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News :: Economy : Urban Development |
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OPEC signals Q4 production peak |
Current rating: 0 |
by Joe Futrelle
Email: futrelle (nospam) shout.net (verified) |
10 May 2005
Modified: 12:44:47 PM |
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In an ominous sign, OPEC is saying that it will probably not be able to meet global demand for crude oil in the last quarter of 2005. |
Chakib Khelil, Algeria's oil minister, said he based this forecast on expected depletion of stocks in importing nations given the seasonal demand cycle, and recommended that importing nations keep their stocks full.
This echoes what Saudi Arabia has been saying, most recently in its high-profile negotiations with the Bush administration. The U.S. asked Saudi Arabia to increase production, and Saudi Arabia said they were producing more or less at capacity.
With no significant new oilfields discovered, untapped reserves several years away from production, and global demand continuing to rise, a failure by OPEC to meet demand this year could very likely mark the global oil production peak.
The "peak oil" phenomenon, which is increasingly embraced by oil industry experts, mainstream energy commodities investors and even some members of congress, is expected to cause energy prices to rise, never to return to pre-peak levels. The economic effects will be severe and widespread, especially for net importers such as the United States.
The U.S. has responded to the coming crisis by building up substantial inventories, in effect buying and storing oil in advance of when it will be needed. While this can help reduce the volatility of oil and gas prices, it can only delay the supply-driven price increase by a matter of months, not years.
The Bush administration's plan to drill for oil in the Arctic National Wildlife refuge would also stabilize prices somewhat, but only temporarily, since the amount of oil in ANWR is just a tiny fraction of reserves controlled by OPEC and other oil-exporting nations (such as Iraq). Moreover, bringing ANWR online will take years, at which point we will likely be past the point where its oil could delay the global production peak.
Significant price increases, when they arrive, will certainly slow demand growth for oil, but since many industries depend on cheap oil to make a profit, the resulting drag on the economies of importers like the United States will be significant.
If we're lucky, some unforseen factor will intervene to slow demand between now and the end of the year. Barring that, it looks like the major producers have established a ceiling for what they can produce this year, and demand projections exceed it.
What does this mean for you? It means a global recession or depression is coming, since many industries don't have a plan for surviving huge energy price increases. The companies and individuals who will do better are the ones that have already made an investment in energy efficiency or renewable energy. |
See also:
http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=35940&version=1&template_id=48&parent_id=28
http://www.energybulletin.net/primer.php
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This work is in the public domain |
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Re: OPEC signals Q4 production peak |
by free marketer
(No verified email address) |
Current rating: 0
11 May 2005
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Supplies of oil will come from places never imagined. High prices send the signal, those seeking profits will respond. It may take a while, but prices will stabilize. |
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Re: OPEC signals Q4 production peak |
by Joe Futrelle
futrelle (nospam) shout.net (verified) |
Current rating: 0
11 May 2005
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> Supplies of oil will come from places never imagined. High prices send the signal, those seeking profits will respond. It may take a while, but prices will stabilize.
Global oil discoveries peaked in 1962 with no new discoveries in 2003 (down from over 50 billion barrels a year in the early 1960's). As a point of comparison, U.S. oil discoveries peaked in the 1930's, and U.S. oil production peaked in the 1970's. Regional production peaks are happening all over the world--Indonesia, a nominal OPEC member, has just become a net importer, and North Sea production peaked in 1999. As production falls from wells on existing reserves, the amount of oil that has to be discovered to meet current demand increases accordingly.
High prices cannot increase the supply of oil unless more can be discovered, and even the oil companies are not predicting that discovery will increase to anything like the rate that would be required to meet current demand growth--even with massive reinvestment of their record profits into exploration. So instead, demand will be forced down, sending oil-dependent economies into the red as they scramble to pay their astronomical energy bills.
If you don't believe this analysis, just wait for Q4 of this year, which is when OPEC expects the demand curve to collide with the production curve. |
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The "free market" Fairy Tale |
by Dose of Reality
(No verified email address) |
Current rating: 0
11 May 2005
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I would suggest any delusional individual who still believes the market solves everything do more research before making such faith-based statements in the future.
A good place to start would be the May/June 2005 issue of the Bulletin of the Atomic Scientists. "Caveat empty" by Alfred J. Cavallo on pages 16-18 has a rather informative, especially if you're a "free market" fundamentalist still ignorant of energy realities.
One might be able to claim that peak oil has not yet occurred, but is still a few years away. This is the optimistic view, as a new report commisioned by Exxon Mobil -- not exactly either a liberal or environmental institution -- forecasts that peak oil is just five years away, in 2010. The report names people like "free marketer" as "extreme optimists" at this point.
Exxon Mobil's prediction means there is essentially no cushion of time for the economy to adapt to growing oil scarcity. The failure of the Bush Adminstration to begin addressing the issue, basically living in the Pollyannish state of mind that "free marketer" lives in, will marketedly aggravate the economic impact of passing the oil peak. Building yet more roads, killing Amtrak, refusing to raise mileage requirements on new vehicles, tax breaks to encourage rich people to buy Hummers -- all these policies are undermining our national security, even assuming that the war in Iraq and Afghanistan was not making more enemies every minute.
You might also want to check ou the author's earlier article, "Oil: Illusion of Plenty," in the January/February 2004 issue of the Bulletin:
http://www.thebulletin.org/article.php?art_ofn=jf04cavallo
PS: "free marketer" is most likely just Jack's newest pseudonymn. He burned his most recent one, "2 cents", pretty badly earlier today, so he's flailing around for another new identity right now. |
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Re: OPEC signals Q4 production peak |
by 2 cents
(No verified email address) |
Current rating: 0
11 May 2005
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Dose,
I'm not clear on how I burned anything. You, I would suggest, have an anger problem, verging on rage. Why do you have such a difficult time confronting opposing opinions without resorting to insults and epithets?
Seriously. |
