64: Peak Oil prediction by EnergyInsights - unqiue analysis and insights

EnergyInsights.net team

We have performed an analysis of the historical production of all oil producing countries. We then went through every country and have predicted the actual maximum reasonable production rate they can achieve from mid 2007 until 2012 - using our expert knowledge. We then overlay the EIA official global oil demand forecast issued in July 2007. What we came up with was a surprising and one could describe as disturbing imbalance - starting this year. The gap between supply and demand widens from early 2007 onwards. Global oil production peaks at 83 million bbls/day in 2010 to 2012 and stays more of less flat for a 3-5 year period. Meanwhile, demand is forecast to rise by the EIA by an additional 1.37 million bbls/day from 2006 up until 2010, and then an additional 1.32 million bbls/day after 2010 up until 2015 - using current GDP projections and economic forecasts. China and India will drive the oil demand growth. Demand in the Middle East, other Asian countries and Africa also grow fast.

Obviously this imbalance implies oil prices will shoot up – probably to $100/bbl and then $125/bbl – which would then start to constrain demand - but we believe it will require oil prices well over $100/bbl to have a material impact on demand. Transport fuels (diesel) is a key driver - and there is no reasonable alternative to the combustion engine at present. 

Those "Doubting Thomases" will say that the oil price has dropped from $78/bbl end July to $71/bbl on 10^th August 2007 – what we say is this is a temporary speculative selling by hedge funds reducing there positions before the biggest oil price hike you will ever see starts in September 2007 lasting years.

The "Doubting Thomases" will also say – Saudi Arabia will bail us all out by hiking their oil production. What we say is – our oil production prediction assumes Saudi Arabia increases production from its current rate of 8.8 million bbls/day to 9.5 million bbls/day by end 2007 then up to 11 million barrels steady for the next 5 years – some people think this is a tall order – we do as well, but even assuming Saudi Arabia dramatically ramps up its production, the overall global production rate does not increase significantly! We have essentially reached Peak Oil – our prediction is that in any year from 2008 and 2012 is Peak Oil year - because production is so flat, it is difficult to say which year production will actually peak in - it's on an unstable plateau with all countries pumping hard - at maximum capacity. It's also possible production could drop off rapidly if one or more countries have major problems with their infra-structure or oil fields - there are upsides as well, but we believe we have balanced them by the downsides to supply. 

These higher oil prices will lead to:

·         Increase food prices – for transportation. Also, land shortages cause by the transfer of crops from food to corn & sugar for ethanol production (e.g. US mid-west and Brazil)

·         Lower global GDP growth rates of ca. 0.5 to 1.0% (high oil prices act like a tax – a drag on economic activity)

·         Booming oil towns around the world where huge wealth will be created

·         Higher stock market valuation for oil companies and oil services companies - lower stock market valuations for energy intensive businesses (e.g. heavy manufacturing)

·         Increases in interest rates – and therefore reduction in asset prices of property

Our chart is truly unique – we have the back-up data for every country to support our predictions - we intend to update the annually, or if other data comes in. Some of the key countries production forecasts we have are outlined in the table below, for your review:

 

Oil Production Forecast  - some key countries
Thousand barrels daily	2005	2006	2007	2008	2009	2010	2011	2012
USA	6895	6871	6734	6599	6467	6338	6211	6087
Canada	3041	3147	3272	3403	3539	3681	3791	3867
Mexico	3760	3683	3609	3537	3466	3397	3329	3263
Venezuela	2937	2824	2782	2740	2699	2658	2618	2579
Norway	2969	2778	2639	2507	2382	2263	2150	2042
Russian Federation	9552	9769	9818	9867	9917	9966	10016	10066
United Kingdom	1809	1636	1538	1446	1359	1277	1201	1129
Iran	4268	4343	4343	4343	4343	4343	4343	4343
Iraq	1833	1999	2000	2000	2000	2000	2000	2000
Kuwait	2643	2704	2758	2813	2870	2927	2956	2956
Saudi Arabia	11114	10859	9200	11000	11000	11000	11000	11000
United Arab Emirates	2751	2969	3177	3399	3637	3819	3876	3876
Nigeria	2580	2460	2460	2460	2460	2460	2460	2460
China	3627	3684	3684	3684	3684	3684	3684	3684
India	784	807	807	807	807	960	1000	1000
	60562	60532	58820	60605	60629	60773	60635	60352

Now you should have a better insight into when the next oil price shock will occur - and do not be surprised to see one develop in the next few years. And if you expect to find the above chart or data anywhere else - I think you'll be disappointed. It's taken years of analysis to get this in the correct format to present to you. We do not have a crystal ball - but we have a good track record for economic predictions – do not be surprised if oil prices are over $100/bbl next year and beyond. The only thing likely to stop this rise is a recession in Europe and the USA - something which is possible, but considered unlikely despite the stock market turbulence of 10th August and sub-prime problems in the USA.

We hope you have found these insights and supporting analysis and predictions helpful.

If you have any comments on the analysis, predictions or insights, please contact us on enquiries@energyinsights.net.

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