To understand the debate on whether peak oil is now or 20 years down the road, we found it useful to review the incentives of those who hold the key information: the oil producers. Below are 3 key facts to help you get a sense for the forces at play. They all suggest that Peak Oil is now - or very soon.
1. Oil companies' incentive: overstate their reserves Oil companies have a strong incentive to overestimate their reserves, since their stock values depends on it. Publicizing the depletion or overstatements of their oil fields leads to write-down in assets and may shake the companies, such as Shell in 2004.
2. OPEC countries' incentive: overstate their reserves OPEC drilling quotas have long depended on the amount of reserves of a member country. The higher the reserves, the higher the quotas and potential US Dollars the country could bring in. That only fact led to an overstatement of reserves by OPEC countries.
What's more, OPEC countries are known to have cheated on their quotas and exceeded their production, further depleting their stated reserves.
3. Drilling technology: assumes large reservoirs
The
graph on the right explains how technology contributes to overestimating
reserves. From the 2 drills, one can assume that the reservoir is very
large, when there may only be a few small oil patches.Obviously, this contributes to the complex system of categorization of reserves into proved, probable and possible ones, and makes difficult the interpretation of reserve figures. Even the most certain reserves, called "proved" reserves and supposed to deliver 90% of the estimates have historically only yielded 65% of the expected amounts.
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