The Oil Drum

Peak Oil is a large and scary concept to get one's mind around. If there are arguments around the water cooler about finite resources, large depletion rates, Peak everything, etc., there are probably cognitive biases underlying these polarized opinions. In the first two parts of this series, we looked at some of the factual reasons why people disagree on the timing and importance of Peak Oil: gross versus net oil production, better technology vs depletion, productive capacity vs flow rates, differing definitions of "Peak", etc. This post will address some social and psychological reasons why the urgency of our energy situation may not be being addressed on an individual level and only at a snails pace on the governmental level. Among the phenomena we will explore are a) why we have beliefs and how they are changed, b) our propensity to believe in authority figures, c) our penchant for optimism, d) cognitive load theory, e) relative fitness, f) the recency effect, and several others. The fact is, even if the world's energy data was transparent and freely available to everyone, it would be an open question whether people would agree on any near term action to mitigate future oil scarcity. This post is a first stab at examining our cognitive belief biases. It's long, but I believe it will be well worth your time to read. (Note - This is an updated version of a post that first ran in May.)

"Lovvy, there's plenty of oil, and if there's not we can just buy some more!"

In the first two parts of this series, we looked at some of the factual reasons why people disagree on the timing and importance of Peak Oil: gross versus net oil production, better technology vs depletion, productive capacity vs flow rates, differing definitions of "Peak", etc. This post will address some social and psychological reasons why the urgency of our energy situation may not be being addressed on an individual level and only at a snails pace on the governmental level. Among the phenomena we will explore are a) why we have beliefs and how they are changed, b) our propensity to believe in authority figures, c) our penchant for optimism, d) cognitive load theory, d) relative fitness, e) the recency effect, and several others. The fact is, even if the world's energy data was transparent and freely available to everyone, it would be an open question whether people would agree on any near term action to mitigate future oil scarcity. This post is a first stab at examining our cognitive belief biases.

"There's 1 tril tril trillion bbbarrels left"	"Quit overreacting pork-chop - there's plenty of oil for decades..."

There continues to be considerable disagreement on both the timing and the magnitude of Peak Oil, though last week's GAO report(pdf) should be helpful in shrinking that gap. Part I of this 3 part series summarized some of the recent discussion of why some are very concerned about Peak Oil and others are relatively unconcerned. We also discussed why there needs to be a clear definition of Peak Oil so that policymakers discuss 'apples and apples'. This post will continue to examine areas of disagreement between the two camps, and will particularly focus on what I perceive to be the largest disconnect in energy, financial and government circles - that of the difference between gross and net production of finite resources.

Decline in Net Energy on US Oil Production
A Hypothetical Sensitivity Analysis on EIA Projections (mbpd)(click to enlarge)

If you're like me, you might have spent a moment or two in recent months pondering how billionaire oilman T. Boone Pickens, oil banker Matthew Simmons, and many others are suggesting that the world is reaching Peak Oil now, and at the same time, Cambridge Energy Research Associates (CERA) headed by Pulitzer Prize writer Daniel Yergin, and others such as Exxon Mobil, are not predicting a Peak in global oil production until circa 2040 followed by a slow gradual decline. How can such smart and successful people disagree by decades on a topic so vital?

Is it possible they use different data sources? Do they mean different things when they say "Peak Oil"? Do they get different secret handshakes from Saudi princes? Do they have different agendas? Are they using different boundaries of analysis? Is one of them kidding? This 3 part post will address how people can differ so much on something so important as a peak and subsequent decline in world oil availability, addressing both factual and psychological reasons. Does the world have plenty of oil? Maybe, but as I will discuss below the fold, this is not among the questions we should be asking.