Curious as I am about any counter argument to Peak Oil (though I spend much of my time raising awareness in corporations about energy decline, I would be very happy to discover it is not true), I recently looked up an article that was claimed to counter Peak Oil.

Having read it, I don’t think the article (written by Eugene Gholz – assistant professor of public affairs at the LBJ School of Public Affairs at the University of Texas at Austin and Daryl G. Press – associate professor of government at Dartmouth University) adds much insight into oil supply. (Not to mention that the Cato institute is financially supported by Exxon-Mobil, the largest Peak Oil denier.) The main point of their essay is “The United States does not need to be militarily active or confrontational to allow the oil market to function, to allow oil to get to consumers, or to ensure access in coming decades.” I would agree with that.

They do admit that “Those arguments do not mean that the United States can ignore energy concerns. Global demand for energy is soaring and shows no sign of relenting. Furthermore, oil supplies, though currently abundant, will eventually begin to run low, and the world will eventually need to develop other energy sources.” Sounds like Peak Oil to me.

Basically, the authors “simplify” the arguments around oil production to make their point about politics: “The amount of oil that can actually be “produced” at any given time,that is, extracted from the ground, transported to refineries, refined, and then transported in various forms to end users, depends on how much money oil companies have invested in a given field.”

So where is Exxon-Mobil investing? Here is Rex Tillerson (Chairman and CEO) in March, 2006:
“Return on capital employed, in our view, continues to be the best overall measure of financial performance, given the long-term and capital-intensive nature of our industry…. We have continued our superior performance with a five-year average return on capital employed of 21-and-a-half percent. …

Before we leave ROCE you might be wondering, why is ExxonMobil allowing the extra cash on our balance sheet to effectively lower near term ROCE? … We’re going to continue to take a disciplined approach to how we manage cash and ensure we maintain the financial strength and the flexibility at all stages of the cycle to pursue any attractive opportunity, particularly those of significant size and scale. …

In 2005, we generated record cash flow of over $48 billion from operating activities. Our current cash use rate is … $45 billion per year when you do the sums on our current Capex of about $18 billion a year, our dividend pay out of $7 billion a year, and the current level of share buy back at $5 billion per quarter.”

So they’ve invested $18 billion a year in capital expenditures, and $20 billion a year in share repurchases. It seems that for Exxon-Mobil, there are few reserves that used to be difficult or costly to tap that have now become profitable.