Tuesday, June 19, 2007

Are We Running Out of Oil

The 'Oil Depletion Analysis Centre' -- which I know nothing about, but sounds like a group with an agenda -- says that as soon as 2011, world oil production will peak. From there, reserves will decline and prices will climb. This contention is disputed by BP’s Statistical Review of World Energy:

Colin Campbell, the head of the depletion centre, said: “It’s quite a simple theory and one that any beer drinker understands. The glass starts full and ends empty and the faster you drink it the quicker it’s gone.”

Dr Campbell, is a former chief geologist and vice-president at a string of oil majors including BP, Shell, Fina, Exxon and ChevronTexaco. He explains that the peak of regular oil - the cheap and easy to extract stuff - has already come and gone in 2005. Even when you factor in the more difficult to extract heavy oil, deep sea reserves, polar regions and liquid taken from gas, the peak will come as soon as 2011, he says.

I am not an alarmist, so when reading articles like this I can never help but notice 'weasel phrases' like 'as soon as 2011.' There are lots of years after 2011 -- some of them are quite far off. I won't worry too much until I see the phrase 'within the next x years.'

The bottom line:

What no one, not even BP, disagrees with is that demand is surging. The rapid growth of China and India matched with the developed world’s dependence on oil, mean that a lot more oil will have to come from somewhere. BP’s review shows that world demand for oil has grown faster in the past five years than in the second half of the 1990s. Today we consume an average of 85 million barrels daily. According to the most conservative estimates from the International Energy Agency that figure will rise to 113 million barrels by 2030.

Two-thirds of the world’s oil reserves lie in the Middle East and increasing demand will have to be met with massive increases in supply from this region.

'What no one disagrees on' is that demand is surging. Sounds like we don't agree on all that much.

Further, the article appears to completely ignore petroleum reserves contained in Canada's tar sands and in shale oil in the US. It's been estimated that those reserves become economic at a price of somewhere around $70/barrel. So if prices climb to $100/barrel or so, a substantial new stream comes online.

Color me interested and mildly concerned, but I won't panic for a while.

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