The decision to shutter "The Oil Drum," the leading website devoted to peak oil, has come to symbolize the end of an era - and sparked a furious debate about whether the theory was all along based on a fundamental mistake. The site's authors and editors blamed the decision to archive it on the "scarcity of new content caused by a dwindling number of contributors," according to a statement on July 3.
"Because of this and the high expense of running the site, the board has unanimously decided that the best course of action is to convert the site to a static archive," they noted sadly.
For critics, the site's demise marks the end of a flawed theory and more generally the fact the commodity supercycle has turned. "Peak oil theory has basically gone the way of the California Condor, from widespread existence and acceptance ... to near extinction," Forbes magazine wrote in a polemical column ("As fracking rises, peak oil theory slowly dies" July 26).
"Today, given the new abundance of shale oil, almost no real industry leaders are peak oil proponents," Forbes added, dismissing peak oil as "a theory based on lack of imagination."
According to the magazine, proponents underestimated the huge role advancing technology plays in allowing industry to discover new sources of oil and recover deposits previously thought to be inaccessible. The site's authors have hit back, insisting it is not folding for lack of interest. Instead peak oil has gone mainstream. "Repetition of the basic information, beyond a certain point, was counter-productive," the site claimed.
DRUM BEATS NO MORE
The life and death of The Oil Drum, which began in 2005 and is set to end in 2013, neatly corresponds with fears about oil supplies running out. If one name has been associated with the modern revival of interest in peak oil, it has been that of Colin Campbell, a veteran oil-industry geologist.
After presenting a conference paper on oil depletion in 2001, Campbell went on to found the Association for the Study of Peak Oil (ASPO), a network of scientists and others interested in determining the date and impact of peaking world oil and gas production. The Oil Drum became the popular front-end for a growing community of experts. They succeeded in pushing concerns about peaking oil supplies back up the agenda for policymakers after almost two decades when it had been absent.
In 2000, the phrase "peak oil" occurred just 2.5 times in every billion words published in English, according to Google's N-gram language-analysis tool, which can search an enormous corpus of books, articles and websites published in English and other languages. By 2008, the number of references had risen 65-fold to 160 occurrences per billion words (Chart 1).
It is not the first time that concerns about oil supplies have risen. Similar though much smaller alarms occurred in the late 1940s and again in the 1970s and 1980s (Chart 2).
More recently, interest seems to have cooled. The web-version of Google's N-gram does not support searches after 2008. But the British Library's UK Web Archive, which tracks the content of British websites, shows references to peak oil rose steadily from just over 1,000 in 2004 to a high of 115,000 in 2010 but had more than halved to just 42,000 by 2012 (Chart 3).
FROM SCARCITY TO ABUNDANCE
Interest in peak oil rose to fever pitch in 2008 as prices rose relentlessly to reach more than $147 per barrel. Later that year, the International Energy Agency (IEA), devoted its flagship publication, the annual World Economic Outlook, to analyzing the accelerating decline rates at many of the world's oil fields.
"The world is not running short of oil or gas just yet," the IEA observed carefully, but "field by field declines in oil production are accelerating." The industry would need to run faster and faster just to stand still, the agency warned. By 2013, oil and gas prices had fallen, in large part because of the North American shale revolution. The IEA could predict confidently that oil, gas and coal resources "are sufficiently abundant" to fuel the world until cleaner alternatives have been developed.
Instead, the IEA and environmentalists have become worried about the climate effects of burning all the fossil fuel deposits already discovered. If governments are serious about limiting the rise in average global temperatures to 2 degrees Celsius by 2020, two-thirds of the world's currently known oil, gas and coal reserves will have to remain in the ground, according to the IEA.
Climate campaigner Bill McKibbin's 350.org, and other organizations like the Grantham Institute's Carbon Tracker Initiative, are pushing for oil companies to cut their spending on new exploration and production, arguing new reserves are not needed and most of the existing ones must remain "unburnable" to avoid catastrophic climate change.
THE UNQUIET SHADE OF MALTHUS
Commentators have been worried about food and fuel shortages since at least the 18th century. The prototype worrier was Thomas Malthus, who believed food shortages must eventually limit population growth.
Writing in his famous "Essay on the Principle of Population," published between 1798 and 1803, Malthus warned population would grow geometrically, while the means of subsistence would grow only arithmetically. "Misery and vice," in the form of war, disease and famine would keep the population in check, Malthus argued.
By the 1860s, concern had switched from food to fuel. Economist William Stanley Jevons worried the exhaustion of Britain's "present cheap supplies of coal" would eventually threaten the country's industrial pre-eminence.
"The exhaustion of our mines will be marked ... by a rising cost or value of coal, and when the price has risen to a certain amount comparatively to the price in other countries, our main branches of trade will be doomed," Jevons noted gloomily in his unlikely bestseller, The Coal Question: an Inquiry Concerning the Progress of the Nation and the Probable Exhaustion of our Coal Mines, which was first published in 1866.
Of course, coal was eventually replaced by oil, and the forecast shortages never appeared. By 1919, however, concerns were being expressed about the adequacy of oil supplies. The United States is facing "a serious shortage of petroleum," geologist Carl Hugh Beal wrote in a report that year for the U.S. Bureau of Mines on "The Decline and Ultimate Production of Oil Wells."
The limit of production in this country is being approached, however, and although new fields undoubtedly await discovery, the yearly output must inevitably decline, because the maintenance of a given output each year necessitates the drilling of an increasing number of wells," Beal warned. "Such an increase becomes impossible after a certain point is reached, not only because of a lack of acreage to be drilled, but because of the great number of wells that will ultimately have to be drilled."
Less than a decade later, U.S. oil production was outstripping demand, and states began to introduce conservation and proration to limit output and stabilize prices.
U.S. oil production surged again during World War Two. But fears about peaking oil production resurfaced in the 1950s when Shell research scientist M King Hubbert predicted U.S. oil production would peak around 1970. "It is impossible to delay the peak for more than a few years," Hubbert claimed in his famous 1956 paper on "Nuclear Energy and the Fossil Fuels."
By the early 1970s, Hubbert's prediction appeared to come true, when U.S. domestic oil output peaked right on cue in 1970, then began to fall sharply.
LIMITS TO GROWTH, HIRSCH REPORT
The 1970s saw a surge in commodity prices, and marked a high-point about fears about scarcity. Hubbert appeared to have been correct. Meanwhile, the first oil shock sent oil prices soaring and heightened fears about the dependence on imported oil from the Middle East.
Responding to concerns from lawmakers, the Congressional Research Service warned: "Even at the current high price of oil, John D Moody, president-elect of the American Association of Petroleum Geologists, has projected that world oil production must necessarily decline by the late 1980s to the early 1990s."
Three years earlier, in 1972, experts from the Massachusetts Institute of Technology had warned that the rapidly rising global population, as well as its demands for food and fuel, were unsustainable, in a controversial report on "The Limits to Growth", which became another bestseller. But by the early to mid-1980s, high oil prices had spurred so much new exploration and production in areas like the North Sea and the Soviet Union, the world was left awash in excess oil production and prices collapsed.
Fears about peak oil remained quiescent throughout the late 1980s and during the 1990s, when policymakers appeared more preoccupied by excess production capacity.
But Campbell and those who agreed with him succeeded in forcing the issue back onto the agenda. Spurred by steadily rising oil prices between 2002 and 2008, policymakers were again ready to listen. In a 2005 report to the U.S. Department of Energy, Robert Hirsch warned: "The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem."
"As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social and political costs will be unprecedented," Hirsch cautioned. He tabulated the views of a list of industry experts, all of whom forecast global oil production would peak between 2007 and 2016.
PHYSICAL EXHAUSTION, RISING PRICES
All these panics about food and fuel running out have many aspects in common. In most cases, proponents noted the real problem is not that the resource will run out physically, but would become increasingly expensive as the easy opportunities for production are exhausted.
Jevons warned: "Many persons perhaps entertain a vague notion that someday our coal seams will be found emptied to the bottom and swept clean like a coal-cellar.... Our fires and furnaces, they think, will then be suddenly extinguished, and cold and darkness will be left to reign over a depopulated country."
But this was wrong. According to Jevons: "Our mines are literally inexhaustible. We cannot get to the bottom of them; and although we may someday have to pay dear for fuel, it will never be positively wanting." Instead, Jevons worried the easiest seams, those thickest and closest to the surface, would be used up, forcing miners to dig ever deeper for thinner and poorer quality seams. "The price of coal must rise in a very extreme degree, that an unworked thin seam should, at a future time, pay," he warned.
The sentiments were echoed almost exactly 140 years later in the Hirsch Report. "When world oil production peaks, there will still be large reserves remaining," Hirsch explained. But sharply rising prices would still cause immense disruption. Most remaining peak oil proponents insist they never said oil supplies would run dry, just that the industry would have to invest more and more, and prices would have to keep rising.
The problem is that even this more sophisticated version, anticipated by Jevons, Hubbert and Hirsch, has turned out to be too gloomy. Oil prices remain far below the peak hit in 2008, and most in the market think they will remain flat or fall in the years ahead.
FAILURE OF THE IMAGINATION
Every one of these predictions was made by a leading expert. Jevons, Beal, Hubbert and Hirsch had all studied carefully the industries they wrote about. Their predictions were treated with deference. But in every case they made the same fundamental mistake: failing to appreciate how technology can transform the outlook for both supply and demand.
Many of the doomsters showed a glimmering of understanding about the transformative potential of new technologies - only to dismiss it too easily. Jevons, for example, was aware the oil could theoretically replace coal:
"Petroleum has of late years become the matter of a most extensive trade, and has even been proposed by American inventors for use in marine steam-engine boilers. It is undoubtedly superior to coal for many purposes, and is capable of replacing it." But he quickly dismissed the possibility: "What is petroleum but the essence of coal, distilled from it by terrestrial or artificial heat? It's natural supply is far more limited."
In the same way, the two technologies which have underpinned the shale revolution, hydraulic fracturing and horizontal drilling, were both already around when the Hirsch Report was written. The first oil well was hydraulically fractured in 1947. By the end of the century, hydraulic fracturing had been employed more than a million times in the United States. Directional drilling has been possible since the 1920s.
Mitchell Energy had employed them together to wring unconventional gas from Texas' Barnett shale in the late 1990s. When the Hirsch Report was written, in 2004/2005, shale gas output was already starting to rise swiftly. Yet the report failed to appreciate how far, and how quickly, it could transform the outlook for the entire gas industry, and then do the same for oil. As the author of the Forbes article put it, it was a failure of imagination.
Failed predictions about peaking oil supplies, and steep rises in the price of other commodities, all stem from the same error: assuming a world of roughly constant technology, rather than one where technology is constantly changing, sometimes slowly, at other times in large disruptive jumps. Malthus, Jevons, Beal, Hubbert, the authors of Limits to Growth, Hirsch and the modern peak-oilers all failed to see how technology was already changing the world even as they wrote, and would alter it beyond recognition within just a few years.
We are likely to hear much less about food and fuel running out, at least for a little while. But if the past is anything to go by, sometime in the 2020s or 2030s, as memories fade, fears about resource scarcity will be resurrected, in another subtle variation on an old theme.
When they do, commentators would do well to remember predictions about food and fuel scarcities have come and gone in waves for almost 250 years - and been proved wrong repeatedly.
John Kemp is a Reuters market analyst. The views expressed are his own.