Examining the Skeptics Arguments

Michael Lynch
http://www.gasandoil.com/goc/features/fex52520.htm
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Oil discovery forecasts are doomed


by Michael C. Lynch 28-05-05 Since the early Greeks speculated that the Trojan War was started by the gods to reduce overpopulation, many have feared resource scarcity. The obvious finite nature of non-renewable resources such as minerals combined with occasional shortages and an inability to be certain of future supplies has made this a recurring theme in political economy.
The most obvious modern analogy has been the work two centuries ago by Thomas Malthus, who made a simplistic (and incorrect) calculation of growth trends in population and food supply, and continued by Paul Ehrlich, who continually foresees imminent mass starvation.

His counterparts in the oil business are no less in error for mistakenly analysing production and discovery data as representing geological processes without political or economic components, and can thus be as safely extrapolated as the orbits of the planets. This is a part of the long debate that began with Plato and Aristotle over whether numbers hold an inherent truth, independent of physical reality, or if the meaning of the numbers cannot stand alone from what they represent.
As our reporter Barrie McKenna wrote in his cover story on oil, M. King Hubbert looked at the numbers and correctly predicted the peak in US oil production. But Mr Hubbert incorrectly assumed that falling natural gas demand in the 1980s reflected geological scarcity rather than a response to higher prices.

More recent work has falsely assumed that low discoveries in the Middle East mean a lack of oil in the ground, rather than a lack of drilling activity, which is primarily the result of a large glut of discovered oil fields. Some of these “scientific” analysts graph production and assume a bell curve, seeing an unending decline after any peak, when in fact, countries often peak, decline, then improve their fiscal regime to attract new investment and raise their production again.
Others fit a curve to discoveries by size, and extrapolate it to an asymptote, mistakenly thinking that discovery size could be gleaned from estimates by geologists, and that sequenced oil discoveries reflect geology, rather than being influenced by political decisions as to where and when drilling will be permitted.

Though both these approaches often yield what appear to be solid “fits,” they are descriptive rather than predictive. Oil discoveries are much more human-influenced than the orbits of the planets, which can be predicted by simple observation, and efforts to forecast them are doomed to failure as was curve-fitting of the stock market.
The world contains abundant oil resources to meet demand for decades to come, with the amount of drilling historically outside North America a fraction of what the United States and Canada have experienced, and well productivity running 30 to 500 times that seen here. (This hardly guarantees that it will be available at any given time.)

Current warnings about the inability of the market (and industry) to perceive the coming peak are no more credible or scientific than those that led so many -- including Canada -- astray in the 1970s, when billions were spent on synthetic fuels and frontier drilling; governments negotiated sweetheart contracts with oil-exporting countries; and a thriving industry was devoted to explaining the coming peak in oil production.
The primary development since then in studies of “peak oil” has been the new availability of graphics software that enables unsophisticated analysts -- knowledgeable of geology, perhaps, but not statistics -- to make and misinterpret graphs. And, of course, the media delights in warnings of catastrophe, because stories about business continuing as usual are hardly news.

Michael C. Lynch is a US-based consultant and is affiliated with MIT.

Exxon Op-Ed Advertisement (a pdf - should open directly in Safari or Firefox, but may require Adobe in other browsers)
www.exxonmobil.com/Corporate/ Files/Corporate/OpEd_peakoil.pdf

The Bulletin of Atomic Scientists site includes this article examining the Exxon 2030 (see below) publication by Alfred J. Cavallo.
http://www.thebulletin.org/article.php?art_ofn=mj05cavallo