No, the world is not running out of oil.Oil will be around for hundreds of years and ‘Peak Oil’ has no correlation with oil reserves. ‘Peak Oil’ is only concerned with the daily flow-rates; all that matters is how much we can produce on a daily basis.
Some time back in one your columns you wrote that “If I was asked to pick the biggest threat to a sustainable economic recovery, Peak Oil would top that list.” Why did you say that?
The entire global economy depends on oil; crude is the lifeblood of our society. Although many people are not aware, crude oil is the single most important natural resource.After all, global transportation is totally dependent on crude, agriculture relies on oil and all the synthetics, polymers and chemicals are derived from crude oil.Needless to say, our modern day world would not have been possible without crude oil.
What are you hinting at?
Our research suggests that the supply of crude is about to peak on a global basis and this is happening at a time when global usage is on the increase. The developing nations are desperate for more oil and we suspect that the world’s supply will not be able to keep up with consumption.Unfortunately, we are not prepared for this outcome and we have left it too late.So, when the supply of total liquids peaks on a world-wide basis, humanity will be in for a big shock.First, the price of oil will rise remorselessly and then, we will get shortages followed by rationing. It goes without saying that a shortage of oil does not bode well for economic growth and the world will sink into a big recession. In our view, ‘Peak Oil’ is a far bigger threat or risk than the ongoing credit crisis, because central banks and governments cannot print barrels of oil! So, when shortages emerge, there will not be any quick-fixes, bailouts or ‘stimulus’ to help the global economy.
The crude oil prices have been in the range of $70-80 for a while now. Where do you that going in the days to come?
Over the near-term, the price may remain range-bound but if global demand climbs to 90-91 million barrels per day, then the price of oil will ignite. We could get there within 3 years.
What is the amount of oil the world is currently using?
At present, global usage is around 86.4 million barrels per day and current production and spare capacity is more than sufficient to cater for today’s consumption.
Has the demand for oil gone down during the recession?
The demand for oil was not affected much during the biggest global recession in decades. During the depths of the crisis, global consumption fell by less than 5% and it is almost back to the pre-crisis level.Although consumption is trending down in the developed world, usage is going through the roof in the developing nations and this is more than offsetting the weak demand in the West.
You wrote in a recent column that as far as the global economy is concerned, Barack Obama’s six-month moratorium on new offshore drilling is an even bigger disaster. Can you elaborate?
Less drilling means less oil; it is as simple as that.In our view, offshore oil is our only hope to combat ‘Peak Oil’ and if politicians impose a ban on offshore drilling, this will further choke the world’s oil supply.If Mr. Obama’s moratorium continues for several more months, then the US will have to import more oil from overseas and this will reduce the available supply for other countries.
Where will the next wave of oil demand come from?
Global demand will continue to rise and this is due to the increasing usage in Asia, Latin America and the Middle East.For instance, oil consumption is exploding in both China and India and both these nations now use up roughly 14% of the world’s supply! In fact, the combined oil demand in these two nations has doubled over the past decade and with extremely low per-capita consumption levels, demand can only go one way and that is up! Apart from China and India, nations in the Middle- East are burning more and more oil and so are the Brazilians in Latin America.As these economies continue to develop, I have no doubt in my mind that their energy usage will skyrocket.
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