Is oil “unpeaking” too”?

(Warning: this post may offend some people’s sensitivities).

Note to readers and commentors: this sort of news may very disturbing to those of you that would like to see oil and gas soon run out. Be aware that I made all attempts to be as sensitive as possible so as not to hurt any feelings people have about oil and its ugly twin- gas. So no abusive comments about the find please. Also please note Director Mark Myers went out of his way to demonstrate the requisite need to show extreme sensitivity towards some people when publicizing such potentially disturbing information.

The US Geological Survey made the following announcement about some of the goodies it may have found up there in the Arctic Circle.

http://www.usgs.gov/newsroom/article.asp?ID=1980&from=rss_home

The area north of the Arctic Circle has an estimated 90 billion barrels of undiscovered, technically recoverable oil, 1,670 trillion cubic feet of technically recoverable natural gas, and 44 billion barrels of technically recoverable natural gas liquids in 25 geologically defined areas thought to have potential for petroleum.

The U.S. Geological Survey assessment released today is the first publicly available petroleum resource estimate of the entire area north of the Arctic Circle.

90 Billion Barrels of Oil and 1,670 Trillion Cubic Feet of Natural Gas Assessed in the Arctic

These resources account for about 22 percent of the undiscovered, technically recoverable resources in the world. The Arctic accounts for about 13 percent of the undiscovered oil, 30 percent of the undiscovered natural gas, and 20 percent of the undiscovered natural gas liquids in the world. About 84 percent of the estimated resources are expected to occur offshore.

“Before we can make decisions about our future use of oil and gas and related decisions about protecting endangered species, native communities and the health of our planet, we need to know what’s out there,” said USGS Director Mark Myers. “With this assessment, we’re providing the same information to everyone in the world so that the global community can make those difficult decisions.”

Yes I know it’s about 3 years supply at global demand of 86 barrels a day. However it’s wrong to look at these new finds this way. The potential find simply adds to marginal production by adding new supply. If we exploited these reserves at say 3 million barrels a day this would last 30 years. Any potential supply adding to reserves simply builds up our “bank balance”. Here’s hoping they get a move on exploiting these new potential reserves as it will help create downward pressure on prices. Note also the Gas reserves are potentially huge adding about 30% to the world’s reserves.

I guess peak oil may have to wait

38 thoughts on “Is oil “unpeaking” too”?

  1. There are a lot of barrels in the Colorado Rockies also, protected by the US Government from mining.

  2. I reckon there’s probably oil off the Great Barrier Reef too. Why else would the loonies be constantly predicting its imminent destruction?

    Many of those predicting peak oil also bought in to the ‘Limits to Growth’ predictions 35 years ago. They’ve obviously never heard of Keynes’ famous saying: When the facts change, I change my mind. What do you do, sir?

  3. With the length of time it requires to deep-sea drill in beastial climate conditions, Arctic Circle oil will not reach the market until world supplies are so diminished and the price is already so high that the arrival of new oil will have neglible affect upon prices. Who will notice if oil prices fall to $280 a barrel from $300?

    In addition, as “peak oil” lurks out there somewhere, as we get closer to the apex of production the political pressure will intensify to use shrinking supplies of petroleum solely for medicines and agriculture instead of transportation and energy.

    Within another generation, the economies based upon nuclear fuel will be those that will thrive; those based upon new discoveries or enhanced production of petroleum will fall back down along the Solow Model’s income curve: The “poverty trap” of natural resources in neo-classical economics. If new technologies do not come on-line soon–say, within one more generation–abundant but dirty coal, or nuclear, are the only viable alternatives.

    How much stronger will the ideo/theology of environmentalism be in another generation? Might be a good time to think about buying a bicycle.

  4. I reckon there’s probably oil off the Great Barrier Reef too. Why else would the loonies be constantly predicting its imminent destruction

    Could well be true David, I vaguely recall exploration in the 80’s was producing promising results but of course who would want to destroy a premier tourist destination?

    Yes, the Barrier Reef is fucked. It’s gone, as I was saying to people years ago: we may as well go dig for oil there.

  5. John:

    If you wanna see supercilious and facile watch Penn Teller’s opinion on certain elements of the environmental movement.

    And:

  6. Too cold down there at the moment, the solutions obvious, burn what we have, really get this climate change thing going, when the ice melts, settle the place and drill. Oh wait thats 100 years away, I guess the price of oil will have to go up instead.

    I wonder if anyone has stopped to consider it would be nice if we had a little left so our grand children get to see plastics in places other than museums.

  7. Here’s an idea, Charles. How about you stop using oil to leave to your grand kids and I’m free to buy however much I want. That way you get to do what you want without imposing your standards on me and others and I won’t say anything silly when i see you riding a bike in the rain.

    Don’t get scared of .6 degrees of warming over 100 years, Charles. It hasn’t killed anyone.

  8. Exploiting the oil in the pole is all dependent on the price, Charles. The article says they have the tech to do it.

  9. 100% right JC it’s dependent on price. Reach peak oil and the price goes up, extract oil from difficult locations and the price goes up. The difference is really academic I would have thought.

    Rest assured JC I’m a little capitalist, I drive a small diesel car because fuel is expensive and I believe anyone with half a brain can see it is going to get more so, peak oil, the cost of drilling in frozen wastelands, a carbon tax or increased demand from emerging economies I really don’t care why.

    Your lack of concern for future generations is toughing, fortunately for them it’s a steady decline from peak and price signals will force a change. However my world view makes me wonder about the justice of two generation consuming a resource that can only be consumed once.

  10. Reach peak oil and the price goes up, extract oil from difficult locations and the price goes up.

    I think you’re confusing price with costs, Charles. They two aren’t the same thing.

    Your lack of concern for future generations is toughing, fortunately for them it’s a steady decline from peak and price signals will force a change.

    My lack of concern for future generations stops at future grand children. I don’t believe you or anyone purporting to have a concern for people born 100 years from now are being honest.

    However my world view makes me wonder about the justice of two generation consuming a resource that can only be consumed once.

    We value resources now because we place a price on them as they offer us utility. You cannot say that the same resources we use now will be useful in the future. So in fact it is you that is offering up the selfish argument … that we should not use resources now so future generations can consume them. Just who gives you the right to say other generations have more right to resources than the current one?

  11. I blame all this on the democratic party here in the U.S., useless bastards like Harry Reid and that old crone Pelosi, they are doing horrible damage to our economy and subsequently to the rest of the civilized world; they won’t the companies to drill and search productive areas so we are dependent on the hateful Moslem Arabs for what we need. But don’t blame the U.S., blame the U.S. democrats, they continue to do us horrible damage every day and now they are going on five freaking weeks of vacation without having done a damned thing about the problem. They should be tarred and feathered for this behavior. Cheers to OZ. Herb. Sunday 2:19 PM in California where, thank God, gas is down about twenty cents from two weeks ago.

  12. I blame all this on the democratic party here in the U.S., useless bastards like Harry Reid and that old crone Pelosi, they are doing horrible damage to our economy and subsequently to the rest of the civilized world; they won’t allow the oil companies to drill and search productive areas so we are dependent on the hateful Moslem Arabs for what we need. But don’t blame the U.S., blame the U.S. democrats, they continue to do us horrible damage every day and now they are going on five freaking weeks of vacation without having done a damned thing about the problem. They should be tarred and feathered for this behavior. Cheers to OZ. Herb. Sunday 2:19 PM in California where, thank God, gas is down about twenty cents from two weeks ago.

  13. So all that oil, if you can get your hands on it, will give you another 3 years of Hummer driving? OK, I’ll just wait 3 years and then sneak up behind you and yell “Peak Oil” again. But I expect by then you’ll have found oil on the Moon or Mars or somewhere. Apparently we’re going to have people up there in the near future, George Bush said so. And they’ll be a disproportionately higher number of women to men in the Moon base so you’ll all have to do your duty and I hear that the nucular powered car is going to save GM and … oh lots of other things that help you to avoid reality …

  14. The reality is we have never run of a resource and resources are always getting cheaper.

    Would you like to predict an alternate reality?

  15. Charles and Patrick-
    Why should we do anything for posterity? After all, what has posterity ever done for us?

  16. I’m sorry for you Patrick.

    Your whole last post avoided reality. What are you smoking? I might want to bring some to the next house party I go to.

  17. So all that oil, if you can get your hands on it, will give you another 3 years of Hummer driving?

    No Patrick B, it won’t get 3 years, the new supply adds to the available reserves.

  18. Mark – resources are not “always getting cheaper”. Even if the long term trend for commodities is frequently in that direction (after adjusting for inflation and currency movements). You’re using too broad a brush. The current oil price is an immediate counter example.

    And if things get more expensive that is not a failure of capitalism or markets. A price rise is precisely the correct reaction to an increase in relative scarcity. Socialism might use some alternate rationing solution but that does not make it better. There should be no need for capitalists to defend their worldview merely because prices rise. Capitalism succeeds as much because it encourages people to economise on scarce resources as it does from encouraging new ways to reduce scarcity. Socialism generally does neither very well.

    Those that complain that free markets are causing us to squander resources are essentially arguing that these resources are under priced. I don’t know what they prove by observing instances when prices rise unless they have at least some faith that market signals are meaningful. If prices were falling I suspect they would use this as evidence that the market process is indifferent to scarcity. Which would be a weird claim. How can you disagree with the effectiveness of the market mechanism and at the same time use it’s output as a basis for evidence of some alternate reality?

  19. Mark – resources are not “always getting cheaper”.

    So a long term chart for commodities shows price rises? Am I reading the chart upside down then Terje?

  20. JC – it wouldn’t surprise me. 😉

    Seriously though I think you’ve missed the point. What the long term trend may show is not the same as what the current trend will always be. And what is long term is always a matter of perspective. Try reading the second sentence in my previous comment again and you should see that this point was pretty clear.

    More importantly even if the long term trend for commodities was upward it wouldn’t harm the argument for capitalism anyway. It isn’t a relevant factor in deciding which economic system is better.

  21. “Am I reading the chart upside down”

    No, you just didn’t read Terje’s next sentence. 🙂

  22. The argument about capitalism has never been in doubt, Terje save with socialist retreads. So even if commodity prices were going up because of real scarcity the socialist argument would never hold as price is the best allocating device we know.

    The point is that even over a 100 years commodity prices have have shown a downward bias in real terms so making points about short term movements is silly.

  23. JC
    Just who gives you the right to say other generations have more right to resources than the current one?

    No one JC, burn away JC, burn away.

  24. Thanks for permission, Charles.

    But you still haven’t answered the question. Why?

    Why are the comforts of the present generation to be sacrificed for unborn generations that are likely on present projections to be much much wealthier than we are?

    Unless you can offer up a stronger comment than the silly one above, Charles then don’t bother replying.

  25. Because JC as I pointed out in the start, oil can be used for things that are a lot more useful than generating a little energy.

    Fortunately the market is working towards making it too expensive to waste in such a manner, so in reality the argument is academic.

    I’m curious do you also believe we should turn all our arable land into desert, it is cheaper not to put in drainage. Forest, should they all be flattened. I gather your position on global warming, is “let the cities sink”.

    Don’t get me wrong, I’m not making a value judgment, I’m curious if there is a limit to your position “Ignore the future”.

  26. Because JC as I pointed out in the start, oil can be used for things that are a lot more useful than generating a little energy.

    Don’t be bloody stupid Charles. We will never run out of oil. Ever. It is impossible to run out of oil before substitutes enter the market.

    Fortunately the market is working towards making it too expensive to waste in such a manner, so in reality the argument is academic.

    I wouldn’t bet on the price of energy staying high, as there is plenty around. It’s not about oil Charles, it’s about energy. I also wouldn’t bet that the world would stay in stasis over the next 100 years. In 100 years the place will be different in comparison to before the industrial revolution and the present day.

    I’m curious do you also believe we should turn all our arable land into desert, it is cheaper not to put in drainage.

    Why would we do that? What rational reason would farmers have to turn their land into dust bowls?

    Forest, should they all be flattened.

    No, as there is no need for that sort of thing.

    I gather your position on global warming, is “let the cities sink”.

    No my position on AGW is pretty straightforward. I think it may be a long-term problem but if we’re going to do anything now to mitigate it would be better to simply tax carbon and return the money as an income tax cut. I think it’s patently stupid to be making wealth transfers from the poor (ourselves) to very rich future generations with world GDP estimated to rise from $46 trillion to US$500 trillion in 100 years time.

    Don’t get me wrong, I’m not making a value judgment, I’m curious if there is a limit to your position “Ignore the future”.

    I/we never/rarely ignore the future, Charles. That’s why I/we have savings.

  27. What is the fuss about? Charles pointed out his belief that the market would bring about the desired result- ‘Fortunately the market is working towards making it too expensive’… etc. This is a classic libertarian position.

  28. Nicholas:

    if the classic libertarian position is to see people get fucked over because of a high oil price count me out of the libertarian position.

    Charles is semi orgasmic over this. He thinks high oil prices are a good thing. I don’t. Certainly it’s the market mechanism signaling more production but it’s hardly thrilling for non high inome earners to be paying 1.5 per litre.

  29. And Charles is peddling his pseudo morality suggesting we should limit consumption for future generations.

  30. JC, please explain.
    I have never before heard of any ‘right’ to low power costs. Is this a holy UN declaration? If the market is NOT to determine these things, who will?
    I would certainly like lower fuel prices, but if I tell the government to do something about it, how can I call myself a libertarian?
    As for Charles and future generations, if he chooses to save oil in a container so they can enjoy petrol, good on him! BUT, which generation? If you bequeath it to the next generation, do they get to use it, or are they obligated to pass it in to the next generation after that, and so on, and so on? Would anyone have a right to use it, or just a right to keep passing it on?

  31. I have never before heard of any ‘right’ to low power costs. Is this a holy UN declaration? If the market is NOT to determine these things, who will?

    You mean I shouldn’t have an opinion that cheap and abundant energy is a good thing, that it helps raise living standards and improves people’s lives? I thought that is what capitalism is all about. Let me make perfectly clear. no one has a right to cheap energy. However cheap energy is a great thing to have.

    I would certainly like lower fuel prices, but if I tell the government to do something about it, how can I call myself a libertarian?

    Who’s telling the government to do anything about it, Nicholas, certainly not me? I am simply making a value judgment that cheap and abundant energy is a good thing. You don’t?

    As for Charles and future generations, if he chooses to save oil in a container so they can enjoy petrol, good on him!

    Dude, he can drink the shit for all I care. However I don’t’ particularly like him pushing his pathetic morality onto me. I’m not interested. I also certainly don’t like the potential problem we could have that his morality gets anchored in society like some of the greens views have.

    BUT, which generation? If you bequeath it to the next generation, do they get to use it, or are they obligated to pass it in to the next generation after that, and so on, and so on? Would anyone have a right to use it, or just a right to keep passing it on?

    Ask Charles. He was the one peddling that crap.

    Charles gets a kick out of seeing the price of oil go up. I think the rise is necessary to signal new supplies, but I hardly think it’s a good thing. Necessary and good thing are entirely different things.

  32. The classic libertarian position is to let the market sort it out, and this seems to be Charles’ position- he thinks this means future prices will be high enough to change our behaviour. All of this is within libertarian guidelines, and Charles does not seem to be calling on the government to ‘fix’ the market.
    As for saving for future generationa, Charles can preach to us if he wants, and some of us might listen.
    As for the rest, now that you’ve clarified things, all is light! I don’t think higher prices are what I want, but they seem to be what I’ll get.

  33. yea, the market will sort it out. Except the market is not sorting it out with an ETS, is it.

    Charles is taking firm delight in seeing the price of energy skyrocket because he think we’re using too much. That’s not a libertarian position at all. And neither is supporting the introduction of an ETS.

    The closest to a libertarian position is Humphreys carbon/income tax set off and even then it’s the best out of the worst situation.

  34. I think that JC kind of hit the nail on the head with regards to future generations. We will be passing them a large positive externality in terms of technology, systems and infastructure deployed largely for our benefit but which will also benefit them enormously. If we pass them a few negative externalities in terms of a slightly warmer planet then the ledger is probably more than balanced in their favour.

    CO2 emmissions might not be an externality given that we all inflict it on eachother but if AGW is real then in terms of the intergenerational effect I would argue that it is an externality. ie Our CO2 would be effecting them but their CO2 would not be effecting us.

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