[Vision2020] Update from Rep. Trail - Article on World Oil Production

[ttrail at moscow.com]

Here is an excellent article by Lester R. Brown concerning the issue of
world oil production.

Rep. Tom Trail

Embargoed for November 15, 2007, 11:00 AM EST

IS WORLD OIL PRODUCTION PEAKING?

http://www.earthpolicy.org/Updates/2007/Update67.htm

Lester R. Brown

Is world oil production peaking? Quite possibly. 
Data from the International Energy Agency (IEA) show a pronounced loss 
of momentum in the growth of oil production during the last few years.
After climbing from 82.90 million barrels per day (mb/d) in 2004 to 
84.15 mb/d in 2005, output only increased to 84.80 mb/d in 2006 and 
then declined to 84.62 mb/d during the first 10 months of 2007.

The combination of world production slowing down or starting to decline 
while demand continues to rise rapidly is putting strong upward 
pressure on prices. Over the past two years, oil prices have climbed 
from $50 to nearly $100 a barrel.
If production growth continues to lag behind the increase in demand, 
how high will prices go?

There are many ways of assessing the oil production prospect. One is to 
look at the relationship between oil discoveries and production, a 
technique pioneered by the legendary U.S. geologist M. King Hubbert. 
Given the nature of oil production, Hubbert theorized that the time lag 
between the peaking of new discoveries and that of production was 
predictable. Noting that the discovery of new reserves in the United 
States peaked around 1930, he predicted in 1956 that U.S. oil output 
would peak in 1970. He hit it right on the head.

Globally, oil discoveries peaked in the 1960s. 
Each year since 1984, world oil production has exceeded new oil 
discoveries, and by a widening gap. In 2006, the 31 billion barrels of 
oil extracted far exceeded the discovery of 9 billion barrels.

The aging of oil fields also tells us something about the oil prospect. 
The world’s 20 largest oil fields were all discovered between 1917 and 
1979. (See data at
http://www.earth-policy.org/Updates/2007/Update67_data.htm)
Sadad al-Husseini, former senior Saudi oil official, reports that the 
annual output from the world’s aging fields is falling by 4 mb/d.
Offsetting this decline with new discoveries or with more-advanced 
extraction technologies is becoming increasingly difficult.

Yet another way of assessing the oil prospect is to look separately at 
the leading oil-producing countries where production is falling, the 
ones where production is still rising, and those that appear to be on 
the verge of a downturn. Among the leading oil producers, output 
appears to have peaked and turned downward in a dozen or so and to 
still be rising in nine.

Among the post-peak countries are the United States, which peaked at 
9.6 mb/d in 1970, dropping to 5.1 mb/d in 2006; Venezuela, where output 
also peaked in 1970; and the two North Sea oil producers, the United 
Kingdom and Norway, which peaked in 1999 and 2000.

The pre-peak countries are dominated by Russia, now the world’s leading 
oil producer, having eclipsed Saudi Arabia in 2006. Two other countries 
with substantial potential for increasing output are Canada, largely 
because of its tar sands, and Kazakhstan, which is developing the 
Kashagan oil field in the Caspian Sea, the only large find in recent 
decades.
Other pre-peak countries include Algeria, Angola, Brazil, Nigeria, 
Qatar, and the United Arab Emirates.

Among the countries where production may be peaking are Saudi Arabia, 
Mexico, and China. The big question is Saudi Arabia. Saudi officials 
claim they can produce far more oil, but the giant Ghawar oil field—the 
world’s largest by far and the one that has supplied half of Saudi oil 
output for decades—is 56 years old and in its declining years. Saudi 
oil production data for the first eight months of 2007 show output of 
8.62 mb/d, a drop of 6 percent from the 9.15 mb/d of 2006. If Saudi 
Arabia cannot restore growth in its oil production, then peak oil is on 
our doorstep.

In Mexico, the second-ranking supplier to the United States after 
Canada, output apparently peaked in 2004 at 3.4 mb/d. U.S. geologist 
Walter Youngquist notes that Cantarell, the country’s dominant oil 
field, is now in steep decline, and that Mexico could be an oil 
importer by 2015. Production in China, slightly higher than in Mexico, 
may also be about to peak.

A number of prominent geologists are convinced that global oil 
production has peaked or is about to do so. “The whole world has now 
been seismically searched and picked over,” says independent geologist 
Colin Campbell.
“Geological knowledge has improved enormously in the past 30 years and 
it is almost inconceivable now that major fields remain to be found.”

Kenneth Deffeyes, a highly respected geologist, said in his 2005 book, 
Beyond Oil, “It is my opinion that the peak will occur in late 2005 or 
in the first few months of 2006.” Youngquist and A. M. Samsam Bakhtiari 
of the Iranian National Oil Company each projected that production 
would peak in 2007.

The Energy Watch Group in Germany, which recently analyzed oil 
production data country by country, also concluded that world oil 
production has peaked. They project it will decline by 7 percent a 
year, falling to 58 mb/d in 2020. Bakhtiari projects a decline in oil 
production to 55 mb/d in 2020, slightly lower than the German group. In 
stark contrast, the IEA and the U.S. Department of Energy are each 
projecting world oil output in 2020 at 104 mb/d.

The peaking of world oil production will be a seismic event, marking 
one of the great fault lines in world economic history. When oil output 
is no longer expanding, no country can get more oil unless another gets 
less.

Oil-intensive industries will be hit hard. Cheap airfares will become 
history, for instance. The airline industry’s projected growth of 5 
percent a year over the next decade will evaporate. The food industry 
will be severely affected by rising oil prices, since both modern 
agriculture and food transport are oil-intensive. The automobile 
industry will suffer as well when demand for cars plummets. Pressures 
will intensify on the three or more major auto companies that are 
developing plug-in hybrid cars that run largely on electricity to bring 
them to market quickly.

Higher oil prices have long been needed both to more accurately reflect 
the indirect costs of burning oil, such as climate change, and to 
encourage more-efficient use of a resource that is fast being depleted. 
While higher prices are desirable, the rise should not be so abrupt 
that it leads to severe economic disruptions.

Some countries are much more vulnerable to an oil decline than others. 
For example, the United States—which has long neglected public 
transportation—is particularly vulnerable because 88 percent of the 
U.S. workforce travels to work by car.

Since options for expanding supply are limited, efforts to prevent oil 
prices from rising well beyond $100 per barrel in the years ahead 
depend on reducing demand, largely within the transportation sector. 
And since the United States consumes more gasoline than the next 20 
countries combined, it must play a lead role in cutting oil use.

A campaign to reduce oil use rapidly might best be launched at an 
emergency meeting of the G-8, since its members dominate world oil 
consumption. If governments fail to act quickly and decisively to 
reduce oil use, oil prices could soar as demand outruns supply, leading 
to a global recession or -- in a worst-case scenario -- a 1930s-type 
global depression.

#    #   #

Lester R. Brown is President of the Earth Policy Institute and author 
of Plan B 3.0: Mobilizing to Save Civilization (forthcoming).

Data and additional resources at www.earthpolicy.org.

For information contact:

Media Contact:
Reah Janise Kauffman
Tel: (202) 496-9290 x 12
E-mail: rjk (at) earthpolicy.org

Research Contact:
Janet Larsen
Tel: (202) 496-9290 x 14
E-mail: jlarsen (at) earthpolicy.org

Earth Policy Institute
1350 Connecticut Ave. NW, Suite 403
Washington, DC  20036
Web: www.earthpolicy.org
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