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Page added on February 27, 2007

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Peak Oil: An Update

After two decades of almost continuous growth, global oil production has been stagnant around 84 million barrels a day for the past two years. This, of course, is exactly consistent with the peak oil hypothesis, which predicts that supply constraints will force up prices, destroying growth in demand.


It will be some years before we can tell for certain, but it is entirely possible that we’re in the middle of peak oil right now. That’s certainly consistent with the predictions of Kenneth Deffeyes, Colin Campbell, Matthew Simmons, and other geologists and oil industry analysts.
This hasn’t stopped the peak oil deniers from continuing to press their suit. Vaclav Smil, an instructor at the University of Manitoba, recently wrote an article for TCS Daily, a right-wing web magazine, that manages to obfuscate mightily on the matter.


Proving that you can demonstrate any trend if you pick the right start and end dates, Smil argued that a modest recent increase was evidence that the peak oilers are wrong, even as OPEC cut its production. (Of course, he fails to consider that perhaps OPEC cut its production because it cannot continue to expand it.)


He crowed about the fact that oil prices dropped from over $70 a barrel in July 2006 to $55 in December. As I write this, Bloomberg reports that futures are trading for $61 a barrel.


He also took Saudi Aramco at its word that it can increase production to 11 million BPD by 2011, even though the company already admitted that it cannot entirely offset declines in its Ghawar oilfield.


Flat production is flat production. Despite the very high prices and widespread demand destruction, especially in poorer countries, oil producers have not brought more supply on-stream. That’s just bizarre, unless the oil producers can’t bring more supply on-stream.


Some of the biggest producers – Saudi Arabia, Mexico, and the North Sea – are past their production peaks and declining inexorably. The smaller producers can barely replace those declines, let alone produce a net increase.

Raise the Hammer



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