IHS Chemical Week


Peak Oil Goes Mainstream

2:09 PM MDT | May 5, 2009 | By VINCENT VALK

Peak oil is not a new idea, though it has generally been the domain of guys like this. Nothing against Kunstler – his ideas are worth consideration – but he probably wouldn’t be my go-to-guy for sober-minded analysis. But now peak oil has popped up in a rather unlikely place: the bland pages of financial analyst reports.

But how could oil have peaked when prices have come down by nearly $100/bbl in the past year? Wouldn’t that point to an inventory glut, if anything? For now, maybe. But just you wait until the economy starts to turn around, say analysts at the bank Raymond James:

"Of course, we cannot definitively prove that this marks the all-time peak (that is, that global oil production will never again surpass the 79.3 million b/d mark). That is something that will only become clear with the benefit of years of hindsight as was the case with the US in the 1970s. However, it is entirely intuitive to conclude that if both OPEC and non-OPEC production posted declines against the backdrop of $100/bbl oil—when the obvious economic incentive was to pump at full blast—those declines had to have come for involuntary reasons such as the inherent geological limits of oil fields. To summarize, we believe that the oil market has already crossed over to the downward-sloping side of Hubbert's Peak [based on the production curve model developed by geophysicist M. King Hubbert]."

Does this mean that oil production has definitively peaked? Considering the recent track record of financial analysts, I’d have to say no. In fact, a recently released government study says that Gulf of Mexico production will peak in 2013 (still a bit close for comfort). Nevertheless, the mere fact that this idea has found its way into an analyst report is noteworthy. Whenever it ends, the age of oil will not last forever.

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