The Long Term Debate - Is Oil Running Out

June 19, 2005 – Vol.10 No.13

THE LONG TERM DEBATE - IS OIL RUNNING OUT?

An oil crisis could begin at the push of a button. A cell phone activated bomb could blow up an oil facility in Saudi Arabia, or Alaska.

But in the long term can oil production keep up with demand? Is oil peaking?

Oil tycoon T. Boone Pickens says yes, oil is near or at peak and the oil industry will never again have a large cushion of oil supply that will keep prices down. Plan on a price floor of $50 per barrel, but expect oil to run above $60 per barrel with gasoline at $3 per gallon in the U.S., he says.

But Cambridge Energy Research Associates (CERA) sees peak oil in the future, not until 2020 at least. Even then oil will plateau, not peak in mountainous terms, and stay there for decades.

However CERA includes in its study the continued development of oil sands (tars), natural-gas-to-liquids technologies and ultra deep water drilling in its survey of potential world oil supplies for the next 15 years or so. These sources could amount to 35 percent of global supplies by then, they think.

CERA, too, thinks oil consumption will grow at an average of 2.2 percent per year even though consumption grew at 3.4 percent in 2004.

On the high side, CERA believes oil capacity could rise by as much as 16 mbd (million barrels per day) between now until 2010, leading to a glut of oil and thus lower prices. The low end of the prediction is an increase of 11.5 mbd. The lower figure would subdue CERA’s optimism.

The full report -- Worldwide Liquids Capacity Outlook to 2010 - Tight Supply or Excess of Riches -- will be published by the end of June. An informative press release is available at the CERA website at http://www.cera.com/