October 31, 2008

The Specter of Peak Oil

There is no consensus among the experts over what the future holds in the way of oil production. As this 2007 chart from Energy Watch Group shows, the advocates of "peak oil" believe that production will fall inexorably over the next several decades to less than half of present output, from some 85 mbd to 40mbd. The official outlook, as represented for instance by the World Energy Outlook of the International Energy Agency, saw production rising from 85mbd to 116 mbd by 2030 in its 2006 report. The IEA subsequently reduced its projections to 106 mbd by 2030 in its 2008 World Energy Outlook, a considerable volte-face for the IEA but still worlds apart from the projections of the Energy Watch Group.

Who is right?

A lot rides on the answer to that question. It's a complicated debate with a long history, pitting at the most general level "neo-Malthusians" with a harsh view of inexorable natural limitations against "cornucopians" who think that humanity, with the aid of the market system, will prove sufficiently inventive to overcome these limitations.

The advocates of Peak Oil make a very strong case. We will review the evidence they put forth later on. Like other key questions, some of it involves questions that neither you nor I have the technical capacity to resolve. Don't feel bad: the experts themselves do not have access to key data and have difficulty arriving at an informed judgment themselves.

So we can't resolve it to 100% satisfaction. But we've got to have a view of it. It is one of the keys to the puzzle, a basic factor in understanding the energy predicament.

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