Instead of hitting peak oil as many have predicted, worldwide oil production seems to be going up.
A version of this article originally appeared on our US site, Fool.com.
Last week I got caught up in a show from a few years ago called "Mega Disasters: Oil Apocalypse" on The History Channel, spelling out the doom our economy was facing as oil production declined over the next 100 years. Domestic production was already declining, and we had no plan B. Stock up on canned soup and ammo while you still can!
If you haven't noticed, the oil apocalypse has been delayed -- again -- and the doomsday predictors are undoubtedly eating crow while they concoct another mega disaster. "Peak oil," the theory that oil production will soon hit a peak and begin declining, sending the world into an economic disaster, failed to live up to its hype again.
It's amazing how fast perceptions of our energy future can change. One day prevailing wisdom tells us that energy costs are going to rise uncontrollably as oil production declines and new energy sources fail to live up to their promise. The next, our problems are solved, and our reliance on foreign oil appears to be evaporating before our eyes.
The oil scare that never goes away
We've been hearing about peak oil for years, and even some of the brightest minds in energy think the theory has some validity. But, like any other apocalypse, it never quite seems to unfold as the predictions assert. There are just too many factors that peak oil prognosticators can't account for in their bold predictions, so they always get them wrong.
Innovation trumps conventional wisdom
One of the problems with peak oil predictions is that they have so little imagination. They don't consider the impact of new drilling techniques that open new oil fields to massive amounts of production. A decade ago, shale drilling wasn't a well-known technique outside of the industry, much less a major contributor to our oil production. Today, Kodiak Oil & Gas (NYSE: KOG.US), Continental Resources, and Whiting Petroleum have turned the desolate North Dakota prairie into an energy bonanza by unlocking shale oil there.
Offshore drilling has also grown by leaps and bounds. Drillers like SeaDrill (NYSE: SDRL.US), Transocean (NYSE: RIG.US), and Noble are building ultra-deepwater rigs as fast as they can to unlock new fields off the coasts of Brazil, Angola, and other parts of the world that were once out of our reach.
Then there are Canadian oil sands, which hold the second-largest oil reserves in the world, behind Saudi Arabia. These developments alone unlocked enough oil to delay peak oil for a few more years at least.
Evidence that these innovations have turned peak oil on its head is undeniable. According to Bentek Energy, North American oil production will top a 40-year-old peak by 2016. The U.S. Energy Information Administration predicts that by 2020, U.S. oil production alone will grow another 20% to 6.7 million barrels per day. Even OPEC's surplus oil production capacity is expected to increase from 2.55 million barrels per day in 2011 to 3.92 million barrels per day by the end of 2013.
It's hard to see how oil production could fall in the short term. And longer-term peak oil theorists have even more problems on their hands.
Alternatives make a peak irrelevant
For the last century there were very few alternatives to the black gold that flowed freely from wells around the world. Today the dynamic is slowly changing, squashing the fear that peak oil once garnered. If diesel fuel gets too expensive, now truckers have an alternative in liquefied or compressed natural gas. Westport Innovations (NASDAQ: WPRT.US) provides the technology to make the engines possible, and Clean Energy Fuels (NASDAQ: CLNE.US) is quickly building a national natural gas highway to make fueling possible.
On the consumer side, manufacturers are releasing not only natural gas vehicles but electric vehicles, as well. Electric vehicles may not be for everyone, but as fellow Fool Alex Planes points out, the adoption rate has been even faster than that of hybrids a decade ago. These alternatives will play a roll in curbing demand for oil.
To top it off, new fuel efficiency standards that call for average fuel economy of 54.5 mpg are going to make vehicles even less dependent on oil and gas over the next two decades.
Putting peak oil to rest
In 10 years oil will no doubt play a major role in our energy picture, but the grasp it had a decade ago is slowly fading. Alternatives, efficiency, and new drilling techniques make the once frightful concept of peak oil nearly irrelevant. This isn't to suggest that prices will suddenly fall, only that a pending economic collapse because of a decline in oil production can be shelved for the time being.
Looking out beyond the next decade, it's hard to see how energy sources like solar, natural gas, wind, and even biofuels couldn't slowly replace our current addiction to oil. Sorry, peak oil theorists, this Fool is putting your predictions of doom to rest.
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