Wednesday, September 02, 2009

the denizens of peak oil denial

ASPO | World oil production grew eight-fold between 1945 and 2000. The peak oil story is about our inability to sustain that trend. Today’s modest “excess” of oil supply — the result of shrinking demand due to the global recession plus Saudi investments — may last another year or two. But in the background resource nationalism, credit constraints, reduced drilling, armed conflict, and regional geological limits are kicking in hard. By 2012, global production will be downshifting into reverse, with a larger world population forced to divvy up a shrinking supply.

Debunking peak oil is like railing against gravity or aging. Consider the table below, based on worldwide production data in BP’s Annual Statistical Review. It summarizes production trends for the world’s 30 largest oil-producing nations, which account for 94% of the world’s daily output.

The track record here is ugly. A decade ago, only four of the world’s top 30 oil producers were in decline; now the number is 11 and growing. The UK had been steadily increasing production during the 1990s, as had Norway. Mexican production surged in the late 1990s. Now all three are in decline and the UK is an importer, despite the use of best-in-class technology throughout the North Sea. Indonesia, a former oil exporter, became a net oil importer within the last two years.

Brazil’s oil future looks promising, but Russia’s oil story likely includes a plateau or worse. The Chinese admit they are near peak production, hence their push to buy capacity abroad. What’s your bet that peace will break out in Iraq and Nigeria to allow production to grow? Or that Chavez and Putin will turn over a new leaf, and that Iran will make nice?

The math is straightforward and compelling. Sure, technology has helped grow deepwater supply, but that has only been enough to keep oil production flat, or “at peak/plateau,” since 2005.