Here are a few of the highlights, but give the entire article a read it's short.
Eric Reguly: Inexpensive Oil Vanishing at Alarming Rate (Globe and Mail).
Citing the economic meltdown and the current oil abundance the other author wonders:
You would think the price would be far less as the United States challenges Saudi Arabia for top producer status.Addressing why a falling price hasn't accompanied the current "abundance of oil" that we often read about.
Exotic production – oil sands, biofuels, natural gas liquids – are supposed to fill the gap. But this so-called unconventional production is highly expensive and quite possibly insufficient to cover the drop off in cheap, conventional production. Prices will rise to the point that demand will have to level off or fall. The “peak oil” and “peak demand” theories are really opposite sides of the same coin.This is the scary stuff, replacing the declining production of existing fields. I'm not sure about the current state of affairs, but I believe we're already wringing out every last drop at whatever cost. Just think of the implications of the extent that tertiary enhance oil recovery methods have been applied to the big Russian and/or Saudi fields. If those tertiary barrels are still out there to be had, that is a big reprieve. But if current decline rates include exhaustive EOR programs then we're in some trouble.
The data leave no doubt that the inexpensive oil is vanishing quickly. Conventional oil production peaked in 2008 at about 70 million barrels a day and is declining by about 3.3 million barrels a day, every year. Saudi Arabia pumps about 10 million barrels a day. The math says a new Saudi Arabia has to be found every three years to offset the conventional oil drop off.Thankfully, Reguly recognizes that both sides of the market drive are required for a full discussion. He discusses a topic that has obviously found a home on this blog. China gets more use out of the marginal barrel consumed then we do. And even aknolwedges that they use their oil much more efficiently (in Energy/GDP terms as alluded to in this post)
The increase is driven by economic recovery and ever-rising demand in China and elsewhere in the developing world. China is willing to pay almost any price for oil because oil drives growth more than it does in the West, where energy use is less intensive per unit of economic output.The only thing we're missing is a discussion on the high decline rates of shale and the implications that will have once these plays are saturated.
The peak oil crowd has thinned out, to be sure, but it won’t disappear. Gushing U.S. shale oil doesn’t mean oil is about to become cheap and plentiful. The fall off in conventional oil production is real, and scary.Like I said, it was a great article, and it's always good to see the POD get some play in the mainstream media.