TheOilDrum.com Responds to Wall Street Journal Peak Oil Article
On November 19, the Wall Street Journal published an article titled "Oil Officials See Limit Looming on Production." In our view, the WSJ article omits several key points regarding future oil production, including the fact that world oil production has stagnated in the last two years, despite rising prices. Our response to the WSJ article can be found here: WSJ Article Response.
(Issues Wire / PRWEB) November 21, 2007 -- On November 19, the Wall Street Journal published an article titled "Oil Officials See Limit Looming on Production." In our view, the WSJ article omits several key points regarding future oil production, including the fact that world oil production has stagnated in the last two years, despite rising prices. Our response to the WSJ article can be found here: WSJ Article Response.
The Oil Drum makes the following major points in its article:
1. "All of the forecasting techniques used by those in the peak oil community are converging to indicate that world oil production is likely to decline in the next few years." "In fact, since early 2005, world oil production seems to be on a plateau, or even declining slightly." "Thus, it is possible that the expected long-term decline in oil production has already begun."
The graph shown in the attached file illustrates the plateau in production we have seen since 2005, together with the spike in oil prices, now approaching $100 a barrel, that seems to be a response to this more limited supply.
Oil Plateau Graph
On this graph we show oil production in million barrels per day, based on information of the two major agencies providing this data, plus the spot price for West Texas Intermediate oil. The oil data is shown both on an individual monthly basis, and on a 13-month average basis. Oil production data is shown for the International Energy Agency (IEA) in burgundy and the US Energy Information Administration (EIA) in green. Data to reproduce this graph is available at this link:
Oil Plateau Data
2. "The oil production and price forecasts that have been truly erroneous are those of the US Energy Information Administration (EIA), the International Energy Agency (IEA), and Cambridge Energy Research Associates (CERA)." All of these organizations prepare estimates that have been consistently biased high on production and/or low on price
One starts to wonder whether the forecasts of these organizations are based primarily on forecasts of future demand, together with a large measure of wishful thinking. Indeed, as recently as 1998 EIA indicated in its report footnotes that its future world supply estimate reflected its estimate of future demand, without consideration of whether that supply would be available.
Links to analyses supporting this conclusion:
Analysis of EIA Forecasts
Analysis of CERA Forecasts
3. One of the issues with respect to extraction of oil is that we must use scarce resources in the extraction process -- including oil and other energy resources themselves, water, metals, and trained workers. Once we reach the limits on these, we can only extract more oil at the expense of some other limiting input to society. Furthermore, as the energy sector requires increasingly more energy itself, less of the total production is available for other sectors of the economy. "Irrespective of dollar cost, we will clearly have a problem if/when we have to spend more than one barrel of oil in order to obtain a barrel of oil."
About The Oil Drum
The Oil Drum is a web-based community that discusses all aspects of energy--from science and technology to its societal and geopolitical impacts. The editors and readers are drawn from many disciplines in academia and industry. The Oil Drum has a staff of more than twenty volunteers, including individuals from the United States, Canada, Europe, and Australia.
The Oil Drum's parent organization is the Institute for the Study of Energy and Our Future (ISEOF), a 501(c)3 corporation. ISEOF is a think tank focused on addressing, via empirical analysis, issues central to both the supply and demand aspects of societies future energy needs. The Institute is funded solely by private contributions and advertising revenue from The Oil Drum's website.
More information on peak oil and its impacts on energy security is available on The Oil Drum website.
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