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Everything You Know About Peak Oil is Wrong

We’re not running out of resources. Quite the contrary. And in our abundance lies a paradox.
January 27, 2012 |
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At some point in the coming months, the confrontation between the West and Iran over the Islamic republic’s nuclear program may reach a breaking point. Even assuming the two sides manage to avoid full-fledged military conflict, the crisis could still cause significant disruption to the world economy. An embargo against Iranian oil exports, or a move by Iran’s leaders to close the Straits of Hormuz—or both—could send the price of oil soaring and jeopardize the re-election hopes of leaders from Paris to Washington. And as happens with every oil crisis, pundits will insist that the pain we’re feeling is nothing compared to what it will be like when the world finally runs out of black gold.

We’ve been warned before. Four decades ago this year, five scientists from the Massachusetts Institute of Technology published an influential set of predictions regarding the sustainability of human progress. Titled Limits to Growth, their report suggested the world was heading toward economic collapse as it exhausted the natural resources, such as oil and copper, required for economic production. The report forecast that the world would run out of new gold in 2001 and petroleum by 2022, at the latest.

Over the intervening years, the threat of “peak oil” has stayed with us—the date when global petroleum production was to reach its supposed maximum, afterward and evermore to decline as dwindling reserves were tapped out. And the exhaustion of the world’s oil reserves was just the start. A host of other critical natural resources, from phosphorus to uranium, have been declared peaking or already peaked.

Forty years later, however, rereading Limits to Growth invokes a growing sense of irony. Far from being depleted, worldwide reserves of minerals continue to climb. New technologies suggest the dawn of U.S. energy independence. The biggest concern isn’t that the planet is running out of resources—it’s having too many for the planet’s own good.

Start with oil. In 1971, the Limits to Growth team forecast that the world’s supply would run out 10 years from today. And yet according to renowned oil analyst Daniel Yergen, technology advances and new discoveries have allowed oil reserves worldwide to keep growing. For every barrel of oil produced in the world from 2007 to 2009, 1.6 barrels of new reserves were added. The World Energy Council reports that global proven recoverable reserves of natural gas liquids and crude oil amounted to 1.2 trillion barrels in 2010. That’s enough to last another 38 years at current usage. Add in shale oil, and that’s an additional 4.8 trillion barrels, or a century and a half’s worth of supply at present usage rates. Tar sands, including some huge Canadian deposits, add perhaps 6 trillion barrels more.

We’re awash in more than oil. One British study from the 1930s predicted an acute global shortage of copper “within a generation.” Not so much. The U.S. Geological Survey estimates global land-based copper resources to be 3 billion tons or more—the equivalent of 185,000 years at current production. That’s almost double the estimate of resources from 11 years ago, which means the number may have further to climb. And when we do finally run out of land-based supplies, there are still the undersea sources to use up.

The long-term picture for phosphate, vital for fertilizer production, is also reassuring, despite a price spike in 2008: Estimated global phosphate reserves climbed from 11 million tons in 1995 to 65 million tons in 2010—equal to 369 years of current production. The list goes on: Current resource estimates suggest it will take 347 years to run out of helium, 890 for beryllium, centuries for chromium, more than a millennium for lithium and strontium. And for those Americans worried about the price of makeup, resources of talc in the U.S. alone are enough to provide more than 1,000 years of supplies at current rates of domestic production.

If we keep on using more minerals, and we don’t do a better job of recycling them, and plans to mine the moon don’t work out, we’ll surely run out of supplies one day. But for pretty much every vital mineral resource, that day looks to be a long way off, which is great news for the world economy. Limits to Growth suggested the world would be on the verge of complete economic collapse around about now, with industrial output falling to its level of 1900 by the end of this century, as resources vital to sustaining a modern economy dried up. However dire today’s global financial crisis, we are nowhere near such a doomsday scenario.

What’s more, expanding resource reserves are great news for poor countries, home to many of the world’s recent mineral discoveries. A growing number of developing economies are likely to earn money from drilling and mining, following in the recent footsteps of countries such as Ghana (on the cusp of an oil boom) and Mongolia (ramping up its copper exports). Although development experts often invoke the “resource curse”—the idea that oil and mining industries predestine a country to dictatorship and poverty—recent analysis by the World Bank suggests the fear of the curse is overblown. “As one might intuitively expect,” the Bank reports, “greater natural resource wealth is associated with higher GDP per capita.”

Managing this planetary cornucopia will, however, present significant challenges. Were we to continue expanding our resource use at current rates, we may pollute our way to a denuded planet. Mining, drilling, and moving industrial commodities is a messy business—the Gulf of Mexico oil spill is just one example—to say nothing of the impact on climate change. The tar sands fields in Alberta, Canada, alone contain 1.7 trillion barrels of oil. That is equal to roughly a half century’s supply at current global oil use—and it’s an environmentalist’s nightmare to extract. Two tons of tar sands are needed to produce every barrel of oil. Getting the sludge-like stuff to the surface takes pumping steam into the tar beds, which in turn takes burning natural gas to heat the steam water. Tar sands oil, in other words, requires greenhouse gasses to produce and emits even more when it is consumed. That was a major reason why climate change activists lobbied so hard for the White House to shut down the Keystone XL pipeline from Alberta to the Gulf of Mexico.

And yet the world economy is becoming increasingly lightweight. Industries consume fewer mineral resources for each dollar of output. As much as two-thirds of global economic activity consists of outputs that don’t pollute or even weigh anything at all—things such as entertainment, education, finance, and health care. The services sectors’ share of global output climbed from 53 percent in 1970 to 71 percent in 2010, according to World Bank data. In part because of that, the amount of energy the planet needs to generate the same amount of wealth is declining.

That evolution may not be happening fast enough to stave off climate change, but it suggests the possibility that we can keep improving global living standards even while reining in our collective impact on the global environment. If we tax carbon emissions, provide financial incentives to preserve global forests, and better regulate mining and drilling to reduce spills and toxic waste, perhaps the global population can protect the planet without sacrificing the well-being of future generations.

There are still plenty of good reasons to conserve the world’s mineral resources—just as there are very good reasons to avoid another war in the Middle East. But fear that the resources will run out isn’t one of them.

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