The Folly of Peak Oil
Peak oil refers to the point at which we are able to produce the most amount of oil. The thing that most people apparently don’t understand is that how much oil we can produce is dependent on two primary factors. The technology available at the time and the cost of pumping the oil out of the ground. To say that we reached peak oil in the late 1960′s is a true statement only if it’s put in the perspective with the drilling technology of the day and the price point of roughly $5 per barrel.
It does not mean that we won’t produce more oil at one or more times in the future. Today, oil is hovering around $100 per barrel. We have much better drilling technology today that allows us to recover a much greater amount of oil from the earth than we could have as recently as a decade ago. That said, if the economy would support oil prices of $200 per barrel, we would significantly increase the amount of oil we could produce because the companies producing it would be able to afford to invest in the equipment, technology and workforce to recover it. So the concept of peak oil is a moving target, not a static number as some seem to think.
A perfect example is the Haynesville Natural Gas reserve in Louisiana. Due in large part to advances in technology, a massive reserve of natural gas that was discovered in 1959, has increased Louisiana’s gas production to over 2 trillion cubic feet per year for the first time since 1982, since new technology allowed companies to recover the gas that was not recoverable before. Prior to these advances, it would have been logical to say that 1982 was the peak gas production in the state. That is no longer true, however, due the discovery made possible by technology. Haynesville is estimated to contain a reserve of about 39 trillion cubic feet of natural gas, or roughly the energy equivalent of over 7.1 billion barrels of oil.
Another perfect example:
America is sitting on top of a super massive 200 billion barrel Oil Field that could potentially make America Energy Independent and until now has largely gone unnoticed. Thanks to new technology the Bakken Formation in North Dakota could boost America’s Oil reserves by an incredible 10 times, giving western economies the trump card against OPEC’s short squeeze on oil supply and making Iranian and Venezuelan threats of disrupted supply irrelevant.
In the next 30 days the USGS (U.S. Geological Survey) will release a new report giving an accurate resource assessment of the Bakken Oil Formation that covers North Dakota and portions of South Dakota and Montana. With new horizontal drilling technology it is believed that from 175 to 500 billion barrels of recoverable oil are held in this 200,000 square mile reserve that was initially discovered in 1951. The USGS did an initial study back in 1999 that estimated 400 billion recoverable barrels were present but with prices bottoming out at $10 a barrel back then the report was dismissed because of the higher cost of horizontal drilling techniques that would be needed, estimated at $20-$40 a barrel.
Some scientists believe that the Bakken Formation could ultimately produce as much as 800 billion barrels of oil. To put that into perspective, Saudi Arabia has the largest proven oil reserves in the world. Their reserve is about 300 billion barrels (and some believe that is overestimated).
So, let’s play a little game called “what if”.
What if the Bakken Formation proved out on the low end of the estimates of around 200 billion barrels, which would be about a third less than the largest oil reserves in the world. If that were the case, then would it be safe to say that the United States did not hit peak oil production in the late 1960′s?
I think so.
The Institute for Energy Research posted an article discussing this same topic with some more current information. Some of the highlights include:
- The United States is now estimated to have 1,442 Billion barrels of recoverable oil (almost 5 times the proven reserves of Saudi Arabia)
- Proven reserves for the United States have grown from 20 Billion barrels in 1944 to 20.7 Billion barrels in 2010, yet during than time we’ve produced 167 Billion barrels of oil
- IER’s annual report from December 2011 indicates recoverable oil, gas and coal at levels that can provide for U.S. energy needs for hundreds of years
The Bakken Oil Formation continues to show significant increases in production due to technological advancements (and the fact that it’s on private land, so the Obama Administration can’t block it). Oil production in North Dakota has tripled over the last few years and as one would expect, the unemployment rate is about 3.5%.
In 2008, the USGS released a report stating that there was 3 to 4.3 Billion barrels of recoverable oil in the Bakken Formation, which was approximately 25 times the amount they believed as recently as 1995. Now we’re hearing that the amount of recoverable oil is closer to 24 Billion barrels and the total amount of oil could reach as high as 500 Billion barrels of oil. That’s roughly double Saudi Arabia’s reserves in the Bakken Formation alone.
As time and technology advance, people will come to realize and accept that the United States has the most vast energy resources in the world. The damage we do by forcing ourselves to rely on foreign sources is immeasurable. We can and should develop our own energy resources. We can do it safely, cheaply and in a manner that eliminates our dependence on unfriendly regions.
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