Glen Sweetnam, Energy Analyst in the Obama administration, says we may be in trouble:
The U.S. Department of Energy admits that “a chance exists that we may experience a decline” of world liquid fuels production between 2011 and 2015 “if the investment is not there”, according to an exclusive interview with Glen Sweetnam, main official expert on oil market in the Obama administration.
This warning on oil output issued by Obama’s energy administration comes at a time when world demand for oil is on the rise again, and investments in many drilling projects have been frozen in the aftermath of the tumbling of crude prices and of the financial crisis.
Page 8 of the presentation document of the round-table, a graph shows that the DoE is expecting a decline of the total of all known sources of liquid fuels supplies after 2011.
The graph labels as “unidentified” the additional supply projects needed to fill in a gap that is expected to grow after 2011 between rising demand and decline of known sources of supply that the DoE supposes will start that year. The declining production foreseen by the DoE concerns the total of existing sources of liquid fuels plus the new production projects that are supposed to come on-stream before 2012.
The DoE predicts that the decline of identified sources of supply will be steady and sharp : - 2 percent a year, from 87 million barrels per day (Mbpd) in 2011 to just 80 Mbpd in 2015. At that time, the world demand for oil and other liquid fuels should have climbed up to 90 Mbpd, according to the presentation document.
The US Military is also taking this scenario seriously:
Iraq is about the only major source of cheap oil big enough to perhaps fill in, but output has never been ramped that fast even in countries with no security problems.
If this comes to pass, high oil prices will blow any recovery out of the water, and with them Government finances, housing, the banks, employment, you name it.
Potentially it might even derail the so-far Teflon coated Chinese economy.
It's not clear what precise level the oil price would reach, but to some degree that doesn't matter, as it would climb 'high enough' to reduce demand to match supply, IOW give a huge hit to living standards, travel and in worst case scenarios food supply, which is oil dependent.
The future looks bright for Nissan's investment in electric vehicles, but no one should imagine that they will be able to substitute in a major way for conventional cars for many years.
Stop/start and regenerative braking on cars should also do well. Both Valeo and Maxwell are due to bring out capacitor based systems this year, which should be a lot cheaper.
It should be borne in mind though that this would be in the context of a car industry which would be hurled into the depths, with sales way, way down.
That is nothing compared to the aviation industry though. Due to low taxes on their fuel any rise hits them astonishingly hard. Good job they are in the best of health at the moment, eh? :-(
It would seem that at least some in the Obama Administration have a fair idea of what is likely to happen, and have a policy to deal with it.
It consists of closing their eyes and wishing really, really hard that it will go away.
They seem to have forgotten to click their heels.
Disclosure: No positions