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http://www.irishtimes.com/newspaper/wor ... 73147.html

Oil prices to keep rising as peak production reached in 2006

FRANK McDONALD, Environment Editor, The Irish Times, Friday April 29th 2011


THE AGE of cheap oil is now over – and that’s official.

For the first time, the International Energy Agency has conceded that global crude oil production has already peaked and that the commodity will become more and more expensive.

In the Catalyst programme broadcast last night on Australia’s ABC1 television, the agency’s chief economist, Fatih Birol, said “peak oil” was reached in 2006.

He said that he expected oil prices to rise by 30 per cent over the next three years.

“The existing [oil] fields are declining so sharply that in order to stay where we are in terms of production levels in the next 25 years, we have to find and develop four new Saudi Arabias,” Dr Birol said.

“It is a huge, huge challenge that we continue to underline.”

Only five years ago, the agency – an independent, inter-governmental agency formed in the wake of the 1973 oil crisis – was confidently forecasting that crude oil production would increase to 120 million barrels a day by 2030.

Dr Birol said one of the conclusions the agency had come to was that the age of cheap oil was over.

Yesterday, light crude was trading at $113 per barrel and forecast to rise to $130 per barrel.

At the height of the global financial crisis in 2008, oil spiked to $148 per barrel.

Global instability in oil-rich regions meant that crude oil would only get more expensive, according to Dr Birol.

“The amount of increase in the oil input bill in Europe is equal to the government budget deficit of Greece plus Portugal put together,” he said.

“If it increases further . . . we believe it will increase at least 20, 30 per cent higher in the next few years to come and this would mean additional pressure on the financing of many governments who are the oil importers.”

More expensive oil will make it more difficult for countries to break out of recession.

Dr Birol said more oil reserves “might be there”, but access was not.

There was also market manipulation.

“For some producers, it is better that oil doesn’t come to market so they would like to see perhaps higher prices as a result of tightness in the markets,” he said.

ABC Interviewer: How urgent is this?

Fatih Birol: I think it would have been better if the governments had started work on this at least ten years ago.

biffvernon wrote:This film is really rather good, in it's own sweet way: http://www.abc.net.au/catalyst/stories/3201781.htm

I love the way it ends:

ABC Interviewer: How urgent is this?

Fatih Birol: I think it would have been better if the governments had started work on this at least ten years ago.

RGR wrote:

UndercoverElephant wrote:

biffvernon wrote:This film is really rather good, in it's own sweet way: http://www.abc.net.au/catalyst/stories/3201781.htm

I love the way it ends:

It's OK. RGR says we just discovered three "new Saudi Arabia's" (sic.)

Just in the past 6 years or so. Goodness knows that TOD is going to be irritated that their 2008 call for peak isn't being taken seriously, or worse yet, those now flaunting information which says we have yet ANOTHER peak in 2010.

Is there a minimum number of decades (or centuries) within which peak has been declared before those of who have been giggling the entire time are vindicated?

RGR wrote: Really? This is what it was supposed to cause within DAYS of it happening.

Go worry about something important.

Peak oil happened (pick your favorite year or past peak) and it was so terrible that it can't even increase my commuting costs.

What do you say we all move along to an issue of real consequence, like a decent super volcano eruption, or cosmic collision?

Doesn't everyone get tired of this make believe stuff...

Yeats wrote:TURNING and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned

UndercoverElephant wrote: The basics of peak oil theory are so damned simple that any reasonably intelligent ten-year-old could grasp it. Predicting the precise consequences of it - the entire series of world events that would accompany it - is beyond the capacity of the most intelligent, highly-educated polymath alive.

If we look over a long period of time there's not a very good correlation between the "actual" oil price – that is, the price it cost at a particular moment in time – and oil production. However, if we use inflation adjusted values – which value oil at a specific point in time (in this case, 2009) – we do get a good correlation when oil production is constrained. If we look at the period from the mid-1980s to 2000, the price of oil was falling as production rose, reflecting the high levels of production as non-OPEC producers – such as Britain, Norway and West African states – brought more oil into the market. Over this same period, due to the significance of oil prices within the economic process, we saw a sustained period of global economic growth. In contrast, from the early-1970s to the early 1980s, when oil supply was constrained by the political actions of oil producers (such as OPEC or Iran), the price roughly follows the production trend – although not with a very good fit.

The graph on the next page is split into two in order to contrast three historic states in oil production: the unconstrained (mid-1980s to 2000) and politically constrained (early-1970s to early 1980s) periods explained above; and the most recent geophysically constrained period of production. If you look at the lower graph you can see that production rises until around 2004/5. This is when oil production reaches the plateau which defines the geophysical limits of oil production – the plateau of peak oil. From this point on, as the constrained oil production rises above the mean of the plateau it causes prices to spike; except for the period around 2008/9 which is complicated by the effects of the financial collapse and the credit crunch. Now that the world economy is growing once more, rising demand is putting pressure on spare production capacity, causing prices to spike again.