Most Popular
1. Dow Max Drawdown Bear Stock Market 2022 - Accumulating Deviations from the Highs - 21st Feb 22
2.Putin Starts WW3 in Ukraine, Will Use Tactical Nuclear Weapons, China Prepares Taiwan Blitzkrieg - 28th Feb 22
3.World War 3 Phase 1 - Putin WINS Ukraine War! - 25th Feb 22
4.INVESTORS SEDUCED by CNBC and the STOCK CHARTS COMPLETELY MISS the BIG PICTURE! - 10th Feb 22
5.Will There Be A 2024 US Presidential Election? - 3rd Mar 22
6.Gold and SIlver, Precious Metals Sector Is at a Terrific Buy Spot - 6th Feb 22
7.Why Putin Wants the WHOLE of Ukraine - World War 3 Untended Consequences - 6th Feb 22
8.Dow Stock Market Expected Max Drawdown 2022 - 19th Feb 22
9.Stock Market Calm In the Eye of the Inflation Storm - 4th Mar 22
10.M = F - Everything is Waving! Stock Market Forward Guidance - 7th Mar 22
Last 7 days
Why Ray Dalio is WRONG About China - Principles for Dealing with the Changing World Order - 24th May 22
Globalists Convene to Plan Central Bank Digital Currencies - 24th May 22
After Recent Highs, What’s Next for the Gold Junior Miners? - 24th May 22
Why APPLE Could CRASH the Stock Market! - 21st May 22
Why Is Crude Oil Ignoring US Inventories? - 21st May 22
Here is Why I’m Still Bullish on Gold Mining Stocks - 21st May 22
THE INFLATION MEGA-TREND QE4EVER! - 20th May 22
US Real Estate Investors – Is There An End In Sight? - 20th May 22
How Technology Affected the Gaming Industry - 20th May 22
How To Set And Achieve Reasonable Goals For Your Company - 20th May 22
How Low Could the Amazon (AMZN) Stock Price Fall? - 19th May 22
Bitten by FANG? Clocked by Cryptos? -- 'Air Pockets' Everywhere - 19th May 22
Northern General Hospital Orthopedics Fractures and and Ankle Clinic Consultations Real Patient Experience - 19th May 22
Cathie Wood Goes All in on Teladoc, ARKK INSANE Noob Investing Strategy! - 17th May 22
This is Anything but Positive for US Housing Market - 17th May 22
What Should We Do If There Is No Fed Monetary Policy Pivot? - 17th May 22
All Possible Ways to Earn Free Litecoin - 17th May 22
How low Could the Amazon Stock Price Fall? - 16th May 22
Cathy Wood ARKK INSANITY There is NO Coming Back! - 16th May 22
NASDAQ 100 Stock Market LOWER LOWS & LOWER HIGH - 16th May 22
Sanctions, trade wars worsen US inflation - 16th May 22
AI Tech Stocks Earnings BloodBath Buying Opportunity - 14th May 22
Futures Contract – Trading Crude Oil With USO - 14th May 22
How to Get Kaspersky Internet Security for 80% Discount! Do not Pay Renewal Price! - 14th May 22
Sagittarius A* Super Massive Black Hole Monster at Centre of Our Galaxy REVEALED! - 14th May 22
UK Public Debt Smoking Inflation Gun - 13th May 22
What Happens When the Stock Market Dip Keeps Dipping? - 13th May 22
Biden Seeks Inflation Scapegoats; Gold Advocate Wins GOP Primary - 13th May 22
Apple and Microsoft Nuts Are About to CRACK and Send Stock Market Sharply Lower - 12th May 22
The War on Gold Ensures the Dollar’s Downfall - 12th May 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