Energy Policy 31 (2003) 389–390
Comment on: R.W. Bentley, ‘‘Global oil & gas depletion’’, Energy Policy 30 (2002) 189–205 M.A. Adelman* Massachusets Institute of Technology, Center for Energy and Environmental Research, 1 Amherst Street (E40-471), Cambridge, MA 02139-4307, USA
Bentley states that world production of conventional hydrocarbons ‘‘will soon decline’’, not because higher prices will choke off demand, but because of ‘‘physical resource limits’’. His many graphs are based on the estimates of Campbell and Laherrere for Petroconsultants, now called IHS. The PC/IHS estimates are proprietary, not published; they are contained ‘‘in the consultants’ report for purchase’’. Bentley states that ‘‘they were also made available by the authors in an abridged (and later, updated) form’’ (Bentley, p. 190). In fact, these estimates were never published, and still remain private. Perhaps Bentley has been misled by volume: of his 36 references, 18 are to Campbell and/or Laherrere. These writers have often repeated their conclusions, allegedly based on the PC/HIS reserve estimates; but the estimates have never been revealed. Now, the physical sciences are based on the reproducible experiment, and the social sciences, on the reproducible table. Nothing of the kind is presented by Bentley. Nobody can take his basic data, which are the PC/IHS data, test them, apply them differently, and see whether the same results emerge. His conclusions therefore are untestable, and unsupported. Actually, matters are worse. In a 1986 report, not in the Bentley bibliography, PC predicted that non-Soviet non-OPEC oil would decline ‘‘certainly before the end of the decade’’. Soviet output would hold steady [‘‘Study sees inevitable non-opec decline’’ Oil and Gas Journal, October 20, 1986, p. 22]. In 4 years the decade ended, and 11 more years have come and gone. If non-Soviet non-OPEC oil had declined after 1985 at the modest rate of 3 percent per year, it would now be down by 37 percent; at 2 percent per year, down by 26 percent. In fact, it has increased. The PC forecast was based, in their words, on ‘‘analysis of reserves’’. It was grotesquely wrong: either in the reserve estimates, or in the analysis, or both. Until an explanation is forthcoming, and the data and *Tel.: +1-617-2533551; fax: +1-617-2538013. 0301-4215/03/$ - see front matter r 2002 Published by Elsevier Science Ltd. PII: S 0 3 0 1 - 4 2 1 5 ( 0 2 ) 0 0 0 7 7 - 0
procedures are set forth, it is not enough to say that Bentley’s conclusions are without foundation; his source, the PC-IHS, does not deserve even the most tentative and provisional acceptance. Comments addressed to Bentley’s own treatment. (1) He does not explain the concept of physical resource limits. They include only a portion of all hydrocarbons existing in nature—the amounts which will be worth producing. That in turn depends on future prices and costs, which depend on future technology and knowledge of the Earth. One wonders how he predicts future knowledge. He makes much of a distinction between ‘‘conventional’’ and non-conventional sources. But 50 years ago, offshore crude was a non-conventional source. The wind bloweth where it listeth; and the industry will go and produce where it is most proﬁtable. (2) If discoveries had been declining since the mid1960s (Bentley, p. 192), then for 40 years oil in the ground would have become increasingly valuable, relative to the wellhead price. No such tendency can be observed, either before or after the 1960s. (Adelman et al., 1991; Adelman and Watkins, 1997). (3) Since worldwide production elsewhere is ‘‘moreor-less’’ at a peak, additional output must come from the Middle East—which incidentally has declined since 1977. Bit ‘‘it will be hard for those countries to dedicate sufﬁcient investment in the face of conﬂicting demands on the national budgets’’ (Bentley, p. 191). (a) First, the size of the problem: in 1975–1987, when data were available, petroleum capital spending in the Middle East was 1–2 percent of oil revenues. (Adelman, 1995) (b) More important: if current revenues do not sufﬁce for investment one can borrow, with the oil ﬂow as collateral. (c) Most important is the natural decline: without continuing investment, revenues will drop forthwith, and keep dropping toward zero. National income will drop correspondingly. Anyone in doubt should look at Iraq, a relatively developed Middle East country. When its oil production was curtailed, national income dropped by an estimated 90 percent.
Forum / Energy Policy 31 (2003) 389–390
Bentley simply assumes that each Middle East country will starve its oil industry until the nation collapses for lack of oil revenues. A wildly implausible assertion, not explained or supported by any evidence. Incidentally, in January 2002 OPEC produced 25.0 million barrels of crude oil daily, with capacity 31.7 mbd. Like all monopolies, their problem is overproduction.
References Adelman, M.A., Harindar De Silva, Michael F. Koehn, 1991. User cost in oil production. Resources and Energy, 13, 217–240. Adelman, M.A., Watkins, G.C., 1997. The value of United States oil and gas reserves. Advances in the Economics of Energy and Resources 10, 130–184. Adelman, M.A., 1995. The Genie Out of the Bottle: World Oil Since 1970. MIT Press, Cambridge.