Shifting Contours of the Energy Landscape

By Alice Wang

(Image credit: energyandresourcesdigest.com)

For those unfamiliar with Hubbert’s Peak, it is the notion that the amount of oil underground in any region in finite and that at some point production must peak and then gradually decline until oil is depleted. This theory gained popularity in the early 1970s after U.S. oil production did indeed peak, causing widespread panic among petroleum consumers and leading to skyrocketing gasoline prices and inflation.

 

Fearing a future with less oil and higher demand for energy due to rising global population, research began on renewable energy sources. However recently, trends have bucked. In 2009, oil production stopped declining and then increased. Oil production was not following the bell curve. From 2008 to 2015, U.S. oil production increased from 5 million barrels a day to 8 million barrels a day.

 

And recently in mid-November, the USGS confirmed the finding of the largest reserve of untapped oil in the U.S. The Midland Basin Wolfcamp shale in Texas’ Permian Basin province contains an estimated 20 billion barrels of oil. Changes in technology and industry practices such as horizontal drilling and multi-stage fracking have led oil and gas companies to find more recoverable resources. More than 3,000 horizontal wells have been drilled and completed in the Midland Basin Wolfcamp section.

 

Even with the appearance of new oil reserves and new technology, we’re still seeing demand peak before supply. With electric and hydrogen fuel cell vehicle technologies emerging from major automakers globally, oil is gradually becoming a minor player in the energy mix. We’re already seeing oil companies shift focus to natural gas. Even those who have been in the oil business for a long time recognize the benefits of new technologies, including renewables like solar and wind. To many, renewable energy is a complement to oil as the world’s demand for energy increases.

 

Many industry analysts are claiming that peak oil is approaching but unlike the past prediction of increasing demand and decreasing supply, the current outlook is forecasting the opposite – diminishing demand and escalating supply. Royal Dutch Shell, the world’s second largest energy company by market value, predicts that demand for oil could peak in just five years. Strategically, they are looking at energy efficiency technologies in transportation and renewable energy sources to help diversify their portfolio. This is a powerful move in their world, especially compared to other major oil corporations such as ExxonMobil and BP who do not share Shell’s position. Whether Shell’s viewpoint is accurate, one thing is apparent. The global energy landscape is shifting, for better or worse.

 

 

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