Friday, May 14, 2004

More signs of peak oil:

Crude oil prices reached an all time high yesterday, as the benchmark US light crude rose to $41.17 a barrel, topping the record last set in October 1990 by 2 cents. Prices have been rising steadiy for months.

OPEC is considering a proposal by Saudi Arabia to lift output by 1.5 million barrels a day to help reduce the problem, but the practical effect of this is uncertain since most OPEC countries have been ignoring the OPEC quotas anyway. Opec president Purnomo Yusgiantoro said that major oil producing countries have already added an extra 2 million barrels per day - 2.5% of worldwide demand - without having an effect on prices.

The main reason for this is that rapid global economic expansion is fueling he biggest increase in world oil demand growth for 16 years. Stronger-than-expected energy consumption among industrialized nations is bolstering explosive demand growth in China resulting in the largest absolute increase in global oil demand since 1988.

On top of that, production in non-OPEC countries, which had been growing steadily, now appears to have leveled off. Statistics for total world production of oil have always been distored by the fact that the OPEC nations, and particularly Saudi Arabia, have acted as swing producers by lowering their production during times of excess supply, while non-OPEC countries have increased their production as fast as they could. In the last 10 years prodcution growth among non-OPEC countries has been steady, totalling a 16% increase. But non-OPEC production hit a peak last December and has been lowere ever since. This is a trend, which if it continues, will be of enormous importance.


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