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Energy Insights: Energy News: The IEA Says Peak Oil Is Dead. That¡¯s Bad News for Climate Policy

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The IEA Says Peak Oil Is Dead. That¡¯s Bad News for Climate Policy


By Bryan Walsh

Suncor base plant, in the Athabasca Oil Sands, near Fort McMurray, Alberta, Canada, on March 26, 2013.
Brett Gundlock / Bloomberg via Getty Images
Suncor base plant, in the Athabasca Oil Sands, near Fort McMurray, Alberta, Canada, on March 26, 2013.

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No one¡ªaside maybe from survivalists who¡¯d stocked up on MREs and assault rifles¡ªwas really looking forward to a peak-oil world. Read this 2007 GQ piece by Benjamin Kunkel¡ªwhile we¡¯re discussing topics from the mid-2000s¡ªthat imagines what a world without oil would really be like. Think uncomfortable and violent. Oil is in nearly every modern product we use, and it¡¯s still what gets us from point A to point B¡ªespecially if you need to get from A to B in a plane. If we were really to see the global oil supply peak and decline sharply, even as demand continued to go up, well, apocalyptic might not be too large a word. And for several years in the middle of the last decade, as oil prices climbed past $100 a barrel and analysts were betting it would break $200, that scenario seemed entirely plausible.

But there was an upside to peak oil. Crude oil was responsible for a significant chunk of global carbon emissions, second only to coal. Only the shock of being severed from the main fuel of modernity would be enough to make us get serious about tackling climate change and shifting to an economy powered by renewable energy and efficiency. We¡¯d have to because we¡¯d have no other choice, save a future that might look something like Mad Max. We¡¯d lose oil but save the world.

Increasingly, though, that doesn¡¯t seem likely to happen. New oil sources, many of them unlocked by new technology¡ªthe Canadian oil sands, tight oil in North Dakota and Texas, ultra-deepwater oil in the Atlantic¡ªhas helped keep the supply of oil growing, even as greater efficiency measures and other social shifts have helped blunt demand in rich countries like the U.S. Oil isn¡¯t likely to be cheap¡ªa barrel of Brent crude is $102¡ªand getting it out of the ground isn¡¯t going to get any easier. But it¡¯s increasingly likely that we will have more than enough oil in the future to keep the global economy growing and stave off any Mel Gibson-esque apocalypses.

Indeed, a new assessment released yesterday by the International Energy Agency (IEA) predicts that the surge of supply from North America¡ªmost of it from new unconventional sources¡ªwill transform the global supply of oil and help ease tight markets. Between now and 2018, the IEA projects that global oil production capacity will grow by 8.4 million barrels a day¡ªsignificantly faster than demand. Oil isn¡¯t likely to peak any time soon.

And that¡¯s bad news for climate policy.


(MORE: There Will Be Oil¡ªand That¡¯s the Problem)

First the inevitable caveats. The IEA projections¡ªincluding one that new North American oil ¡°will be as transformative to the market over the next five years as was the rise of Chinese demand over the last 15¡å¡ªstrike a lot of analysts as over the top. Here¡¯s Liam Denning in the Wall Street Journal¡ªthe publication that coined the triumphalist term ¡°Saudi America¡±:

In that decade-and-a-half, China¡¯s demand increased by 5.6 million barrels a day, fully 36% of the world¡¯s overall growth in oil consumption. Oil went to north of $100 a barrel from about $20.

It is a fairly safe bet that even if the shale and sands boom does even better than the IEA forecasts, the world isn¡¯t going back to $20 oil.

The kind of unconventional wells that are buoying new production in the U.S. tend to go dry fast and require a lot of investment. There are also political issues to contend with¡ªsee the battle that¡¯s brewed over the proposed Keystone XL pipeline, which supporters say is key to fully developing the vast Canadian oil sands resource. Production might slow down for economic or political reasons. And even if North American oil keeps booming, we¡¯re not likely to see a return to the rock-bottom prices of the 1990s. Expect to keep paying $3.50 or more for a gallon of gas.

(MORE: Smart Power: Why More Bytes Will Mean Fewer¡ªand Cleaner¡ªElectrons)

Still, sort of expensive gasoline isn¡¯t exactly the dystopia that peak-oil theorists predicted. So what does a world of fairly abundant oil mean for climate policy? Charles Mann explored just this question in a recent Atlantic cover story¡ªand his answers are bracing:

For years, environmentalists have hoped that the imminent exhaustion of oil will, in effect, force us to undergo this virtuous transition; given a choice between no power and solar power, even the most shortsighted person would choose the latter. That hope seems likely to be denied. Cheap, abundant petroleum threw sand in the gears of solar power in the 1980s and stands ready to do it again. Plentiful natural gas, a geopolitical and economic boon, is a climatological shackle. To Vaclav Smil, the University of Manitoba environmental scientist, the notion that we can move so fast is naive, even preposterous. ¡°Energy transitions are always slow,¡± he told me by e-mail. Modern energy infrastructures, assembled over decades, cannot be revamped overnight. Worse still, in his view, there is little public appetite for beginning the process, or even appreciating the magnitude of what lies ahead. ¡°The world has been running into fossil fuels, not away from them.¡±

The energy efficiency guru Amory Lovins challenged Mann¡¯s thesis in a post of his own after the story ran out, arguing that future oil supplies wouldn¡¯t matter because increasingly cheap renewables and efficiency would crowd out oil all by themselves. Mann replied in his post. You can score it yourself, though I agree with Mann. Oil is so much better at what it does¡ªcontaining easily portable energy¡ªthen any currently workable substitute that it¡¯s difficult to see it the world voluntarily giving it up unless it becomes prohibitively expensive, or we see a real social shift that puts much greater value than we do now on preventing climate change. Looks like we¡¯ll have to hope for¡ªand work for¡ªthe latter.


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