Whenever we come across shortage of oil, short-term of course, or a hike in oil prices, the very first thing implied is that we’re running out of affordable oil, an idea formally known as the “Peak Oil” concept. Peak Oil may be defined as the hypothetical point when the maximum rate of extraction of petroleum is reached, followed by a terminal decline. According to economists, it is the point at which the oil production maxes out: the easily available reserves are exhausted, and the cost of extracting and refining the remaining stuff exceeds the price it fetches on the open market. There is a lot of debate regarding the Peak Oil Theory, with some experts predicting a rapid decline in oil production with serious implications for the entire human economy and society. If such a decline in production happens too rapidly, it could outpace the development of viable energy alternatives, resulting in a drastic spike in prices. On the other hand, some believe that peak oil is merely a myth, and that the world’s oil supply would never be drained to a point of such crisis.
From a geological perspective, it may be stated that oil production will achieve it’s peak when half of the total ultimate recoverable resources have been produced. However, the actual problem lies in the determination and estimation of the total recoverable conventional oil reserves. Recovery factor and uncertainty are the players of major roles in this case. With various technological advancements, discoveries are being made in virgin areas and in case of old fields, methods of enhanced oil recovery are being put to use. It is essential to keep in mind that, peak oil is about the maxima in oil production, and not about running out of oil. Production is affected by price and price is controlled by the demand and supply economics, i.e. the global oil markets.
Peak oil is not about oil reserves or resources, neither of which translates directly into production rate. Peak oil is not about running out of oil but about its peak in production. Production is the key metric because price is controlled by the balance between supply and demand. So the question is if the ideas of peak oil a myth. If readers are expecting an abrupt decrease in oil production, then it is. But if they understand that the manifestation of peak oil is a struggle between supply and demand that is resolved through global oil markets, they will understand that the data show that peak oil can originate from economic as well as geological factors.
However, an apparent peak in production does not necessarily represent a peak in oil availability, especially in a global market - something that Peak Oil advocates tend to overlook. In fact, a “peak” may just be one of many “spikes”.
With conventional oil production on a plateau and with expensive unconventional sources the only means by which oil production may be increased in the short term, it is clear that societies face a major dilemma. Will the price remain high enough to develop unconventional sources and, in doing so, limit economic growth? Even so, can the production rate of unconventional oil ever be enough to support the concept of an “energy revolution,” much less “oil energy independence”? The grey areas remain grey still as well.