Mainstream purveyors of conventional wisdom have for years dismissed or ignored the prospect of a world peak in oil production before the 2030s or later. But high oil prices are undermining the conventional wisdom and some mainstream figures are taking more pessimistic views about Peak Oil. Fatih Birol, chief economist for the International Energy Agency, says Middle Eastern countries will not extract oil at the maximum rate possible because they want future generations to be able to live off of oil as well.
FP: Why arenít more new supplies coming online, given the current high prices?
FB: The bulk of the oil has in the past been produced by the international oil companies, so-called Big Oil. But their existing reserves are declining in what they have under ownership. They have no access to new reserves, the bulk of which are in Middle East countries. In most of these countries, only the national oil company can, by law, invest. So, even though the international oil companies may have the capital and the technology, they donít have access to the reserves. Therefore, the bulk of the growth in the future needs to come from the national oil companies, and perhaps price will no longer be the main determinant when they make their [production] decisions, because for many countries, oil is their only natural endowment. And those countries legitimately value and want to leave their one and only natural endowment for future generations.
Since their holding back oil in a world with limited alternatives drives up the prices they can make more money by producing less. If you were in their shoes wouldn't you produce less and make more money? Though Matthew Simmons and some other Peak Oil theorists argue that the real reason they are not producing more in response to higher prices is that their fields are old (which they are) and heavily depleted (which, again, they are). But regardless of whether Matt Simmons or Fatih Birol is right about the motivations of the Middle Eastern producers we can not expect more oil from that quarter.
Birol thinks global peak oil is coming soon.
FP: Do you believe in peak oil?
FB: Of course, but the question is when? Global oil resources are limited. We have conventional oil; we have unconventional oil. We have oil in the North Sea, in the Gulf of Mexico. We have more oil in the OPEC countries. What I can tell you is that one day global conventional oil will peak. This will depend on many factors, including the role of technology, investment, and production policies. When we look at oil outside of the OPEC countries, when you put all of them together, I think it is going to peak very soon. But we have unconventional oil, and we have oil in the Middle East as well. How much will come to the market from unconventional oil?
We are in trouble before world oil production peaks. Net exports (the amount of oil exported by oil exporting nations) will peak before net production because oil demand is growing more rapidly in oil exporting nations than in the oil importing nations. So oil exports will decline much more rapidly than oil production. On this see my post Big Oil Producers Cut Exports In 2007. Also, see Jeffrey Brown's post Is a Net Oil Export Hurricane Hitting the US Gulf Coast?
The data show that combined net oil exports from Venezuela & Mexico to the US have dropped by 414,000 bpd from 10/07 to 3/08, an astounding annual decline rate of -32%/year. This decline was at least partially offset by increases in imports from the Persian Gulf.
Think biomass ethanol will come to the rescue? With corn over $7 per bushel some corn ethanol plants may close. We need algae biodiesel in order to make a biomass alternative scalable. But while lots of companies and academic research groups are chasing cheaper and scalable ways to grow algae for diesel fuel no clear success story has emerged yet.
|Share |||Randall Parker, 2008 June 22 01:51 PM Energy Fossil Fuels|