The annual meeting of the Association for the Study of Peak Oil, which wrapped up last month in Vienna, was an exercise in cognitive dissonance.  On the one hand, this is a group of people – comprising academics, disaffected oil-industry officials, environmentalists, energy scientists, and a few crackpot theorists – who have spent the last decade or so warning of the imminent decline in worldwide oil production and the dangers to the world economy, and to modern human society, that the decline will bring.

On the other hand, at the moment at least, worldwide oil and gas production hardly seems to be declining.  Improvements in technology and the expansion of exploration and production to remote, hitherto untapped areas of the world have led to a surge in oil supplies.  I predicted this two years on Fortune.com, and recent developments are bearing me out.

“Crude oil inventories have been increasing steadily for most of this year and are still well above the levels they were at during the height of the recession,” writes energy trading analyst Dominick A. Chirichella, on International Business Times, “as well as being at the highest level since 1990.”

The surplus of commercial stocks of crude oil and refined products widened last week, on a year-over-year basis, to 35.6 million barrels.  Compared to the five-year average for this point in the year, total oil stocks are 45.1 million barrels ahead.  Oil and gas production might be peaking, but thanks to new sources of production and a stumbling world economy that limits demand, we awash in the stuff at the moment.

On this blog my colleagues have written at length about the effects of abundant fossil fuels (specifically natural gas) on wind power, on the power grid, and on the wider renewable energy industry.  In some ways, the glut of natural gas – which is cheaper and cleaner to burn than either coal or gasoline – could help provide a bridge to an energy system based less on fossil fuels and more on renewable energy.  To say the least, that is an optimistic view.

Michael Klare, a professor of Peace and World Security Studies with a joint appointment at Amherst College, the University of Massachusetts, and three other New England colleges, has made a career of sounding the alarm about increasingly scarce resources and the conflicts that scarcity brings on, in books like Resource Wars, Rising Powers, Shrinking Planet, and, most recently, The Race for What’s Left: The Global Scramble for the World’s Last Resources. To his credit, Klare acknowledges that current events seems to contradict his thesis.

A Vanishing Bridge

“Rather than an imminent shortage of oil and other key fuels, major energy companies now anticipate a period of relative abundance as demand continues to fall and stockpiles increase around the world,” he wrote in 2008.  But that’s not necessarily good news:  “While the [global financial] crisis has eliminated the threat of an immediate energy shortfall, it does not follow that the global struggle will be any less acute in the years to come. In fact, there is good reason to conclude the reverse: that the crisis will only intensify the struggle.”

Klare points to three ominous developments: “the depletion of existing oil reserves continues to accelerate rapidly;” oil producing companies are “determined to take steps to extend their control over valuable production and delivery assets,” fueling geopolitical conflict of the sort we’re seeing right now in the South China Sea; and, most importantly, “the major energy firms appear to be scaling back their investments in costly new development projects, including alternative energies.”

The current fossil-fuel surplus will turn out to be a bridge to a sustainable energy economy only if policymakers and major energy companies use the breathing room it provides to craft long-term strategies that go beyond simply drilling more holes and tapping ever-more-costly sources of oil, tar sands, and shale gas.  Unfortunately there’s little evidence that’s happening.  The developed economies today are like a diabetic eyeing a double-frosted chocolate cake: the self-discipline required to choose not to consume the available fossil fuel resources may well be beyond us.  Writing on Grist, David Roberts points out the fundamental contradiction at the heart of current energy politics and business.  While the world’s governments have pledged to hold the coming rise in temperature to 2 degrees Celsius, to do so would require leaving a large portion of remaining oil and gas resources in the ground.  Yet, the world’s top energy producers (including the top 100 listed coal companies and the top 100 listed oil and gas companies) are valued at $7.42 trillion.  “They are valued at this level because of proven fossil fuel reserves to which they have access,” remarks Roberts.  “In other words, their valuation carries the implicit assumption that they will burn the fossil fuels available to them.”

Dan Lashof, of the Natural Resources Defense Council, makes the point even more explicitly: “We were always going to run out of the earth’s capacity to absorb carbon dioxide without suffering catastrophic climate disruption long before we ran out of fossil fuels.”

In other words, the Peak Oilers likely have it exactly wrong.  We don’t have too little oil.  We have way too much.