International Energy Association: Forced to Eat Their Optimistic Data on Future Oil Supply?

The Guardian newspaper dropped a small bomb on the International Energy Agency (IEA) Monday night, on the eve of the IEA’s annual release of their signature product: The World Energy Outlook. According to the British newspaper, at least one if not two whistleblowers within the agency were claiming that the IEA’s record of chronic optimism on future oil supply had been disingenuous at best, and moreover, that this positioning had been influenced over the years by pressure from the US. In journalistic terms, the story was beautifully timed. Because yesterday, media on both sides of the Atlantic from the Financial Times to Reuters, to CNN and even CNBC, produced at least as much coverage on the controversy as the IEA’s scheduled data release. This effectively buried the Paris agency under a mound of accusation.

Let’s go back a few months and find some of the early signals, however, indicating this story was likely overdue. In August, a journalist at a separate British newspaper, The Independent, had conducted a long interview with the IEA’s chief Fatih Birol. In that interview, Dr. Birol made a number of very clear statements about the rather dire prospects for any future growth in world oil supply. This was unsurprising, in some respects, because the IEA had already asserted, in World Energy Outlook 2008, that existing oil fields were declining by at least 4.00% if not 6.00% per annum, and that to actually lift global oil production would require not billions, but trillions, of investment.

But something odd happened in the weeks that followed this interview. First, Dr. Birol was interviewed by another journalist, this time David Strahan. In this subsequent interview, Birol claimed he’d either been misunderstood, or misquoted, by the Independent’s journalist–Steve Connor–who had reported that Birol was calling for “peak oil in about ten years.” The dispute appears to have turned on the issue of conventional oil vs all liquids (which includes natural gas liquids). Was Birol talking about just crude oil with the Independent’s journalist? Or was that interview about all liquids, which includes biofuels? Regardless, the confusion conformed to a pattern at IEA in which conclusions stated in reports and publications were hedged in public statements, or vice-versa.

Let’s also recall that the forecasting record of both the IEA in Paris and the EIA in Washington has been abysmal this decade. The actual growth of global crude oil supply compared to their forecasts has been so far off the mark, that each agency probably shouldn’t have even bothered to produce forecasts. But what’s particularly bizarre in today’s IEA World Energy Outlook 2009 report is that IEA maintains their forecast of a peak in global oil supply around 2030, but now suggests Non-OPEC supply will peak next year. Sorry, you can’t have 60% of world supply peaking in 2010, and then a final global peak 20 years from now. Besides, Non-OPEC peaked five year ago, and is currently on care and maintenance.

The President of ASPO International, Kjell Aleklett, also posted yesterday at his website on his own attempts to force greater transparency at IEA Paris through the lever of his country, Sweden, and also through the organizational OECD structure, which funds the IEA. It would appear that the IEA has quite a lot to answer for. At the very least its own vacillations between its printed assertions, buried deep in its reports, and its public statements needs to be cleaned up. Secondly, the Paris agency produces a number of reports that run as much as 500 EUR, so it’s likely that some users may think twice before paying those kinds of sums if the information and conclusions have become politicized.

Finally, the IEA is a taxpayer supported group via the OECD, and it would be justified for the electorates in OECD countries to examine IEA’s funding, and to question to what extent country-by-country energy and transport policies are reliant on politicized IEA data. Today, Wednesday 11 November, Dr. Birol will field questions via the FT which is taking questions up until Noon GMT. Let’s see how the IEA handles this issue.

Photo: Wayne Thiebaud, Cakes, 1963. National Gallery of Art, Washington.

Graphic: Rembrandt Koppelaar, Non-OPEC Crude Oil Production, via The Oil Drum and Peak Oil Netherlands.

Comments

[Davewmart]

The IEA is also subject to pressure from the producers to accept their greatly overstated reserve estimates.
Had realistic appraisals been made, then serious efforts might have been made to promote alternatives, which the producers did not want.
In addition to the factors laid out in this article, it is a simple fact that more oil has been used than discovered every year since the mid-sixties.
IEA estimates are ludicrous.
For a realistic appraisal of reserves, see:
www.energybulletin.net...
It is quite clear that Western oil consumption will be much curtailed, with rising consumption in the oil exporters leaving ever less for export, rising consumption in the Bric countries and the impossibility of ramping production from resources like oil sands quickly, or at costs commensurate with economic growth.

2009 Nov 11 04:40 AM

[JeffDB]

If true, this could have HUGE implications for the world economy.

2009 Nov 11 08:43 AM

[wind4me]

when will the IEA just admit, they dont have a clue and U may as well go with China and Obama Green Energy coming in spades Nov 15th with China announcing a total 180 degree turn in GREEN ENERGY!

www.Wind4me.com

may as well PROFIT from (APWR) vs worry about the direction of Oil as China pumps out 14,000 NEW CARS per day and kills 700,000 citizens per year if they dont change their dirty waya!

2009 Nov 11 09:09 AM

[Ferdinand E. Banks]

Gregor, Dr Birol is the CHIEF ECONOMIST of the IEA. He is absolutely and totally hopeless, and I am absolutely and totally furious that I did not make a fool of him at a conference in Rome some years ago. Of course a bigger fool was also there in the form of a lady energy economist whose name I don't remember.

2009 Nov 11 10:06 AM

[Gary A]

We are going to be parking our cars, and refiners will continue to lose money indefinitely. 6 dollar gas won't do much for the US strapped consumer.

But Americans can fight back by not driving. Demand can and will tank if prices get too high. Get it? "Tank". Sorry I couldn't resist.

Bottom line, the US consumer must fight asset inflation by not spending. His survival depends on it.

2009 Nov 11 11:29 AM

[JeffDB]

On Nov 11 11:29 AM Gary A wrote:

> We are going to be parking our cars, and refiners will continue to lose money indefinitely. 6 dollar gas won't do much for the US strapped consumer.

But Americans can fight back by not driving. Demand can and will tank if prices get too high. Get it? "Tank". Sorry I couldn't resist.

Bottom line, the US consumer must fight asset inflation by not spending. His survival depends on it. >

$6 gas will "tank" the U.S. economy as well. It will suck additional hundreds of millions of dollars a day out of consumers' pockets and ship them to other countries to pay for our imports.

Just parking our vehicles is a lot easier said than done, at least on a large, national scale. Otherwise, we would have done so already. But if daily supply will be dropping, particularly if worldwide demand continues to increase, we will be forced to do so. We won't have a choice. If it isn't there it isn't there.

We will then have a pricing mechanism to force the necessary rationing upon us, at least if we are smart enough to allow the free market to allocate resources. If not we will have government controlled rationing, &/or "rationing by running out."

Truckers, farmers, taxi drivers and even consumers aren't likely to just park their vehicles unless and until they are forced to do so. Or at least that is how I see it.

2009 Nov 11 12:28 PM

[Alan von Altendorf]

That depends on how you define survival. I presume you'd like to have food delivered to grocery stores, feedstock for plastics, fuel for cops and garbage trucks. Matt Simmons rightly shows us the average age of US refineries and pipelines, and warns that our oil infrastructure is rusting to pieces. Which brings up the question of gas reserves.

As always, kudos to Gregor.

2009 Nov 11 12:44 PM

[svkoho]

JeffDB has it exactly right. Peak Oil is/was Peak Economic growth. The curves post peak will closely follow each other. Energy does work, mines minerals and metals, moves goods, becomes products. As cheap energy disappears,, so does cheap economic growth, subsidized by cheap energy and no amount of more expensive alternative energy will change that fact.The sectors harddest hit by this fact IMHO seem obvious, transportation, Big Ag and real estate. Positioning an investment strategy to take advantage of this shift is alas, less certain, made difficult by massive debt and deficits and statistical lies and distortions emanating from the government and the large corporations.

2009 Nov 11 01:00 PM

[OilFinder]

The IEA is not being pessimistic on future oil supply.
Once you start adding up production plans you'll see why:

1. Iraq - Proudction will increase from the current 2+ million barrels/day to around 10 million barrels/day by 2020. That's at least +7 million barrels/day in new supply.
www.ft.com/cms/s/0/5bc...

2. Brazil - Production will increase from the current 2+ million barrels/day to around 5.7 million barrels/day in 2020. This does not include discoveries made and gone into production in the interim, of which there will be many:
www.thaindian.com/news...

So far we're at +10.5 million barrels/day

3. Angola - Figures from already-announced plans show an increase in production by 1.2 million barrels/day by 2015. This does not include discoveries announced in the interim or recent discoveries whose production plans have yet to be made.
www.reuters.com/articl...

So far we're at +11.7 million barrels/day in new supply.

4. Saudi spare capacity is currently around 4 million barrels/day:
www.thenational.ae/app...
And the former chief reservoir engineer at Saudi Aramco says they can sustain 12-14 million barrels/day output for 50 years:
www.saudi-us-relations...

So we're now at + 15.7 million barrels/day in new supply. Conservatively.

5. Canadian oil sands production will double by 2020. This is an addition of 1.6 million barrels/day:
www.bloomberg.com/apps...

Subtotal is now 17.3 million barrels/day in new supply by 2020.

6. Non-Nigerian West African coast. Recent discoveries off the coast of Ghana and Sierra Leone indicate a large new oil province opening up. The Ghana discovery will begin production late next year. There *will* be other discoveries in this area. Let's assume 1 million barrels/day production from this province by 2020.
www.ogj.com/index/arti...
blogs.wsj.com/environm.../
investors.hyperdynamic...

Subtotal is now 18.3 million barrels/day in new supply by 2020.

I could go on with more examples. Reaching 20 million barrels/day by 2020 would be easy. I might even get to 25 million barrels/day, especially if we make some reasonable assumptions about new discoveries off the coast of Brazil and Angola.

Now, what about declines?

Let's be extremely pessimistic and assume production from Mexico, the UK and Noway falls to ZERO. This loses you about 7 million barrels/day, but we're still ahead by at least 11 million barrels/day. At this point you would have to lose the entire production of Russia to get to a measly +1-2 million barrels/day, but of course that won't happen. And production from the UK, Norway and Mexico won't fall to zero, either.

I could write a much longer exposition on this, but you get the point. The IEA is not being optimistic. Heck, they might even be *pessimistic*.

2009 Nov 11 01:37 PM

[Wildebeest]

How about some numbers on the projected cost of these new reserves? eg. the cost to produce oil from oil sands is significantly higher than producing it from a early life Saudi field.

The concern in these comments is about $6 gas. What is the marginal cost of producing a barrel from these new reserves versus reserves in the 90s? In other words it is not just about how much is left it is about what it costs to produce it.


On Nov 11 01:37 PM OilFinder wrote:

> The IEA is not being pessimistic on future oil supply.
> Once you start adding up production plans you'll see why:
>
> 1. Iraq - Proudction will increase from the current 2+ million barrels/day
> to around 10 million barrels/day by 2020. That's at least +7 million
> barrels/day in new supply.
> www.ft.com/cms/s/0/5bc...
>
>
> 2. Brazil - Production will increase from the current 2+ million
> barrels/day to around 5.7 million barrels/day in 2020. This does
> not include discoveries made and gone into production in the interim,
> of which there will be many:
> www.thaindian.com/news...
>
>
> So far we're at +10.5 million barrels/day
>
> 3. Angola - Figures from already-announced plans show an increase
> in production by 1.2 million barrels/day by 2015. This does not include
> discoveries announced in the interim or recent discoveries whose
> production plans have yet to be made.
> www.reuters.com/articl...
>
> So far we're at +11.7 million barrels/day in new supply.
>
> 4. Saudi spare capacity is currently around 4 million barrels/day:
>
> www.thenational.ae/app...
>
> And the former chief reservoir engineer at Saudi Aramco says they
> can sustain 12-14 million barrels/day output for 50 years:
> www.saudi-us-relations...
>
>
> So we're now at + 15.7 million barrels/day in new supply. Conservatively.
>
>
> 5. Canadian oil sands production will double by 2020. This is an
> addition of 1.6 million barrels/day:
> www.bloomberg.com/apps...;sid=aAXd0jJuIIoA
>
>
> Subtotal is now 17.3 million barrels/day in new supply by 2020.<br/>
>
> 6. Non-Nigerian West African coast. Recent discoveries off the coast
> of Ghana and Sierra Leone indicate a large new oil province opening
> up. The Ghana discovery will begin production late next year. There
> *will* be other discoveries in this area. Let's assume 1 million
> barrels/day production from this province by 2020.
> www.ogj.com/index/arti...
>
> blogs.wsj.com/environm.../
>
> investors.hyperdynamic...
>
>
> Subtotal is now 18.3 million barrels/day in new supply by 2020.<br/>
>
> I could go on with more examples. Reaching 20 million barrels/day
> by 2020 would be easy. I might even get to 25 million barrels/day,
> especially if we make some reasonable assumptions about new discoveries
> off the coast of Brazil and Angola.
>
> Now, what about declines?
>
> Let's be extremely pessimistic and assume production from Mexico,
> the UK and Noway falls to ZERO. This loses you about 7 million barrels/day,
> but we're still ahead by at least 11 million barrels/day. At this
> point you would have to lose the entire production of Russia to get
> to a measly +1-2 million barrels/day, but of course that won't happen.
> And production from the UK, Norway and Mexico won't fall to zero,
> either.
>
> I could write a much longer exposition on this, but you get the point.
> The IEA is not being optimistic. Heck, they might even be *pessimistic*.

2009 Nov 11 02:10 PM

[Tony Daltorio]

You neglect to mention that the costs of many of these new sources of oil will be extremely high.

Also there will probably never be a large amount of oil sands production, not only because of high costs, but because of the environmental costs - water, etc.

Finally, if you believe the Saudi numbers on their reserves, I got some swamp land I'd like to sell you.


On Nov 11 01:37 PM OilFinder wrote:

> The IEA is not being pessimistic on future oil supply.
> Once you start adding up production plans you'll see why:
>
> 1. Iraq - Proudction will increase from the current 2+ million barrels/day
> to around 10 million barrels/day by 2020. That's at least +7 million
> barrels/day in new supply.
> www.ft.com/cms/s/0/5bc...
>
>
> 2. Brazil - Production will increase from the current 2+ million
> barrels/day to around 5.7 million barrels/day in 2020. This does
> not include discoveries made and gone into production in the interim,
> of which there will be many:
> www.thaindian.com/news...
>
>
> So far we're at +10.5 million barrels/day
>
> 3. Angola - Figures from already-announced plans show an increase
> in production by 1.2 million barrels/day by 2015. This does not include
> discoveries announced in the interim or recent discoveries whose
> production plans have yet to be made.
> www.reuters.com/articl...
>
> So far we're at +11.7 million barrels/day in new supply.
>
> 4. Saudi spare capacity is currently around 4 million barrels/day:
>
> www.thenational.ae/app...
>
> And the former chief reservoir engineer at Saudi Aramco says they
> can sustain 12-14 million barrels/day output for 50 years:
> www.saudi-us-relations...
>
>
> So we're now at + 15.7 million barrels/day in new supply. Conservatively.
>
>
> 5. Canadian oil sands production will double by 2020. This is an
> addition of 1.6 million barrels/day:
> www.bloomberg.com/apps...;sid=aAXd0jJuIIoA
>
>
> Subtotal is now 17.3 million barrels/day in new supply by 2020.<br/>
>
> 6. Non-Nigerian West African coast. Recent discoveries off the coast
> of Ghana and Sierra Leone indicate a large new oil province opening
> up. The Ghana discovery will begin production late next year. There
> *will* be other discoveries in this area. Let's assume 1 million
> barrels/day production from this province by 2020.
> www.ogj.com/index/arti...
>
> blogs.wsj.com/environm.../
>
> investors.hyperdynamic...
>
>
> Subtotal is now 18.3 million barrels/day in new supply by 2020.<br/>
>
> I could go on with more examples. Reaching 20 million barrels/day
> by 2020 would be easy. I might even get to 25 million barrels/day,
> especially if we make some reasonable assumptions about new discoveries
> off the coast of Brazil and Angola.
>
> Now, what about declines?
>
> Let's be extremely pessimistic and assume production from Mexico,
> the UK and Noway falls to ZERO. This loses you about 7 million barrels/day,
> but we're still ahead by at least 11 million barrels/day. At this
> point you would have to lose the entire production of Russia to get
> to a measly +1-2 million barrels/day, but of course that won't happen.
> And production from the UK, Norway and Mexico won't fall to zero,
> either.
>
> I could write a much longer exposition on this, but you get the point.
> The IEA is not being optimistic. Heck, they might even be *pessimistic*.

2009 Nov 11 02:31 PM

[OFWHAP]

Oilfinder- If you want to believe Saudi Arabia's numbers, just read Twilight in the Desert by Matthew R. Simmons. Saudi Aramco will not allow outside parties to audit their "proven" reserves, they no longer publish well-by-well reserves, and most of this so-called excess capacity in Saudi Arabia is heavy, sour crude, which isn't very useful for our purposes. A lot of these new wells in Saudi Arabia are replacing lost capacity from Ghawar, Safaniyah, Abqaiq, and Berri, primarily due to overproduction in the past whenever the Kingdom felt obligated to pick up the slack with any worldwide production shortfalls.

2009 Nov 11 04:06 PM

[William Davison]

If current field depletion is 6% a year as the IEA has forecast and current conventional crude production is about 72mbd, then your 18.3mbd new supply is wiped out in 5 years and your 25mbd in 7 years.

On Nov 11 01:37 PM OilFinder wrote:

> The IEA is not being pessimistic on future oil supply.

> Subtotal is now 18.3 million barrels/day in new supply by 2020.<br/>
>
> I could go on with more examples. Reaching 20 million barrels/day
> by 2020 would be easy. I might even get to 25 million barrels/day,
> especially if we make some reasonable assumptions about new discoveries off the coast of Brazil and Angola.*.

2009 Nov 11 04:25 PM

[OilFinder]

@ OFWHAP and Tony,

Let's assume you're right and the Saudis are lying about how much oil they have. Let's say their claim of 700 billion barrels total oil resources is a complete fabrication. As as aside, that 700 Bbbl figure is from 2004 - thanks to increased recovery technology they're now thinking they can eventually bump that up to 900 Bbbl:
www.arabianoilandgas.c.../

But let's ignore that. Let's say their P1 reserves of ~260 Bbbl are actually more like their P3 reserves. That is, their total oil recoverable resources are 260 billion barrels instead of 700 billion barrels. What does this say about former Aramco engineer Saleri's claim in my link above?

Do the math.

12 million barrels/day = 4.38 billion bbl per year.
4.38 billion bbl for 50 years = 219 billion bbl.

Notice that is still 41 billion bbl less than our assumed P3 reserves of 260 billion bbl. So, the Saudis could pump 12 million bpd nonstop for 50 years and still have a Libya's worth of oil left over. And this assumes their production would be constant. If, as is likely, periods of slow demand force them to pump less for a while, this will only extend the time in which they are capable of pumping 12 million bpd, and delay their depletion. Maybe the last 10-20 years of this 50-year time span we might see them finally go into some declining state, probably gradually. And again, this is a pessimistic scenario.

There is also a lot more worldwide refining capacity for sour and heavy crudes than you think, nor is it a particularly new phenomenon. Most of the oil drilled from California's Kern County oil fields starting 100+ years ago has been 14-17 gravity oil - heavy stuff. Your typical North Slope crude has been 20 degree sour crude. Most oil from Venezuela going back to the 50's has been heavier grades of oil. And so on. Recently, prices of sour and heavy grades of crude have been rising relative to sweeter and lighter crude because of an excess of refining capacity geared toward refining such oils. Refiners are paying a relative premium for these oils just to keep their refineries going.

If all you do is read Matt Simmons and the ASPO website, you are going to be disappointed when world and Saudi oil production does not begin to crash when you expected it to.

@Willdebeest,
Yes, it is true that many of these new oil sources will be more expensive than in days past. However, claims of $100 prices as a requirement for Brazilian oil and Alberta oil sands are little more than peak oil hype. Petrobras has repeatedly told us their sub-salt fields will be profitable at $40:
www.laht.com/article.a...

As for the oil sands, the day when they have to spend gob of money ripping up the earth to extract the stuff will eventually be history:
www.edmontonjournal.co...
This will likely bring down costs, too.

We may not see $10 oil any time soon, but the world economy is not going to crash with $40-$70 oil, and such a price will bring us a lot more oil.

2009 Nov 11 04:51 PM

[OilFinder]

That is only true for fields *past* their peak, and it is 5.1%, not 6%:
www.worldenergyoutlook...
^
Page 2:
"Based on data for 580 of the world's largest fields that have passed their production peak, the observed decline rate - averaged across all fields and weighted by their production over their whole lives - is 5.1%"

Not all fields are past their production peak.


On Nov 11 04:25 PM William Davison wrote:

> If current field depletion is 6% a year as the IEA has forecast and
> current conventional crude production is about 72mbd, then your 18.3mbd
> new supply is wiped out in 5 years and your 25mbd in 7 years. <br/>
>
> On Nov 11 01:37 PM OilFinder wrote:

2009 Nov 11 05:12 PM

[Saildog]

What a load of tosh.

KSA has likely passed peak; and either cannot or will not increase supply. It doesn't matter which, the extra production will not happen.

As for Brazil, Africa and Iraq, you can believe what you like, but I am not nearly so sanguine. Technology, lack of investment, politics and war are more than not likely to intervene.

You mention The UK, Mexico and Norway as representative of declines, almost in passing. Decline rates average at least 5%, or over 4mbpd every year. That is a new KSA every 2 years just to stay even, a statistic the IEA itself has quoted. How many new KSA's are there?

As I say - complete tosh. Peak Oil happened over the period 2004-2008.


On Nov 11 01:37 PM OilFinder wrote:

> The IEA is not being pessimistic on future oil supply.
> Once you start adding up production plans you'll see why:
>
> 1. Iraq - Proudction will increase from the current 2+ million barrels/day
> to around 10 million barrels/day by 2020. That's at least +7 million
> barrels/day in new supply.
> www.ft.com/cms/s/0/5bc...
>
>
> 2. Brazil - Production will increase from the current 2+ million
> barrels/day to around 5.7 million barrels/day in 2020. This does
> not include discoveries made and gone into production in the interim,
> of which there will be many:
> www.thaindian.com/news...
>
>
> So far we're at +10.5 million barrels/day
>
> 3. Angola - Figures from already-announced plans show an increase
> in production by 1.2 million barrels/day by 2015. This does not include
> discoveries announced in the interim or recent discoveries whose
> production plans have yet to be made.
> www.reuters.com/articl...
>
> So far we're at +11.7 million barrels/day in new supply.
>
> 4. Saudi spare capacity is currently around 4 million barrels/day:
>
> www.thenational.ae/app...
>
> And the former chief reservoir engineer at Saudi Aramco says they
> can sustain 12-14 million barrels/day output for 50 years:
> www.saudi-us-relations...
>
>
> So we're now at + 15.7 million barrels/day in new supply. Conservatively.
>
>
> 5. Canadian oil sands production will double by 2020. This is an
> addition of 1.6 million barrels/day:
> www.bloomberg.com/apps...;sid=aAXd0jJuIIoA
>
>
> Subtotal is now 17.3 million barrels/day in new supply by 2020.<br/>
>
> 6. Non-Nigerian West African coast. Recent discoveries off the coast
> of Ghana and Sierra Leone indicate a large new oil province opening
> up. The Ghana discovery will begin production late next year. There
> *will* be other discoveries in this area. Let's assume 1 million
> barrels/day production from this province by 2020.
> www.ogj.com/index/arti...
>
> blogs.wsj.com/environm.../
>
> investors.hyperdynamic...
>
>
> Subtotal is now 18.3 million barrels/day in new supply by 2020.<br/>
>
> I could go on with more examples. Reaching 20 million barrels/day
> by 2020 would be easy. I might even get to 25 million barrels/day,
> especially if we make some reasonable assumptions about new discoveries
> off the coast of Brazil and Angola.
>
> Now, what about declines?
>
> Let's be extremely pessimistic and assume production from Mexico,
> the UK and Noway falls to ZERO. This loses you about 7 million barrels/day,
> but we're still ahead by at least 11 million barrels/day. At this
> point you would have to lose the entire production of Russia to get
> to a measly +1-2 million barrels/day, but of course that won't happen.
> And production from the UK, Norway and Mexico won't fall to zero,
> either.
>
> I could write a much longer exposition on this, but you get the point.
> The IEA is not being optimistic. Heck, they might even be *pessimistic*.

2009 Nov 11 05:43 PM

[OFWHAP]

@Oilfinder

At what point has Saudi Arabia ever produced 12.5 million barrels per day? They have been SAYING that they plan to produce that for 2009, but I have yet to find data that they have ever produced numbers that high.

2009 Nov 11 06:47 PM

[OilFinder]

Their ability to produce 12 million barrels/day is very recent, being contingent upon projects completed just this year and last. But since demand is weak with the recession, to date they haven't NEEDED to produce that much.

The peak oil crowd loves to crow about Saudi's inconsistent production, but what they conveniently forget is that the Saudis are the swing producer. When demand goes up, they produce more. When demand goes down, they produce less. After the 1985-86 oil price crash they reduced production down to a measly 4 million bpd. That did not mean they were "past peak," they simply turned off the spigots in response to an oversupply of the stuff. Today, they aren't going to churn out 12 million bpd just for the sake of churning out 12 million bpd. In a market like this, they wouldn't be able to find buyers for all that extra oil - at least not without crashing the price of oil and pissing off their fellow OPEC members, neither of which they care to do.

On Nov 11 06:47 PM OFWHAP wrote:

> @Oilfinder
>
> At what point has Saudi Arabia ever produced 12.5 million barrels
> per day? They have been SAYING that they plan to produce that for
> 2009, but I have yet to find data that they have ever produced numbers
> that high.

2009 Nov 11 07:42 PM

[bigelk]

Why no one ever talks about the DECREASE in demand that lays on the very near horizon is mind shattering. With cars that will easily achieve 150 mpg + and eventually moving toward vehicles that are powered by non-oil product (electric cars/batteries etc). If gasoline demand makes up a large percentage of the oil demand then we should be talking more about the coming economic discontent to the middle east, and who the winners will be in the "new" oil climate 5 years from now (utilities anyone?)

2009 Nov 11 08:48 PM

[JeffDB]

On Nov 11 03:53 PM William Davison wrote:

> See Lionel Badal article about IEA
> seekingalpha.com/artic...
----------

That is a great article you linked to, Mr. Davison. An excellent supplement to this article.

P.S. I inadvertently hit a the thumbs down button. Sorry about that. It deserves a solid thumbs up!

2009 Nov 11 11:51 PM