A Free-Market Energy Blog

Peak Not: Michael Lynch Defeats the Mainstream

By Robert Bradley Jr. -- April 28, 2016

“Since at least 1989, Mr. Lynch has made a career of poo-pooing any concept that oil supplies might be finite and that we might find production capability dropping as demand continues to rise…. [Oil supply] not an issue?  Do you expect to be dead and gone in the next 4 to 8 years?”

– Charles Armentrout, “Lynch Poo-Poos Peak Oil,” LastTechAge, February 2, 2011.

It is entirely appropriate to recognize an intellectual victory, particularly when a confident, even arrogant, mainstream was overcome. In the case of Peak Oil, the victor is Michael C. Lynch, president of Strategic Energy and Economic Research, a Massachusetts-based consultancy.

Lynch has held a number of research positions at M.I.T. and was chief energy economist at DRI-WEFA.  He currently blogs at forbes.com, and his publications have appeared in six languages, focusing on petroleum supply, energy forecasting, and energy policy.

Praeger will publish his book The Peak Oil Scare and the Coming Oil Flood this summer (preorder here).  In addition to describing oil resources and economics, the book employs detailed analysis to demonstrate the mistakes made by many analysts, including peak oil advocates, and uses this to draw conclusions about the future of energy and appropriate policy.

I was reminded of Lynch’s victory when finding the article below (reproduced in its entirety). Written in 2011 by one Charles J. Armentrout, it ends with a veiled warning that Peak Oil will change things as we know them (‘life in this tender new century may become very interesting and very soon’).

Intellectual error often results from underestimating human ingenuity in market settings. The fixity-depletion notion is an engineering one and not a business-economic one. Michael Lynch, an economist, has done his discipline proud.

Lynch Poo-Poos Peak Oil (Posted on by )

Michael Lynch, a long term consultant to the oil industry and Hubbert Peak debunker for over two decades published another Op Ed piece in the New York Times on Friday, February 25, 2011.

Since at least 1989, Mr. Lynch has made a career of poo-pooing any concept that oil supplies might be finite and that we might find production capability dropping as demand continues to rise.  (This, in a nutshell,  is what the pat phrase “peak oil” means.)  References: In a 1998 articles he refers to his work in 1989. A search engine check yields many hits.

In the NYT article, above, his background idea is that discussing the end of easily obtainable oil is like screaming that the sky is falling.  His hidden subtext is: Such things are done by people who are foolish, or have a hidden agenda. His explicit points are:  There is a miscommunications in the size of Saudi reserves, or whether the estimates were for proven reserves or estimated reserves.  Or whether the Wikileak revelations some time ago was really new.

Everyone:  the 2011, or 2010 (or 2007) Wikileak documents were not all that new.  Information about Saudi capacity did not just pop up recently.  This information was available in 2007 in over-the-counter mags like Atlantic Monthly!  See my previous post for details. 

In 2004, Matthew Simmons, founder of the Simmons & Company, International, issued an analysis (report by Institute for Analysis on Global Security on his analysis) that Saudi Arabia could not continue increasing oil production. Mr. Simmons’ concern about energy security dates back to the oil embargo crisis that entangled the US and Saudi Arabia in 1973.  Lynch and Simmons are old sparring opponents.

Hidden in Big Numbers. Let’s use Lynch’s numbers and put the 270 billion barrels of proven reserves, 600 billion in potential reserves,  into a usage perspective.  There is an unexpected trap right here before we start, because “billion” means U.S. billion (European thousand million, not the European billion).

“Billion” is a dumb unit because it is easy to misunderstand.  Use the ugly  “giga” prefix for 109 instead … as in 4 GB memory.  This is equally ugly in English, French, Spanish German, Russian, Chinese, etc.  No one feels slighted because all ears are offended.

Giga-barrels (Gbbl) sounds big, 600 Gbbl sounds impressive.  Here is how the issue is hidden – How can something so big ever be a problem?  Let’s calibrate our thinking:  humans use is about 85.5 M bbl each day, about 31.2 Gbbl each year.

Constant use, CU: The constant use lifetime for the reservoir is the time interval where the petroleum is removed from the reservoir at a steady rate.  The proven Saudi reserve, 270 Gbbl, would last YP = 270/31.2 = 8.6 CU years. The total estimated reserve of 600 Gbbl would last only 10.6 years longer (YE = 19.2 CU yr).  And this is if oil is used at the same bbl/day value each and every day until we hear that straw make its empty-bottle sucking sound.

Constant rate, CR: The constant-rate time happens when the demand forces production to grow at a constant rate of increase.  We tend to think in terms of the CU time frame, but data show that resources are withdrawn from the reservoir through  the CR mode for as long as technically possible.  This is another way to say that the growth is exponential.

The CR time formula was discussed in my previous peak oil post.  Anyone with a calculator can use it:  T = ln(1 + r*Y*f)/r.  Here, r is the average annual growth rate, Y is the CU time for the reservoir, f is the fraction of the reservoir used (f = 1 means  completely used up), and r is the rate (0.04 would mean 4%/year).

Good to the very last drop. If the Saudi’s were the only petroleum producer for the world, and the rate of increase in consumption is 4% annually, then for its proven reserve,  Y = 8.6, r = 0.04, and the entire reservoir (f = 1) would last TP1 = ln(1+0.04*8.6*1)/0.04  …about 7.4 CR years.  The estimated recoverable reserve would be drained in TE1 = ln(1+0.04*19.2*1)/0.04  …about 14¼ CR years.

Half full or half empty? A constant growth rate of supply cannot be sustained right up to the last drop in the reservoir.  Usually, the end of CR growth is considered as the time to the half empty point (f = 0.5).  By the standard Hubbert model, after that, growth flattens out;  after painful and expensive efforts to resist, it begins to fall.  This is the Peak Time, T1/2.  For Saudi proven reserves (as only world supplier)   TP1/2 = ln(1+0.04*8.6*0.5)/0.04  … about 4 CR years.  For Saudi estimated reserves (as sole world supplier) TE1/2 = ln(1+0.04*19.2*0.5)/0.04  … about 8 CR years.

Not an issue?  Do you expect to be dead and gone in the next 4 to 8 years?

Not really a fair question because our exponential growth model values assume that Saudi Arabia is the only petroleum provider in the world.  Not fair also, because we did not start our calculations from an untapped field, but from the Saudi resource base of about 2006. The reserve is far from virgin and the true question is whether or not it has reached the half empty point.

This is not a discussion of 40% errors.  Such are trivial concerns, representing mere months of world demand, a year or two at most.   Exponential growth of the demand curve means the Saudi fields must be capable of relentless expansion of their product.  Are they?

The Saudi leaks and interviews indicate that they might not be capable of exponential growth in production.  If not, then they have already reached their peak value.  From here on out, petroleum extraction will be more technically sophisticated, more difficult, more expensive. The question “Has Saudi oil peaked?” is more meaningfully phrased “Can Saudi fields supply oil with a relentless growth in production of 3-5 % each year?”

Key Question: Can Saudi production demonstrate exponential growth over the next several years to supply US, China Europe, India and all other locations?

1. Yes.  Then they are not yet at Peak production, they will continue to play a major role in world politics as it has unfolded for more than a century.

2. No.  Then they have hit the peak production.  Gbbl/yr will be constant in the near term, provided huge monies are spent,  but ultimately must slowly decrease.

Answer 1. the world will continue on as it has, with US slipping while industrial leaders continue to ship manufacturing and research capabilities abroad;  former “third world” countries enter into their own strength.

Answer 2. the world is on the cusp of a massive transition from the one paradigm for living into another based on some unpredictable political and social order.  “Paradigm shift” is one of the ways of describing the chaotic jump in complexity theory from one strong attractor to a different one. 

I have been taught that the Chinese have a curse:  May you live in interesting times.  Such a curse may not actually exits, but depending on which answer is correct, life in this tender new century may become very interesting and very soon.


  1. rbradley  

    The Peak Oilers (they are unbowed) are not still not happy with Michael Lynch: See the comments here: http://peakoil.com/production/michael-lynch-defeats-the-mainstream


  2. Fernando L  

    The post is hard to digest for somebody like me. I worked 40 years in the oil and gas industry, retired recently, and therefore I come at the “peak oil” issue from the inside.

    Approximately 25 years ago I was asked to look at industry exploration results in the previous 10 years, the pace of technology development, and political changes such as the fall of the USSR. Our conclusion as a group was that exploration for oil was a very low return business, there was a need to high grade the effort, and reduce staff and investment.

    My personal conclusion was that we were clearly entering a phase where exploration wouldn’t replace production. The corollary was that we needed to focus on capturing hydrocarbon molecules in the ground, which could be held under contract for the future, and wait as technology and higher oil prices allowed us to develop them. This however was my minority opinion.

    As the years have gone by, I have seen nothing to change my mind: we are depleting the easy to get oil, and are having to exploit low quality rocks and fluids, often located in incredibly difficult places. I’m not a “peak oiler” as such. I’ve simply reached the conclusion that we, as an industry, will demand ever increasing prices to satisfy the market. And these prices are gradually reaching levels which enable competitors to emerge (such as hybrid plug in vehicles and Brazilian biofuels).

    I can’t debate here whether the global warming issue is really as bad as they say. I think it’s sufficient to acknowledge there’s enough people convinced it’s a problem to create a competitive environment for subsidized replacements. This means there is an emerging replacement for oil, which relies in part on subsidies, but which can erode some of oil’s market share.

    When I add all these factors, I have to conclude that peak oil is indeed approaching, but I’m afraid it will come in a chaotic, oscillating oil price environment, with an overall rising trend.

    One conclusion seems to be that peak oil will happen when the oil price dips slightly, which discourages industry activity, and that prices will rise after peak oil, but the industry will no longer have the means to satisfy demand. Thus the rising prices will have to trigger substitutes, or else the world economy will be in trouble. I don’t think the peak we saw a few months ago is THE peak. But I’m afraid the peak will come within 10-20 years, and we won’t be prepared for it.


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