The Energy World Is Flat: Opportunities from the End of Peak Oil by Daniel Lacalle

Approximately for the past three years I have been following what Daniel Lacalle has been publishing in the digital newspaper elconfidencial.com, and I must admit the information he has been sharing and his opinions have been, from my humble standpoint, ones of the most accurate that I have ever read regarding the energy industry.

Therefore, when I was presented with this book The Energy World Is Flat: Opportunities from the End of the Peak Oil, I presumed I was going to learn a good bunch of new ideas about the current global energy scenario; and I was not mistaken.

According to Lacalle, amongst others there are two main forces which are shaping the energy industry: geopolitics and the energy resources and reserves.

Regarding geopolitics the 1973 oil crisis and the fear of future likely scarcity impelled the search and development of new deposits, which meant as a result an important increase of the production capacity in all the countries outside the OPEC. The oil production is currently more abundant and diversified than ever. Furthermore the energy independence and safety became paramount targets for the consuming countries. In 1975 USA approved a law which demanded to double the fuel average efficiency in the new automobiles; currently this country, according to IEA, is independent in gas and the biggest oil producer worldwide -11 million barrels daily on July 2014-, owing to the fracking revolution.

In relation to the energy resources and reserves, for the past decades the consuming countries have fed the perception of resource scarcity, however the situation is quite the opposite: the oil reserves exceed in more than 50 years the current demand. Since the oil industry was launched in 19^th century, around one trillion oil barrels have been produced. The Earth hosts another trillion and half of barrels of proven and likely reserves, which can be recovered technically and financially currently. And apart from that there are another 5 trillion oil barrels, which are located but the extraction of which is not commercially worthwhile with the current prices and technology.

And not only there is enough oil, with respect to gas it is deemed Europe has 156 Bcm –billion cubic meters- shale gas reserves, what would be enough to cover the demand of the next 90 years. Nonetheless the shale gas development in Europe has been very politicized –the same as it happened with the nuclear power.

For Lacalle the oil does not create a crisis but the credit and money supply excess, which raise raw material prices much higher than fundamentals. It’s essential to recall since 2001 the main central banks have provided $10 trillion as money supply. Between 2009 and 2013 FED provided half of the money supply of its history.

As a conclusion of this review Lacalle’s final stroke: the end of the oil era will not take place because we run out of it. The end will be the same as its beginning: replacement by technology. The whale oil was not employed any more because there were no more whales: simply the oil was cheaper and more efficient. The change will be gradual and cyclic. The last oil barrel won’t cost million, but just zero.