present when the term peak oil was coined, went on to obtain a degree of mainstream respect for the concept, based on the pioneering work of M King Hubbert. In the Forbes interview, Maxwell suggests “around 2015, we will hit a near-plateau of production around the world,” with peak oil experienced within two to three years of this.
Much of the reaction to this isn’t over what was said – Maxwell has voiced similar peak oil warnings previously – so much as where it was said. Forbes is not noted as a friend of the peak oil hypothesis, which states geological restrictions mean there will be a time of maximum oil output and that, despite investment and innovation, production will subsequently diminish. Unconventional oil supplies such as Canadian oilsands will not be able to prevent this, despite the hype. Canada’s Prime Minister may claim “Alberta's tar sands are second only to Saudi Arabia as the world’s largest oil reserve,” but these are “energy- and capital- and time-intensive” and have lousy flow rates – output cannot be scaled up to meet the ravenous global demand for oil.
An item in Oil Price, with the clear headline Respected Oil Analyst Forecasts Peak Oil by 2017, notes with surprise that:
Respected oil analyst and oil industry veteran Charles Maxwell (nicknamed the ‘Dean of Oil Analysts’) has forecast peak oil by 2017or 2018:But a number of disparate commentators, working independently, are predicting a tightening in oil supplies perhaps as early as 2011. Reports published this year by a UK business consortium, the US military, insurers Lloyds, Kuwait University engineers, the German military and an Australian think tank collectively point to a coming supply crunch between 2012 and 2015. Together, they refer to a list of issues including oil industry underinvestment, declining new discoveries and aging oilfields - at a time of surging global demand.
His prediction is not so remarkable, as is where he made his prediction. The prediction was in Forbes, which has often scoffed at the notion of a near-term peak.
According to the International Energy Agency’s Sept. 10 Oil Market Report, global demand is predicted to reach 86.6 million barrels per day in 2010, and then 87.9 million barrels per day in 2011 – passing the all-time high of 86.9 million barrels per day established in 2008 before the global economic downturn. Soaring demand is being pushed by China, the world’s fastest growing major economy and its largest energy consumer, and India, the world’s second-fastest growing economy.
The IEA’s chief economist Fatih Birol who, as I’ve mentioned previously, has been repeating the phrase the era of cheap oil is over at any chance he gets, was recently quoted talking about non-Opec oil “reaching a peak” and saying that “strong real demand growth and lack of investment in production [suggests that] in 2013, 2014 we may well see higher prices than we have seen in the recent past.”
And UK Energy Secretary Chris Huhne earlier this month spoke of a possible doubling in the price of oil, and a subsequent oil shock.
It’s hard to escape the impact of the repetition of the same few projected dates for the onset of peak oil by independent commentators. Which adds credence to the comments of Charles Maxwell, Weeden & Co.’s senior energy analyst - he's clearly not going out on a limb, after all. The Forbes interview, Bracing For Peak Oil Production by Decade's End, quotes him saying:
A bind is clearly coming. We think that the peak in production will actually occur in the period 2015 to 2020. And if I had to pick a particular year, I might use 2017 or 2018. That would suggest that around 2015, we will hit a near-plateau of production around the world, and we will hold it for maybe four or five years. On the other side of that plateau, production will begin slowly moving down. By 2020, we should be headed in a downward direction for oil output in the world each year instead of an upward direction, as we are today.He suggests that oil “supply and demand are now in rough equilibrium and that means that prices are in a range between about $69 on the bottom and about $86 on the top,” but supply will most likely begin to turn tight “around 2013 or 2014.” It will naturally be followed by a price spike – and, he suggests subsequent windfall profit taxes on oil companies – and a global scramble to find alternatives to oil.
And at around 2015, we will be unable to produce the incremental barrel in the global system. So a tightness of supply will begin to be felt. Let's say in 2013, we may produce 1% more oil than we did the year before and then if we have a demand growth of 1¼% in 2013, we'll be very slightly tightening the system.
The difference between supply and demand is not going to be very much at first. It would not normally cause a big rise in price. On the other hand, in 2014, that tightness begins to grow and it is now a trend. By 2015 perhaps we're only able to produce 0.50% more with about 1.25% higher demand, so that we're 0.75% short. And now we have to raise prices enough to stop some people from using that oil because it is actually not available.
That begins to scare people, since they can look ahead and see that the issue is not going to be resolved quickly, since you have to find the oil many years in advance of being able to produce it. We just haven't found enough oil for a number of years, so this problem is now beyond the reach of some big, major discovery that suddenly would provide us with a sufficiency. And so far, we have no technological breakthrough to assist us.
So we're going to have to make a switch from using oil to using more coal or more natural gas or more nuclear or other alternatives. But most alternative supplies (such as hydropower) can't be expanded quickly. Solar power is too small to be meaningful. Wind power, again, is too small, and most of the good places for wind have already been taken.