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Peak Oil Wars and Bell Curves - What it means...

Peak Oil Wars and Bell Curves tell a future of higher U.S. energy costs?

Perspective:  Peak Oil Wars and Bell Curves tell a future of higher U.S. energy costs
Brian Blazina, Energy Resource Americas (ENRAM)
June 10, 2015 (last updated)
Chicago - Peak Oil is a war of numbers related to supply and demand of crude oil.  Some experts believe in the Peak Oil Theory, where sometime soon, world energy demand will permanently surpass supply, and prices will spike to non-affordable levels causing great economic trauma.  In reality, demand and supply often do not match – that’s what makes a market.  Price spikes will occur, but the energy industry would respond to avoid a "super spike of doom" resulting in non-payable prices and no supply, because that's what the energy industry does well - the most efficient industry at fixing supply/demand problems.  Alternative energy would thrive as well.
Those last million or so barrels of incremental world demand/supply on any given day determine the market.  Market events, like a temporary shortage of a million barrels per day, can have big consequences for all energy-related costs worldwide in some circumstances.  Small incremental supply/demand changes can drive prices up or down significantly.  World demand and supply is projected for 2016 at about 95 million barrels per day (source: EIA), and +/- a million per day depending on the source - up from an average of roughly 85 MMBPD just a few years ago.  However, each year, approximately 4% of production from existing oil fields disappears, and needs replacement.
Now picture the grading bell curve in your mind - a hill on top of a line.  Now let's say US crude oil production is somewhere on the curve (the hill) each year.  The USA's position on the bell curve was peaking in the early 1970s, and then moving to the downward side of the curve even after Alaskan oil began flowing.  The massive shale oil discoveries of recent years may peak the U.S. oil supply again for a few years, but overall production may then resume the decline.  Exploration and production technology breakthroughs may hold this decline for some further years.  However, we poked more drilling holes, used the latest technology, and brought more creative efficiencies than in any other country, but still remained on the right side of that bell curve - on a steady decline in oil production. 

...inconvenient truth...the US and the world are
hydrocarbon economies for decades to follow.

Canary in the coal mine - Any limitation in coal as an energy resource raises natural gas and crude oil prices since coal represents about 40 percent of US energy production (currently 39% and declining).  If that high share of energy supply is under attack politically and/or economically, then other hydrocarbons and alternatives should fill in the gap - thus speeding up oil and gas exploration and production, as well as the decline of US oil and gas reserves.  Alternative energy can currently fill only a tiny share of the shortfall, even though the government will and should continue its economic support as a bridge to stabilize higher energy demand.  The position on the U.S. bell curve resumes down the right hand side, even with higher prices for oil, gas, and energy alternatives providing plenty of incentives to both dirty and clean energy industries limited by political and/or economic constraints.
Each country in the rest of the world will have its own bell curve.  The world bell curve is the sum of all the country bell curves.  Global application of US and other best technology will speed up the process of increased supply, followed by declines.  Therefore, the logical conclusion is that all markets eventually end up on the right side of the bell curve, unless there is infinite supply of hydrocarbons and other energy.  So prices and market volatility will trend upward even though occasional and dramatic price declines occur - like just recently when oil prices dropped by over 50%. 
When the global village finds itself on the right hand side of the world oil production bell curve, then energy alternatives may finally see strong market-driven economics for massive investment.  However, this is not next year, but decades away.  The inconvenient truth is that the US and the world are hydrocarbon economies for decades to follow.  And going alternative energy alone, unilaterally, just like in war, can hurt any economy financially, especially a manufacturing economy like the US.  Preserving treasure and resources is more important than executing a war per Sun Tzu's famous work The Art of War - required reading at West Point Military Academy today. 
Therefore, any and all alternative energy should be welcomed and needed to smooth price spikes in energy costs until the supposed world peak oil is breached, and new energy technologies emerge.  World carbon trading, based on market economics rather than government rate setting, is one way to address the alternative energy problem.  Earned carbon credits can be used to import coal to some regions outside the U.S. 
Heavy-handed political actions may speed up the inevitable decline in oil and gas reserves and the spiking of energy prices.  The US could then find itself with the highest energy costs in the world instead of the lowest.  Therefore, caution is highly recommended to manage resources in a way that maintains the positioning of oil production near the top of the aformentioned bell curves.  Leaders should take the long-term view with U.S. economic security at the forefront of all thinking in this area. 

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