Why the Market Needs to Take Peak Oil Seriously
Against the background of everything else happening in the financial markets is the apparent circumstance of peak oil. Even The New York Times joined the chorus in a Sunday editorial, saying:
"Our demand for petroleum products strains the limits of the global capacity to supply them. In past decades, if a pipeline broke in Nigeria, Saudi Arabia might compensate by setting workers to pumping more oil. Now, with little additional capacity, rising prices are necessary to balance out supply and demand."
No more increasing capacity = peak oil.
It's as simple as that. We now have nine and a half months of "rearview mirror" action to look back and see that world oil production has retreated from its all- time high of just over 85 million barrels a day (m/b/d) achieved in December 2005 (just as geologist Kenneth Deffeyes of Princeton had predicted). For 2006, production has remained in the 84 m/b/d range every month reported so far, while demand has exceeded that.
Texas oil man Jeffrey Brown, a commentator at TheOilDrum.com, the outstanding oil discussion group on the Internet, makes the point that Saudi Arabia is at the same point statistically (in terms of ultimate recoverable reserves) that Texas was at in 1972 when production there peaked. The world's four greatest oil fields are in depletion (Burgan [Kuwait], Daqing [China], Cantarell [Mexico], and Ghawar [Saudi Arabia]) and these have accounted for over 14 percent of the world's oil production. (Ghawar alone accounts for over 60 percent of Saudi Arabia's production.) The North Sea has peaked and production there is "crashing."
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