Peak Oil News: Calm Before The Storm

Thursday, March 01, 2007

Calm Before The Storm

Our planet is rapidly approaching its oil-production peak. In fact, some leading geologists argue that we are already past that point.

It is important to understand that oil-production follows a bell-curve. This is true whether we are talking about a particular oil-field, a nation or the planet as a whole. Once more than 50% of the reserves are depleted, the rate of oil production enters a rapid and irreversible decline.

Today, several oil-provinces around the world are producing significantly less oil when compared to their record-production levels. Despite phenomenal breakthroughs in technology, these regions have failed to sustain their record-high output levels and this is proof of the concept of peak-oil. If we look around today, the US is past its peak, the North Sea is in decline, Indonesia is struggling and even Mexico has announced that its largest oil-field is past its peak-output. Although these regions still have massive reserves, the rate at which they pump oil out of the ground on a daily basis has entered a serious and permanent decline. In the recent past, non-OPEC nations increased their production and managed to compensate for the declining output levels elsewhere in the world. However, when you take into account the fact that these countries are also faced with geological limitations, it becomes clear that unless we discover gigantic oil-fields very quickly, our world will find it extremely hard to keep up with rising demand.

When discussing “peak oil”, it is also important to mention that over the past 35 years, we have discovered just one gigantic oil-field anywhere in the world! For sure, there have been some discoveries in different parts of the world but only a single world-class oil-field has been discovered in over 3 decades; Kazakhstan’s Kashagan Oil Field in the Caspian Sea. This is despite all the technological achievements over the same period. In other words, unless we have been incredibly unlucky and there is indeed a jackpot waiting to be found, this is not a healthy sign.

To complicate matters further, demand for oil continues to grow rapidly. At present, our world consumes roughly 84 million barrels of oil per day. If current growth rates continue, Asia’s demand alone will increase from 22 million barrels per day to approximately 40 million barrels by 2020. According to the US Energy Information Agency, global consumption is projected to increase to 103 million barrels per day in 2015 and 119 million barrels by 2025. In order to meet this explosive demand, global production must increase by 45% - about five times the maximum annual output available from Canada’s oil sands.

So, you can see that our world faces an imminent energy crisis which may cause an escalation of resource wars over the coming years. Normally, I do not like to make bold forecasts but I can say with confidence that the era of cheap oil is over. Moreover, I also suspect that things will get a lot worse on the geo-political front before we return to a period of world-peace.


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