Little has been heard from peak-oil theorists these past few years. With the oil market in extended surplus, warnings about resource deficiency excite no one. Indeed, popular speculation has swung to the opposite peak—that of oil demand.
Peak oil, the supply variety, has gone so quiet that hardly anyone noticed last month when DeGolyer & MacNaughton consigned the idea to long-term obscurity. The Saudi energy ministry announced on Jan. 9 that the venerable Dallas consultancy had completed a 30-month audit of Saudi Aramco’s reserves and validated estimates once assailed as bloated.
Including the Saudi half of Neutral Zone reserves shared with Kuwait, the audited estimates for the kingdom increased slightly from official data—to 266.1 billion bbl of oil and 324.4 tcf of natural gas—22% of the world’s technically and economically recoverable oil and 10% of its gas.
Target of naysayers
Because of its outsize endowment of conventional oil, Saudi Arabia was a perpetual target of peak-oil naysayers. Controversy flared in the 1980s, when the kingdom and five other members of the Organization of Petroleum Exporting Countries reported sharp increases in oil reserves.
They had a clear political motive. After the Iranian Revolution of 1979, OPEC experimented with ways to exercise its newly discovered market power. One strategy calibrated production quotas to country-level reserves.
Suddenly, five OPEC members on the Persian Gulf and Venezuela had oil reserves much greater than before. During 1982-88, total reserves of those countries nearly doubled.
Hadn’t Saudi Arabia and the others simply inflated their reserves estimates to manipulate OPEC’s quota system? Were the incremental volumes not, therefore, fanciful?
A barrage of papers and presentations emerged to explain the reserves shock in those terms. Oil & Gas Journal, which had reported the reserves increases, published some of them.
Many geoscientists already had become convinced that a peak in worldwide oil production was imminent. Extrapolating the production modeling of M. King Hubbert, who had correctly predicted the end to a long rise in US oil production—once considered the peak—specialists built global depletion models that projected when output would enter irreversible, possibly rapid decline.
OPEC’s reserves additions in the 1980s challenged the pessimism of the day and elicited fierce skepticism.
According to a rule of thumb that emerged during this period, OPEC reserves needed to be discounted by one-third to account for “political oil.” OGJ received regular criticism for publishing, in its annual Worldwide Report, OPEC-country reserves numbers that critics found inconceivable.
Saudi reserves fell subject to withering doubt. Articles and books by knowledgeable authors not only rejected official reserves estimates but also cited increasing water cuts to warn that the kingdom’s production soon would plunge.
With skepticism about Saudi reserves ever at its core, peak-oil theory became advocacy in the 1990s as many of its adherents implored governments to prepare, while time remained to act, for devastating oil shortage.
Well, Saudi production isn’t peaking. According to DeGolyer & MacNaughton’s audit, Saudi Arabia has more recoverable oil now than the kingdom reported when pessimists couldn’t believe the numbers.
And with still-robust Middle Eastern reserves joined by vast new potential from deep water and unconventional resources, global oil production shows no sign of peaking—at least for geological reasons.
Governments still face pressure to commandeer energy markets. It now comes from activists opposed to fossil energy, as certain as peak oil theorists had been in their animating pessimism—and just as skeptical about data in conflict with theory.
Simplistic explanation?
With their reserves increases of the 1980s, OPEC members caught up in quota politics might simply have been disclosing for the first time data previously treated as state secrets.
That simple—some would say simplistic—explanation didn’t get much attention in the 1980s and wouldn’t have sold many books in the 1990s. It just happens to explain history better than the assertion that OPEC members falsified reserves estimates to game quota competition.
Skepticism always seems wise until it’s wrong.
Bob Tippee | Editor
Bob Tippee has been chief editor of Oil & Gas Journal since January 1999 and a member of the Journal staff since October 1977. Before joining the magazine, he worked as a reporter at the Tulsa World and served for four years as an officer in the US Air Force. A native of St. Louis, he holds a degree in journalism from the University of Tulsa.
