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Oil Panic and the Global Crisis: Predictions and Myths

ISBN: 978-1-4051-9548-5
256 pages
December 2009, Wiley-Blackwell
Oil Panic and the Global Crisis: Predictions and Myths (1405195487) cover image
Is the world running out of oil? This book analyzes predictions of global oil depletion in the context of science, history, and economics.

There has been continuing alarm about the imminent exhaustion of earth's non-renewable resources. Yet, the world has never run out of any significant, globally traded, non-renewable resource. Is the world finally facing a non-renewable resource depletion catastrophe, or is the current concern just another one of a succession of panics? In this book, key assumptions and underlying arguments in the global oil-depletion debate are first summarized and then challenged. Facts about oil supply, production, and consumption are made accessible using concise and simple graphics.

Concepts of resource depletion, end-use needs, technology leap-frogging, efficiency, and substitution are used to evaluate historical patterns of exploitation of non-renewable resources and to explore what history suggests about our future dependence on oil.

This book is aimed at a broad range of readers,from undergraduate students studying resource science and economics to anyone interested in understanding the context of the controversy over global oil depletion.

"It is a book serious students of the world oil market should read, not because Gorelick has all the answers but because his account is well reasoned, well informed, and argued honestly, with respect for responsible opposing viewpoints."
Book Review, Science, May 2010

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Preface ix

Acknowledgments x

About Units xi

Getting Started: What Do You Think? xiii

1 End of the Oil Era 1

Cause for Concern 1

Hubbert's Curve 4

The Appeal of Hubbert's Curve 10

Hubbert's Success 11

US Oil Dependence Since Peak Production 12

Chapters Ahead 13

Notes and References 13

2 The Global Oil Landscape 16

Introduction 16

Defi nitions 17

Petroleum Composition and Energy Density 18

Why a Barrel Is a bbl 20

The Oil Business 20

OPEC 23

How Much Oil Is There? The USGS Assessment 26

From the USGS Assessment to 2009 29

Reserves 31

Where Is Oil Produced? 32

Where Is Oil Consumed? 33

Oil Imports 35

After Oil Is Produced 37

Oil Production Versus Consumption 38

Oil Quality 40

Oil Pricing by Quality 40

Gasoline 41

What Determines the Price of Gasoline at the Pump? 41

The Price of Gasoline 44

Gasoline Price Elasticity: What Happens When the Price Goes Up (or Down)? 45

Gasoline Price Variability 47

Points to Take Away 49

Notes and References 51

3 The Historical Resource Depletion Debate 58

The Malthusian Doctrine 58

The Limits to Growth 59

The Oil Panics of 1916 and 1918 62

Panic Revisited: The Oil Crisis of the 1970s 63

Arguments Supporting Global Oil Depletion 65

Declining Oil Production in Countries in Addition to That in the US 65

Production Exceeds Discoveries 66

Reserve and Endowment Estimates are Inflated 67

Industry Exaggeration of Reserves 69

Fewer Giant Fields Discovered and Production is Declining 70

Decline in Discovery and Oil Drilling Suggests Onset of Production Decline 72

Global Industrial Development and Oil Consumption 74

The Price of Oil is Increasing: Does This Indicate Scarcity? 77

Forecasts Support a Decline in Global Production Using Extensions to Hubbert's Approach 80

Summary 81

Notes and References 82

4 Counter-Arguments to Imminent Global Oil Depletion 87

Myth I: Hubbert's Predicted Production Rates Were Accurate 87

US Oil Production 88

The Bell-Shaped Curve 93

US Natural Gas Production 95

Global Oil Production 95

Myth II: A Decline in Production Necessarily Indicates Scarcity 98

Commodity Scarcity 98

Generalizing the Debate: Resource Economists versus Neo-Malthusians 103

Back to Oil 110

Scarcity Rent 116

Myth III: Resource Assessments Provide Useful Endowment Estimates 118

The Missing Mass Balance 123

Counter-Argument to OPEC and Industry Exaggeration of Reserves 124

Myth IV: After So Much Exploration, There Is Little Oil Left To Be Found 126

US Oil: Reserves 126

US Oil: Discoveries 128

Global Oil: Reserves 132

Global Oil: Discoveries 138

Russian and Global Arctic Oil 144

Myth V: The World Cannot Afford Increases in Oil Use as Developing Nations Demand More Oil 146

Future Demand of Developing Nations 146

Oil Expenditures in the World Economy 153

Myth VI: There Are No Substitutes for Oil 156

The Gold Resource Pyramid 156

The Oil Resource Pyramid 160

The US and Global Oil Resource Pyramids 161

Three Unconventional Oil Substitutes 165

US heavy oil 165

Global heavy oil 166

US oil sands 168

Global oil sands 168

US oil shale 170

Global oil shale 172

Fossil Fuel Conversion: The Role of Gas and Coal 173

The Importance of Diesel 175

Synthetic Fuel from Coal and Natural Gas 175

Natural Gas Resources 177

Coal Resources 180

Chapter Summary 181

Notes and References 183

5 Beyond Panic 195

The Non-Renewable Resource Model 195

Where Is an Effi ciency Gain Possible? 196

Will Increases in Effi ciency Indeed Reduce Demand? 199

Two scenarios for developing nations 204

What Might Ultimately Substitute for Oil? 207

Consideration 1: Cost of dependence on imported oil 208

Consideration 2: Gasoline and atmospheric carbon dioxide emissions 209

Consideration 3: Alternatives 210

Ethanol 211

Biodiesel 212

Leapfrogging to an ultimate substitute 213

Effects of a US move to oil alternatives 215

The State of Oil Resources 219

Ending Thoughts 221

Notes and References 225

Index 231

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Steven M. Gorelick holds the Cyrus Fisher Tolman Professorship in the School of Earth Sciences at Stanford University, where he has been on the faculty for over 20 years. In 2005, he was named a Guggenheim Fellow for his study of global oil depletion. Professor Gorelick is a Fellow of both the American Geophysical Union and Geological Society of America, and he has been selected twice as a Fulbright Senior Scholar (1997 and 2008) for studies of water resources issues in Australia.
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"He writes so from a position of strength having spent years analysing industry data and I find it difficult not to be swayed by the force of his honest arguments." (Oilholics Synonymous Report, September 2010)

It is a book serious students of the world oil market should read, not because Gorelick has all the answers but because his account is well reasoned, well informed, and argued honestly, with respect for responsible opposing viewpoints." (David Lloyd Greene, Science, May 2010) 

"The book is a refreshing and methodical expose´ of the most common myths about oil that many of us hold as truths. Gorelick weaves an intriguing story from what might have been a dreadfully boring, yet impressive collection of data and observations. It was a pleasure to read and learn from this book, which I highly recommend to experts and  non-experts alike, particularly our leaders in government." (Kenneth E. Peters, Geofluids, 2010)

"In all my years as a journalist who has written on oil and  follows the crude markets closely, I feel this book is the most engaging, detailed and well written one that I have come across in its genre. I am happy to recommend it to commodities professionals, economists, students and just about anyone interested in reading up on the oil depletion debate." (Gaurav Sharma, Infrastructure Journal 2010)

"Professor Gorelick’s book is a valuable contribution to the debate about peak oil and could profitably be read by anybody requiring a pathway through the economic and political smokescreens which have grown up around the topic." (Geo Expro, September 2010)

"The book is a refreshing and methodical expose´ of the most common myths about oil that many of us hold as truths. Gorelick weaves an intriguing story from what might have been a dreadfully boring, yet impressive collection of data and observations. It was a pleasure to read and learn from this book, which I highly recommend to experts and  non-experts alike, particularly our leaders in government."

Kenneth E. Peters, Geofluids, 2010

"It is a book serious students of the world oil market should read, not because Gorelick has all the answers but because his account is well reasoned, well informed, and argued honestly, with respect for responsible opposing viewpoints."

David Lloyd Greene, Science, May 2010

"This is a wonderful book, not only full of information, but with the clear stamp of the patient teacher who above all wants his reader to understand.  I hope it makes its way into the halls of Congress."

Garrison Sposito, Professor, Betty and Isaac Barshad Chair, Environmental Science, UC Berkeley

"Are we running out of oil or do we have plenty of this resource? Will
the oil age end before we run out of oil? Have we reached the maximum
daily production rate of oil or are we already on the down slide?
Professor Gorelick has compiled the necessary data and provided his own
incisive analysis to assist the reader in understanding the complex
issues related to the supply and demand hydrocarbons. A must read for an understanding of both the domestic and global energy picture."
Professor Khalid Aziz, Department of Energy Resources Engineering at Stanford

"The dynamics around oil have shaped our lives for many decades and will do so for many decades to come. Surprisingly, many misconceptions exist around the extent and availability of this fundamental resource. This
book is a lucid compilation of facts which is a must-read for anyone
interested in energy and the environment."
Ashok Belani, Chief Technology Officer of Schlumberger Limited

 ”It is a pleasure to read an informed, balanced, and lively account of the prospect of meeting the world's need for oil in coming years. A combination of sound economics, attention to history's lessons, and political leadership offer the way forward. Read this book and decide what you should do."
John Deutch, Institute Professor, Massachusetts Institute of Technology, former Director of Central Intelligence.

“A very readable statistical history of global oil depletion that frames and illuminates the century-old debate about “peak oil” or the “end of oil.” A suitable text for introductory resource economics or for the general reader with a love for facts and detail.”
Sylvio J Faim, Los Alamos National Laboratory

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October 28, 2009
Oil Panic and the Global Crisis: Predictions and Myths

The future of oil and our dependence upon it is one of the most important issues of the twenty-first century. As oil prices have surged, two rival camps have emerged to forecast the pending oil crisis. One claims that depletion of oil and natural gas is imminent and will be followed by global chaos, while the other predicts that if we support technological innovation and trust the free markets, humanity will be spared.

In Oil Panic and the Global Crisis: Predictions and Myths award winning scholar Steven Gorelick navigates the arguments between the two camps and in doing so tackles some of the twenty-first century’s most important questions:

  • Are we on the verge of running out of oil, or are Peak Oil predictions outdated? 
  • What warnings do the oil shortage scares of the 20th century offer us today? 
  • Why are there such extraordinarily different views on the future of oil?
  • What is the role of environmental and economic issues in determining our future use of oil? 
  • What lessons can be drawn from the production history of other non-renewable resources? 
  • Will oil sands, coal, natural gas, and fuel alternatives provide solutions to our energy needs?
  • How will the needs of developing nations, such as China and India, affect global consumption?

Until now, no book has addressed these questions by providing a coherent discussion of the two perspectives on the status and future of global oil resources. 

“Scientists and engineers have applied prediction methods that lead them to the conclusion that the depletion of global oil is nearing. The majority of audiences I have addressed on this topic support this notion, yet there are those with a very different perspective that presupposes plentiful oil whose production is limited merely by price and technology,” said the author 

 

Perhaps the light of this history can help illuminate our energy path before there is panic in the dark.”

Steven M. Gorelick

 

 

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