Wednesday, October 29, 2008

Peak Oil mischief

Today the newswires are all over a report by the Peak Oil Group that sensationalizes a future lack of oil will be a greater threat than terrorism.

I guess the first thing we should ask is who exactly is the Peak Oil Group? Not surprisingly it is made up of alternative energy resource interests, though its chairman is an "ex-oil industry executive". So they clearly have an axe to grind and are currently concerned that, with oil prices dropping, their projects are beginning to look a lot less economically viable. Hence the scaremongering.

The second question we should ask is if the statement is actually true that there will be a future lack of oil. Yes, oil is a finite resource, so it will run out "some day". What has fooled the pundits so far is naming the date when oil production peaks. At one time the peak was estimated to be around 1950 but so far technology, exploration successes and wildcatters' guts have put far more oil into the pipelines than anyone has ever imagined. And the same is probably true today. I say probably in that there are political pressures due to most of the oil being under the control of a few countries, in particular, Saudi Arabia, Iraq and Iran. That is where the terrorist threat is greatest so it is hard to see how one threat (peak oil) is greater than the other (terrorism) as they are potentially linked in an earth shattering way.

It behoves us all to desire and expect alternative energy sources, but these need to be economically viable and sustainable. Unfortunately wind and solar energy systems are not economically viable except in very special circumstances. The cost of making solar electricity panels, for example, far exceeds the savings we can expect from them. Wind energy can work with other energy sources but not replace them. The Scandinavian model demonstrates this type of potential viability, where Denmark sells its wind power to Sweden (when the wind blows) and buys Swedish hydro-electric power back when it doesn't. The problem is that some of the infrastructure is idle most of the time, requiring excess capital investment and operating costs.

By comparison oil continues to be the most versatile, cost effective energy source we have.