UL: The End of Oil's Golden Age

One can argue that the world would be very different from what it is today if we hadn’t found crude oil and invented how to leverage this very convenient and relatively cheap energy source. The energy density of oil derivatives such as gasoline is superior to any other substance in liquid or gas form. That’s why the majority of cars are propelled either by gasoline or diesel and airplanes use kerosene.

Also, approximately 15% of oil is used to make asphalt, plastics and a wide variety of critical chemical products. Therefore, crude oil plays a key role in the modern globalized world economy. It has truly enabled a golden age for those that can afford to leverage it.

Unfortunately, oil is a finite resource and some day we will run out of it if we continue consuming it like we do. Long before this happens we will have serious problems, as soon as demand exceeds the supply. This is the essence of “peak oil” concept. International Energy Agency (IEA) estimated in their 2008 World Energy Outlook that oil production should not peak before 2030 if 64 million barrels per day (mb/d) of additional capacity is taken into use between 2007 and 2030.

In theory this is possible, but in practice there is a very real risk of under investment since the required new capacity is equivalent to six times the current production of Saudi Arabia. Therefore, the report concludes that an oil supply crunch can happen as early as 2015.

It is immensely hard to estimate the maximum rate at which the oil can be extracted from all different sources, both conventional and unconventional. Therefore, it is also hard to estimate when oil production will peak. What seems fairly certain is that it will do so within the next 30 years, and I personally believe it will happen within the next 10 years......Read the entire article.



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Oil Supply Set to Grow Through 2030 with No Peak Evident

Global oil productive capacity will grow though 2030 with no evidence of a peak of supply before that time, according to a new report by IHS Cambridge Energy Research Associates based on analysis of more than 10,000 projects around the globe. The report, The Future of Global Oil Supply: Understanding the Building Blocks extends IHS CERA's global oil outlook through 2030 and expects global oil productive capacity to grow to as much as 115 million barrels per day (mbd) through that period from the current level of 92 mbd, a 25 percent increase. Post 2030 supply could struggle to meet demand but this would take the form of a decades long "undulating plateau" rather than a sharp fall, the report says.

"There is more than an adequate inventory of physical resources available to increase supply to meet anticipated levels of demand through 2030," said Peter Jackson. "It would be easy to interpret the market and oil price trends from 2003 through 2009 in isolation to support the belief that a peak in global supply has passed or is imminent. But this only illustrates that the market continues to act as the shock absorber of major volatility".....Read the entire article.

Peak Oil Will Influence The Shape of Our Future World

We are currently reading another interesting book dealing with the global economy and cheap oil that combined to revolutionize the world's transportation business and altered the history of our economic development. The book is called The Box: "How the Shipping Container Made the World Smaller and the World Economy Bigger" by Marc Levinson. This book is essentially a history of the evolution of the mundane shipping container (just a large metal box) that brings us exotic foods and inexpensive consumer products from around the world. Much like the books, Cod: "A Biography of the Fish That Changed the World" and "Salt: A World History", both by Mark Kurlansky that document the world altering impact of simple things like a fish and grains of a chemical product, the shipping container is a remarkably simple device that also changed the course of the world's economy.

If oil is no longer available, or cheap, will developed economies be capable of getting cheap foodstuffs and industrial and consumer products that have contributed so much to their economic development and high living standards? The answer from Messrs. Rubin and Steiner is: No!

The two authors have the same theme, how Americans will have to give up traveling, abandon eating foods that come from great distances away and find new ways to work. These books, listed on the non fiction book lists, amaze me because they truly are fictional works. Admittedly they are based on reasonable premises, but they are largely speculation about how the world of the future will unfold.....read the entire article.

Peak Oil? Crude Oil Supply Data Doesn't Lie

After the epic crash last year, the price of oil is stabilizing and it should rise exponentially over the following years. Over the past year, global consumption has stayed weak, however once the economy recovers, crude oil should resume its secular bull market. Despite the 'demand destruction' hype, it is interesting to note that during this severe global recession, worldwide oil usage has dropped by a minuscule 2.7%. So, what will happen when the world comes out of this recession? Who will rise up to the challenge and meet our insatiable thirst for energy? These are critical questions not many are willing to ask. According to the US Department of Energy, liquid fuel demand in the developed nations peaked in August 2005 at 41.89 million barrels per day..... Complete Story