World oil supplies are set to run out faster than expected, warn scientists but this turns out to be the usual suspects. Its in response to BP: BP’s Statistical Review of World Energy, published yesterday, appears to show that the world still has enough “proven” reserves to provide 40 years of consumption at current rates. The assessment, based on officially reported figures, has once again pushed back the estimate of when the world will run dry.
But the Peak Oil folk (well, Colin Campbell) say it’s quite a simple theory and one that any beer drinker understands. The glass starts full and ends empty and the faster you drink it the quicker it’s gone. Gosh, that was easy… but how about some numbers? (he also says When I was the boss of an oil company I would never tell the truth. It’s not part of the game – which leads me to wonder: is he telling the truth now?). The numbers: global production of oil is set to peak in the next four years before entering a steepening decline.
Um, well, who is right? Wiki says Economist Michael Lynch claims Campbell’s research data is sloppy. He points to the date of the coming peak, which was initially projected to occur by 1995, but has now been pushed back to 2007. However, Campbell and his supporters insist that when the peak occurs is not as important as the realization that the peak is coming.. Um. So maybe it won’t be the next 4 years after all.
[Update: hey, peak oil posts are popular, I must do more of them. Meanwhile, a reader writes: If oil is so abundant, why are we digging up bitumen and drilling several klicks below the Gulf of Mexico waters to sate our demand? to which I would reply: because oil is $60 a barrel and
oil shale bitumen is economic at $30 (or whatever) a barrel.
On another note, I presume that there are people within the oil industry who really know what is going on. If there was a real scarcity of oil, it should be in the futures prices. OTOH the price went up from $10 to $60 without any great change in reserves, so trying to guess reserves from prices is tricky! -W]
[Another update: 2 people (plus a friend down the pub) picked me up on my economic illiteracy: I had assumed that futures prices would show a rise if future oil was going to be scarce. But D says it most clearly: You can always buy on the spot market and sell on the future market by paying the price of carry (cost of storage plus the opportunity cost of forgoing the best risk-free investment), therefore the future price can never exceed todays spot price plus the price of carry for the period in question. Which is pretty much what the futures prices seem to show... constant-ish at around $70. I assume its the "sett" column I should be reading? -W]