Sunday, July 18, 2004

Peak Oil

Will it be this year?

J. D. Moody, a former president of the American Association of Petroleum Geologists, has designated the same year 2004; see John D. Edwards, "Twenty-FIrst-Century Energy: Decline of Fossil Fuel, Increase of Renewable Nonpolluting Energy Sources," in Petroleum Provinces of the Twenty-First Century, ed. Marlan W. Downey, Jack C. Threet, and William A. Morgan, AAPG Memoir 74 (Tulsa: American Association of Petroleum Geologists, 2001), p. 28.

Matthew R. Simmons, chairman and CEO of Simmons & Company International (Houston, Texas), being a major energy-investment bank (dating from 1974), with Mr. Simmons too on the National Petroleum Council, as of the 2000-2001 year, states in his "2003's Constant Surprises May Not Be Finished," World Oil (February 2004): "Despite exceptionally high oil prices for the fourth consecutive year no serious surge in oil supplies resulted" (p. 23). And, second, from "Inventory Data Help Oil Claw Back Some Losses," Financial Times (1 July 2004): "Ali Naimi, Saudi Arabian oil minister, said he believed oil prices were fair [at $35.00 per barrel] and saw no reason either to raise or lower production from current 9.1 m [million] barrels a day" (p. 29). The fact really is that even Saudi Arabia, the one country in the world, which at present supposedly has some excess capacity for increased production, has little leeway for additional output either. Thirdly, as Bruce Stanley reports in "OPEC to Cover for Lost Exports," Philadelphia Inquirer (17 June 2004): Russia and Norway, the second and third leading exporters of oil, after Saudi Arabia, "could do little to help"

Or next year?

At the end of December, Oil & Gas Journal published their oil production figures for calendar year 2003. From 2000 to 2003, world crude oil production has been essentially flat, which is to be expected as we roll over the top of the bell-shaped Hubbert curve. In the revised paperback edition of Hubbert's Peak, the only change required is to add one more dot along the line on page 157.

There was some speculation that the year 2000 might stand as the single largest year of oil production. (Production in 2001 and 2002 was not as large as the year 2000.) However, 2003 squeaked ahead of 2000 by one-half of one percent. The important news is that growth has essentially stopped. Production declines, from most countries, was offset by increases in Russia. However, Matt Simmons has pointed out that the Russians are catching up on maintenance that was deferred during the Communist era. There have been no new field discoveries or major field extensions reported in Russia.

Although it is a bit silly, we can now pick a day to celebrate passing the top of the mathematically smooth Hubbert curve: November 24, 2005. It falls right smack dab on top of Thanksgiving Day 2005. It sounds a little sick to observe a gloomy day, but in San Francisco they still observe April 18 as the anniversary of the 1906 earthquake.


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