And then it became the consensus

Last year, the consensus among mainstream journalists seemed against the idea of peak oil—that is, against the idea that the world has a finite supply of oil, that a graph of its production is likely to follow a bell curve, and that we may be within a decade of the peak of that curve. For example, in a 7 March 2007 article, “Oil Innovations Pump New Life into Old Wells,” New York Times reporter Jad Mouawad wrote that “There is still a minority view, held largely by a small band of retired petroleum geologists and some members of Congress, that oil production has peaked, but the theory has been fading.” To maintain his dismissal of peak oil, Mouawad had to walk a fine tightrope. The gist of his article, after all, was that as oil prices rise, it begins to make fiscal sense to use more expensive technologies to extract oil from the earth. In fact this is something that most people concerned about peak oil expect to happen as oil becomes scarcer. True, rising oil prices have reopened wells that were once closed as unprofitable, and they have brought dirty and unwieldy petroleum sources such as tar sands into development, but none of these phenomena suggest that oil is still as abundant as ever. To the contrary.

But it was not until recently that I began to notice mainstream journalists accepting that oil production may be peaking. In a more recent Times article, “Why Is Oil So High? Pick a View,” dated 21 June 2008, Mouawad and fellow reporter Diana B. Henriques don’t actually embrace the idea of peak oil, but they sidle up awfully close to it. They note with puzzlement, for example, that lately “the future price is higher than the spot price” of oil—reversing the offer of Popeye’s friend Wimpy, who will gladly pay you Tuesday for a cheeseburger today. “That development usually signals concerns over future supplies,” Mouawad and Henriques note, “encouraging refiners to stockpile oil, which has not happened yet.” They don’t speculate as to why not. They continue:

Many economists see a straightforward explanation for rising prices: Global oil supplies remain tight and there is a deep-seated fear that demand will outpace new production growth for years to come. In that climate, they say, the price will rise until it reduces global demand. But demand is still rising, even with oil at $134.62 a barrel.

The high price “doesn’t mean we have a shortage today, but it means there is a serious worry about a shortage three to five years from now,” said Adam E. Sieminski, the chief energy economist at Deutsche Bank.

That view — that market fundamentals are responsible for the price rally — is widely held among energy analysts.

In other words, prices may be rising because demand is exceeding supply, and because everyone in the market expects demand to continue to exceed supply, they expect they’ll have to pay more for the Tuesday cheeseburger.

The journalistic consensus may be shifting because a scientific one is coalescing. In “Final Warning,” New Scientist, 28 June 2008, Ian Sample writes, “Most geologists now accept we have reached, or will imminently reach, peak oil,” and backs up his assertion by citing Gideon Samid, head of the Innovation Appraisal Group at Case Western Reserve University in Ohio. Writes Sample:

Most industry experts, including geoscientists and economists, who were polled by Samid in 2007 said that peak production will occur by 2010. This contrasted with a similar survey conducted two years earlier, in which respondents were split, with many of the economists opting for a later date. “Now, a real consensus is emerging,” says Samid.

And in a drive-by Nixon-goes-to-China sort of way, this week The Economist jumped on the bandwagon. In “The Power and the Glory,” dated 21 June 2008, part of a special report on the future of energy, Geoffrey Carr wrote that “Oil is no longer cheap; indeed, it has never been more expensive. Moreover, there is growing concern that the supply of oil may soon peak as consumption continues to grow, known supplies run out and new reserves become harder to find.” Carr continues by unraveling the apparent contradiction that was flummoxing the Times last spring:

“Peak oil,” if oil means the traditional sort that comes cheaply out of holes in the ground, probably will arrive soon. There is oil aplenty of other sorts (tar sands, liquefied coal and so on), so the stuff is unlikely to run out for a long time yet. But it will get more expensive to produce, putting a floor on the price that is way above today’s.