Predictions of peak oil have been around for years. The most telling prediction has been that the “easy” oil is mostly gone. Most of what’s left is the hard to extract oil, and the Alberta tar sands project is a prime example.
Shell Says It Has Reached Peak Oil Production
Shell says oil is on its way out.
In a Thursday statement, the fossil fuel giant said its “oil production peaked in 2019,” and that we can now expect it to decline gradually by 1 or 2% per year. Shell also said its total carbon emissions peaked in 2018 at 1.7 gigatonnes.
The statement doesn’t come as a total surprise. The oil market has been in decline for years, and since the covid-19 pandemic began last year, fuel prices went from bad to catastrophically bad. Last Fall, the International Energy Agency predicted a “treacherous” path ahead for the industry. And in September, fellow energy giant BP said the world may have already reached peak oil. Shell’s own CFO hinted at the announcement in May when she told investors the company has experienced “major demand destruction that we don’t even know will come back,” and soon after, Shell wrote down $22 billion on its balance sheets. But still, this is the first time it’s made an outright announcement of this kind.
Beau of the Fifth Column just produced a video on it, talking about how oil companies will have to shift away into other forms of energy production, and how one company admitting reality could force others to do the same.
It sounds nice to say, “Oil production will go down! That’s good for the environment!” but there are other considerations. Three very common uses for oil are producing plastics, computers, and creating artificial fertilizers. From the Canadian Association of Petroleum Producers (CAPP):
Average Output from a Barrel of Oil
Did you know the average barrel of oil does much more than just put gasoline in your car? In fact, oil is used to create a wide range of products, such as propane, asphalt, petrochemical feedstocks and more.
- Transportation Fuel
- Electronics
- Textiles
- Sporting Goods
- Health & Beauty Products
- Medical Supplies
- Household Products
Fewer plastics is a good thing, and will be better for the environment and animals. But a lot of clothing is synthetic (e.g. nylon, rayon, viscose, polyester, lycra, etc.) and the end of synthetics will mean new clothes have to come from natural materials (e.g. cotton, linen, wool, etc.). Giving up “fashion” is a good thing, but we also have to make clothes more durable so they won’t need replacing. Clothing and footwear companies will have to change their business, both in sales and manufacturing. And that will put a lot of pressure on producers of natural materials.
We will reach a point where computers, cellphones and control systems can no longer be replaced every few years, never mind annually. Forced obsolescence will have to end, as will forcing consumers to buy new products (e.g. OS needs a better computer, then new computer needs a new OS; phone networks going 2G to 3G to 4G to 5G; etc.). We won’t be able to build new anymore, and will have to rely on machines that already exist. Software companies need to stop forcing users to buy new hardware. They may have to go back to supporting and writing programs for old hardware.
The one I worry about most is artificial fertilizers. The 20th century increase in population from 1.5 billion during World War I to 7.8 billion today is directly linked to increased food production, which includes the invention of the Haber-Bosch process in 1918. Without oil to maintain fertilizer production and industrial farming, what will happen to food production?
That isn’t really what Shell is saying. Shell is saying that it has reached the point financially that diversifying is more profitable then investing more in oil. Between fracking and tar sands there is a lot of oil the could be extracted but the price is too high. There is also a lot of environmental damage but I’m sure that is a secondary concern in Shell’s calculation.
Over the short term (in decades) the price of plastics might even go down. The spread of electric cars is the primary reason why companies are shifting away from oil as their primary business. As demand for gasoline goes down there will be more available for other uses.
@JM:
Can you quote what it is you mean when you write
??
I can find anything that Rhiannon is saying that might be wrong. Peak oil never meant the oil was gone, just that the price of oil extraction goes up faster than the price at which you can sell the resulting distillates/other products, and thus you reach a point (and Shell is arguing that they/we have reached this point) where oil production is now expected to decrease even in the face of increasing global energy use.
I have always heard the term peak oil used in the sense of hitting maximum practical production because all of the oil that is known about and can be reached given current technology is being used. There is a certain amount of price/supply adjustment there but the idea is that the limit is more of a limit of technology and what is actually in the ground. That sort of hard limit isn’t what is happening, rather the shift to other energy sources is reducing demand enough that there is available oil that isn’t worth using.
The effect of this is that this peak won’t be as harsh as one driven by hard supply limits. Instead prices will drop or stabilize for a period as the remaining accessible oil is used at a lower rate by other industries. Then prices will start creeping up again when that accessible oil is used up.