A couple of months ago the Denver Post ran an editorial, “The death knell for ‘peak oil.’” The Post editorial stated that at a 2009 conference in Denver, peak oil theorists predicted that spot shortages would “blow up prices, shock economies and destabilize governments”; but now collapsing prices and a world “awash” in oil had refuted these ideas, and “peak oil worries have been laid to rest.” (Jan. 21, 2016).

Oh, really? Let’s take a look.

In the past decade, we have seen wildly oscillating prices — from a high of $147 a barrel to a low of under $30. We have seen the Great Recession, an anemic recovery with an abundance of low-paying jobs, and the Federal Reserve nervously considering whether raising interest rates just a tiny little bit will destroy the economy. We have seen unrest multiplying in Syria, Libya, Ukraine, and Yemen, with all of this spreading to other countries outside the area, as refugees swamp international borders. Europe is being sucked into the maelstrom of disorder, and even the United States now faces a huge destabilizing influence in the form of Donald Trump.

The price of Brent crude is one commonly cited price exemplifying the general price of oil.

In short, we have seen prices blown up, economies shocked, and governments destabilized. This is a vindication, not a refutation, of peak oil concerns. All of these problems are doubly troubling considering that we haven’t even hit peak oil yet.

Yes, peak oil has been averted, depending on your definition of “oil” — just barely. In the decade since 2005, we have seen a modest production increase of about 1% annually. Most importantly, though, even this modest increase depends on the increase in unconventional oil.

Source: Art Berman, http://www.artberman.com/the-crude-oil-export-ban-what-me-worry-about-peak-oil/. This only counts “heavy oil” and “tight oil” (fracking) as “unconventional.”

Unconventional oil consists of things like natural gas liquids, tar sands oil, tight oil (from fracking), deepwater oil, heavy oil, coal-to-liquids, biofuels, and polar oil. Increasing unconventional oil is basically the path advocated by the famous “Hirsch Report” to the Department of Energy in 2005, which warned of disastrous consequences unless we prepared for peak oil at least 20 years in advance. The solution suggested by Robert Hirsch is very much like the strategy that the U. S. has adopted, a dramatic increase in unconventional oil to compensate for the shortfall in conventional oil supplies. (Thanks to Arthur Berman for the chart above.)

Some might say, “picky, picky, picky. Conventional, unconventional, it’s all the same, we can still drive our cars.” This isn’t true. If we go the route of unconventional oil to meet the threat of peak oil, we are entering a completely new world of environmental destruction. We are adopting a cure which is worse than the disease.

Peak oil theorists have often warned of the dire consequences of peak oil, and that’s true, but in some ways this puts the cart before the horse. Peak oil will likely be a result of economic and environmental deterioration rather than its cause. Because oil undergirds so much, we will likely cannibalize other parts of the economy (e. g. increase government debt through “quantitative easing”) and pillage the environment (e. g. fracking, tar sands) to keep oil flowing as long as that is politically and physically possible. Oil flow itself will be the last thing to go.

The BP oil spill

Unconventional oil is environmentally damaging, much worse than conventional oil. The Alberta tar sands are hugely environmentally destructive, deepwater oil gave us the massive BP oil spill in 2011, and fracking continues to cause earthquakes, poisoned water, and methane leaks. And the climate implications are ominous indeed, as unconventional oil is substantially worse for the climate than conventional oil. Gasoline from the Alberta tar sands and “heavy oil” won’t turn your Prius into a Hummer, but it does substantially increase carbon emissions. Unconventional oil also has a much lower EROEI (energy return on energy invested) than oil from conventional wells, so it is clear that it’s going to be damaging to the climate.

World liquids production and oil price, with labels for beginning and end of QE (thanks to OurFiniteWorld.com)

Unconventional oil has another problem, related to its lower EROEI; it’s a lot more expensive. The only reason we’ve had this huge growth in unconventional oil is because from 2010 to 2014 prices have been relatively high, around $80 to $100 a barrel. This, in turn, was made possible by “quantitative easing,” a complicated and expensive financial scheme to stimulate the economy adopted in the wake of the Great Recession. But in 2014, the Federal Reserve stopped “quantitative easing” and guess what? Oil prices promptly crashed.

This may just be a coincidence, and low oil prices aren’t a bad thing for consumers, but a lot of these American oil producers are being left high and dry, and unless prices come back pretty soon, we may soon see an increasing stream of bankruptcies in the oil business. When the dust settles, it may turn out that unconventional oil is not only too expensive environmentally, but for our pocketbooks as well.

According to Art Berman’s chart above, “conventional” oil looks to have peaked for good in January 2011 at 86.2 mbpd (million barrels per day). It is now about 84 mbpd. But you can slice and dice the statistics many different ways depending on what oil you count as “conventional.” Euan Mearns counts much of the other expensive oil as “unconventional” and puts the current peak of conventional oil as even less, at just over 74 mbpd. We will likely not see much or any increase in conventional oil at all. Instead, if we see oil production increasing at all, we will see a growth in unconventional oil, with its serious climate change and other environmental implications.

Yes, we have plenty of oil at the moment, but that’s because of unconventional oil. If we are to continue to maintain and even increase our oil supplies, it will be at the cost of the economy, the environment, and possibly our planetary future. There may be something worse than hitting peak oil, and that’s not hitting peak oil. We are “awash” in oil, but we are also “awash” in its consequences.