Most Popular
1. THE INFLATION MONSTER is Forecasting RECESSION - Nadeem_Walayat
2.Why APPLE Could CRASH the Stock Market! - Nadeem_Walayat
3.The Stocks Stealth BEAR Market - Nadeem_Walayat
4.Inflation, Commodities and Interest Rates : Paradigm Shifts in Macrotrends - Rambus_Chartology
5.Stock Market in the Eye of the Storm, Visualising AI Tech Stocks Buying Levels - Nadeem_Walayat
6.AI Tech Stocks Earnings BloodBath Buying Opportunity - Nadeem_Walayat
7.PPT HALTS STOCK MARKET CRASH ahead of Fed May Interest Rate Hike Meeting - Nadeem_Walayat
8.50 Small Cap Growth Stocks Analysis to CAPITALISE on the Stock Market Inflation -Nadeem_Walayat
9.WE HAVE NO CHOICE BUT TO INVEST IN STOCKS AND HOUSING MARKET - Nadeem_Walayat
10.Apple and Microsoft Nuts Are About to CRACK and Send Stock Market Sharply Lower - Nadeem_Walayat
Last 7 days
Where’s my self-driving car? - 16th Aug 22
Real Reason why Pakistan and India Gained Independence in 1947 at 75th Anniversary - 16th Aug 22
Electronic Payments Can Benefit Your Business - Here’s How - 16th Aug 22
Qualcom Stock Market Harbinger - 12th Aug 22
Apple Exec Gets World's 1st iPhone 14 for Daughters 14th Birthday Surprise Present Unboxing! - 12th Aug 22
Steps to remember while playing live roulette online - 12th Aug 22
China Bank Run Protests - Another Potential Tiananmen Square Massacre? - 11th Aug 22
Silver Coin Premiums – Another Collapse? - 11th Aug 22
Gold-to-Silver Ratio Heading Lower – Setup Like 1989-03 - 11th Aug 22
Severe Stocks Bear Market: Will You Be Among the Prepared 1.5%? - 11th Aug 22
There's a Hole in My Bucket Dear Liza, UK Summer Heatwave Plants Watering Problem Song - 11th Aug 22
Why PEAK INFLATION is a RED HERRING! Prepare for a Decade Long Cost of Living Crisis - 9th Aug 22
FREETRADE Want to LEND My Shares to Short Sellers! - 8th Aug 22
Stock Market Unclosed Gap - 8th Aug 22
The End Game for Silver Shenanigans... - 8th Aug 22er
WARNING Corsair MP600 NVME2 M2 SSD Are Prone to Failure Can Prevent Systems From Booting - 8th Aug 22
Elliott Waves: Your "Rhyme & Reason" to Mainstream Stock Market Opinions - 6th Aug 22
COST OF LIVING CRISIS NIGHTMARE - Expect High INFLATION for whole of this DECADE! - 6th Aug 22
WHY PEAK INFLATION RED HERRING - 5th Aug 22
Recession Is Good for Gold, but a Crisis Would Be Even Better - 5th Aug 22
Stock Market Rallying On Slowly Thinning Air - 5th Aug 22
SILVER’S BAD BREAK - 5th Aug 22
Stock Market Trend Pattren 2022 Forecast Current State - 4th Aug 22
Should We Be Prepared For An Aggressive U.S. Fed In The Future? - 4th Aug 22
Will the S&P 500 Stock Market Index Go the Way of Meme Stocks? - 4th Aug 22
Stock Market Another Upswing Attempt - 4th Aug 22
What is our Real Economic and Financial Prognosis? - 4th Aug 22
The REAL Stocks Bear Market of 2022 - 3rd Aug 22
The ‘Wishful Thinking’ Fed Is Anything But ‘Neutral’ - 3rd Aug 22
Don’t Be Misled by Gold’s Recent Upswing - 3rd Aug 22
Aluminum, Copper, Zinc: The 3 Horsemen of the Upcoming "Econocalypse" - 31st July 22
Gold Stocks’ Rally Autumn 2022 - 31st July 22
US Fed Is Battling Excess Global Capital – Which Is Creating Inflation - 31st July 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Peak Oil and can Saudi Arabia come to the rescue ?

Commodities / Analysis & Strategy Aug 07, 2005 - 08:35 PM GMT

By: Nadeem_Walayat

Commodities

As crude oil hits ever higher, Peak Oil concerns are not new, having first been raised by M. King Hubbert, a Shell Oil geophysicist, over 50 years ago. In a now-famous paper written in 1956, Hubbert suggested that production rates for oil (and other fossil fuels) follow a bell curve: In new fields, clean, highly pressurized oil flows abundantly to the surface, and as new wells are drilled, production rates rise steadily. After about half the oil has been extracted, however, production rates start to go down. There's still oil left, but declining pressure, exhaustion of the best oil pockets, and increasing contamination bring it to the surface ever more slowly. Applying this production model to the entire United States, taking into account the rate at which new fields were being discovered, Hubbert predicted that oil production in the lower 48 states would peak around 1970 and then start declining. And the facts is that oil production in the USA DID peak in 1970, and has since gradually declined from some 9.5 million barrels a day, to days level of 4.6 million barrels a day.


Fewer and fewer new reserves are being find to replace consumption and the quality of reserves found tends to be poorer and more costly to extract oil from. Alternatives such as the tar sands in Canada will likely take decades to develop and even then unlikely to make up the difference between projected demand of 100million bpd in 15 years time, and today's demand of some 84 million bpd.

And thus we come to reliance on Saudi Arabia's oil reserve projections which rely on Saudi Arabia doubling oil production from 10 million bpd to 20 million bpd during the next 15 years to meet the increasing demand.

The problem here lies the lack of transparency within the Saudi Oil industry, where until quite recently very little data was forthcoming other than year on year claims of increasing oil reserves for OPEC quota reasons rather than actual verifiable discoveries. The established reserves of some 280 billion barrels, maybe over inflated by some 100 billion barrels and be barely 180 billion barrels, off course new discoveries could be made and likely will be, but the question is whether Saudi Arabia will be able to double oil production let alone maintain the current out put of some 10 million bpd.

The reason why the projections and actual ability to supply greater oil may be way out is due the the fact that the amount of water contamination in the oil determines how much life is left in the oil fields, recently it was found that some of Saudi's biggest oil fields, were producing a mix as high as 30% of water with oil, implying that less oil is available for the same amount of production due to increasing water contamination i.e. less oil produced and not more as most of Saudi Arabia's oil comes from these handful of old giant oil fields, which suggest ever more water mixed with the oil, so more wells would need to be sunk just to maintain the same level of oil production.

So instead of a doubling in Saudi oil production to save the day, it could well be that in fact we are seeing the peak in Saudi Oil production ! Even if large new oil fields come on stream during the coming years, they will be offset by the loss of production of crude oil on the existing fields.

As the worlds spare capacity of oil production gets eroded by demand we will increasingly see a sharp rises in oil prices towards and above $100 per barrel !!!

(c) MarketOracle.co.uk 2005

Disclaimer - All statements and expressions are the opinion of Marketoracle.co.uk and are not meant to be investment advice or solicitation or recommendation to establish market positions.  Our opinions are subject to change without notice.We recommend that independent professional advice is obtained before you make any investment or trading decisions.

The Market Oracle is a FREE Financial Markets Forecasting & Analysis online publication. We aim to cut through the noise cluttering traditional sources of market analysis and get to the key points of where the markets are at and where they are expected to move to next ! http://www.marketoracle.co.uk

This article maybe reproduced if reprinted in its entirety with links to http://www.marketoracle.co.uk


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in