Posted on 11/11/2007 10:36:19 PM PST by B-Chan
After the CEO of Total (the French oil major) last week, two more CEOs of an oil major came out this Thursday to give stark warnings that mean that peak oil is happening right now. In addition, the chief economist of the International Energy Agency (the IEA), one of the main cheerleaders of the "there's more than enough oil" camp until now, is giving an extraordinarily pessimistic interview in the Financial Times, following the recent publication of their latest World Energy Outlook.
Let me take you through all their affirmations.
Big Oil CEOs Point To Constraints On Supply Growth
HOUSTON -(Dow Jones)- Pointing to a variety of political and technological constraints on energy investment, chief executives at two oil giants Thursday highlighted systemic limitations on the growth of the supply of oil, implying that there will be high oil prices for at least the medium term.
The fact that two CEOs spoke separately, but at the same conference, on this topic, is, in itself, significant. We've already had various "worried" messages coming from executives or senior analysts of the oil world with bearish messages, but they could be reported in isolation, and safely ignored the next day. This time, very similar messages came from 2 sources, making it harder to ignore (and, of course, the proximity of the symbolic $100 barrel makes it all the more newsworthy).
But let's get to the gist of it:
ConocoPhillips (COP) Chief Executive James Mulva had earlier told a New York financial conference that he doubted that world oil producers would be able to meet forecast long-term energy demand growth. The International Energy Agency, the energy watchdog for western economies, has projected 2030 world oil demand of 116 million barrels a day. But Mulva said he doesn't believe oil supply will ever exceed 100 million barrels a day. He didn't offer a price forecast.
"Demand will be going up, but it will be constrained by supply," Mulva said. " I don't think we are going to see the supply going over 100 million barrels a day and the reason is: Where is all that going to come from?"
"Where is the oil going to come from?" This is the CEO of the third biggest oil major in the USA, admitting that we no longer know where we can get access to oil. And he's repeating exactly what Christophe de Margerie, the boss of energy giant Total said a few days before: that IEA's projections, that everybody uses, are completely absurd (and, as you'll see in second, the chief economist of the very same IEA is, very schizophrenically, essentially saying the same thing...)
Given that demand is set to be way above 100mb/d within a few years (it's at around 86-88mb/d right now), we have a problem - if the supply's not there, we'll need demand destruction, ie people and economies that wanted oil and will be doing without instead. Will that happen in a controlled way, or be imposed on us/them? The question is still not asked enough by and to politicians...
But moving on to CEO n°2, that of BP, the British oil giant:
[BP plc (BP) Chief Executive Tony] Hayward said "about half" the world's oil has been recovered, but he implied that significant improvement is possible on a broader scale. "The biggest source of new oil will come from increasing recovery," he said.Despite "rejecting the notion" of a peak in production, he is nevertheless the first senior oil executive, to my knowledge, to say that "half the oil" being gone - something which is usually considered to happen at pretty much the same time as peak production (although the two are not necessarily simultaneous). Even with enhanced recovery techniques, no country has been able to increase its maximum production once the peak had been reached - starting with the US and the North Sea region, where oil companies have had all the liberty to use all the most sophisticated techniques.Although BP has increased the oil price it uses to test whether energy investments are economical, Hayward rejected the idea that oil prices have shifted permanently into a higher trading range - along with the notion that the world has hit peak oil production.
So yes, it is a pretty huge deal that the BP CEO says that half the oil is gone.
But, in a way, this is almost small beer compared to the various bombs dropped by IEA chief economist Fatih Birol in his interview with the FT. The interview is very long, but well worth reading in its entirety. I'm providing a few quotes below, but for those of you that are finding this diary long already, here's the quick summary:
* we are beyond peak oil in the non-OPEC world;
* OPEC officially has lots of reserves - but we don't really know;
* even if they make all the investment plans announced are made and are on time, we'll still have a gap of 12.5mb/d (more than 10% of overall demand) by 2015; we now officially need to beg OPEC to invest more;
* oh, and by the way, that's the smaller of the two energy-related problems we have: climate change is a lot worse.
We’re doomed. Bush’s fault.
Oil is a finite resource like diamonds. Control the flow and you’ll control the price. Control the refinement, and you’ll further control the price.
I suspect there’s a lot more oil out there than these folks are willing to admit. But it sure sounds good when you’re trying to limit the flow and refinement to realize profit potential.
If oil production were to increase, what would happen to the cost of a barrel? Get the picture.
The consumer takes it in the shorts. Again...
Damn, Al Gore is out of another job again. Think he will give his prize back??
This is all about promoting alternative energy sources which BP (Beyond Petroleum) will be happy to sell us.
Not when televison networks are dedicating weeks to promote his B S views.
NBC has gone green. I fear that will be the model for what we’re going to see for the next few years. Frankly, the Gobbles media has lost all touch with reality.
Life will go on.
Unless, of course, the Neocoms succeed in forcing a state-sponsored solution down our throats.
Energy independence now.
Totally agree with your energy independence now statement. It would solve more problems than just $100 per barrel prices.
I don’t understand why anyone would not want alternatives? It’s crazy.
Of course we are at peak oil. We are no longer exploring or drilling or building new refineries. Won’t find oil unless we look for it. The real shame is that we know where some oil is now, offshore, but greenies think we can all get along without energy and our stupid government officials cave in to them.
I can’t understand why the people we have entrusted with the leadership of our nation refuse to understand that energy independence is the most important plank in any successful war on terror.
>* oh, and by the way, that’s the smaller of the two energy-related problems we have: climate change is a lot worse.<
That last line pretty much destroyed any shot at credibility for this article.
Here we go again... Muzzies declare war on America and squeeze the supply of oil, while the tree-huggers demand we stop the nasty use of petroleum, and you have an amazing jump in price because of limited production!
DUH
OPEC BLAMES BEN BERNANKE FOR HIGHER OIL
http://www.dailyreckoning.com.au/opec-blames-bernanke/2007/11/12/
Without the liquid fuels we know and love.
Isn’t that the truth.
The current media campaign by the oil companies up here is intense!
Somehow, I smell a rat in all of this...a very dirty rat.
OPEC claims that their spare capacity—part of their price control mechanism—is more limited today. The oil futures market may sometimes override whatever OPEC is trying to affect for a limited time.
Business Week:
“I don’t understand why anyone would not want alternatives? It’s crazy.”
It’s the oil companies dream come true.
Less ovehead, more profits.
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