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Peak oil predictions coming true

Records tumble as the oil majors release their annual results. The most profit made by a European company: Shell’s $27 billion. The most profit made by any company ever: ExxonMobil’s $40 billion. Amid the noise about capital allocation and windfall taxes, there is a danger of missing the most important results of all. The oil and gas production of Shell, BP, ExxonMobil, and Chevron is going down, not up.

This is not what is supposed to be happening. Our oil-addicted economies are supposed to be growing. The global oil giants are supposed to be expanding their production, not shrinking it. They are not supposed to be leaving the technically less well-equipped national oil companies such as Saudi Aramco and Pemex to carry the burden of expanding production to match global demand.

For people like me who worry about peak oil, the writing on the wall is ever clearer. We live in a world geared to the assumption that demand for oil can be met by supply. But it cannot for much longer. The fallout will dominate our lives within a few years.

Economists tend not to see the problem. As the oil price goes up, they assume more cash will be available for exploration, the oil majors will duly explore, and they will find more oil. But if so, why have the big five oil companies cut exploration spending in real terms?

If the “peakists” are correct, and the oil establishment suddenly awakens to its dysfunctional culture of overoptimism, here is what is likely to happen. The oil and gas producers are going to start keeping what remains for themselves, in an effort to feed their own economies. Many countries would then face the threat of not having enough oil and gas to run the production processes needed to manufacture the low-carbon technologies that could replace oil and gas. Or, indeed, to feed themselves.

(Jeremy Leggett, the chairman of Solarcentury, is author of Half Gone: Oil, Gas, Hot Air and the Global Energy Crisis.)

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