“In the public mind, peak oil means ‘running out.’”

Verbal shots from legendary political consultant James Carville land with the shock of a hand grenade. If the always-blunt and ever-controversial Carville were to grasp our oil dilemma and begin a peak oil education campaign, his war-room slogan would probably paraphrase his winning axiom from the 1992 Clinton campaign, using “It’s the Flows, Stupid!”

Peak oil is about peak flow. It’s that simple, despite all those lame statements (some from people who ought to know better) that “we aren’t running out.” That’s right, we aren’t, but who said we were!

“Running out” is a framing technique used with some success to belittle the legitimate peak oil concern. The “running out” epithet has been uttered often by Daniel Yergin, president of Cambridge Energy Research Associates. If you haven’t heard Yergin on CNBC saying, “this is the fourth or fifth time we were supposed to have run out of oil,” it could be because he’s up to “sixth time” by now.

Peak oil describes the maximum flow rate of oil from a well, an off-shore platform, a field, a basin, or a geographic area—state, nation, continent, and eventually the world.  Peak doesn’t mean the end or the bottom or the dregs.  In most areas of human life, peak is a high point, a cause for celebration.

When the USA hit its peak in October 1970, the record went unnoticed. Today, more than 50 nations have peaked, including Mexico and, it now appears, Russia. During the next few years the world will hit peak oil; it could be a sharp summit preluding a steep fall or perhaps a gentle bump on a long plateau.

Petroleum engineers know very well what peak oil means. Indeed, in larger projects they spend billions designing enormously complex systems to meet expected peak production. Consider Thunderhorse, BP’s offshore platform in the deepwater Gulf of Mexico. If memory serves, when it begins operation later this year the platform will process 250,000 barrels of crude oil per day.

The American Petroleum Institute published a 56-page paper entitled “Are We Running Out of Oil?” in December 1995. The executive summary concludes with this red herring: “There is a very real danger that attempts by government to address the non-problem of resource exhaustion will distract from or even aggravate the real challenge of removing remaining institutional barriers to supply growth.” Peak oil does not mean “resource exhaustion,” though M. King Hubbert’s curve does show production declining to zero many decades into the future.

Why does the obfuscation of peak oil deniers matter? The coming end of the “supply growth” world will require an enormous paradigm shift: there will be a little less oil to divvy up among more people. We will need to conserve with a vengeance, and substitute ingenuity, intelligence, and efficiency where we can. Treating this immiment event as a non-problem could end up being enormously painful.

The math determining present and future flow rates is simple:

• 85 percent of the world’s oil is produced by the 21 largest producers.
• Production declines dominate the story in six of those large producers: the USA, Indonesia, the U.K., Norway, Mexico and Venezuela.
• Flat or volatile production rules in five more: Russia, Iraq, Iran, Nigeria and Algeria.
• Production is increasing in the rest. But China is nearing peak. Saudi Arabia, Kuwait, Qatar and the United Arab Emirates are not planning much more expansion. Canada and Libya can continue growing, within limits. Of this crowd, only Brazil, Kazakhstan and Angola are likely to grow production sufficiently to make a difference past 2010.

Some factors act like dragging anchors on these flow rates:

• Geologic limits. We drilled the easy pickings first. Most new barrels—from offshore Brazil to the Bakken play in North Dakota and Montana—are smaller or harder to drill than the older giant fields they’re trying to replace.
• Non-OPEC production is flat, “mature” and underperforming, with few prospects for change.
• The world’s oil system lacks the skilled labor, equipment, and rigs to help us increase production off the recent three-year plateau. Delays from major projects like Thunderhorse are the norm.
• OPEC’s reserves are increasingly off-limits, and prevailing petronationalism won’t quickly reverse. To quote an industry player, “yesterday’s Big Oil is today’s small oil.”
• While investments to expand production are optional, depletion is mandatory and relentless. In a horse race with technology, eventually depletion will win the day.
• Rising domestic demand by major oil producers Russia, Iran, Venezuela and Mexico drives down their exports. Expect peak exports to hit before peak oil.
• Unconventional oil is more expensive and slow, with a small energy balance and a large environmental footprint. Unconventional oil will likely be a herd of turtles rather than the cavalry on which many are pinning their hopes.

Because they don’t understand peak oil, many reporters keep getting the story wrong. Because they don’t understand peak oil, some in the U.S. Congress and Senate now threaten to sue OPEC. Because they don’t understand peak oil, business journals keep whining that producer nations don’t practice rational economics.

And indeed they don’t. Lacking refinery capacity, Iran exports crude, imports finished gasoline, subsidizes it at 40 cents/gallon, and then rations its sale to curb consumption. Seems crazy, but Iran isn’t the only nation where cheap energy is the opiate of the people.

Summer sales tax holiday on U.S. gasoline, anyone? After all, we aren’t “running out.”

Steve Andrews and Randy Udall are two of the co-founders of ASPO-USA.

Kobb C (2013) The only true metric of energy abundance: The rate of flow. Resource Insights.

Energy abundance depends entirely on the RATE of energy flow.

Why is the rate of flow the key metric? Because in order to function the global economy depends entirely on continuous, high-quality energy inputs. We cannot shut down the world’s electric generating plants for six months or even three months without crashing world society into a state of irretrievable chaos and decline. We cannot shut down the world’s shipping fleet for even a few weeks without doing irreparable harm. Modern global society has become like a shark. It either keeps barreling forward or it dies.

If the rate of flow for oil declined by half in the next 20 years, we wouldn’t be running out of oil at all. We’d still be pumping about the same amount as we were in 1967, a year of exceptional economic vitality. But, we’d feel the crunch because there are twice as many people on the planet now as there were then. And, the per capita consumption of oil has risen considerably since that year.

New unconventional sources of hydrocarbons are more difficult and costly to extract than conventional ones, since they have very steep declines in their rate of production–so steep that in the tight oil fields of Texas and North Dakota drillers must replace about 40 percent of their production PER YEAR just to maintain current output. The decline rates for shale gas are no more encouraging: 79 to 95 percent after three years according to a comprehensive survey of 65,000 oil and gas wells in 31 shale plays. Shale natural gas and tight oil drillers face a task similar to climbing up a down escalator. Each must replace enormous fractions of their current production frequently just to keep production flat. A path to persistently rising global production of oil and gas far into the future cannot be built on production from such fields.

Some 60 percent of current production flows come from aging giant fields representing just 1 percent of the world’s fields, and as a group they are in decline.

But there’s more. The affordability of hydrocarbons will also matter greatly. Gail Tverberg has outlined in detail on her blog Our Finite World how the high price of hydrocarbons tends to suppress economic activity which then leads to a downturn that then causes oil and natural gas prices to fall due to falling demand. That fall in prices makes unconventional sources of oil and natural gas uncompetitive leading to a slowdown in their production even as production from conventional sources continues to decline. As prices rise with economic recovery, we begin the same cycle again. This suggests that there is a limit to how much of the modern economy’s financial and physical resources can be devoted to extracting energy without causing an economic contraction–something that the shark-like nature of the modern financial economy cannot withstand without the kind of severe repercussions we saw in 2008.

Despite our best efforts, we have only just been able to keep oil supplies from declining in the last seven years. Despite (possibly exaggerated) claims that we have more oil reserves than ever, we need to remember that the rate of flow, that is, our daily consumption, has grown by a factor of eight from 1950 to the present. And, half of all the oil ever consumed has been consumed since 1985. The available reserves may be large, but they are being consumed at such a colossal rate that supposedly record reserves have been unable to lift that rate appreciably above a plateau that started in 2005.