Last year American energy historian Daniel Yergin wrote The Quest: Energy, Security, and the Remaking of the Modern World and for the first time questioned the Peak Oil thesis: the premise that the world was running out of crude oil. (You can view an interview with Yergin here.)  In response to those people who believe that the world is running out of oil, Yergin conceded that it is running out of “cheap”, easy to reach oil. But it is not running out of oil. Technology and human ingenuity and the price system have continued to extract oil where none was presumed to exist.  As Yergin wrote in There Will Be Oil in the Wall Street Journal:

Meeting future demand will require innovation, investment and the development of more challenging resources. A major reason for continuing growth in petroleum supplies is that oil previously regarded as inaccessible or uneconomical is now part of the mix, such as the “presalt” resources off the coast of Brazil, the vast oil sands of Canada, and the oil locked in shale and other rocks in the U.S.

Things don’t stand still in the energy industry. With the passage of time, unconventional sources of oil, in all their variety, become a familiar part of the world’s petroleum supply. They help to explain why the plateau continues to recede into the horizon—and why, on a global view, Hubbert’s Peak Oil is still not in sight.

Yergin adds: “Price itself is an important piece of information. When oil prices are zooming up, demand goes down, people find alternatives, technology gets stimulated, and you get greater efficiency.” (The Daily Ticker, The Quest: The Daniel Yergin Interview. Why He’s “Cautiously Optimistic” on the Future of Oil)

Until this past month or so, the Peak Oil supporters struggled to hold onto their beliefs. But now there appears to be a change of heart as more and more evidence mounts to suggest the world is becoming awash in oil…and natural gas. Major finds deep in the Atlantic Ocean off Brazil and the North Sea, expected major finds in the Arctic, and enormous natural gas reserves off the East Coast of Africa have joined with the Canadian Tar Sands and the vast reserves of shale oil and gas in North America, China and elsewhere to create a vision of a world powered by fossil fuels well into the 21st century.

These discoveries had not gone unnoticed by some members of the Peak Oil crowd or those promoting a rapid transition to renewable energy sources like wind and solar.  On June 12th The Financial Post wrote Sad news for peak oil disciples. On June 18th the BBC environmental columnist followed with Shortages: is peak oil idea dead?  On June 27th Gordon Campbell in Werewolf asked: The Peak Oil Idea… Peaked? Campbell’s article was quickly promoted by The Oil Drum – ANZ in Gordon Campbell asks has Peak Oil Peaked? And then earlier this week anthropic global warming advocate George Monbiot surprised us all with False Summit: “We were wrong about peak oil: there’s enough in the ground to deep-fry the planet.”

Monbiot summarized the thinking of a growing number of Peak Oil enthusiasts who have had to admit Yergin was right: the facts have changed.

The facts have changed, now we must change too. For the past ten years an unlikely coalition of geologists, oil drillers, bankers, military strategists and environmentalists has been warning that peak oil – the decline of global supplies – is just around the corner. We had some strong reasons for doing so: production had slowed, the price had risen sharply, depletion was widespread and appeared to be escalating. The first of the great resource crunches seemed about to strike…Some of us made vague predictions, others were more specific. In all cases we were wrong.

Peak oil hasn’t happened, and it’s unlikely to happen for a very long time. A report by the oil executive Leonardo Maugeri, published by Harvard University, provides compelling evidence that a new oil boom has begun. The constraints on oil supply over the past ten years appear to have had more to do with money than geology. The low prices before 2003 had discouraged investors from developing difficult fields. The high prices of the past few years have changed that.

Hubbert’s Peak, the famous bell-shaped graph depicting the rise and fall of US oil, is set to become Hubbert’s Rollercoaster…There are, we now know, monstrous deposits in the United States: one estimate suggests that the Bakken shales in North Dakota contain almost as much oil as Saudi Arabia.

So this is where we are. The automatic correction – resource depletion destroying the machine that was driving it – that many environmentalists foresaw is not going to happen. The problem we face is not that there is too little oil, but that there is too much.

In the next post we will look at how the shale oil and gas discoveries in North America are impacting the rest of the world.

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