Is the world of oil experts as polarized as society in Bush's America? Michael Simmons, prominent representative of the school of peak oil, in opposition to the oil industry's optimists, comes up with more alarming facts on the dwindling replacement rate of used oil. In an article in WorldOil.com (hat tip to PastPeak) Simmons sees exploration pinched from two sides. There are not enough drilling rigs and new finds are minimal:
"The global lack of spare capacity now extends far beyond wellhead capabilities. By late summer 2005, every capable drilling rig in the world was in use, Fig. 2. The backlog of planned, new wells that awaits an available rig is growing monthly. In the offshore market, the rig deficit by the start of 2005 was about 250 drilling months before Hurricanes Katrina and Rita took another 20 rigs out of commission; some permanently, some for just a matter of months. The resultant offshore drilling deficit compared to planned activities might now exceed 400 to 500 drilling months. Every key oil pipeline and processing facility is also at 100% capacity, as is global refining capacity. The oil system has never been so tight.
As demand soared, new oil supplies became smaller. Many new finds were tiny satellite fields that could be tied back to under-utilized production facilities, because primary fields had declined."
Record nominal oil prices had no effect on consumption, says Simmons:
"Oil demand grew so steadily in the US, that by late 2005, America's usage crossed 22 million bopd, an amount exceeding the entire world's oil use in the early 1960s. The US is the world's largest oil user by more than three times the second largest user China, which replaced Japan as number two consumer several years ago."
His outlook for 2006 can be headlined "Challenging." He ends then with a very good explanation what peak oil really means, pointing to the fact that it will be impossible to keep up supply with rapidly rising demand:
"Like it or not, 2006 will be eventful for oil. It will also be the year when the Peak Oil topic intensifies into a debate on the scale of climate change/ global warming. So far, this Peak Oil debate has been muted to a very separate, small group of "extreme optimists" battling a small group of geologists, petro-physists and, on occasion, energy analysts or economists.
Optimists often do not properly understand what "peak oil" means. They dismiss any worries by saying the world is unlikely to run out of oil in the next 30 to 75 years. Instead, these optimists need to grasp the simple fact that peaking does not mean running out. It means that supply no longer can grow, and it generally means the pending arrival of a production decline."
It appears as if oil can become the commodity where buying the bottoms will bring a handy return in 2006. Oil follows gold and silver and can be considered equally as money and energy resource, just as gold can be seen as money and a jewellery utility.