like reading way-out-there things on the internet, I'll share this link with you. This one in particular is way way way out there.
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