Thanksgiving marked the day that some analysts thought global oil production would have reached its peak, ushering in a new era of fuel shortages. Posted on 11/25/2005 7:52:35 PM PST by M. Espinola
Thanksgiving marked the day that some analysts thought global oil production would have reached its peak, ushering in a new era of fuel shortages.
These petro-pessimists were using the same formula as the one that accurately predicted the apex of U.S. oil production in 1970.
Matthew Simmons, author of "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy," is one of them. He thinks Saudi Arabia has pumped much of its usable reserves and will start to experience production declines.
Even analysts who are more optimistic warn that chronically high prices and occasional supply crunches are likely in the years ahead. The world's consumers are using up nearly all the oil being produced today, and the outlook for growth of supplies is uncertain.
"In terms of prices, I think the risk is ... it's going to explode," Fatih Birol, chief economist at the International Energy Agency, told the Council on Foreign Relations in New York last week.
Mr. Birol thinks plenty of cheap oil remains to be discovered, but it lies mostly in politically volatile nations of the Middle East. He is hopeful that those countries will spend the billions of dollars needed to increase their supplies and satisfy the growing appetite for fuel.
"The bulk of the growth needs to come from very few ... countries in the future, namely Saudi Arabia, Iran, Iraq, Kuwait" and the United Arab Emirates -- the countries where the lion's share of the world's remaining oil reserves lie, he said.
Two of the top four producers -- Iraq and Iran -- are not expected to increase supplies any time soon.
Persistent sabotage of oil facilities in Iraq has cut production below the 2.5 million barrels per day produced before the U.S. invasion in March 2003. Meanwhile, a U.S.-led economic embargo has reduced investment in new oil facilities in Iran.
Saudi Arabia, the largest producer with the biggest reserves, plans to increase production to 12.5 million barrels a day from about 11 million today. Smaller Persian Gulf states also seek to expand output.
Mr. Birol said he is not sure these increases will satisfy rising world demand, especially as oil consumption grows rapidly in China, India and other developing nations.
The United States, the world's biggest consumer, has done little to increase the fuel efficiency of its auto fleet, Mr. Birol said, and efforts to curb demand in other major consuming countries also has been elusive.
This puts consuming countries on a collision course with supplier nations, he said.
Consumers are becoming more resistant to higher oil prices, he said, because they are increasingly dependent on cars, airplanes and other forms of petroleum-fueled transportation.
"There are no easy and economic alternatives," he said. "This is a new era from the consuming countries' point of view."
Mr. Birol said the share of oil from the Middle East will increase to 44 percent from 35 percent by 2030 if countries in the region make all the investments needed to increase supplies.
He thinks Saudi Arabia, in particular, can boost production to 18 million barrels a day by 2030 to meet a projected world demand of 120 million barrels a day. Demand today is 82 million barrels.
U.S. Energy Secretary Samuel W. Bodman expressed confidence this week that the Saudis can supply the world with the oil it needs.
But some oil analysts question whether Saudi Arabia has the massive reserves of more than 263 billion barrels that it proclaims.
Speculation that the world is reaching "Hubbert's peak," named after a Shell geologist who correctly predicted in 1956 that U.S. oil production would crest in 1970, has been fueling the "energy bulls" on Wall Street and bolstering oil prices for the past two years, said Bill Miller, investment strategist at Legg Mason Wood Walker Inc.
"Production has peaked in the U.S., so it is not far-fetched to believe it may be about to globally," he said.But Mr. Miller remains skeptical, partly because of resistance from consumers and businesses when the price of premium crude exceeds $55 per barrel.
"Market forces are at work to curtail demand and increase supply," he said.
Cambridge Energy Research Associates also rejects dire predictions about the end of the oil era. Suppliers are ramping up to meet and even exceed demand through 2010, and technologies will bring new oil sources to light, the energy forecaster says.
graphics added
Oil demand continues to rise.
Supplies are limited.
It's basic law of supply/demand.
Be smart - buy energy stocks :)
There is only one ofrm of enery able to replace large quantities of hydrocarons - nuclear. That's how you'll know they are serious about shortages - when they get realistic about new nuclear plants.
Absolutely. I see no discussion from the White House or in Congress by anyone saying we need to build more nuclear plants.
The US government doesn't believe there's a problem. The wannabe experts have been saying we're about to run out for over 100 years. But current known capacity is greater today than at anytime in the past.
The peak oil crap is just crap.
Capitol idea. Let the jihadees drink the few puddles of crude oil we leave them.
"Oil demand continues to rise.
Supplies are limited.
It's basic law of supply/demand.
Be smart - buy energy stocks :)
One additional point, once OPEC's 'nuclear' Iran is confronted another round of rocketing oil prices will be in the making.
You are correct. Thanks for posting that informative link on exposing the peak oil myth.
Then you aren't listening. As part of his energy plan Bush proposes increasing nuclear energy. He gave a several speechs about it.
Is that you, Neil Cavuto?
Basic law of supply/demand? Experience has shown through the ages, speculation trumps actual facts, and the law of supply and demand can be manipulated by cartels, monopolies, and rumor causing runs on the market due to hysteria. Some call that law CAUSE AND EFFECT.
Oil is running out? Some say oil ran out in Pennsylvania to prove that oil is finite. My GMIL is still receiving money from her Pennsylvania oil rights. Her land is still producing. And I understand the natural gas lease is producing as well. Guess the oil didn't run out.
Oil peaked? Oil companies are sitting atop capped fields that were idled during oil at $14, not because they were not producing. Some wells may be dry (and some think there's evidence that dry wells are pooling up again while others say new drilling technology can access wells better than in 1907) but most capped wells are good to go AS IS. Oil hasn't peaked--not even in known reserves, so say many guys in the field.
Graphs show output of all countries? Accepting your evidence on face value, I found the graphs should read "known uncapped reserves". Untapped and capped reserves do not even figured into the graph's equation.
Oil is a finite fossil fuel? New research finds oil may be abiotic liquid and not a substance derived from fossils, as was once believed. New theories say that oil is a natural substance that flows under the earth's crust and pools, especially near the surface at various faultlines in the earth's crust. Easy oil is the liquid that requires the least amount of money to drill and pump. AS technology increases so too does the ease of extracting the oil. And I haven't even mentioned extracting oil from natural gas, oil shale, oil sand, and coal. The US and Canada have the largest "known" coal deposits in the world.
China will surpass US in consumption? Some see all those "well-paid" chinese workers buying gas at the same market value as the US, with the communist tax system. I don't. And I don't believe the chinese slave-labor will to buy Y200,000 SUVs. Europeans that are relatively rich compared to China use mass transit and other forms of transportation due to the cost of fuel--that is, their low wages in socialist utopia versus fuel prices with excessive taxation. Why do we speculate the rise of China. IMO their oil consumption is due to their infrastructure growth which is now declining, as is their steel consumption, not by a billion chinese driving Suburbans.
US produces less than 15% of the world's oil? True. But production and potential production are two different animals. Oil companies know the reserve potential in Alabama, Mississippi, Carolinas, Florida, California, Oregon, Washington, New Jersey, Long Island, and Massachusetts, as well as the untapped reserves in the western states and Alaska--to name a few locations--that are enormous, untapped, and unmapped on your graphs. I would also like to turn your attention to new studies on the true potential of USSR production, and the news says that reserves in USSR are far greater than perhaps the Mideast combined.
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