June 14, 2007: The Day “Peak Oil” Became a Household Word

Matt Drudge has just taken Peak Oil mainstream.

Up until today, you could randomly ask 10 people on the street what “Peak Oil” is and you’d get a blank stare from at least nine of them. I’d wager that as of yesterday, Drudge himself would have been among that vast majority.

Up until today, the idea that there’s only a finite amount of oil in the world that can be recovered, and that once you reach the halfway point there begins an irreversible decline, simply hasn’t been in most people’s awareness.

Of course, geologists and oil industry insiders have been familiar with it. Whiskey & Gunpowder readers are certainly familiar with it. And so is a subset of Lexus liberals who like Peak Oil because it dovetails nicely with their Malthusian and anti-capitalist worldview.

But all of a sudden, awareness of Peak Oil is spreading exponentially. It started today, and will only grow from here.

I’ve been familiar with Peak Oil for at least a couple of years, and I had no idea this was coming. Not even yesterday, when I saw a story in the Financial Times summarizing BP’s latest Statistical Review of World Energy.

BP’s Land of Milk and Honey

It had predictably sunny findings — that the world still has proven oil reserves good for another 40 years of consumption at current rates.

It has been ever thus. Back in the 1980s, so-called experts estimated that proven oil reserves were good for 40 years out. Amazing how the amount of proven reserves keeps rising in tandem with the passage of time so the 40-year horizon remains unchanged.

BP reached this conclusion despite its own findings that global energy demand grew much faster in the last five years of this decade than in the last five years of the 1990s — and despite its own findings that proven reserves actually declined slightly last year.

The FT story also had the obligatory dismissal of Peak Oil from BP’s chief economist Peter Davies: “We don’t believe there is an absolute resource constraint. When peak oil comes, it is just as likely to come from consumption peaking, perhaps because of climate change policies or for some other reason, as from production peaking.”

I read the story yesterday, made the mental note to myself “nothing new,” and moved on to other affairs.

But today, Britain’s Independent newspaper did a follow-up story that led thus:

Scientists have criticized a major review of the world’s remaining oil reserves, warning that the end of oil is coming sooner than governments and oil companies are prepared to admit.

The article’s publication was not a particularly big deal by itself. But then Drudge linked to it. Fairly high up on his home page, too — “PAPER: A WORLD WITHOUT OIL COMING SOONER THAN PREDICTED.”

The Peak Oil Meme Suddenly Spreads

In the space of just a few hours, millions of Internet users have become familiar with Peak Oil through the Independent article.

They’ve been introduced to Colin Campbell, the former chief geologist and vice president at several of the Western oil majors and one of the leading lights of Peak Oil theory.

They’ve learned how his think tank forecasts that “global production of oil is set to peak in the next four years before entering a steepening decline which will have massive consequences for the world economy and the way we live our lives.” (Actually, as Byron King has pointed out in this space, another authoritative estimate says we passed peak last year.)

They’ve even learned about the path-breaking findings of the late M. King Hubbert in the 1950s, his spot-on prediction about the peaking of U.S. oil production in 1970, and how his research could be extrapolated to world oil production.

I can’t emphasize strongly enough how this signals a shift in public awareness — not just because Drudge has a wide readership, but because he helps set the agenda for mainstream media coverage.

Mainstream Media Will Catch On — Quickly

Of course, people who work in mainstream media rarely admit this. In their eyes, Drudge was a pioneer of “new media,” trafficking in gossip and innuendo in a way that “respectable” people in “traditional” media wouldn’t be caught dead doing.

But the fact remains they check in with Drudge at least once a day because he does a very good job of keeping his pulse on “watercooler stories” — the things ordinary people talk to each other about, the things that sell newspapers and bring eyeballs to TV sets.

So as of today, thousands of mainstream journalists who’d never before heard of Peak Oil are now familiar with the concept. And believe me, they’re intrigued. They want to know more. They want to see how much there is to the theory. And they’ll be doing their own stories.

Look for Peak Oil stories a few days from now in the New York Times and the Washington Post. Awareness will spread. Then look for Peak Oil stories a few days after that on CNN and the broadcast networks, and in your local newspaper. Awareness will spread further. And if gas prices spike again in a few weeks, your local TV news team might well seek out an economist from a nearby university to try to shed light on whether Peak Oil somehow factors into the latest increase in pump prices.

And so it goes: The legions of people who don’t read Drudge and still rely on traditional news media — local TV stations are still the most widely-consumed source of news, even if viewership is declining dramatically — will also become familiar with Peak Oil.

The Genie is Out of the Bottle

Of course, like any new and unfamiliar concept, Peak Oil will get a somewhat skeptical treatment in much of the mainstream media coverage. Skeptical, but respectful — Peak Oil will get a fair hearing, except on CNBC and the Fox Saturday Business Block where the unwritten coverage mandate is “all sunshine, all the time.”

But no matter the tone of the coverage, the genie is out of the bottle. The Peak Oil meme has begun to spread with lightning speed. And while you might think this is a positive development, as wisdom is imparted to the masses, you might want to pause and contemplate what will happen when the topic is tackled in that unique mainstream media forum known as the Sunday morning talk show — and politicians are asked what Washington should do about Peak Oil.

Dave Gonigam

June 14, 2007

The Daily Reckoning