Natural Resources

Peak Oil, Revisited


In May 2006, I reported in reason that global oil reserves were ample to supply humanity's needs for liquid fuels until at least 2030, despite headline-grabbing predictions that our supply had already peaked. Afterwards, the world experienced an unprecedented run-up in oil prices topping out at $147 per barrel in July 2008, which led some negative prognosticators to get a little cocky. One of the leading doomsters, Houston investment banker Matthew Simmons, told CNBC in July 2008, "The idea that it's a bubble is all poppycock." He confidently added that the price of oil "is not going to collapse." Simmons advised Americans to move into villages and to buy locally produced foods and goods.

Following the July 2008 peak, the price of oil dropped to $33 per barrel; it has since leveled out at $60. Meanwhile, official estimates of proven oil reserves have increased slightly from 1.292 trillion barrels in 2006 to 1.342 trillion barrels in 2009.

So why are people still worried about a petroleum crunch? Two words: resource nationalism. As I noted three years ago, the sad fact is that nearly 80 percent of the world's oil reserves are in the hands of government-owned companies. Even though there are no geological or economic reasons to expect imminent peak oil, the world could easily experience "political peak oil."

Most of the government-owned oil companies are badly run, technologically backward, and being systematically looted by corrupt politicians. Under the direction of the Castro wannabe Hugo Chavez, for example, Venezuelan oil production has dropped from 3.3 million to 2.4 million barrels per day. Iran, which has the world's second highest proven oil reserves, produced 6 million barrels of crude per day in 1974; a 2007 U.S. National Academy of Sciences study estimated that Iran's oil exports could fall to zero by 2015. Mexico's national oil company, Pemex, has seen steep production declines, and some analysts believe that Mexico will stop exporting oil by the middle of the coming decade. Russia, the world's second biggest producer of oil, has nationalized its oil industry, and now production is falling. And the political and economic stability of such oil exporters as Nigeria, Chad, Iraq, and Ecuador is far from assured.

"The challenges the world faces in growing supplies to meet future demand are not below ground, they are above ground," BP chief executive Tony Hayward wrote in June. "They are human, not geological." If peak oil comes, it will be the result of human folly, not of the world suddenly running out of crude.

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  1. Peak oil is not about the world suddenly running out of crude. It is about peak production and then declining production. The amount of oil in the ground is only relevant to the extent that it has been observed that in the case of oil fields and regions peak production occurs when approximately half of the recoverable oil has been extracted.

    Worldwide, oil production has been on a plateau since the beginning of 2005. At $60 plus per barrel, this price is more than three times the historic average and well above the 2005 price. This high price is insufficient to increase production. There is, at the same time, little evidence the economy can withstand higher prices. Meanwhile, the amount of oil available on the export/import market is declining. This is not due to resource nationalism, but to higher consumption in oil exporting countries.

    This is a poorly researched article and not worthy of publication on a site supposedly dedicated to ‘reason’.

    I am left with the impression that the nomenclature is designed to hide an ideological agenda.

  2. You, Mr. Bailey, are woefully uninformed.

  3. The author blames national companies being ineffective. Why is it then, that:
    1. US oil production is declining since 1970
    2. UK oil production is declining since 1999
    3. Norway oil production is declining since 2000

    Why are these countries not increasing their production? The reserves are not controlled by national oil companies, yet they fail to reverse declining production.

    The article is filtering out important facts, it is a propaganda piece instead of objective journalism.

    1. Why are these countries not increasing their production?

      Because the government doesn’t allow it.

    2. Ehem, excuse me, but if you’re going to diss Bailey for getting his facts wrong you should at least get yours right. I happen to be a Norwegian, and I can tell you that Norway’s oil reserves are, in fact, controlled by the government. Hell, the oil company is called Statoil (State Oil).…..ault3.aspx

      As a matter of fact, there is a discussing going on right now about whether or not we should open up a new oil field in Northern Norway, which of course would seem like a great idea, considering our sky-high state spending. Of course, the environmentalists and the local fishermen are crying out and putting a lot of pressure on the government, and our newly-elected Socialist/Green Party coalition is not likely to budge. But in the end, the government decides. In other words, you are wrong.

  4. As is known Chevron’s stock has dropped 5.6 percent this year. Exxon Mobil Corp., the biggest U.S. oil company, and ConocoPhillips, the third-largest, have declined 14 percent.

    Really oil industry is unable to find more oil with currently used exploration technology as it does now.

    Ref. 1.”Help! They Can’t Find Any More Oil!” ? (by Jay Yarow, the Green Sheet, Sep.23,2009) , 2. “The need for innovation in the oil industry”, ( by Javier Luque,,

    3.”Three discoveries instead of one”, ( by Andrey Berg, )

  5. the world’s state oil companies are not “ineffective.” They are very effective at implementing their nations’ desired oil policies. Those policies, however, do not include extracting oil from the ground at a pace that will restore uber-cheap gasoline, and as oil importers, it is high time we sat up and took notice.

  6. This is supposed to cheer people up? Isn’t the end result the same, unless we want to start endless resource wars to secure our non-neogotiable american way of life?

  7. Proven reserves have increased 50G bbls in the last 3 years. That means while we consume 30G per year, we are adding 30+17 = 47G bbls per year. As long a proven reserves climb, we are not about to peak

  8. Eric Gisin,
    Increases in comsumption have been exceeding increases in discovery since the late 60’s. We are now comsuming at least an extra 4 barrels for every 1 barrel we discover.
    And remember that all recent new disoveries (with the exception of the recent find in politically unstable Iran) are only in the hundreds of thousands of barrels and not the billions that would be needed to make any difference to the peak, and that all the latest discoveries are either in deep water or deep rock and thus may take 5 – 10 years to be brought on line and will cost many 100s of millions in the process – all for a volume of oil that humanity consumes in less than one day – currently about 84 MBpd

  9. Very shabby piece, Ron. As others above noted, it scarcely makes any difference if governments are behind the problems that make peak oil a reality.

  10. Woefully misinformed, indeed. As is well known, we passed the world oil peak in 2005. The International Energy Agency, which never previously acknowledged peak oil, forecast an annual decline rate of 9.1% after 2008 in their 2008 World Energy Outlook. So far, data indicate a 3% annual decline.

    Denial runs deep in the empire. Ron clearly is an imperialist.

  11. Whether we are running out of oil or not we should invest in these:

    They are LiFTR thorium nuclear power plants.

    “Energy From Thorium: A Nuclear Waste Burning Liquid Salt Thorium Reactor”

    They can do something oil can never do. They can provide enough energy for everyone to raise their standard of living to western nations’ standard. And when I say everyone I mean all 7 billion of the world people. They can provide enough energy for all 7 billion people and more for at least a few million years.

  12. If the powers that be at Reason take the time to read these comments, I hope they just happen to notice that their readers are saying, bullshit. The Reason/Cato party line as expressed in this piece has devolved into childlike optimism and political denial of the facts staring us all in the face.

    And this denial of peak oil and a quickly arriving depletion of cheap oil is in complete contradiction to the usual libertarian line. Libertarians believe that people act in their own perceived self-interest and that sometimes this leads to bad results but that intervention cannot deflect but only worsen these bad results. We must be allowed to make bad choices as well as good choices. Yet when it comes to oil, where the choice of humanity has been to squander the resource and profit from it like it’s never going to end, until it really does, reason acts like this running out part can never really happen. The bad result that we risk and must be allowed to risk doesn’t really exist? That’s just too sad to even think about? That’s just a fantasy of liberals?

    Or, the position is taken that we will develop new technologies to offset the eventual loss of oil. This also flies in the face of otherwise established libertarian declarations. The development of new technologies is an expensive activity. Our government now has virtually destroyed our wealth through its wasteful and inefficient practices and its interference with well calculated individual choice. So, given the wise libertarian recognition that the government has destroyed our wealth, where does the wealth come from that is necessary for these magical new technologies that will replace the ubiquitous applications of crude oil? Why isn’t this point ever mentioned?

    Answer: It ain’t there. We don’t have the money to create these marvelous new technologies. We’ve blown all our money. Sure, China might come up with something. Good for them, but we won’t be able to afford it. Oil is it, the beginning and the end. When it’s gone, we’re gone. Sorry to be so negative (i.e., rational).

  13. My only point is that if you take the Bible straight, as I’m sure many of Reasons readers do, you will see a lot of the Old Testament stuff as absolutely insane. Even some cursory knowledge of Hebrew and doing some mathematics and logic will tell you that you really won’t get the full deal by just doing regular skill english reading for those books. In other words, there’s more to the books of the Bible than most will ever grasp. I’m not concerned that Mr. Crumb will go to hell or anything crazy like that! It’s just that he, like many types of religionists, seems to take it literally, take it straight…the Bible’s books were not written by straight laced divinity students in 3 piece suits who white wash religious beliefs as if God made them with clothes on…the Bible’s books were written by people with very different mindsets…in order to really get the Books of the Bible, you have to cultivate such a mindset, it’s literally a labyrinth, that’s no joke

  14. My only point is that if you take the Bible straight, as I’m sure many of Reasons readers do, you will see a lot of the Old Testament stuff as absolutely insane.

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