Another Interpretation of BP’s “Statistical review of world energy”

The notion that the world is approaching “Peak Oil” is just not supported by the facts. We may still be getting closer to a peak, but the world has far more untapped oil than anyone could have imagined 10 years ago.

Rising oil production and slumping demand yielded a predictable result. “Oil prices declined for the first time since 2001,” and fell by the largest amount in Europe and North America on a percentage basis since 1986, notes the report. Oil prices are up from the start of the year and are unlikely to continue that upward move right away. Moreover, even with last year’s pullback, oil prices are still three times higher than in 2001. But over time it is increasingly clear that the world has ample energy reserves despite the scary super-spike of 2008.

OPEC states cut output by -7% in 2009, which is fairly remarkable considering the predilection for OPEC members to stealthily exceed their quotas. Whether they maintain that resolve will determine whether oil prices stay in their current range, or plunge.

The global economic slowdown led to a hefty drop in energy demand last year, but consumption dropped even faster in economically developed countries in Europe and North America. That’s because the West is driving ever-smaller cars, building large solar and wind farms, and adding more intelligence to national electricity grids.

Major oil companies such as Exxon Mobil and BP are no longer the dominant energy players. Their role in the global energy market has been supplanted by the nationalized oil companies in places such as Saudi Arabia, Mexico and Venezuela.

The publicly-traded oil majors have been in low-growth mode for some time and are best seen as vehicles for massive cash flow  generation. These companies have increasingly looked to buy back stock or offer juicy dividends rather than seek new development opportunities. The fields they look to develop are mainly meant to replace declining output from existing fields.

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