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http://news.ft.com/cms/s/e0cdc282-ee47- ... 511c8.html

Saudis warn of shortfalls as oil hits $61

By Carola Hoyos and Neil Dennis in London
Financial Times, July 6 2005.


Oil prices hit new record highs above $61 a barrel on Thursday, driven by short-term supply fears as the first hurricane of the season threatened crude production and refinery operations in the Gulf of Mexico.

But private warnings also point to a worsening long-term outllook, with Saudi officials saying that the Organisation of the Petroleum Exporting Countries will be unable to meet projected western demand in 10 to 15 years.

At today's prices, the world will need the cartel to boost its production from 30m to 50m barrels a day to 50m by 2020 to meet rapidly rising demand, according to the International Energy Agency, the energy watchdog for consuming countries.

But senior Saudi energy officials have privately warned US and European counterparts that Opec would have an ?extremely difficult time? meeting that demand. Saudi Arabia calculates there is a 4.5m b/d gap between what the world needs and what the kingdom can provide.

Saudi Arabia has the world's largest oil reserves and will need to bear up to half Opec's production growth in the next 10 to 20 years, with the rest mainly coming from Kuwait and the United Arab Emirates.

Saudi Arabia pumps 9.5m b/d and has assured consumer countries that it could reach 12.5m b/d in 2009 and probably 15m b/d eventually. But a senior western energy official said: ?They said it would be extremely difficult to move above that figure?.

But European officials hope that energy saving measures could curb oil demand. They believe Opec could produce the 44m b/d the world would need if consumers adopted efficiency measures under discussion by governments in the US and Europe.

G8 leaders are expected to discuss the high oil prices during their three day summit which began in Gleneagles, Scotland, on Wednesday.

Fears that US refineries are ill-equipped to meet winter demand for heating oil and other distillates have driven crude prices more than 9 per cent higher in the last week.

These concerns were compounded on Wednesday as Chevron, Shell and BP all reported they were evacuating workers from platforms in the Gulf of Mexico as tropical storm Dennis was upgraded to hurricane.

These concerns were compounded on Wednesday as Chevron, Shell and BP all reported they were evacuating workers from platforms in the Gulf of Mexico as tropical storm Dennis was upgraded to hurricane

The August West Texas Intermediate contract on the New York Mercantile Exchange hit a record $61.63 in early electronic trade, while on London?s International Petroleum Exchange, the front-month Brent crude contract climbed to an all-time high of $60.26 a barrel.

be unable to meet projected western demand in 10 to 15 years.

10-15 years ?!

This year by other analysis (see thread below on Sprott calling the peak now with link to article

Maybe they're trying to break it to people gently. Cause less of a catastrophic economic meltdown.

Everyone on this board takes rather a pessimistic view.

Don't forget that, there's a chance your pessimism may be mis-placed... there's still a lot of experts who reckon a peak will arrive later next decade. Sprott's view may not be right. Only time will tell.

Fair point BigJim - it could be 10-15 years till peak, and we may be overly pessimistic. Worth remembering that as a later peak might buy more time to adjust.

But on the other hand for the Saudis to suggest that they can meet projected western demand for the next 10 years with demand growth and domestic (US/N.Sea) production in (steepish) decline does seem a tad optimistic.

I wonder where the extra 3million b/day to get to 12.5b/d by 2009 are coming from in Saudi. It doesn't seem to be new discoveries, so it must mean applying more technology to suck it out of the mature fields faster (water/gas injection etc) - fair enough if it can be done, but it just makes the post-peak downturn more of a cliff-face.
So although increased production from SA might delay the peak, it will make the effects of passing the peak worse.

There IS only a finite amount of oil. Technology can delay the peak, but at the end of the day it is all gone whichever way you look at it. And the steeper the decline, the harder the adaption.

<< So although increased production from SA might delay the peak>>

It could also make people awareness of PO worse. On the bases of the past we predict the future. If we have campaigns such as this warning about PO and 10 years time it didn?t happen it will make it harder to tell people then about PO, even if it occurred in 5 years after that. You can imagine the scene in 2015 with PO 5 years away trying to tell people about PO. ?You said that 10 years ago and it didn?t happen then, it won?t happen now!?

But European officials hope that energy saving measures could curb oil demand.

Yeah right, tell that to the Chinese or the Indians who have been waiting for ages to get the rate of industrial growth that they have now. Like they are going to stop now that things start to go well for them HA! good joke.

isenhand wrote: It could also make people awareness of PO worse. On the bases of the past we predict the future. If we have campaigns such as this warning about PO and 10 years time it didn?t happen it will make it harder to tell people then about PO, even if it occurred in 5 years after that. You can imagine the scene in 2015 with PO 5 years away trying to tell people about PO. ?You said that 10 years ago and it didn?t happen then, it won?t happen now!?

Yes that is a worrying thought - caught between the devil and the deep blue (or a rock and a hard place if you don't come from a maritime nation).

On the other hand people have been warning about global warming for years with no obvious effects, and yet we don't see many people saying "you said that in the 70s and it didn't happen, why should we believe it now"

Partly this is because the effects are starting to be visible now. In the same way if the peak oil production really is 15 years away, then when it arrives the effects will arrive with it and people will believe.

We are not crying "Wolf!" when there is no wolf - we are crying "Wolf!" because we can see the wolf coming even if we don't know how fast

Effect of peak oil will be apparent before the peak sure to supply constraints - eg supply will still be able to grow for a bit but not as fast as we would like causing shortages and high prices. This is a good thing as awareness will hopefully grow pre-peak.

Some of these affects are already apparent.