Posted on 08/05/2005 10:35:34 PM PDT by dila813
WE are not running out of oil - not yet. "Shortage" is certainly in the air - and in the price.
Right now, the oil market is tight, even tighter than it was on the eve of the 1973 oil crisis. In this high-risk market, "surprises" ranging from political instability to hurricanes could send oil prices spiking higher.
Moreover, the specter of an energy shortage is not limited to oil. Natural gas supplies are not keeping pace with growing demand.
Even supplies of coal, which generates about half of the country's electricity, are constrained at a time when our electric power system has been tested by an extraordinary heat wave.
But it is oil that gets most of the attention. Prices around $60 a barrel, driven by high demand growth, are fueling the fear of imminent shortage - that the world is going to begin running out of oil in five or 10 years.
This shortage, it is argued, will be amplified by the substantial and growing demand from two giants: China and India.
Yet this fear is not borne out by the fundamentals of supply. Our new, field-by-field analysis of production capacity, led by my colleagues Peter Jackson and Robert Esser, is quite at odds with the current view and leads to a strikingly different conclusion:
There will be a large, unprecedented buildup of oil supply in the next few years. Between 2004 and 2010, capacity to produce oil (not actual production) could grow by 16 million barrels a day - from 85 million barrels per day to 101 million barrels a day - a 20 percent increase.
Such growth over the next few years would relieve the current pressure on supply and demand.
Where will this growth come from? It is pretty evenly divided between non-OPEC and OPEC.
The largest non-OPEC growth is projected for Canada, Kazakhstan, Brazil, Azerbaijan, Angola and Russia. In the OPEC countries, significant growth is expected to occur in Saudi Arabia, Nigeria, Algeria and Libya, among others.
Our estimate for growth in Iraq is quite modest - only 1 million barrels a day - reflecting the high degree of uncertainty there.
In the forecast, the United States remains almost level, with development in the deep-water areas of the Gulf of Mexico compensating for declines elsewhere.
While questions can be raised about specific countries, this forecast is not speculative. It is based on what is already unfolding.
The oil industry is governed by a "law of long lead times." Much of the new capacity that will become available between now and 2010 is under development. Many of the projects that embody this new capacity were approved in the 2001-03 period, based on price expectations much lower than current prices.
There are risks to any forecast. In this case, the risks are not the "below ground" ones of geology or lack of resources. Rather, they are "above ground" - political instability, outright conflict, terrorism or slowdowns in decision-making on the part of governments in oil-producing countries. Yet, even with the scaling back of the forecast, it would still constitute a big increase in output.
This is not the first time that the world has "run out of oil." It's more like the fifth. Cycles of shortage and surplus characterize the entire history of the oil industry.
A similar fear of shortage after World War I was one of the main drivers for cobbling together the three easternmost provinces of the defunct Ottoman Turkish Empire to create Iraq. In more recent times, the "permanent oil shortage" of the 1970s gave way to the glut and price collapse of the 1980s.
But this time, it is said, is "different." A common pattern in the shortage periods is to underestimate the impact of technology. And, once again, technology is key. "Proven reserves" are not necessarily a good guide to the future.
The current Securities and Exchange Commission disclosure rules, which define "reserves" for investors, are based on 30-year-old technology and offer an incomplete picture of future potential. As skills improve, output from many producing regions will be much greater than anticipated. The share of "unconventional oil" - Canadian oil sands, ultra-deep-water developments, "natural gas liquids" - will rise from 10 percent of total capacity in 1990 to 30 percent by 2010.
The "unconventional" will cease being frontier and will instead become "conventional." Over the next few years, new facilities will be transforming what are inaccessible natural gas reserves in different parts of the world into a quality, diesel-like fuel.
The growing supply of energy should not lead us to underestimate the longer-term challenge of providing energy for a growing world economy. At this point, even with greater efficiency, it looks as though the world could be using 50 percent more oil 25 years from now. That is a very big challenge.
But at least for the next several years, the growing production capacity will take the air out of the fear of imminent shortage.
And that in turn will provide us the breathing space to address the investment needs and the full panoply of technologies and approaches - from development to conservation - that will be required to fuel a growing world economy, ensure energy security and meet the needs of what is becoming the global middle class.
Yergin wrote the book "The Prize: the Epic Quest for Oil, Money and Power," which received the Pulitzer Prize.
2/3 of the Earth's oil reserves are not in oil wells, they are in oil sands in Alberta and Venezuela, and in oil shale in the Western US (the US has 75% of worldwide oil shale deposits). Extracting the oil from these solid deposits does not make economic sense at the present because it requires too much energy to make it worthwhile. However, with improving technology and the availability of safer nuclear power (coupled with the increasing price of oil), it's becoming more and more likely these oil deposits will be utilized in the near future. Certainly we won't run out of oil by the time we all home our own "Mr. Fusion".
organic, USDA Approved?
What are you going to do when gasoline costs $ 3.85 a gallon and diesel costs $ 4.00? What about $ 5.00 a gallon? High diesel prices will raise the cost of all goods across the board. Trucks and trains burn diesel and lots of it. Shelf prices for everything will soon start climbing higher and higher.
When oil hits $ 85 that will signal the start the beginning of the end. Or, perhaps, the 'end of the beginning.' The words starts with a "R" and ends with a "D" . . .Whatever.
I worked in petroleum resevoir engineering in the early 1970s, with engineers and geologists calculating project feasibility analyses.
Reserves are also measured as to what oil volume can be recovered that is "economic.
In the early 70s oil was about $2.50 per barrel. Today it is $60 per barrel.
An oil company would operate a field much longer, raising up more oil, because they could afford to employ much more costly methods. Hence greater "reserves" and production.
They can afford to drill and produce in much deeper waters, and even invest in more risky political situations, to name other factors.
In north America lie vast untapped reserves of oil shale and tar sands, waiting for high prices to make them "economical."
I read that Alberta has more hydrocarbon reserves, in such forms, than Saudi Arabia. And Canada has been (more wisely?) exploiting same, getting the technology down.
Hitler ran armies on transport fuels derived from coal, and today South Africa operates plants for this purpose; plants built by American firms.
Look no further than the Caspian Basin.
Germany ran jets on coal dust.
It explains why gasoline prices matter less and less as time passes, why most of what we think of as "energy waste" actually benefits us, why energy demand will never go down, and why energy supplies are infinite.
Its an eye-opener.
What you say may be true. We may have the time to develop new sources for oil and build new refineries. But our economy cannot afford to stagnate for 3 - 5 years with gasoline selling at the pumps for $ 4.00. But, being a realist, if millions lose their jobs that will also cut demand. Demand goes down and prices go down. Prices will stabililze at about $ 2.50 so some lucky people can still drive their SUV's to work.
Isn't the price of oil on the "futures market"?
Given the massive coal reserves all over the USA, if the price of oil keeps staying up we may see a lot of supposedly uneconomic coal mines suddenly return to operation because the coal can be converted into motor fuels. It could make companies like Norfolk Southern, Union Pacific and BNSF Railway extremely rich as they get into the business of hauling coal to coal liquification plants that are likely converted from many current oil refineries.
I don't know who really is right, but here is a token response from a Peak Oil advocate (Matthew Simmons) in mp3 format. http://www.netcastdaily.com/broadcast/fsn2005-0806-2.mp3
he sounds like a quack
In 1965 I made $10,000 and gasoline was $0.199 a gallon, and cigarettes were $0.10 a pack. Now gasoline is $2.59, cigs are $5 a pack and fortunately I made $130,000 in inflation-adjusted dollars. It all works out. I had to cut a few things from the budget, though. Food, movies, cigarettes.
Sorry, you gotta listen to the whole interview. There is a mention of the Yergins article in there but the rest is just about Peak Oil.
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