Peak Oil Goes Mainstream

The International Energy Agency has ordered an inquiry into whether or not the world has hit peak oil.  This is an organization focussed in mainstream thinking, and provides advice to its 27 member countries of the OECD.

Until now, the conventional thinking in the oil industry, in the IEA, in the US Energy department has been that we have lots of oil.  But that we have political problems in getting it from unstable regimes, or unfriendly OPEC nations.

This study, a first for the IEA, may well convert conventional thinking over to the peak oil side.  While there has been Ken Deffeyes, or Matthew Simmons as prominent spokespeople for peak oil, their message has yet to hit mainstream thinking.  It is baffling to me that awareness of peak oil isn’t more widespread.  I gave a talk a couple of weeks ago, and I asked the audience who had heard of it, and less than 20% of the hands went up.

Is peak oil real?  Yes, we all know that oil is finite.  The only question is when will it occur.  Isn’t $135/barrel, when the US is teetering on the brink of recession, with softening demand, telling us something?

Mexico’s oil production fell 13% in April compared to a year earlier, according to an article in Bloomberg.  The giant Canterell oil field that Mexico depends on was down a whopping 33%.  If you ran Mexico’s oil company, wouldn’t you try to maximize production with oil prices where they are?  Of course, but you can only produce what the declining fields will give up.

Russian oil production, which declined dramatically with the fall of the Soviet Union, but then rebounded, has stopped increasing.  Again, wouldn’t you pump all you could right now?

Peak oil, if it isn’t here now, will be here shortly.  And while it doesn’t mean we run out of oil, it does mean that production will steadily decline, regardless of the price.  The price will only be able to influence demand, not supply.  And that is a recipe for high prices for the future.

Lets hope the IEA finds the evidence they need.  If peak oil is coming, we are woefully unprepared.

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