Review of Lieutenant Colonel Fleming’s U.S. Army War College thesis on Peak Oil

EnergyBulletin | LTC Christopher M. Fleming has made a valuable contribution to peak oil research with his concise thesis, Considering Oil Production Variance as an Indicator of Peak Production (June 2010, 26 pgs).

In his Abstract, LTC Fleming summarized both the purpose and the conclusions of his research: “Peak Oil predictions range from the year 2000 to 2100 with the highest concentration of forecasts from 2005 to 2016. Confidence in international oil reserves data is lacking. As such, different forecasters make different assumptions about future undiscovered oil amounts and oil reserves, resulting in a wide range of peak oil estimates. Viewing this wide time disparity in forecasts as problematic, the research objective was to look for an economic cross-check indicator, metric, or alternative data-based means to corroborate or refute existing peak oil estimates."

The primary finding was unprecedented statistical variance in oil production rates as well as in oil prices beginning approximately 2005 to 2010. In the case of oil production rates, variance is at historically low levels. In the case of oil prices, variance is at historically high levels. The data indicate a new higher order of inelasticity between oil price and oil production.

These findings support peak oil forecasts in the range of 2005 to 2010 and together provide strong evidence that geological factors could presently be limiting world oil production.”

In his section, Hydrocarbon Man and the Petroleum Age, LTC Fleming clearly appreciates the fundamental role of petroleum: “All the marvels of the twentieth and twenty-first century were made possible by our connection to cheap, plentiful fossil fuels.”

He then provides a compelling analogy to express the energy density of petroleum in practical terms:
“There are 42 gallons in a barrel of oil which contains about 1667 kilowatt-hours of energy. A gallon of gasoline energy content is about 33 kilowatt-hours. In perspective, 33 kilowatt-hours is the equivalent of a healthy male pedaling a stationary bike for 330 hours – if he can maintain 100 watts per hour. If he pedals 40 hours per week, he will generate the same amount of energy as in one gallon of gasoline in about eight weeks. Pedaling 40 hours per week for just over eight years equates to 1667 kilowatt-hours of energy in a barrel of oil.

Now, if we attach a financial cost per hour to the pedaling, we begin to understand what is meant by “cheap” abundant fossil fuels. At the current $7.25 per hour minimum wage, the coast of pedaling 330 hours (energy in one gallon of gasoline) is $2,392.50; and pedaling 16,667 hours (energy in one barrel of oil) cost $120,835…. We have exploited this cheap abundant source of energy for over 150 years” (p. 3).

In his section, Oil Discoveries in Perspective, LTC Fleming points out how recent high-profile reports of oil discoveries should be interpreted as evidence of trouble ahead, rather than as reassurance that all is well: “BP’s discovery of three billion barrels of oil represents a 1.15 month supply to the overall global market” (p. 9). Fleming adds, “It should be noticed that the explorations, whatever they might be, tend to be setting records for depth, and are in harsh, forbidding places” (p. 10).

The chief contribution of this thesis is its statistical analysis of oil production variance and oil price variance (with a particular focus on the five years between March 2005 and February 2010):

“Oil production variance and oil price variance have never been so far apart…. [There is] an inelasticity at least ten times greater than at any time during the previous 30 years, and 100 times greater than during the previous decade. One might conclude that what we have considered ‘normal’ oil production and oil price cycles have ceased to exist” (p. 15-16).

LTC Fleming concludes, “The synchrony of unprecedented low production variance, unprecedented high price variance, and the number of peak oil forecasts in the range of 2005 to 2010 provide strong evidence that, regardless of price pull, geological factors could be presently limiting world oil production” (p. 17).

Finally, LTC Fleming notes the gravity of what lies ahead and the need for realistic planning: “It is important to make the distinction between a temporary oil supply disruption and oil’s terminal production decline. Managing the risk of one is much different than managing the risk of the other” (p. 12).

LTC Fleming and his War College advisers are commended for their concise, insightful analysis of one of this century’s most formidable challenges, the peaking of global oil production. The US war colleges have produced a number of first-rate analyses of peak oil during the past six years, and this recent thesis is a significant contribution to that body of research.

LTC Fleming’s study is available here.