Do you remember all the fuss about peak oil just before the GFC hit, when oil was $147 a barrel? Unless the US or Europe collapse, expect the price to continue rising (largely due to Asian demand) and expect all the media fuss about ‘peak oil’ to come back too.
But remember this. The response to the question “how much oil do we have left?” is “it depends on the price.” If the price of oil continues to rise we will find more oil and get more oil out. However, the speed at which you recover the oil also influences how much is down there. If the price is high and you get it out fast you recover less oil. Conversely, if the price is low you go after less but you recover more. Geddit?
I believe that peak oil is accurate and that we are now past the point of peak oil. I think many of the current events have to do with this senerio and it won’t be long before the main stream media and population wake up and understand what is going on. For me and my family, we are preparing for the life after the crash.
Any discussion about oil prices over the next decade must include an attempt to quantify emerging economy demand as an important driver at the margin. Here is a simple thought experiment using Chinese demand to give some idea of the magnitude of the supply issues we face:
– China moves from 3 bbls/person/year to the South Korean per capita consumption level of 17 bbls/person/year
– Transition takes 30 years
– No peak in global production
In next 10 years we must find 44 million BOPD. If you superimpose peak production on top of this demand profile using the following parameters oil prices would increase approximately 250% in real terms over next 10 years:
– Oil demand elasticity of -0.3
– Current production 84 million BOPD, current price US$ 80
– Peak production 100 million BOPD
– Post peak decline rate of 3-4%
If you want to try the model for yourself using your own assumptions it can be found at Petrocapita Income Trust:
http://www.petrocapita.com/index.php?option=com_content&view=article&id=128&Itemid=86