Peak oil theory analysed

Peak Oil, the theory that world oil production will soon reach a peak and go into sharp decline, is the subject of a new analysis by Cambridge Energy Research Associates (CERA).

CERA finds that the remaining global oil resource base is actually 3.74 trillion barrels "“ three times as large as the 1.2 trillion barrels estimated by the theory's proponents "“ and that the peak oil argument is based on faulty analysis which could, if accepted, distort critical policy and investment decisions and cloud the debate over the energy future.

"The global resource base of conventional and unconventional oils, including historical production of 1.08 trillion barrels and yet-to-be-produced resources, is 4.82 trillion barrels and likely to grow," according to CERA director of Oil Industry Activity, Peter M Jackson.

"The peak oil theory causes confusion and can lead to inappropriate actions and turn attention away from the real issues," Jackson said.

"Oil is too critical to the global economy to allow fear to replace careful analysis about the very real challenges with delivering liquid fuels to meet the needs of growing economies. This is a very important debate, and as such it deserves a rational and measured discourse."

"This is the fifth time that the world is said to be running out of oil," said CERA chairman Daniel Yergin, of the peak oil theory.

"Each time "“ whether it was the 'gasoline famine' at the end of WWI or the 'permanent shortage' of the 1970s "“ technology and the opening of new frontier areas has banished the specter of decline. There's no reason to think that technology is finished this time."

The peak oil report emphasises the importance of focusing on the critical issues. "It is not helpful to couch the debate in terms of a superficial analysis of reservoir constraints. It will be aboveground factors such as geopolitics, conflict, economics and technology that will dictate the outcome."

The report also points to such aboveground questions as timing and openness to investment, infrastructure development and the impact of technological change on demand for oil.