Truths and myths about Peak Oil

There are many misunderstandings regarding when the global peak in oil production will occur. When I discuss Peak Oil with people from different walks of life they seem to have highly differing ideas about it. I would like to present a few myths and briefly explain why each is a myth.

Myth #1: Global Oil production will peak in thirty years time or later.

Why this is a myth: Nobody knows exactly when global oil production will peak, but it will probably happen within the next decade, possibly in the next few years, or it may already have happened. Since the 1960’s oil companies have made fewer and fewer discoveries, and today they find only one third the amount of oil that we use every year. This is regardless of the fact that prices are increasing. The largest discoveries were made in the 1960’s when oil was very cheap, and they have not risen due to increasing prices.

Myth #2: If oil becomes scarce oil prices will increase, but we can maintain economic growth.

Why this is a myth: In order to maintain and increase economic activity on a global scale we depend on increasing volumes of energy, primarily oil. With less oil we will not be able to produce and transport goods and people around the globe. For transportation we don’t have a readily available alternative to oil. We need to rapidly develop renewable fuels, large scale production and distribution systems for those.

Myth #3: When oil prices increase investors and companies will have the incentives to develop renewables.

Why this is a myth: It takes decades to develop new technologies and implement them on a large scale. In order to sustain a high level of development and investments in new technology over long periods of time we need strong economic growth. After Peak Oil economic growth will probably turn into decline, and it will become increasingly difficult to invest large amounts of money in the development and implementation of renewables.

Myth #4: The market will make sure that economic growth will continue after Peak Oil.

Why this is a myth: The only thing the market does is to determine a price of different commodities and factors of production at certain levels of supply and demand. If demand for oil exceeds supply, prices will increase. The market will not make sure that everyone who demand oil will get a share. Production activity performed by the financially weak will suffer as oil prices increase and it will not easily be replaced by new economic activity.

Myth #5: We will have ample time to develop and implement renewable energy sources when oil prices start to increase.

Why this is a myth: After Peak Oil the available volumes of oil will decrease. This will put strain on the economy, which will start to lean towards recession. It will become increasingly difficult to stimulate economic growth. At this point the situation will get worse until we manage to develop and implement renewable energy sources on a large scale. This will be difficult at this point, given the aspects described above.

Myth #6: Oil importing countries will always be able to buy oil in world markets.

Why this is a myth: As production volumes decline, oil producing countries will need to use an increasing share of its oil for its own needs. The volumes available for export will decline. Oil importing countries will compete over increasingly small export volumes.