Understanding the Origins of Peak Oil

An article in Upstream Online confirms something which I have several times over the past year written on blog posts or expressed verbally: that whether or not talk of “Peak Oil” is premature, such discussions are pointless unless it is universally understood that the major obstacles to increasing oil production are political in nature, not technological.

High oil prices and perceptions of soaring industry profits have prompted many producing countries to give national oil companies more power to extract richer fiscal terms and greater control over resources, pushing out international players, Rex Tillerson, chief executive of US supermajor ExxonMobil, said.

Such policies will lead to tighter oil supplies as ExxonMobil and other majors stop deploying their technology, know-how and capital in some of those countries, he said.

“If there’s no room to share it then there is no role for us – it’s a simple as that,” he told business and political leaders at a meeting in Calgary, Reuters reported.

State oil companies now control 75% of the world’s proven oil reserves and international companies like ExxonMobil, Anglo-Dutch supermajor Shell and French giant Total account for about 10%, he said.

Total chairman Thierry Desmarest agreed that many countries in regions like the Middle East, former Soviet Union, Africa and South America have been putting more political obstacles in place, restricting access to new reserves.

Meanwhile, production in most of the rich countries of the West is expected to keep declining.

That the likes of Exxon-Mobil, Shell, and BP should find themselves shut out from most of the world’s oilfields will come as music to the ears to many of the anti-globalisation, anti-capitalist, green movements, assorted bands of halfwits, and the perpetually angry.  For when they talk of the evils of Big Oil, it is only the western, publically owned oil companies which come in for criticism with the state-owned giants which control most of the world’s production being given a free pass, usually due to a misguided view that they are vehicles of fairness, wealth redistribution, and social progression.

Such views are breathtaking in their naivety.  A look around the world reveals that the only national oil company which operates safely, efficiently, and on a par with international standards is Statoil of Norway.  The rest range from being bloated and inefficient to startling unsafe and riddled with corruption, with environmental concerns coming far down the list of priorities after production, profit, and protection of favoured sons in the organisation.  By contrast, despite their many faults, western oil companies are models of safety, efficiency, and environmental responsibility.

If the pattern of western oil companies being shut out of the world’s major oilfields continues, we can expect the price of oil to rise steeply because of two factors: a decrease in production figures caused by a decrease in reservoir extraction rates, and extraction costs increasing as operations become more inefficient.  We can also look forward to that production which is taking place to be accompanied by a significant increase in environmental damage, explosions, fires, and deaths.

If we are heading towards Peak Oil, the point at which production rates peak and decline from thereon after, the answer is simple: allow western oil companies access to the world’s largest oilfields.  The alternative is to allow the oil producing countries to steadily wreck the industry and the environment and force the world over the next couple of decades to find alternatives to oil long before the reservoirs run dry.


4 thoughts on “Understanding the Origins of Peak Oil

  1. Pingback: The Cost of Energy » Blog Archive » Open thread

  2. Pingback: White Sun of the Desert » Rex Tillerson

Comments are closed.