The Real Oil Shock

One expert argues that the Saudis won’t be able to meet demand; we’d better prepare now

By MATTHEW SIMMONS

Between 1950 and 2005, the world’s use of oil grew more than eightfold, bringing global demand to 85 million bbl. of oil per day. Despite that incredible growth, the world’s oil appetite is just getting a head of steam, as countries like China and India finally move toward lifestyles comparable to those of Europe and the U.S. Most oil-forecasting models show demand rising to between 120 million and 130 million bbl. per day by 2025 or 2030. The only way this demand can be met is for most of the additional supply to come from the Middle East, with Saudi Arabia providing the bulk.

Don’t bet on it.
For decades, almost all public-policy planners, aided by most oil experts, assumed that the Middle East had vast quantities of proven oil reserves that could be extracted at extremely low cost, thereby enabling oil demand to grow to almost any level. Anchoring that belief is a hope that Saudi Arabia’s oil production can increase from around 9 million bbl. a day in 2005 to 25 million or even 30 million bbl. a day by sometime between 2025 and 2030.

After spending more than two years researching my book Twilight in the Desert, I am convinced that it is highly improbable that Middle Eastern oil–and particularly Saudi Arabian oil–can grow to those far higher levels. Instead there is a risk that Saudi Arabia’s oil output and the rest of the Middle East’s oil supply may start to decline.

Time Magazine