Peak Oil proponents, as they are known, have long suggested that a global peak in oil production (followed by an inexorable decline), coupled with increasing demand for petroleum would soon lead us all to ruin, as soaring prices for oil would lead to a global economic collapse. They may yet be right, but it appears that, for the moment at least, doomsday has been deferred.
When conventional global oil production seemed to hit a plateau sometime around 2005, and when oil hit $145 a barrel in 2008, the evidence for a near-term Peak Oil scenario seemed to be mounting. And it is true that the price of oil has outpaced inflation: today (August 26th, 2013), the price for Brent Crude is just north of $111, ten years ago the price was a hair under $30. However, for the moment it looks like, for the very near term anyways (barring a revolution in Saudi Arabia, or some other “Black Swan” type event), the price of oil may stabilize somewhere north of $100, possibly for several years hence.
Why did this happen? Why did the squeeze in price not materialize, like so many had expected? Global demand continues to rise, and conventional oil production has largely stagnated over the last decade or so. The difference, it turns out, and the reason we haven’t fallen into the Peak Oil trap (yet), is unconventional production: oil sands, oil shale, deep offshore drilling, and new techniques for oil and natural gas production (“fracking”) have, for now, allowed the price of oil to stabilize (though at a relatively high level.) For most of us living in the developed world, this is a largely tolerable situation: people can still afford $3.50 for a gallon of gas, and can even manage when and if the price spikes even higher. For the rest of the world, oil prices remaining on a “high plateau” could lead to significant social, political, and economic turmoil, as we have seen in Egypt and elsewhere.
It is difficult to know how long this “high plateau” will last. Estimates vary greatly: from the end of this year, to sometime around 2030 or even beyond. Eventually, of course, the Peak Oil theorists will be right. Oil is a finite resource that we will have to transition away from eventually, even if it is to oil’s dirtier, but more plentiful cousin, coal. Let’s hope that we find better energy sources before the Oil Age ends.