Production capacity in most of
the regions with large reserves are usually down due to technological
constraints but the basic point about 'peak oil' is that there's a finite amount
of the stuff. The market reacts to regional disturbances to flow as opposed to
speculations of how much there is left globally so the fluctuating price of
crude is a poor indicator if we are looking for signs of peak oil.
In the short term, demand will slow down when prices become exorbitant but this trend will itself be a result of supply restrictions occasioned by an initial increase of demand. For example, there was a brief dip in global demand in 08 but this was caused by OECD consumers backing off from high pump prices when crude hit $140 + a barrel. India's demand hasn't even begun to take off yet. It's currently 18 times less per capita than the US.
Likewise, Indonesia, China and Brazil are all countries with huge populations that are rapidly modernising. What was interesting five years ago was how few suppliers there were who could boost their production to take advantage of $150 a barrel crude. There were none - not even the Saudis. All the figures, in fact, indicated that production remained constant for all the major producers. This is likely to mean that their big fields have substantially peaked and they are already injecting up to 40% water to get what’s left out.
So, for those who doubt we are nearing peak oil production, if we have not already surpassed it, a brief look at the latest figures compiled by British Petroleum is in order. There are six major oil producing regions which will deplete their reserves within the next decade if they continue to pump the stuff out at their current rate - Norway (currently producing 2.5 million barrels per day), the UK (1.5 mbd), Indonesia (1 mbd), Mexico (3.1 mbd), the United States (6.7 mbd) and China (3.8 mbd).
Adding up the figures this gives us 18.6 million barrels a day which will need to be produced elsewhere to make up the deficit in global oil demand. This also assumes that world demand, which is currently 82 mbd, remains constant between now and 2020. A big ‘if’, given that the US Dept of Energy has predicted a 45% increase between now and 2025. Let us suppose the IPPC has its way and there is a drastic reduction in carbon emissions leaving us with a 25% increase by 2020. This would give us an easy to compute 100 million barrels a day global demand. But, this still gives us a shortfall of 36 mbd!
Where on earth (literally) is this oil going to come from? We can rule out the detection of any more ‘super giant’ fields; the last major discovery was in the Caspian over twenty years ago and even that has proved to be something of a disappointment with only a couple of billion barrels at most. The most obvious step is to maximise production in those regions where there are large proven reserves.
It looks like Iraq may boost their production from 2.5 mbd to 11 mbd within a decade - if we are to believe recent pronouncements from the government - but this will have be a long term investment in infrastructure costing billions of dollars and assumes co-operation and absence of sabotage. If all goes well Iraq can provide an extra 8.5 mbd.
Toppling the Iranian theocracy (a-la PNAC) and installing a Western-oriented government open to foreign investment to rehabilitate wells destroyed during the Iran-Iraq war can take their current 4.3 mbd to the Saudi level of 11.3 mbd. That's another 7 mbd but hawk planners will have to act fast because smartening things out takes a while - Iraq took seven years to quieten down before any contracts could be made with the big oil majors. If occupation is ruled out, the theocracy can be toppled externally by sponsoring a viable opposition, boosting sanctions and ramping up the propaganda on the nuclear issue - happening as we speak in fact.
Elsewhere, the Saudis are pumping at full throttle and can't deliver any more than 11.5 mbd - the Ghawar field, the world's largest, has a 30% water cut which means it has already peaked.
Kuwait (2.8mbd), Qatar (1.4mbd) and the Emirates (3mbd) are the only other countries in the Middle East which have sufficiently large reserves and which can boost production to the requisite levels. What has been holding them back from boosting their output thus far?
They are friendly to the West even though their populations and (we must assume) much of their ruling class are pro-Palestinian. Is it because their ‘proven’ reserves were originally inflated to secure higher OPEC production quotas back in the 80‘s?
I can only assume there must be large technical obstacles preventing further output in these regions, either that or their hands are tied by Saudi dominance of OPEC who would have an interest in seeing their rivals constrain output.
Outside the Middle East - Azerbaijan, Kazakhstan, Nigeria and Angola; the cost of bribes appear to be too high even for the majors to consider the investment required to boost production. They are in any case too volatile to make long term investment attractive. Russia is surely peaked at 11 mbd and Venezuela's policy has been to cut production to drive prices upward but another attempted coup there will release a massive public backlash.
Bottom line, the deficit will have to come from the smaller Gulf states - the Emirates, Kuwait and Qatar, as even with carbon markets and emissions regulations European giants like Germany, France, Italy and the UK have only cut their consumption by less than 5% over the past ten years; nowhere near enough to make up for the predicted added demand in the highly populated developing countries.
In the short term, demand will slow down when prices become exorbitant but this trend will itself be a result of supply restrictions occasioned by an initial increase of demand. For example, there was a brief dip in global demand in 08 but this was caused by OECD consumers backing off from high pump prices when crude hit $140 + a barrel. India's demand hasn't even begun to take off yet. It's currently 18 times less per capita than the US.
Likewise, Indonesia, China and Brazil are all countries with huge populations that are rapidly modernising. What was interesting five years ago was how few suppliers there were who could boost their production to take advantage of $150 a barrel crude. There were none - not even the Saudis. All the figures, in fact, indicated that production remained constant for all the major producers. This is likely to mean that their big fields have substantially peaked and they are already injecting up to 40% water to get what’s left out.
So, for those who doubt we are nearing peak oil production, if we have not already surpassed it, a brief look at the latest figures compiled by British Petroleum is in order. There are six major oil producing regions which will deplete their reserves within the next decade if they continue to pump the stuff out at their current rate - Norway (currently producing 2.5 million barrels per day), the UK (1.5 mbd), Indonesia (1 mbd), Mexico (3.1 mbd), the United States (6.7 mbd) and China (3.8 mbd).
Adding up the figures this gives us 18.6 million barrels a day which will need to be produced elsewhere to make up the deficit in global oil demand. This also assumes that world demand, which is currently 82 mbd, remains constant between now and 2020. A big ‘if’, given that the US Dept of Energy has predicted a 45% increase between now and 2025. Let us suppose the IPPC has its way and there is a drastic reduction in carbon emissions leaving us with a 25% increase by 2020. This would give us an easy to compute 100 million barrels a day global demand. But, this still gives us a shortfall of 36 mbd!
Where on earth (literally) is this oil going to come from? We can rule out the detection of any more ‘super giant’ fields; the last major discovery was in the Caspian over twenty years ago and even that has proved to be something of a disappointment with only a couple of billion barrels at most. The most obvious step is to maximise production in those regions where there are large proven reserves.
It looks like Iraq may boost their production from 2.5 mbd to 11 mbd within a decade - if we are to believe recent pronouncements from the government - but this will have be a long term investment in infrastructure costing billions of dollars and assumes co-operation and absence of sabotage. If all goes well Iraq can provide an extra 8.5 mbd.
Toppling the Iranian theocracy (a-la PNAC) and installing a Western-oriented government open to foreign investment to rehabilitate wells destroyed during the Iran-Iraq war can take their current 4.3 mbd to the Saudi level of 11.3 mbd. That's another 7 mbd but hawk planners will have to act fast because smartening things out takes a while - Iraq took seven years to quieten down before any contracts could be made with the big oil majors. If occupation is ruled out, the theocracy can be toppled externally by sponsoring a viable opposition, boosting sanctions and ramping up the propaganda on the nuclear issue - happening as we speak in fact.
Elsewhere, the Saudis are pumping at full throttle and can't deliver any more than 11.5 mbd - the Ghawar field, the world's largest, has a 30% water cut which means it has already peaked.
Kuwait (2.8mbd), Qatar (1.4mbd) and the Emirates (3mbd) are the only other countries in the Middle East which have sufficiently large reserves and which can boost production to the requisite levels. What has been holding them back from boosting their output thus far?
They are friendly to the West even though their populations and (we must assume) much of their ruling class are pro-Palestinian. Is it because their ‘proven’ reserves were originally inflated to secure higher OPEC production quotas back in the 80‘s?
I can only assume there must be large technical obstacles preventing further output in these regions, either that or their hands are tied by Saudi dominance of OPEC who would have an interest in seeing their rivals constrain output.
Outside the Middle East - Azerbaijan, Kazakhstan, Nigeria and Angola; the cost of bribes appear to be too high even for the majors to consider the investment required to boost production. They are in any case too volatile to make long term investment attractive. Russia is surely peaked at 11 mbd and Venezuela's policy has been to cut production to drive prices upward but another attempted coup there will release a massive public backlash.
Bottom line, the deficit will have to come from the smaller Gulf states - the Emirates, Kuwait and Qatar, as even with carbon markets and emissions regulations European giants like Germany, France, Italy and the UK have only cut their consumption by less than 5% over the past ten years; nowhere near enough to make up for the predicted added demand in the highly populated developing countries.
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