Peak oil and an economic recovery

Peak Oil is widely known to be the point at which oil production reaches its highest point and thereafter declines. Most people expect that this point will be reached in the very near future. Others believe we reached the highest point of oil production in the first half of the present decade and that from now on it is all down hill. They are correct.

A detailed analysis prepared for The Oil Drum by Tony Erikson provides reasonable evidence that Peak Oil occurred in 2008. It contends that peak production of 74.8 million barrels per day was achieved in July 2008 and has been in decline since then. Current production is estimated to be about 71 million barrels per day, a decline of 5 per cent, with a further decline of about 7 per cent expected over the next 15 months.

Thereafter, daily production is expected to decline more steeply, to about 68 per cent of peak production or 51 million barrels per day by 2015 and to 50 per cent of peak oil by 2025. These estimates take into account future oil discoveries, including those in the Arctic, the use of heavy oils and recovery of oil from the vast Canadian oil sand deposits.

In the short term, decline in availability of crude oil is unlikely to curb recovery from the global financial crisis (GFC). However, that recovery will increase demand for oil and if this can not be supplied, it will result in rising prices for oil and its derivatives. The US Energy Information Administration estimates global demand will increase to 98 billion barrels per day by 2015 and to 118 million barrels per day by 2030. However, by 2015 all of the worlds