Karl Smith Karl Smith, Contributor
Noah Smith argues that the Peak Oil crowd wasn’t really wrong. No, instead what we got was a hybrid between the “Good Peak Oil” scenario where we move off oil on to an new energy source – presumably renewables; and the “Bad Peak Oil Scenario” in which the price of oil skyrockets the global economy tanks and in the worst case scenario industrial capitalism itself grinds to halt.
First of all, the peak in conventional oil, coupled with a dramatic surge in unconventional oil, looks a lot like the “Good Peak Oil” scenario, in which technology produces a new alternative energy source, and we switch to the new thing.
But the seemingly permanent increase in oil prices, and the fall in oil demand in rich countries, fit the “Bad Peak Oil” story. It indicates that the world is hitting oil supply constraints.
(And of course what the Peak Oilers missed was unconventional oil itself. Some of them missed the technology entirely, while others merely failed to anticipate that the industry’s terminology would switch from “oil” to the more weaselly “liquids”.)
To start, “liquids” is not a weaselly term and simply represents the fact that we put more oil to more uses than ever before. When the first refinery opened in the US its purpose was to extract kerosene from crude oil. There was no market for the lighter liquids, what today we would call gasoline and diesel fuel, and so were dumped in to the nearest body of water. Yes, they considered gasoline “waste” and yes they poured into the lake. This should give both environmental and enviro-skeptics pause, considering how much of what was once standard business practice, is now horrifyingly beyond the pale.
Likewise, liquids like butane, propane and ethane are important petroleum products. Economist, Jim Hamilton had a post noting that you can’t drive your car on ethane and I think that convinced a lot of the blogosphere that the huge increase in ethane “didn’t count.” But, lets be clear here. You cannot drive your car on ethane because the US Presidential Primaries begin in Iowa. It is vastly cheaper and less energy intensive to turn ethane into ethanol than to turn corn into ethanol, and US gasoline contains roughly 10% ethanol. Currently, however, high corn prices are sustained in large part by ethanol demand and so for the time being ethane will but shutout of the motor fuels market.
More deeply, however, Peak Oil was ‘clutter’ science. Not quite junk science, but still a big mess. Most discussions start with the Hubert Curve, but really should go back a bit further. In the late 19th century geologist came to understand the Kerogen cycle, by which (mostly) plant matter dies; is deposited into sedimentary soil; under heat and pressure is cooked through various petroleum stages ending with methane. The methane seeps out of the soil and into the atmosphere where sunlight decomposes it into water vapor and carbon dioxide and it is reabsorbed by living plants through photosynthesis.
However, under just the right conditions pockets of petroleum could get trapped between rock formations. If you drilled into those formations petroleum would come rushing up to the surface. It was basically on this insight alone that the entire conventional oil exploration business was founded. In the 1950s, along comes Hubbert and he notices that for the heavier petroleum – not so much for methane – cumulative extraction follows a logistic curve and hence once can predict the point where the extraction rate will be at its maximum. That’s the peak in Peak Oil.
This is where the science gets “cluttery.” None of this, so far,says anything about the vast kerogen cycle in general or what one might do to tap into it. It is only about these little pockets. Some Peak Oil enthusiast will acknowledge this by saying “only the tiniest fraction of petroleum can be profitably extracted” Not to be too glib here but one’s response has to be “how do you know, have you tried?” Because the answer is no, they haven’t tried. No one until recently tried. Because, why would you. We had not yet exhausted the over 100 year-old insight that a lot of this stuff gets trapped in little pockets. Not only that, but people were getting absurdly rich just by being the first one to find a new pocket. It was like a 100 year long gold rush.
To wit, the core of the Peak Oil hypothesis could be summed up as: sometime in the not so distant future we need to put some effort into finding new oil extraction techniques. This might be easy in which case there will be plenty more cheap oil. Or, it might be hard, in which case either we can switch to something else or, as with most every other good on earth, we will want to devote some fraction of our time and energy to continually pushing the technological frontier. And, while this is superficially true, it leads you to no deep conclusion and provides no serious insight into the future of humanity or the global economy.