World oil production may have peaked
By Scott Malone
World production of crude oil may have already peaked, setting the stage for declining output that could lag demand, a top advocate of the "peak oil" theory said on Thursday.
Matthew Simmons, chairman of Simmons & Co. International, a Houston-based investment banking firm specializing in the energy sector, said U.S. government data showed that the world oil supply has declined through the first half of this year.
Energy Information Administration data showed world supply of crude oil has declined to 83.98 million barrels per day in the second quarter after hitting 84.35 million bpd in the fourth quarter of 2005.
"If you basically have another six to ten months of that decline lasting, then I think for certain we would look back and say, 'Guess what? We actually reached a sustainable peak in crude oil production in December 2005,'" Simmons said at a meeting of the United States of the the Association for the Study of Peak Oil and Gas.
The peak oil theory has detractors, who note technology can help extend the life of the world's oil reserves.
Simmons acknowledged his call may be premature, saying, "If that number turns around, that will be wrong."
Other speakers at the conference took a more tempered view of the world's oil capacity, arguing that peak production is still a few years out.
"Conventional oil production is going to increase by a few million barrels a day between now and the period between 2010 and 2015," when it may peak, said Mike Rodgers, a partner at PFC Energy, an energy industry consulting company.
Advocates of the peak oil theory, however, said a decline in high oil prices was likely to lead to less pressure for oil companies to invest in production.
Rising demand for oil, stoked by the rapid economic development of China and India, have helped to drive oil prices to record highs. U.S. oil futures peaked above $78 in July, but have since eased to about $61 per barrel.
"If the supply and demand are such that we see declining oil prices, and given that the economy functioned pretty well through a period of high oil prices, the question is -- are policymakers going to lose focus on this problem?" Rodgers asked. "I would argue that they probably will."
It's hard to determine just how much oil is left in the world, since companies in different countries use varying standards to calculate their oil reserves, speakers said.
Major oil companies haven't raised the specter of peak supply with their shareholders.
One speaker said that could suggest their oil reserves are richer than many executives disclose, as a result of strict U.S. regulations on how public companies may estimate their reserves.
"We don't have data which allows us to study in detail the depletion of oil fields," said Jeremy Gilbert, managing director of Barrelmore Ltd. and a former top engineer at BP Plc. <BP.L>. "The industry itself does know more about the way things are behaving, wells are producing and it may be that if we had access to that data, we might refine some of our estimates."