World oil supply still plentiful, study shows

/ Source: Reuters

World oil production will not begin to fall for at least another 24 years, contrary to doomsday theories that supply is already in terminal decline, a prominent energy consulting group said Tuesday.

Cambridge Energy Research Associates said in a report that the world has some 3.74 trillion barrels of oil left -- enough to last 122 years at current consumption rates and triple the amount estimated by “peak oil” theorists.

The world consumes nearly 85 million barrels of oil per day, with the United States using about a quarter of that, according to the Department of Energy.

“Oil is too critical to the global economy to allow fear to replace careful analysis about the very real challenges with delivering liquid fuels to meet the needs of growing economies,” said Peter Jackson, director of oil industry activity for Cambridge, a Massachusetts-based consultant to the oil, natural gas and electric power industries.

The said the peak in global daily oil production will not come before 2030 and will be followed not by a steep decline, but rather by an “undulating plateau” of ups and downs in output before a gradual dropoff, according to the report.

Jackson said the main flaw in “peak oil” theory is that it fails to account for exploration, technology, rising estimates of the size of existing fields and geopolitical shifts.

The “peak oil” idea was first proposed by the late geologist M. King Hubbert in 1956, who correctly predicted a 1970 peak in U.S. production in the lower 48 states. Hubbert followers have carried forward the theory, applying it to global supplies.

Matthew Simmons, chairman of Houston-based investment banking firm Simmons & Co. International, said last month that world production of crude oil may have peaked this year, setting the stage for energy shortages.

“The peak’s been called on many occasions, and dates come and go without any scientific explanation," Jackson said in a teleconference to discuss the report, “Why the 'Peak Oil' Theory Falls Down: Myths, Legends, and the Future of Oil Resources.”

Actual production has exceeded “peak oil” predictions by 15 billion barrels in the United States alone, and such contrary data has caused advocates of the idea to keep shifting the predicted peak year into the future, Jackson said.

“In doing this, they’re proving the opposite of what they’re suggesting,” Jackson said.

The sheer size and variety of the oil-producing world, 35,000 fields in more than 70 countries, makes it difficult to apply “peak oil” analysis everywhere,” Jackson said. Hubbert initially looked at only part of the United States.

“Peak oil” theorists fail to note that the industry has replaced more oil reserves through field reserve upgrades than from exploration, which has tended to keep production levels steady, Jackson said.

Technological development and geopolitical shifts, more than realities underground, will govern how production unfolds before it begins to decline permanently in the second half of the 21st century, the Cambridge report said.

The plateau could last for decades, Jackson said.

“The 'peak oil’ theory causes confusion and can lead to inappropriate actions and turn attention away from real issues,” Jackson said.