Serious discussion has erupted outside the oil and gas industry about the important topic of depletion. The industry, to which depletion is not news, should make sure the discussion remains serious.
Until recently, nobody outside the oil and gas business talked much about the habit of hydrocarbon-bearing rocks to void themselves through production. Inside the business, depletion is just a fact of nature, a normal production phenomenon, something to be accounted for in planning but nothing to get excited about.
Now, however, depletion has entered the mainstream. Heavyweight general-interest publications from the New York Times to National Geographic have written in depth about the subject. Well they should. Nature offers a fixed amount of the oil and natural gas on which humanity depends heavily and increasingly for inanimate energy. Resource limits imply exhaustion at some point. The ramifications for human welfare are immense.
OGJ attention
Oil & Gas Journal has done its part to bring attention to depletion. It published a widely referenced six-part series on the subject, entitled Future Energy Supply, in successive issues during July 14-Aug. 18, 2003. A follow-up series entitled Hubbert Revisited, also in six parts, concluded last week. Those are just OGJ's most recent contributions to the debate. The journal has written about depletion and the consequences for future energy supply for most of its 102 years in existence. The world has been drawing down its endowment of fluid hydrocarbons the whole time.
The analytical challenge, of course, is that no one knows the full extent of the hydrocarbon endowment. Even that part of the resource counted as "reserves" is devilishly difficult to estimate. Analysts who predict a production peak within a few years don't know how much petroleum remains to be discovered and produced. Neither do analysts who believe economics and technology will extend production growth well into the future.
Both sides of the debate offer serious and learned arguments. No effort will be made here to choose one over the other. OGJ doesn't know how much oil and gas ultimately will be produced, either. What's important is that the discussion continue, not only about when production will peak but also—and more importantly—about adjustments the world must make whenever it does. As experts advance the debate, however, they also should discourage a public newly concerned about depletion from rushing to governments for snap remedies.
Public views of complex issues naturally migrate to extremes. As seen from outside the industry, extremes in the depletion issue are that: 1) The world soon will run out of oil, and 2) There is no reason to worry. Both are wrong. The former fosters unwarranted fear and the latter, dangerous complacency. Either can breed disastrous policies. A peaking of conventional oil production, even if imminent, does not mean exhaustion of supply. Moreover, conventional oil is not the whole story about liquid hydrocarbons. Technology and economics do extend total oil and gas supply, often in unpredictable ways. And regrets about finding rates ignore the modern industry's preference for adding reserves where oil and gas already have been discovered.
Still, the industry doesn't find giant oil fields at historic rates—or routinely add reserves any other way at rates matching production. Many producing regions are in advanced stages of natural decline. While deposits of nonconventional oil and gas are indeed abundant in nature, they do face economic and technical questions about their producibility. And when global production peaks, the decline might be uncomfortably steep.
Unpredictable course
As energy demand grows, the path to future supply will follow a largely unpredictable course through these features of fossil fuels and whatever contributions develop from alternate sources and improvements to consumption efficiency. It's no crisis that future patterns of energy demand are clearer than those of supply. Because demand projections reach beyond most investment horizons, uncertainty about supply is inevitable. It's nothing new. The only likely crises would be those created by governments forcing consumers to quit using oil prematurely in panicky response to depletion, which also is nothing new.
In fact, the best policies for governments are those that protect markets and let economic forces and human ingenuity deal with nature's imperatives. Serious discussion about depletion will avoid demanding from governments remedies they can't provide.
