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Page added on July 16, 2010
Peak Oil: WorldCrisis, Arab Oil Producers Benefit
Even if we are to leave the issue of climate change aside for the purposes of this post yet it is clear that peak oil is a game changer. The world oil production is about 86-87 million barrels a day and the prestigious and mainstream IEA, International Energy Agency, projects the need for over 110 million barrels each day by 2030. If the world is already at peak then where is the additional oil going to come from? A quick survey of plans by the major oil companies of the world shows clearly that we are digging deeper and in more difficult terrain than we ever did simply because the low hanging fruits have already been picked, so to speak.
There are at least two important implications associated with peak oil. (1) The less the availability of conventional oil then the greater is the incentive to exploit the non conventional oil reserves like Venezuela’s heavy oil, Canada’s tar sands and eventually Colorado’s shale. Each of the above produces oil but at a much greater cost. (2) As conventional oil becomes less abundant; we have already lifted half of all the oil reserves; then again the energy return on investment ; EROI; will decrease and continue decreasing to the point whereby it would require more energy to lift a barrel than the energy embodied in that barrel.
The implications of the above two facts that result from peak oil are very clear. As the world demand for energy increases and the supplies cannot keep pace the resulting imbalances will play havoc with the price of oil. We have already witnessed what a slight shortage could do in 2008 when the price per barrel rose parabolic ally to over $140. Under the scenario of peak oil towards the end of this decade that previous price will be appreciably overshot. There are some who project a price of over $300 per barrel given the tight market conditions predicted by peak oilers.
Arab countries can very easily be producing about 30 million barrels of oil each day by 2020 if Iraq is to achieve its planned goal of 8 million barrels per day. Furthermore it would be easy to project exports of about 22 million barrels each day. If the above scenario is to play out and if the resulting economic crisis does not lead to the use of military force then the Arab oil exporters can expect an annual cash flow of over $1 Trillion. Could peak oil, a major challenge for most of the world be exceptionally beneficial to the Arab countries? And if so are they ready to absorb such flows of funds in order not to clog the international flow of funds.
2 Comments on "Peak Oil: WorldCrisis, Arab Oil Producers Benefit"
Steve in Hungary on Sat, 17th Jul 2010 6:22 am
There are some good analyses around as to why oil will never make those prices.
The short answer is that prices such as that will simply drive the economies of the world into ever deepening depression, throwing more and more people out of work and thereby reducing the demand for oil. So the price goes back down and the next round begins.
Tim on Sat, 17th Jul 2010 4:29 pm
Oil will easily make those prices, although not in a straight climb. In “the end of oil” written in 2005′, all kinds of horror scenario’s were based on a price of $40 a barrel. A couple of years later we pay double in the middle of an economic crisis which has cut demand. And everybody finds it ok, with producers saying this is absolutely bottom price. IN JUST 5 YEARS TIME! Prices will go up and down but in a steady overall climb, and far over $300.
Oil producing countries are becoming more and more aware of the limitations of their sources, and a time will come where they’ll prefer selling 1 barrel at $300 then 5 barrels at $100, even though it means less short-term revenues. And there you have your extra scarcity 🙂