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So BP, one of the world’s most prominent oil majors, is not worried about global oil supplies. In fact, CEO Tony Hayward summed up his view on future supply constraints in the group’s latest annual statistical review released on Wednesday as follows (our emphasis):
Our data confirms that the world has enough proved reserves of oil, natural gas and coal to meet the world’s needs for decades to come. The challenges the world faces in growing supplies to meet future demand are not below ground, they are above ground. They are human, not geological.
What’s more, the issue BP actually sees curtailing production in the future is a lack of global demand, not oil resources. That’s quite a statement from an oil producer. It’s also glaring in that it significantly contradicts the much heralded theories of peak-oil believers the world over, most famous of whom is probably Matt Simmons, author of Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy.
Peak oil proponents like Simmons, of course, believe the world has reached or is nearing the maximum global petroleum extraction point, after which the rate of production enters terminal decline. This does not stem so much from well or reserve depletion, but rather the moment when the costs no longer make sense, and alternatives like renewable energy become economically more viable.
But as BP states, while global oil consumption may have slowed in 2008 — non-OECD demand actually surpassing OECD consumption for the first time ever– the demand slowdown came in the context of an actual production increase:
While oil consumption declined, global oil production increased by 0.4%, or 380,000b/d. Although OPEC began cutting production late in the year, average annual production rose by 2.7%, or 990,000b/d. Middle Eastern OPEC members accounted for all of the net increase, with Saudi Arabian production rising by nearly 400,000b/d and Iraqi output rising by 280,000b/d.
Peak oil believers might instead point to a fall in proved oil reserves in 2008 to make their case. These did indeed fall for the first time since 1998 to 1,258bn barrels, versus 1,261bn barrels a year earlier. But again, BP believes this was more likely the result of decreased drilling activity due to lack of investment stemming from the economic crisis than an indication of actual reserve shortfalls.
Of course, whether the peak oil theorists are actually correct entirely depends on your point of view in assessing peak oil. Geographical constraints aside, the above does, after all, confirm the world may have reached a critical turning point in production rates.
CERA Global Oil Group Managing Director Jim Burkhard is certainly among those who see it as evidence of “peak oil” having arrived. During a recent presentation Burkhard explained how his interpretation is based on the fact that US gasoline demand peaked in 2008 and is expected to decline in future years.
As the Association for the study of Peak Oil & Gas reports, CERA’s main justification for why it believes US liquid fuel demand has peaked is economic and geopolitical in nature, rather than in any way driven by geologic factors.
Back to the BP statistics, meanwhile, this popular chart depicting the really long-term view of oil prices was also freshly updated and is worth a look too:
As can be seen, inflation-adjusted prices were just as high– if not higher — during the Pennsylvania oil boom as they were in 2008.
