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Raymond J. Learsy

Raymond J. Learsy

Posted: June 25, 2007 08:19 AM

Peak Oil is Snake Oil!


Friday of last week I had occasion to do brief battle on CNBC Morning Call with Steve Andrews, co-founder of the "Association for the Study of Peak Oil" considered the most influential organization supporting "peak oil", the Hubbert curve theory which predicts future oil availability. Surprisingly there is more than one such organization. And why should that be? The Wall Street Journal summed it up succinctly in an article appearing in the Sept. 14, 2006 issue, stating:

"That argument known as 'peak oil theory' has provided intellectual backing for the boom in crude prices."

My contention was that the fabricated drama of "peak oil" goes back to the very beginnings of oil history, to 1855 when crude oil was bubbling to the surface in Pennsylvania and transformed into patent medicine for Samuel Kier's "Rock Oil". The "Rock Oil" people pointedly cautioned buyers:
"Hurry, before this wonderful product is depleted from nature's laboratory".

And that refrain, in one version or another has been a constant theme of the oil peakists for over a century now.

Mr. Andrews defended his "peak oil" theorem by pointing to a study done and paid for in 2005 by this administration's ambassadorial mission to the oil industry, the Department of Energy. No mention of the Department of Energy commissioning, some months ago, another study by the National Petroleum Council, an oil and gas research organization to investigate peak oil claims. To head this study would be none other than the oil industry's "Gipper" himself, Lee Raymond ex CEO of Exxon Mobil, who would tear himself away from counting his $400 million golden parachute to come to the aid of the folks in the industry who made it all possible. So much for the Department of Energy's objectivity, whose concerns for the sensitivities of the oil patch have far outweighed the concerns of the nation as a whole.

There are others, less vested into scaring us into higher crude oil prices who have different views. There is Michael C. Lynch, noted economist associated with both MIT and the Fletcher School of Law and Diplomacy and past President of the United States Association for Energy Economics, who has pointed out that Colin Campbell's (among the most notorious of the "peak oil" Halloween scenarists and a founder of ASPO) research is simply sloppy. This while the patron saint of the "peak oil" theory, ex Shell geologist M. King Hubbert's doom predictions of peak oil occurring in the year 2000 have been pushed back to 2007 and again to 2010.

With recent discoveries of massive oil and gas finds off China's northeastern coast, the Gulf of Thailand, the U.S and Mexican Gulf of Mexico, Sakhalin Island, Siberia, the West Coast of Africa and the staggering increases in proved oil reserves in Saudi Arabia recently announced by Aramco officials attributable to new exploratory and recovery techniques (from 260 billion barrels to over 700 billion/bbls with potential to reach 1 trillion/bbls -- see post, "Peak Oil' RIP. Official Obit Frontpaged in the NY Times", 3.8.07 -- interestingly the New York Times' article was dismissed by ASPO, accusing the Times of distorting news and that perhaps its reporting "has something to do with the negative impact of soaring oil prices on a delicate Stock Market ) .

It seems that Mr. Hubbert's predictions will have to be revised again and again. This especially so with the vast Arctic reserves of oil being made progressively available by melting icecaps opening whole new frontiers for exploration. Talk about an industry having it both ways, helping to create global warming and then benefiting by its effects.

In this writer's opinion the "peak oil" prankster's zeal is closer to theology than to theory. They are aided by the oil companies that run TV ads advising us that half the planet's oil will be consumed in 20 years, or such as the very recently released study from BP cautioning us that available oil will be consumed in 40 years time. All permitting vested oil interests to tweet "peak, peak, peak" while stampeding us into ever higher prices.

And one last point: what we pay for fossil fuels needs urgently to be readdressed in terms of its cost on our environment, cost on our national security, and cost on our economic and future well-being. The oil and gas market as currently construed and managed is a manipulated and propagandized marketplace that has enriched the oil companies beyond the wildest dreams of Croesus while the rest of the nation absorbs the ancillary costs and is left to deal with their impact on our society. It is time we realized what is scarce is not oil but honesty and transparency.