OXFORD – Throughout the history of the oil industry, fear and concern about the imminent exhaustion of oil reserves has been a recurring theme. Such sentiments often spread and capture the public imagination at times of rapidly rising oil demand, sharp spikes in energy prices, and geo-political uncertainty. So today’s talk of oil scarcity, which began at the turn of the last century, should come as no surprise.
Believers in oil scarcity point to the sustained annual average increase of oil prices from 2002 to 2008, declining output in many areas of the world, and the absence (until recently off the coast of Brazil) of large-scale oil discoveries in the last few decades. All these factors lend credence to the view that oil production has peaked. In the face of relentless demand-side pressure, driven mainly by high-growth countries like China and India, some predict stratospheric energy prices, supply shortages, economic and social hardship, and even resource wars.
Given that oil is a non-renewable resource, in a sense the world is always running out of it. Unless global demand collapses, at some point in the future oil production will peak and eventually be exhausted. But this prediction is close to a tautology. For it to be useful, believers in scarce oil must be able to predict such things as the timing of the oil peak, the state of demand when oil production reaches it, and the pattern of decline.
But the track record of “peak oil” theorists on such matters has not been impressive: their predictions have steadily moved forward the date that global oil production will peak. Worse still, they have made no serious attempt to identify why their earlier predictions have had to be revised.