Fears about Peak Oil may be revived by a WikiLeaks cable describing how Saudi Arabia may not be able to keep raising oil production to keep crude oil prices from rising.
The Saudi’s are essentially at peak production now and don’t have the reserves or the development capacity to increase production above about 12 million barrels per day (mbpd).
The cable reveals that the Saudi’s may have overestimated recoverable oil reserves by as much as 300 billion barrels to spur foreign investment.
The Energy Information Administration (EIA) has always looked to Saudi Arabia to increase its production as justification for its prediction that crude oil production will keep rising until 2030. This is likely not to be true. The world could be at peak production now. The peak will likely be more of a plateau, but will not provide the oil to meet increasing demands from growing economies.
Saudi Arabia has played a role in OPEC as the marginal producer, raising production as prices increase and lowering production as prices decrease. They view a stable and growing world economy as good for their long term oil revenue.
If Saudi Arabia can’t increase production as oil prices rise, then prices alone must be used to price out marginal consumers. Since the supply-demand elasticity of oil is very steep, this could result in very high oil prices.
Policy makers in Washington have not made any progress on a long term energy policy for the country. I believe that some Washington policy makers view high oil prices as a good thing because they feel that it will force consumers to switch to renewable energy. It is more likely that high oil prices will have a severe negative impact on the economy, possibly pushing us into recession. An economy in recession is not a good economic environment to develop new renewable energy resources.
The correct energy policy would be to switch from oil to natural gas as a fuel for vehicles; cars, buses, trucks, and trains. This is our bridge fuel to a renewable energy future. We have abundant reserves of natural gas. The Natural Gas Act would stimulate this investment but has not been brought to the floor of Congress for a vote in over two (2) years. Maybe a Republican controlled house will finally get this legislation to the floor for a vote.
From UK Guardian: WikiLeaks cables: Saudi Arabia cannot pump enough oil to keep a lid on prices
Comments
Thanks for the article.
Two items regarding switching to natural gas:
1. The cost of switching the transportation infrastructure over to using natural gas would be huge and take a long time.
2. Natural gas will also likely peak in the next 20 years, possibly 10. Switching transportation to use natural gas may make that even sooner. See the Wikipedia article on "Peak gas".
As you say, natural gas may help bridge the transition to renewable energy, but it is not a renewable fuel and is just as problematic as oil-based fuel.
Also, the English plural of Saudi is Saudis (no apostrophe). Please see "Bob the Angry Flower's Guide to the Apostrophe" for a humorous (but accurate) guide to that particular punctuation usage in the English language. (Dutch does use apostrophe for pluralization for nouns ending in single a, i, o, u, or y.)
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