BALLYDEHOB, Ireland (Reuters) - The economic shock of global recession has led a prime exponent of the theory conventional oil output has peaked to shift his view of the consequences, but he still thinks the world has to go green.
Retired petroleum geologist Colin Campbell, who worked for major oil companies as well as smaller firms, has long been associated with the belief the world’s oil supplies are dwindling.
He does not waver from that and dismisses the argument of the so-called optimists that technology will manage to keep eking out more and more oil to keep pace with rising demand.
What has changed is his opinion of the price impact and implications for fuel consumption after the spike of July 2008 to nearly $150 a barrel was followed by world economic recession, a deep drop in fuel use and a crash in oil futures to just above $30 in December 2008.
“I have changed my point of view about future prices,” said Campbell, who used to think the peak in conventional oil production, which he believes happened in 2005, would lead to a relentless price surge.
Instead, the record rally led to a peak in demand in the developed world.
“Peak oil drives prices up in the first place. It has its own mechanism. We’re sort of at peak demand right now,” Campbell told Reuters from his home in the village of Ballydehob, West Cork. “I think presently the price limit is about $100.”
For those who have painted alarming pictures of civil unrest as the world economy is forced to move away from conventional fuel and pay high prices for it in the interim, an inbuilt price mechanism to limit demand and move the world to other forms of energy should be a good thing.
“We have no alternative but to go green,” Campbell said.
But he does not think reduced demand is enough to offset the gravity of peaking supply. He still sees a possibility of social anger as millions are forced to change their lifestyles in a too-sudden structural shift from economic growth driven by cheap conventional fuel.
Campbell’s theory, which he developed from studying first Colombia’s oil reserves and then analyzing global data on the world’s oilfields, applies to conventional oil.
The peak for difficult-to-extract, non-conventional sources, including oil sands and polar oil — for instance, in Arctic regions of Russia — is three years later, in 2008. The problem is non-conventional oil only “ameliorates the decline” and relies on high oil prices to be viable.
“They are no substitutes for what we have built the economy on so far,” said Campbell, whose oil depletion theory has been published in books and through the Association for the Study of Peak Oil, which gave its first workshop in 2002.
Since then, the peak oil theory has nudged its way further into the mainstream and was widely publicized around the 2008 price spike, but it is hotly contested by many in the oil industry, including OPEC, which argues the world will rely on fossil fuels for decades to come.
Campbell’s analysis of data questioned reporting of reserves by the Organization of the Petroleum Exporting Countries, whose members’ upward revisions, he said, were not credible.
“It’s absolutely implausible new discoveries would absolutely match that produced,” he said.
He takes the view the reporting of higher reserves was designed to ensure higher output targets for individual OPEC members — targets, he said, were increasingly irrelevant.
As OPEC heads toward its 50th anniversary in September this year, for Campbell the producer club has lost its “raison d’etre.”
Prices, he argued, were likely to stay sufficiently high as supplies dwindled naturally and the danger for OPEC was the market would embark on another rally that could further focus attention on the pursuit of alternatives to oil.
“OPEC’s purpose is to limit production to hold prices up. It no longer has any need to do so,” he said.
The counter argument is OPEC’s output discipline helped to drive the market higher from its low-point in December 2008 to prices around $85 a barrel now, although the group’s compliance with agreed limits has dwindled to only around 50 percent.
Editing by Sue Thomas