Again, stolen from another NG, the following is a portion of an article
published in the "Economist".

It seems to refute some of the Peak Oil doom and gloom arguments.

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There was an article in the latest Economist about this. Here's
a little of it:

"The notion of a sharp global peak in production does not
withstand scrutiny, either. CERA's Peter Jackson points out that
the price signals that would surely foreshadow any "peak" would
encourage efficiency, promote new oil discoveries and speed
investments in alternatives to oil. That, he reckons, means the
metaphor of a peak is misleading: "The right picture is of an
undulating plateau."

What of the notion that oil scarcity will lead to economic
disaster? Jerry Taylor and Peter Van Doren of the Cato Institute,
an American think-tank, insist the key is to avoid the price
controls and monetary-policy blunders of the sort that turned the
1970s oil shocks into economic disasters. Kenneth Rogoff, a
Harvard professor and the former chief economist of the IMF,
thinks concerns about peak oil are greatly overblown: "The oil
market is highly developed, with worldwide trading and long-dated
futures going out five to seven years. As oil production slows,
prices will rise up and down the futures curve, stimulating new
technology and conservation. We might be running low on $20 oil,
but for $60 we have adequate oil supplies for decades to come."

The other worry of pessimists is that alternatives to oil simply
cannot be brought online fast enough to compensate for oil's
imminent decline. If the peak were a cliff or if it arrived soon,
this would certainly be true, since alternative fuels have only a
tiny global market share today (though they are quite big in
markets, such as ethanol-mad Brazil, that have favourable
policies). But if the peak were to come after 2020 or 2030, as
the International Energy Agency and other mainstream forecasters
predict, then the rising tide of alternative fuels will help
transform it into a plateau and ease the transition to life after
oil.

The best reason to think so comes from the radical transformation
now taking place among big oil firms. The global oil industry,
argues Chevron, is changing from "an exploration business to a
manufacturing business". To see what that means, consider the
surprising outcome of another great motorcar race. In March, at
the Sebring test track in Florida, a sleek Audi prototype R-10
became the first diesel-powered car to win an endurance race,
pipping a field of petrol-powered rivals to the post. What makes
this tale extraordinary is that the diesel used by the Audi was
not made in the normal way, exclusively from petroleum. Instead,
Shell blended conventional diesel with a super-clean and
super-powerful new form of diesel made from natural gas (with the
clunky name of gas-to-liquids, or GTL).

Several big GTL projects are under way in Qatar, where the North
gas field is perhaps twice the size of even Ghawar when measured
in terms of the energy it contains. Nigeria and others are also
pursuing GTL. Since the world has far more natural gas left than
oil-much of it outside the Middle East-making fuel in this way
would greatly increase the world's remaining supplies of oil.

So, too, would blending petrol or diesel with ethanol and
biodiesel made from agricultural crops, or with fuel made from
Canada's "tar sands" or America's shale oil. Using technology
invented in Nazi Germany and perfected by South Africa's Sasol
when those countries were under oil embargoes, companies are now
also investing furiously to convert not only natural gas but also
coal into a liquid fuel. Daniel Yergin of CERA says "the very
definition of oil is changing, since non-conventional oil becomes
conventional over time."

Alternative fuels will not become common overnight, as one
veteran oilman acknowledges: "Given the capital-intensity of
manufacturing alternatives, it's now a race between hydrocarbon
depletion and making fuel." But the recent rise in oil prices has
given investors confidence. As Peter Robertson, vice-chairman of
Chevron, puts it, "Price is our friend here, because it has
encouraged investment in new hydrocarbons and also the
alternatives." Unless the world sees another OPEC-engineered
price collapse as it did in 1985 and 1998, GTL, tar sands,
ethanol and other alternatives will become more economic by the
day (see chart 2).

This is not to suggest that the big firms are retreating from
their core business. They are pushing ahead with these
investments mainly because they cannot get access to new oil in
the Middle East: "We need all the molecules we can get our hands
on," says one oilman. It cannot have escaped the attention of
oilmen that blending alternative fuels into petrol and diesel
will conveniently reinforce oil's grip on transport. But their
work contains the risk that one of the upstart fuels could yet
provide a radical breakthrough that sidelines oil altogether.

If you doubt the power of technology or the potential of
unconventional fuels, visit the Kern River oil field near
Bakersfield, California. This super-giant field is part of a
cluster that has been pumping out oil for more than 100 years. It
has already produced 2 billion barrels of oil, but has perhaps as
much again left. The trouble is that it contains extremely heavy
oil, which is very difficult and costly to extract. After other
companies despaired of the field, Chevron brought Kern back from
the brink. Applying a sophisticated steam-injection process, the
firm has increased its output beyond the anticipated peak. Using
a great deal of automation (each engineer looks after 1,000 small
wells drilled into the reservoir), the firm has transformed a
process of "flying blind" into one where wells "practically
monitor themselves and call when they need help".

The good news is that this is not unique. China also has deposits
of heavy oil that would benefit from such an advanced approach.
America, Canada and Venezuela have deposits of heavy hydrocarbons
that surpass even the Saudi oil reserves in size. The Saudis have
invited Chevron to apply its steam-injection techniques to
recover heavy oil in the neutral zone that the country shares
with Kuwait. Mr Naimi, the oil minister, recently estimated that
this new technology would lift the share of the reserve that
could be recovered as useful oil from a pitiful 6% to above 40%.

All this explains why, in the words of Exxon Mobil, the oil
production peak is unlikely "for decades to come". Governments
may decide to shift away from petroleum because of its nasty
geopolitics or its contribution to global warming. But it is
wrong to imagine the world's addiction to oil will end soon, as a
result of genuine scarcity. As Western oil companies seek to cope
with being locked out of the Middle East, the new era of
manufactured fuel will further delay the onset of peak
production. The irony would be if manufactured fuel also did
something far more dramatic-if it served as a bridge to whatever
comes beyond the nexus of petrol and the internal combustion
engine that for a century has held the world in its grip."


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