Peak Oil: The Next 5 Years

I suppose this post should be titled, “Why you want to own long term oil futures.” The following graph of “all liquids” supply and demand going forward five years gives us an basis to compare recent observations on peak oil by Matt Simmons, Charlie Maxwell and Chris Skrebowski, three very astute oil observers, and draw some conclusions. The graph represents recent IEA estimates of supply and demand. I found it in a discussion posted on HoweStreet.com. Here it is:
Overall, the chart implies ample supply in 2008, a possibility of pinched supply in 2009, a squeeze in 2010, and a serious shortfall thereafter. Let’s see how it gets there.

First, non-OPEC oil production is expected to grow about 700kb/d in 2008 and by lesser but still positive amounts thereafter. Charlie Maxwell, on the other hand, has predicted that non-OPEC supply will peak in 2008. Compared with Charlie’s vision, this chart is extremely optimistic for 2009, a bit less so for 2010, and still optimistic for 2011 and 2012 by about 500,000 b/d. Charlie believes non-OPEC crude will decline on a net basis after 2008.

Second, biofuels growth is expected to be fairly minimal in 2008, about 300 kb/d, and then decline to almost nothing. This estimate is consistent with observations that I recently posted that were first published in Oil and Gas Journal, the thrust of which is that we have already seen the easy growth of ethanol, substituting for MBTE. The argument is that future ethanol growth will be contained by limitations on ethanol distribution and mixture capacities.

Third, natural gas liquids: these are oil-like deposits found in a form like natural gas when the pressure of an old field is declining. They have been a major source of oil-like liquids in the past two or three years and are projected in this graph to grow strongly in 2008 and 2009, but to become a negligible factor thereafter. Matt Simmons has written that natural gas liquids cannot continue to grow. The graph may be especially optimistic about 2009.

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