World will struggle to meet oil demand
By Carola Hoyos and Javier Blas in London

Published: October 28 2008 23:32 | Last updated: October 28 2008 23:32

Output from the world’s oilfields is declining faster than previously thought, the first authoritative public study of the biggest fields shows.

Without extra investment to raise production, the natural annual rate of output decline is 9.1 per cent, the International Energy Agency says in its annual report, the World Energy Outlook, a draft of which has been obtained by the Financial Times.

Iniciado por Rey Marítimo

¿En global un 9.1%? Eso sería demasiado. Se referirá a algún campo en concreto. No puede ser. Bueno, de hecho habla "sin inversión adicional para aumentar la producción", o sea que se refiere a campos concretos (claro que aún me deja más intranquilo el comentario).

La única buena noticia de la depresión económica en que entramos, es que está bajando y mucho más que bajará la demanda de petróleo...

Iniciado por Rey Marítimo

¿En global un 9.1%? Eso sería demasiado. Se referirá a algún campo en concreto. No puede ser. Bueno, de hecho habla "sin inversión adicional para aumentar la producción", o sea que se refiere a campos concretos (claro que aún me deja más intranquilo el comentario).

La única buena noticia de la depresión económica en que entramos, es que está bajando y mucho más que bajará la demanda de petróleo...

The risk to the UK from falling oil production in coming years is greater than the threat posed by terrorism, according to an industry taskforce report published today.

The report, from the Peak Oil group, warns that the problem of declining availability of oil will hit the UK earlier than generally expected - possibly within the next five years and as early as 2011.

Oil supply could then rapidly decline, or even collapse, the report warns, with potentially devastating implications for the UK economy.

The report was issued today by the recently established UK industry taskforce on peak oil and energy security, a group of eight companies including transport firms Virgin, Stagecoach and FirstGroup, engineers Arup, architects Foster and Partners, and energy giant Scottish and Southern.

Entitled The Oil Crunch, the report argues that the risk of an early peak in oil production poses a bigger threat to UK society than tightening gas supplies, terrorism or the short-term impacts of climate change.

The "peak oil" debate has raged for many years. Some governments and oil companies believe that crude oil production will meet rising demand for decades to come. But an increasingly vocal group - including many experts from within the oil industry - claim that a production peak is imminent.

The new report marks the first time a group of businesses has weighed into this debate. At its core are two newly commissioned assessments of future oil production: one from Chris Skrebowski, consulting editor of Petroleum Review, and one from Shell.

Skrebowski predicts that global oil production will peak in the period 2011-2013 and then decline steadily, with non-conventional sources such as tar sands failing to fill the gap in time to avoid a serious energy crunch. He also warns that supplies could collapse if a handful of huge, long-established oil fields go into terminal decline simultaneously.

Shell, by contrast, foresees oil production rising until 2015, and then remaining on a plateau until the 2020s, with unconventional sources balancing out a decline in regular crude extraction.

Having examined the evidence, the taskforce considers that Skrebowski's peak-and-fall scenario is the "highly probable" outcome, with the collapse scenario also possible.

This view contrasts starkly with the position of the British government. A statement from the new Department of Energy and Climate Change reiterates the government's established view on this issue.

"The government's assessment is that global proven reserves are larger than the cumulative production needed to meet rising demand until at least 2030," the statement says. "This is consistent with the assessment made by the International Energy Agency in its 2007 World Energy Outlook that lead to the conclusion that global oil resources are adequate for the foreseeable future."

(...) By any benchmark the economic cost of the recent rise
in oil prices is nothing short of staggering. A lot more
staggering than the impact of plunging housing prices
on housing starts and construction jobs, which has been
the most obvious brake on economic growth from the
housing market crash. And those energy costs, unlike the
massive asset writedowns associated with the housing
market crash, were borne largely by Main Street, not Wall
Street, in both America and throughout the world.
Certainly oil shocks are no stranger to recessions. Four
of the last five global recessions were preceded by one
(Chart 1). Yet the recent spike in oil prices doesn’t seem
to get any credit for what’s happening to the world
economy now.

That’s odd because it should. Curiously, an over-500%
increase in the real price of oil gets virtually ignored as a
culprit behind today’s economy, eclipsed by the ongoing
crisis in financial markets. Yet the run-up in real oil prices
this cycle is over twice the spike in oil prices that occurred
during the first or second OPEC oil shock (Chart 2). And
those oil shocks produced two of the deepest recessions
in the entire post-war period, including the 1980-82
double dip. (...)

The problem is particularly acute for US manufacturers, especially Detroit's 'Big Three': GM, Chrysler and Ford. The current slowdown has made a bad situation worse. In 1998, for example, they accounted for 70% of the North American market. Today, it's closer to 42%. High gasoline prices have seen Americans switch from the gas-guzzling SUVs, such as the monstrous Hummer, to cheaper and more fuel-efficient runabouts from Japan and Europe. As such, sales at Ford and Chrysler are down 35% and 33% respectively this year. GM and Chrysler are close to bankruptcy, while Ford is burning through $1bn a month in cash just to stay afloat.

All this means shares in US carmakers are cheap, of course, but given that credit ratings agency Standard and Poor's looks as though it could downgrade GM's debt further, only a truly brave investor would touch it. Citigroup has just downgraded Ford and GM to sell from hold because of the deteriorating credit situation. Chrysler is even more vulnerable and may require a government bailout to survive.