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Oil Around Us: Energy Pundit Says We're Awash in the Stuff

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American oil started here (in Pennsylvania) but production peaked around 1969. (Flickr/OZinOH) Daniel Yergin of the Boston-area Cambridge Energy Research Associates (CERA) is probably the world’s most respected authority on oil. In imposing, magisterial books like The Prize: The Epic Quest for Oil, Money, and Power and his new 800-page tome, The Quest: Energy, Security, and the Remaking of the Modern World, he aims to be the final word on oil history, supply and future trends. In its largely positive review of the new book, The New York Times called Yergin "America's most influential energy pundit."

Yergin's message? “Don’t worry, be happy.” Oil is headed not for a peak, but for a plateau, he argues, and “the world is still, it would seem, many years away from ascending to that plateau.” That’s the reassuring conclusion that the oil industry wants us to reach, and Yergin’s company, part of IHS, consults with Big Oil—one reason his critics have pounced on his theories.

Yergin took to an oil-friendly forum, the opinion pages of the Wall Street Journal, on September 17 to assert that peak oil theory is a moving target that its proponents are forever pushing into the near future. “The date of the predicted peak has moved over the years,” he writes. “It was once supposed to arrive by Thanksgiving 2005. Then the ‘unbridgeable supply demand gap’ was expected ‘after 2007.’ Then it was to arrive in 2011. Now ‘there is a significant risk of a peak before 2020.’”

In other words, peak oil advocates have cried wolf one too many times, a message Yergin has delivered consistently—he thinks the world is awash in oil. That view is supported by Raymond Learsy, author of Oil and Finance: The Epic Corruption, who’s been saying that oil “is not scarce” for years. He cites massive oil finds off China’s northeastern coast, in the Gulf of Thailand, in the Gulf of Mexico and the west coast of Africa as evidence that peak oil theory “is closer to theology than to theory.” Learsy told me that evolving technology will enable the development of western oil shale, with reserves "thought to be greater than those of Saudi Arabia." But one reason we haven't exploited America's abundant oil shale is because it's extraordinarily destructive environmentally.

Yergin would second Learsy's conclusions; he sees “decades of further growth in production” ahead of us before we reach a plateau.

There was blood, all right, and a lot of oil, too. (Paramount Pictures) But Yergin’s views are being challenged. I was curious what James Howard Kunstler, author of The Long Emergency (and follow-up novel, World Made by Hand), would have to say. Kunstler's writing posits a planet totally hobbled by peak oil and energy scarcity. So I called him in Saratoga Springs. I wasn’t disappointed. Kunstler, whose next book will be about misplaced confidence in technology, has been following the Yergin phenomenon closely.

“Daniel Yergin parlayed his success as a historian of the oil industry into becoming the chief public relations prostitute for the industry,” he told me. “Yergin is blowing smoke. The unnamed discoveries of new oil that he writes about are almost entirely hypothetical, and in fact the peak oil predicament is real. It is Yergin, and people like him, who are preventing the U.S. from preparing adequately for a resource-scarce future.”

Writing in Grist, Christopher Mims claims that “Yergin has been demonstrably wrong about oil for years.” Yergin said in 2005 ($60 a barrel oil) that prices would go down because oil production would rise from 85 million barrels a day to 101 million by 2010—but, instead, we’ve only marginally increased production, to 89.1 million barrels daily. And oil costs $30 a barrel more than it did in 2005.

Writing for TheOilDrum.com in 2008, Glenn Morton, a former Kerr-McGee oil industry geophysicist, outlines instances where he considers CERA to have gone off the rails in predicting oil price and supply. “Respect is earned,” he writes. “By that standard, CERA does not have my respect. Their predictions have been too wrong too often….”

University of California-San Diego professor James Hamilton argues in the respected Econbrowser that while oil may not have yet peaked, supply is growing very slowly (only 2.2 million barrels per day between 2005 and 2010), while China’s demand increased by more than that—2.5 million barrels a day. “Thus,” he writes, “although the world did produce more [oil], everybody in the world outside of China had to make do with less.”

Who could have predicted the 2010 Deepwater oil spill, or out-of-control platform fires like this one off West Australia in 2009? (Flickr photo/SkyTruth) I know enough about oil to know that the factors going into oil price and supply are numbingly complex. I’m not as smart as Daniel Yergin, so I would never presume to make predictions. But, in fact, nearly everybody—oil peakers, CERA, government agencies, the industry itself—are almost always wrong about energy. Who could have predicted 9/11? Who was prescient enough to know, 10 years ago, that China’s auto production would surpass that of the U.S., and that oil demand from India and China would lead to higher prices?

I haven’t yet seen the film Moneyball (or read Michael Lewis' reportedly excellent book, for that matter) but I like the idea it presents that new analytical thinking can transform a losing team into a winning one. Unfortunately, as a new article in the New York Times Magazine points out, Billy Beane’s As did not actually win, and his team of Bad News Bears has since been on a downward trajectory—all the other teams adopted the new analysis he pioneered, so there goes the advantage. The film doesn’t go there.

If relevant facts put in a meat grinder yielded infallible results, somebody would have beaten the Vegas casinos by now. (I’m aware that if you win consistently with some kind of formula developed at MIT they ban you from the premises, so the system’s rigged against smart people.)

In the end, I think oil peak is a less important driver in transforming our energy economy than global warming. That one’s a certainty, despite sand kicked up by candidate Rick Perry and others. We’ll give up on oil long before it runs out, because as leading climate scientist James Hansen (and activist Bill McKibben) point out, we have to get carbon dioxide concentration in the atmosphere down to 350 parts per million. The actual level now is a highly dangerous and destabilizing 390.2 ppm. Achieving the 350 ppm goal is “just barely” possible, Hansen says, but not unless we get off our oil addiction (and stop burning coal, too).

If you've got some time, here's a 45-minute documentary on peak oil:

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