Guest Post: What Peak Oil?

Tyler Durden's picture


Submitted by John Aziz of Azizonomics

What Peak Oil?

Is peak oil imminent? Lots of people seem to think so.

The data (released by BP a company who have a vested interest in oil scarcity) don’t agree. Proved reserves keep increasing:

The oil in the ground will run out some day. But as the discovery of proven reserves continues to significantly outpace the rate of extraction, the claims that we’re facing immediate shortages looks trashy.

Some may try to cast doubt on these figures, saying that BP are counting inaccessible reserves, and that we must accept that while there are huge quantities of shale oil in the ground, the era of cheap and readily accessible oil is over. They might cite the idea that oil prices are much higher than they were ten years ago. Yet this is mostly a monetary phenomenon resulting from excessive money creation beyond the economy’s productive capacity. Priced in gold, oil is still very cheap — almost as cheap as it has ever been:

The argument that the vast majority of counted reserves are economically inaccessible is fundamentally flawed. In the long run there is only one equation that really matters in determining whether oil is extractable, and that is whether there is a net energy gain; whether energy-in exceeds energy-out. If there’s a net energy gain, it’s feasible. Certainly, we are moving toward a higher cost of energy extraction. Shale oil (for example) has a lower net energy gain than conventional oil, but still typically produces five times as much energy as is consumed in extraction.

But the Earth’s extractable hydrocarbons will eventually dry up, whether that’s in 500 years or 200 years. If we want humanity to have a long-term future on Earth, we need to move to renewables; solar, hydroelectric, thorium, synthetic hydrocarbons. And the market will ensure that, eventually — as the cost of renewable energy continues to fall, more and more of us will adopt it. I don’t buy the myth that markets are stupid — if humanity needs renewable energy (I believe we do) the market will see to it (I believe that is slowly happening). Markets are just the sum of human preferences.

According to the International Renewable Energy Institute:

Power from renewable energy sources is getting cheaper every year, according to a study released Wednesday, challenging long-standing myths that clean energy technology is too expensive to adopt. The costs associated with extracting power from solar panels has fallen as much as 60 percent in just the past few years.The price of  from other renewables, including wind, , concentrating solar power and biomass, was also falling.

So no. I’m not lying awake at night worrying about imminent peak oil. There’s plenty of extractable oil, and renewable energy will eventually supplement and replace it. But will politics get in the way of energy extraction? The United States has huge hydrocarbon reserves, yet regulation is preventing drilling and shipment, leaving America dependent on foreign oil. And the oil companies themselves are largely to blame — after Deepwater Horizon, should anyone be surprised that politicians and the public want to strangle the oil industry?

If there’s an imminent energy crisis, it will be man-made. It will come out of the United States’ dependency on foreign oil. Or out of an environmental catastrophe caused by mismanagement and graft (protected cartels like the energy industry always lead to mismanagement). Or out of excessive red tape. Or war.

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falak pema's picture

BP on the Oil scam and damn the consequences trail? 

fuu's picture

Incoming train wreck.

Mr. Fix's picture

A massive wave of destruction from the left.

Pinto Currency's picture


Paper currencies (not just the USD) are declining in value as they are being diluted together by central banks.

Real assets are increasing in price.

The 100 year battle of banks and governments against 3,000 years of market evolution that chose gold and silver as money is almost over.

Short Memories's picture

LOL! So just because BP profits due to scarcity we should believe them on this?

How about, if peak oil gets out of the bag then govt investment will move toward renewables!!!

poor basis for a belief

Marginal Call's picture

The world is swimming in oil, that's why we're pressure washing sand to get it. 

easypoints's picture

The author states that BP has an interest in oil scarcity, but can't it also be said that larger reserve estimates are good for oil companies to use as leveraged collateral?

Stating you have X billion barrels of oil in your possession that is worth $X at the current price of oil, is much better looking on paper than say, having to spend the money to extract the tar sands or shale, refine it, and sell it at that same price.

GiantVampireSquid vs OWS UFC 2012's picture

Oil production (extraction) started at 0 and eventually it will return to zero.  Since we know where it started and where it will end up, we know there will be a peak.  A maximum extraction rate after which will come a decline.  Only a Phd would believe we can extract more oil every year.

macholatte's picture

But the Earth’s extractable hydrocarbons will eventually dry up, whether that’s in 500 years or 200 years.


Demand will increase as long as there's the dichotomy demanding "human rights" to population growth and the "save the planet" crowd against the politically inconvenient truth of the simple concept that increasing the standard of living for 5 billion people means consuming huge quantities of energy like never before. There needs to be a way to create economic growth without population growth before the term "sustainable" has any meaning at all. Until then it's all just academic blather.

(For all you psychos out there... I am not advocating mass murder, genocide, eugenics or any of that shit. Just stating a fact that I believe Mr. Aziz missed.)

Ookspay's picture

There will always be energy, God wants all six billion of us to have Ipads and stuff... ; D

Pinto Currency's picture


Even though Obama's Choomwagon was a Volkswagen, his adminsitration is blocking sales of the 72 mpg. Volkswagen bluemotion diesels from being sold in the US.


Element's picture

Yes, but don't forget or discount efficiency. 

Buy a Prius and your fuel use will fall by around 30 to 40%.

(other hybrids not so much, maybe 20%, the Prius is still the most efficient as far as I am aware)

However, you may decide to drive further, and more often as a result, cancelling efficiency dividends.

Then again, you most probably wont.

Let's say 25% ... not bad.

Extend and pretend

(well, let's face it, only a modest fraction of humanity drives, so energy use remains high and soon going higher).

macholatte's picture


Efficiency is an illusion and here's why..........

Make all cars 30% more effiecient. OK?

NOW increase the number of cars by 100%. OK?

Element's picture

There is nothing illusory about the efficiency gain of each vehicle.  It does help us to ease the effects and cost of increased numbers of vehicles being bought.

If those numbers are increasing in unsustainable ways (and WHERE this is happening, it will be a severe problem in some places, but not in others), and if we think the market will deliver economical alternatives for travel and transport, then the economic opportunity and incentives will emerge to make it more attractive to not use ANY car in certain places or countries.  Either way the cars that do exist and will persist to be used are certainly going to be dominated by more efficent hybrids.

The finer-points of an efficiency argument are beside the point though, it's an entirely practical situation here, I fill 'er up and the cost is way lower. 

When you experience that, you don't go back.

Pay Day Today's picture

"Buy a Prius and your fuel use will fall by around 30 to 40%." Don't ignore the 'embodied energy' of a Prius, the energy needed to build the Prius, all its components and component materials, in the first place.

Element's picture

Fuel use still falls by around 30 to 40%.  That is the salient point and whole reason for this technology existing in the market. A product for which there is strong and growing demand as prices fall while their production is going up very sharply indeed, and is displacing sales of convention models.

A Prius's components are designed to be lighter (thinner panels, lighter materials used wherever possible) than other comparable sized cars.  And because their electric motors generate so much torque, their combustion engines can be much smaller and more reliable, uses far less materials.  Their gear boxes are also incredibly simplified, lighter, use less metal, less lube, less machining to create.

That's one of the major reasons for why the Prius is so much more fuel-efficient than merely 'converted' hybrids, that have a preceding much heavier design and conventional drive-train model, like the Camry did (and still does).

Those legacy cars are the ones primarily containing more "embodied energy".  Why single-out the Prius, when its the most efficient car to operate (and perhaps to maintain).

Is the reason because more batteries, magnets and copper are used, than in the conventional car?  But there is a trade-off that is not being 'accounted' for, in the development of this technology. Toyota just introduced a version of the Prius that can get away with using AC-mains power only, for about 20km at a time, for zero emissions at the exhaust pipe.

Drive to work, recharge at work, drive home - zero emission vehicle.  Effectively it becomes a short range electric car - AS WELL as a hybrid, if the battery runs down, or you want more power.  If you want more power with high torque and low weight, you plant the foot and instantly the petrol motor kicks-in, then shuts-down again when the battery is topped-off and you have eased off the pedal.  the pedal is just an input device telling a computer you want more acceleration.  The computer decides how the car will generate it, whether to run the engine, or not.

This is ultra efficient.  What's not to like here?

Now think of what will routinely become possible with the next generation of dedicated hybrid models.

This absolutely is the way forwards for autos and for efficiency gains. These efficiency gains are in real-world effect, not just abstract arguments.

Plus anyone looking can see the price of magnet materials and copper is being jacked up to the stratosphere into bubbles (mostly due to hoarding stockpiles).  The thing with hording large stocks of industrial metals is eventually results in huge input price collapses.  And when this does occur the most energy-efficient processes and producers with be the ones left standing, to supply the market demand at the resulting prices.

And that will greatly reduce the costs of manufacturing and replacing such hybrids, even if we ignored the growing economy of scale effects of the rapidly ramping mass production of these cars, which is already having a dramatic effect on lowering prices, even during a massive input price bubble.

Don't just look at the down-side story, because the potential upside is pretty bright for these cars.

There are trade-offs in anything we do. We need to keep them in perspective and not just look at the alleged down-side story.  I think that side of the story is more or less unbalanced and being overblown.

Pinto Currency's picture


Not just hybrids - but Obama has blocked the 72 mpg Volkswagen bluemotion diesels from being sold in the US.

Now think of a hybrid diesel and what can be achieved (with some tweaking).


Element's picture

Guess the competition was deemed, "nofair!"?

72 mpg is a bit unamercan though.

Pinto Currency's picture


The last thing big gov (Barry, Romney, & co.) want is highly mobile & informed citizens without begging bowls in their hands.

Nothing worse than a cigar chomping, pissed sheep in a diesel car that can go 75 mpg.

...and never forget EPA incompetency as a factor.

Zionist Jew's picture

Peak Oil will not be an issue after we cull 80% of the goy herd.

Element's picture

OMG! ... an honest joo!! ... lol

Lord Koos's picture

History shows the culling usually goes toward the opposite demographic, thus explaing uber-militant Israel.

AldousHuxley's picture

Does the chart include Iraqi oil Sadaam was selling in black market under Food for OIL scam?


sure, oil peaked, but there's still 70years before oil runs out.


Ford always coming out with mass production ALL electric is there, they just needed go ahead + bailout money from government to signal that.

DaveyJones's picture

it's that definition of "runs out" that trips people up. You don't mean to suggest that before that "point" things are cheesy

AldousHuxley's picture

my guess is that world war III will occur when world is running on empty.


Saudis are running out but Venezuela tripled their reserves in last 10 wonder chavez is marked by US as a "socialist terrorist" because he didn't want his people end up like Saudi kingdom.



Your grandkid's so called terrorist will look more like south americans than middle eastern....


UGrev's picture

Because Chavez is just such a peachy-great guy... right?  



SubjectivObject's picture

I'll see your terrorist, and raise you an Administration full.

riley martini's picture

 Exactly Easy they use those numbers at bonuses time too . There is a lot of oil it's just a matter of what price.

Lord Koos's picture

Price in dollars, and price in environmental destruction will continue to rise unless conservation & alternatives are seriously implemented.

flattrader's picture

The author wrote:

>>>So no. I’m not lying awake at night worrying about imminent peak oil. There’s plenty of extractable oil,<<<

Margin Call wrote:

>>>The world is swimming in oil, that's why we're pressure washing sand to get it.<<<

Yeah, no "f"ing joke.

Flattrader writes:

>>>I lay awake in bed at night and worry about imminent peak stupidity.<<<

markmotive's picture

There's a big difference between Saudi oil and Canadian oil sands. It's not a 1:1 comparison.

We have exploited the easy to get oil:

AldousHuxley's picture



China can manipulate the foreign policy of the United States in the same way the United States forced the United Kingdom to withdraw its forces back during the Suez crisis.

This was in 1956 when the UK, France and Israel invaded Egypt to take control over the Suez Canal. Washington threatened to dump the US Government's Sterling Bond holdings if Great Britain didn’t withdraw troops and the invasion ended.

falak pema's picture

That decision initiated the decline of UK in world politics, and also cornered colonial France to just Algeria!


It resulted in the political demise of Antony Eden, and his successor Macmillon talked about "the winds of change". And "we've never had it so good". 

On that second account he was proven, ironically, very wrong. As from 1959 onwards the UK economy went into a 20 year tail spin! 

Guy Mollet the other culprit got mired down in Algeria and shameful military terrorism and torture, like USA in IRak. It broke the IV Republic and France thankfully got De Gaulle back who cleaned out that Augean stable but gave France an absolutist and statist constitution that his successors have used and abused to the bone; aka Sarkozy recently; whereas his tenure kept government lean and mean and initiated 15 years of economic growth and nuclear independence.

Lastly, the ensuing 1956 and 1967 wars made Israel uber-alles militarily in Mid -East, resulting in ousting Nasser and making Eygpt firm US surrogate, thanks to Sadat and Kissinger shuttle diplomacy. Pax Americana was Seven Sistered into place and the USD Oil hegemony solidified, making Saudi the new Montezuman golden vaults. 

Awesome play by USA in 1956 to claim the ME away from the last remnants of the British Raj. But it also let the USSR into the henpen with the Aswan dam...starting the Palestinian resistance militarisation, with Al Fateh.

AlaricBalth's picture

Great quote from "The Formula".

: [Barney Caine to Adam Stieffel, Chairman, Titan Oil] What do you know about this nation? Don't you ever give a second thought to American citizens? You're the reason their money's worthless. You're the reason old people are eating out of garbage cans, and kids get killed in bullshit wars. You're not in the oil business; you're in the oil SHORTAGE business! You're an ivory-tower hoodlum-a common street killer. I wish to Christ there was some way I could nail ya. "

Sophist Economicus's picture

Shouldn't Barney Caine have given that speech to Nancy Pelosi?   Oh wait, could it be that doing so goes against the Hollywood/Stalanist paradigm of pointing 'the poor' at the 'feel good' enemy while the ruling class gets more powerful....Nahhhhh


LetThemEatRand's picture

What those of your ideology routinely miss is that he could have given the speech to both of them.  It's not one or the other.

LawsofPhysics's picture

What everyone fails to realize is that it is not about reserves.  Reserves don't mean shit.  What is important is the cost and the flow rate or FLUX of oil.  And by cost I mean in energetic terms.  Look at the charts, cost is increasing.  If the whole process becomes unprofitable from an energetic standpoint it won't matter one fucking bit.  Print all the pretty paper you want, we will stop using oil with millions of barrels in the ground.

Pay Day Today's picture

Exactly. Finding 4 billion barrels of oil is much less impressive when you factor in that one billion barrels worth of energy might be needed to extract and refine it.

RECISION's picture

Or more to the point - an EROEI of five may return you five x the energy invested to extract it, but if your whole economy has been build around an EROEI of x twenty - that means that 1/5 of your economic activity that you used to enjoy has just vanished.

DaveyJones's picture

not just your economy but many of your economic theories

WezTheJuic's picture


Self imposed increase which justifies the imposed increase in pricing.  Energetic Terms.



Last time I checked, there ARE at least FIVE super holes on this planet. These are holes with so much oil and pressure, that each hole has enough for 200+ plus years of global demand.  It is everywhere, and, it is ABIOTIC.  What do you think the Gulf of Mexico fiasco was about?  Was it not also about a response to Russia discovering their first super-hole?

After all, the people who control energy and production of energy can say anything.  Take a look at the mass purchasing of power producing companies back in the nineties, and then ask, "Which/Who's money was used?"  Follow the money.


Still, well stated comment.




falak pema's picture

Read this : the last time the oil majors tried to pull the wool over the people's eyes it cost Shell's top man his job in 2004. They never get tired of lying in their own interests....a shortfall of 20-25% in Shell's proven reserves! 

Philip B. Watts 1945— Biography - Warned of global warning, Exploration director for shell u.k

This is a corker ! : Priced in gold, oil is still very cheap — almost as cheap as it has ever been! Wow, does this guy understand what the US policy in ME is all about?

The whole purpose of US oil dependency on foreign ME oil since 1973 was for it to be a USD monopoly thus ensuring thats its price in "funny money" would devalue with the reserve currency. As this is the MAIN plank of Pax Americana of post-1971 monetary and energy policy; any change in this would change the geopolitical game in energy. No way that US on its own initiative will go back to gold vs oil pricing formula; no way, unless its forced onto them and this inspite of wars! They would lose that VITAL lock-in of USD hegemony, if the world premier fossil fuel reserve of cheap (in cost terms)  liquid reserves were to be denominated in other currencies. Pricing of course is another issue controlled by the cartel! 

Woodyg's picture

Never mentioned in any of these articles is that the USA is the third largest producer of oil in the world....

Behind only Russia and Saudi Arabia -

We produce nearly 8 million barrels a day....

And the largest user of oil in the world is the us military......

Bring the troops home and end the worldwide occupation is my suggestion.

Cathartes Aura's picture

great posts, both falak & Woodyg's reply - the story is always more detailed than they let on, as simple memes pacify simple minds. . .

I like the word you chose,  "occupation" - used to mean one's "job" and also describes what the military does to other sovereign nationstates labeled "foreign". . . let's not be too pre-occupied with ideas foreign to our own integrity, as this year continues to unfold.

integrity : the quality or state of being complete or undivided : completeness

MajorWoody's picture

You see people, a post like falak's cannot be upvoted enough.  Yes it is difficult to understand at first, but give it a try.

jimijon's picture

Brilliant Strategy Really.

Send them digits or paper and we get their Oil and force everyone else to take our digits and paper.

AND, we get to keep our reserves in the meantime with just enough free market access to keep the free market boys salivating.

HOWEVER, this great success could not be handled. This power was too great and corrupting. It also fed right into the banksters hands and their exponential function.

Meanwhile ... How much is a 1964 Quarter in Gasoline these days?


greyghost's picture much is a 1964 quarter in gasoline these days? exactly...and how much is a barrel of oil today in gold and what was a barrel of oil in 1964? this is the point and the only point. have read almost every comment on this thread....just love the ones where the poster uses a math trail no one else can follow to make their point...useless mind masturbation. HOW MANY GALLONS OF GAS COULD YOU BUY WITH A 1964 QUARTER? THE SAME QUARTER TODAY WILL BUY HOW MANY GALLONS OF GAS TODAY?

the author of the article is correct...oil is as cheap today as it has ever been. the only thing that has changed is the fucking value of the dollar you over educated nin com poops!!!!!!! yet we get endless stats about cost of shit in cost of shit out equals running out of oil...into the high price of oil in dollars is a sure sign of peak a sure sign the world is coming to an end like the mighty quinn said last week.....go to his blog and check out all the end of the world food containers you can buy...6 months supply for $xxxxx. makes what he says suspect...yes?

Jim Quinn's picture

Blow me douchebag.

Come over to my blog and I'll kick you in the balls so hard they'll come out your mouth.