[nero]

Chris Skrebowski's Megaprojects report(pdf) report is quite commonly cited in these forums as evidence that 2007 is going to see the peak of world oil production. However, IHS Energy (pdf) has also studied the projects coming on stream in the near future and finds that we will be well supplied (13 million barrels per day added to capacity) until 2010. How can we reconcile these strikingly different predictions? 2010 is now only 5 years away. All major offshore projects that are to be put on stream by then should be well into development. The main potential for additional barrels is onshore in the Middle-East. Is that the essential difference.

[0mar]

As an average? Maybe. You can buy heavy crude for 10-12 dollars right now.

Light sweet stuff? Fuck no.

[cat]

I didn't vote either. I think that as we approach peak, we will see a zig-zag plateu for a while. Oil prices will soar as demand increases and supplies are limited. High oil prices will cause recessions to occur, and demand will decrease. Oil prices will come down and we may see small gluts in the market. Then, when it looks like we have oil again the market will speed up until demand outstrips supply again and we fall into another recession. This will repreat itself over and over, and I would imagine that as time goes on each run will get shorter and each recession will get longer. There are some factors that needed to be added to this senario however. What kind of effect will the "housing bubble" have, or our large debt have? Maybe, due to an instable economy, we will hit the first recession and fall into a depression, which may cause a large oil glut for a while. There seem to be so many variables in predicting this.

[joewp]

Jervon's paradox says China will suck it up, since our demand will be lower and prices will too!

[jdmartin]

I wished there were some other options in the poll.

Nevertheless, I also subscribe to the ratchet theory, as I think we've already seen it over the past 2 years. Up in Spring 2004, back down some in summer, up further than Spring 2004 in Fall 2004, back down some (but not as far down as summer), Back up again in Spring 2005, etc.

I think some other concurrent issues might make the ratcheting smaller, however. The housing market going bust, increasing prices in other necessities (food, utilities), and the continued outsourcing of jobs to low pay countries will (in my mind) create a permanent recession situation, where we never actually come out of it, just go through good and bad spells within it.

Also, I don't think they'll ever be a glut because OPEC will simply ramp back down to sustainable levels to keep the amount of oil on the market and the price of that oil reasonable for them. It may also be beneficial to them because it will prolong the life of their remaining oil. Regardless of the rest of the world (unless some huge field is discovered in non-OPEC), OPEC has and will continue to have the ability to control the amount of oil on the market to keep prices propped up. Remember, we'll still need to grow food, use some oil for power, etc. If all the non-OPEC people pumped flat-out, OPEC could cut back far enough to keep prices up there where they want.

[JohnDenver]

The IHS Report mentions a new wrinkle I haven't heard before:

$this->bbcode_second_pass_quote('', 'I')nvestors reluctant to commit to large capital expenditure on transport and refining in an environment in which peak production is foreseen

In other words, the crisis may turn out to be getting oil to the markets.

[ubercrap]

$this->bbcode_second_pass_quote('JohnDenver', 'T')he IHS Report mentions a new wrinkle I haven't heard before:

$this->bbcode_second_pass_quote('', 'I')nvestors reluctant to commit to large capital expenditure on transport and refining in an environment in which peak production is foreseen

In other words, the crisis may turn out to be getting oil to the markets.

[cube]

I've got my own theory and it's called the double whammy.

Once we hit PO there will be a recession. Oil demand will drop, but not by much...maybe 4%. This is where the optimists will argue that oil prices will also drop. I see it differently. That can only be the case if there's spare production capacity. However oil production will also drop by a similar amount due to geological constraints. Since spare production capacity will be next to zero that ensures high oil prices.

Basically you're getting hit from both ends hence the name (double whammy)
1) a recession
2) high oil prices

Talk about doom and gloom

on a side note the Asia economic crises of the 90's cannot be used as a reference. Back then there was spare production capacity and that's why oil crashed to around $15/ barrel(???)

BTW noticed how many times I've use the phrase spare production capacity that's the magic word. It's next to zero right now and will remain that way from here on out...