Driven in part by the response to Russia’s invasion of Ukraine and the consequent disruption of energy markets, a view of the supply and demand for oil and gas that predicted that the world would run out of the finite resources in the ground – a.k.a. “peak oil” – may have been turned on its head.
Today, many energy and oil analysts suggest that demand for fossil fuels will peak and begin to decline far sooner than they might conceptually run out. It’s a 180-degree turn.
Here’s a recent headline from the Wall Street Journal: “Peak Fossil-Fuel Demand Is Possible in a Few Years, IEA Says.” The Journal’s somewhat breathless account is based on the International Energy Agency’s “World Energy Outlook 2022.” IEA Executive Director Fatih Birol said, “Energy markets and policies have changed as a result of Russia’s invasion of Ukraine, not just for the time being, but for decades to come. Even with today’s policy settings, the energy world is shifting dramatically before our eyes. Government responses around the world promise to make this a historic and definitive turning point towards a cleaner, more affordable and more secure energy system.”
According to the IEA report, “For the first time ever, a WEO scenario based on today’s prevailing policy settings…has global demand for every fossil fuel exhibiting a peak or plateau.” In IEA’s analysis, “coal use falls back within the next few years, natural gas demand reaches a plateau by the end of the decade, and rising sales of electric vehicles (EVs) mean that oil demand levels off in the mid-2030s before ebbing slightly to mid-century.”
There is substantial anecdotal evidence to back up the IEA’s broad predictions. Here are a few examples:
Bloomberg, Oct. 25, two days before the IEA’s 2022 outlook: “Too Much Gas. Europe’s Energy Crisis Takes a Surprise Turn.” The lede: “Starved of the Russian imports on which it has lengthy relied, Europe has rushed to import liquefied pure fuel from around the globe to replenish storage. Now, a mixture of unusually heat climate and profitable bidding for cargoes means amenities are virtually full earlier than Europeans have even turned the thermostats up. Gas costs have additionally fallen again sharply, and are lower than a third of their summertime peak.”
OILPRICE.com, Oct. 24: “Texas Natural Gas Prices Sink Close To Zero.” “Flourishing natural gas production in the Permian has swamped pipelines, putting an undue burden on takeaway capacity, resulting in an oversupply situation that has caused natural gas prices to sag to as low as 20 cents per MMBTU, traders have reported, and up to 70 cents per MMBTU.”
CowboyStateDaily.com, Oct. 24: “PacifiCorp: In Reversal, Wyoming Coal Now Secondary To Wind And Solar.” “Coal generation once was a base load source that provided 24/7 energy as needed with wind and solar supplementing energy from coal. Now coal-fired generation will be used more to follow energy produced from wind and solar, according to testimony from a PacifiCorp representative at a Monday meeting of the Wyoming Public Service Commission.”
Reuters, Oct. 18: “China’s Sinopec taps large shale gas reserve in Sichuan exploration well.” “China’s Sinopec Corp. has struck a high-yielding shale gas exploration well in southwestern Sichuan basin with daily gas flow of 258,600 cubic meters, the state oil and gas major said on Tuesday.
“The success of the Jinshi-103HK well could potentially lead to another sizeable shale gas field with geological reserves of 387.8 billion cubic meters, Sinopec said in a statement, without specifying the exact location of the well.”
CowboyStateDaily.com Oct. 27: “Arch’s Wyoming Coal Mines Has Great 3rd Quarter But Still Has Plans To Shut Everything Down.” “Despite a strong quarter for its Powder River Basin operations, Arch Resources Inc., which owns the Black Thunder and Coal Creek mines in Campbell County, remains on track for an accelerated shutdown and reclamation of its Wyoming mines.”
OILPRICE.com, Oct. 25: “Energy Execs Tell Granholm Shuttered U.S. Oil Refineries Won’t Restart.” “Shuttered refineries unlikely to start back up are the latest nail in the U.S. refinery coffin. In June, Chevron CEO Mike Wirth posited that there would never be another new refinery built in the United States.”
In 1956, noted geophysicist M. King Hubbert (1903-1989) presented a paper at a meeting of the American Petroleum Institute in San Antonio, where he predicted that U.S. petroleum production, which had increased every year in modern history, would peak sometime between 1965 and 1970. Oil would run out. He wasn’t taken seriously until 1970, when U.S. production peaked and began to decline. Hubbert then predicted that global oil production would peak in 1974, which happened during the first Arab oil embargo produced long gas lines and high prices in the U.S. Hubbert was lionized as a petroleum prophet.
There remain advocates of Hubbert’s theory of peak oil, although there is no empirical evidence to support it. Perhaps the most dismissive rejection of Hubbert’s peak oil prognostication came from longtime Saudi oil minister Ahmed Zaki Yamani (1930-2021), who famously quipped “The Stone Age didn’t end because they ran out of stones.”