A seismic shift
It seems like we’ve been talking about “peak oil” for a long time, but the meaning has shifted radically in the last few years.
Historically the phrase referred to the hypothetical point in time when the world’s oil production would hit its maximum. It became famous in the 1970s, when we feared there may not be enough black gold underground to fuel our cars and economies.
Four decades later, the phrase is making a comeback—but it’s now about moving toward a solar-powered, electric car future that won’t require such vast amounts of fossil fuels.
That transition could prevent catastrophic climate change, if it happens quickly enough, but it will also profoundly reshape the global economy.
In essence, the topic has changed from geology—how long can we drill oil in a cost-effective way—to figuring out what happens to our economies when we don’t have to drill anymore.
600,000: Number of active oil wells in the United States.
96 million barrels: The global daily demand for oil in 2016, according to the International Energy Agency. (That’s about 45 billion Coke cans full of oil.)
8,400 sq. km: Size of the Ghawar oilfield in Saudi Arabia, the world’s largest, equal to the size of five Londons.
400%: Increase in the price of oil—from $3 per barrel to $12 per barrel—that caused the 1973 oil crisis, which made the US rethink its energy policy.
3%: Proportion of $100 billion in combined annual spending by the five biggest oil firms that goes to renewable power projects.
Which industries consume the most oil?
Nearly half the world’s oil is burned on roads, and almost half of that is spent on moving stuff, rather than people.
So it’s not a surprise that the main driver (so to speak!) of peak oil demand is the rise of electric cars. Electric vehicles are getting cheaper, batteries are lasting longer, and charging stations are becoming ubiquitous. And countries around the world—including the UK, Norway, France, Netherlands, India, and especially China—are subsidizing electric vehicles and setting dates for banning gas guzzlers.
The first mention of peak oil
The earliest worries about peak oil production appeared in 1918, in a Tractor and Gas Engine Review article titled “Petroleum consumption enormous.” The article quotes the then-president of the Colorado School of Mines saying: “The average middle-aged man of today will live to see the virtual exhaustion of the world’s supply of oil wells.”
Those fears didn’t materialize. But in 1956, American geologist Marion King Hubbert, who worked for Shell, showed that the world’s oil production will follow a bell curve. He predicted that the world hit peak oil between 1965 and 1970. He was criticized for his methods, until the oil crisis of 1973 redeemed him. Later, after he admitted some mistakes, he revised the peak oil date to 1995.
Even that, however, wasn’t correct—due in part to new technologies like hydraulic fracturing, aka fracking.
So when will the world hit peak oil?
No one can predict peak oil with any certainty—but that doesn’t mean predictions are not valuable. Trillions of dollars of investments, largely from pension funds, rely on understanding how soon the world will start weaning off oil. Here are Big Oil’s predictions:
- 2022 – Royal Dutch Shell
- 2030 – France’s Total and Norway’s Statoil
- 2040 – Britain’s BP
- Not in sight – ExxonMobil, Chevron, Saudi Aramco
Many experts agree with the “not in sight” scenario. “Based on what we know now, we would need major technological breakthroughs or weak world growth, including for large emerging and developing economies, for oil demand to peak in the next 20 years,” said Gian Maria Milesi-Ferretti, deputy director of the International Monetary Fund’s research department, told Axios.
As Reuters reported this week, BP is scaling back the investments it had made in renewable energy and many big oil firms say they’re just as confident as ever.
Drill, baby, drill
The most optimistic prediction of peak oil was made by Abdullah Jum’ah, the former CEO of Saudi Aramco, the world’s largest oil company. “I do not believe the world has to worry about ‘peak oil’ for a very long time,” he said in 2008. His calculations suggested that by then we had extracted only 1.1 trillion barrels of conventional and non-conventional oil out of a total of 16 trillion barrels. His successor, Amin Nasser, has doubled down on the claim, saying earlier this year that it is “misleading” to think oil demand is nearing its peak.
The optimism may be explained by what’s happening with Saudi Aramco. The world’s largest privately owned company—valued between $1 trillion and $2 trillion—is in the midst of preparing for an IPO. US president Donald Trump recently made a pitch that Aramco should list on a US stock exchange. At the same time, however, the IPO is part of a grand scheme to diversify Saudi Arabia’s portfolio. Even if the company doesn’t believe that peak oil is coming soon, it knows that oil money will keep it going only for so long.
Which of these countries did not hit peak oil production in 1970?
We need Big Oil on our side
No matter where oil companies stood on climate change in the past, they are almost all united today and agree that cutting carbon emissions is necessary. The stance, however, goes directly against their business model of selling more oil. Unless, that is, they also find ways of burning fossil fuels without emissions.
Enter carbon-capture technology. Some of the world’s biggest companies have come together to spend $1 billion to make it a reality. Though in commercial use since the 1970s, the technology has remained expensive and faces a huge public-relations challenge. Environmental groups loathe it because it extends the use of fossil fuels. Politicians find it to be a hard sell: There is no shiny solar panel or wind turbine to show for it.
But as the world gets closer to overshooting on its climate goals, carbon capture technology will be absolutely crucial to ensure that the global average temperature doesn’t rise above the dangerous 2°C threshold. And we will probably need to work with oil companies who have the money and knowledge to help deploy the technology at scale.
In 2013, The Atlantic’s Charles C. Mann explored the world-changing repercussions of Winston Churchill’s decision to switch the British Navy’s fuel source from coal to oil.
“New technology and a little-known energy source suggest that fossil fuels may not be finite,” he writes. “This would be a miracle—and a nightmare.”
Peak nodding donkey
Quartz recently visited China’s second largest oilfield near Dongying, south of the capital Beijing. Amid well-kept farms and sturdy cattle, every few hundred meters out popped a familiar symbol of the oil age: a nodding donkey (also called pumpjacks). The pumps work day in and day out, sucking up between 3 barrels and 3,000 barrels a day, depending on a range of factors including the age of the oilfield and size of the pumpjack.
Peak oil means peak nodding donkey. But there’s no end in sight—GE purchased the pumpjack maker Luftkin Industries for $3.3 billion. Pumpjacks are so widely used that NPR once called them “the American symbol of life in the oil patch.” An NPR correspondent asked a pumpjack operator what he thinks of when he hears one running: “That’s the sound of making money,” he said.
Wackiest idea of them all
The prize for the most extreme prediction for peak oil goes to… Thomas Gold. The Austrian-born astrophysicist at Cornell University believed oil doesn’t just have to come from organic matter—decaying plants and animals—but that it may also be created through inorganic means, as the carbon in the Earth’s core is somehow transmuted by heat and pressure into oil. This theory is called the abiogenic origin of petroleum. If true, it means oil is not a limited fossil fuel but a continually renewing abiotic product.
There are many known chemical reactions that could be used to create synthetic oil. But there is no evidence that nature creates oil from inorganic matter. That doesn’t necessarily mean abiogenic petroleum can’t exist…just that we haven’t found it yet.