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Peak Oil

World oil prices are currently approaching $130 per barrel. A massive increase in the price of oil has been predicted by peak oil theory for some time. This is the outline of the theory.

Most of the world’s biggest conventional oil fields have already been discovered.

For example the average size of newly discovered oil fields
from 1935 - 1940 was 1.5 bn barrels.
From 1955- 1960 it was 300m barrels
and from 1999-2004 it as just 45m barrels.

So you can see that the discoveries today are fairly puny compared to those of the middle part of the 20th century.

This means that most of the world’s biggest oilfields are now in the later phases of their life, where the oil is harder to extract. This is resulting in an average decline in output of around 5% per year in the world’s oilfields.

At the same time world oil consumption has risen from
10m barrels per day in 1950
20m bpd in 1960
60m bpd in 1980
81m bpd in 2004

With China and India industrialising fast world demand for oil can only be expected to increase.
Scientists now know quite well how oil is produced and it is utterly dependent on the formation of a certain type of sedimentary basin, whose existence is relatively easy to discover.They are looking hard but they are pushed even to keep up with the decline in oil production let alone increase it.

Peak Oil theory simply says there will come a day when the rate of world oil production is at an all time high and from then on goes into decline. As we continue to demand more oil, the earth will no longer be supplying it. And as soon as demand exceeds supply then the price will go up. And that is just what is happening. Many commentators are now saying that the era of cheap oil is over.This may have disastrous economic consequences.

As similar argument can be made about the impossibility of the situation by considering energy return over energy invested

Whether oil will ‘run out’ is another matter. There are huge deposits in tar sands in Alberta, possibly over 1 trillion barrels but this unconventional oil is much harder to extract and may never produce oil at a rate fast enough to have much impact. The latest plan is to produce 4m bpd from the Tar Sands by 2020 compared to 1.3m bpd now. This is relatively small beer compared to the current world consumption level which is over 80m bpd.

Most of this data comes from David Strahan - The Last Oil Shock

For up to the minute information about Peak Oil from world experts go to www.theoildrum.com

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