Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

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


© 2005-2022 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