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IEA: oil demand has surpassed supply
Posted by Rembrandt on December 6, 2007 - 11:00am in The Oil Drum: Europe
Topic: Supply/Production
Tags: crisis, demand, iea, supply [list all tags]
The energy watchdog of the OECD countries, the International Energy Agency (IEA), recently started to talk about looming oil shortages. The high oil price of today will remain is the message they are spreading. We need to save more oil, invest more in increasing oil production and upscale alternatives. However, the IEA does not see a peak in worldwide oil production occurring in the coming decades. Based on the expectation that large amounts of oil will be discovered, not yet on the radar of oil companies worldwide. This new stance follows below from the translated transcript of an interview recently broadcasted on the Dutch television channel RTL-Z with Aad van Bohemen, the Director of Crisis Management at the IEA
What is the significance of the current crisis on the oil market?
“The situation on the oil market is worrisome in the sense of there being more demand than supply. This does not mean that we should panic because of an acute shortage of oil, there is sufficient oil in the world. There is production capacity that can be brought to the market by the oil producing countries. But this capacity should be brought to the market to meet supply. So the situation is on overall worrisome, but it is not yet time to panic.”
But if there is more demand then supply then stocks will decrease, how long can the west maintain this situation?
“This is indeed already happening for almost a year. A year ago OPEC decided to decrease their production. They are able to increase production again since the capacity is still there. Because of this decline, however, demand has surpassed supply and the western countries are consuming their own oil stocks to fill the gap. In the last quarter this event was reflected in higher oil prices. It can be solved by increasing production, but then the oil producing countries have to decide that they want to increase production.”
Can producing countries increase production? One of the questions that some analists have is if OPEC is still able to increase production?
“Certainly on the short term OPEC will be able to increase production, one and a half years ago they were also able to decrease their production. But we also see that the demand will continue its increase in the long term. Not only in the western countries but also in other countries amongst which China and India. To meet this increasing demand we need more then the present spare production capacity, new production capacity needs to be developed for the oil markets. A large number of fields are under development, new fields are being discovered and developed. What we are concerned about is if these fields will be brought to the market in time, if sufficient investment is taking place in new production capacity. Currently we are not sure if this is the case, whether enough new oil fields are being developed to meet demand."
Are you optimistic about the oil market?
“The IEA is not optimistic. We see a gap developing in the future between demand, if nothing is done to curtail demand, and production. So something has to happen, either more investment in production or more investment in substitution for oil or the curtailment of demand. All these three things will probably happen at the same time. Such developments don’t happen on their own, it can very well be that this is going to hurt. Meaning that we are going to enter a period wherein oil prices are quite a bit higher, possibly even higher than today's near all time high price, before we have found new solutions. If your question refers to the optimistic stance that it will all be fine, then I am not optimistic.”
Who is going to feel the largest impact of the problems on the oil market, are these the poor countries?
“It is sad to say but this will be the case, the western countries have become so rich that we are nearly not impacted at all by high oil prices. Only now the oil price is nearing 100 dollars per barrel we are seeing a demand reaction, but this is only a very modest reaction. At the same time the national budget of developing countries is more and more dominated by energy costs. And these countries want to grow and economic growth is always paired with growth in the consumption of energy. So such countries will be hit much harder then we in the west will be.”
When are we going to see in your view that factories will stop production because there no longer is any fuel available?
“Not, this is not going to happen. In this sense I am optimistic. Humanity has always been intelligent enough to find solution when new challenges come forth. Possibly we will have difficulties muddling through, but not in the sense that a crunch is going to occur in which factories will have to stop production.”
You are familiar with the phenomenon of peak oil, what is your view on this?
“The theory of Peakoil says that we have currently used about half of the oil production that is available under ground. That implies that we can no longer produce more than we are currently doing, and that oil production is going to drop sooner than later. At the IEA we do not believe this, we think that we know that we are still not nearly halfway, that there are plenty of reserves underground in areas where little to no oil exploration has taken place. Until now oil companies have only searched in areas where oil was relatively simple to find. Now we are looking for oil at increasingly greater depths in the oceans and more and more at northern locations above Russia. Oil is still being found at the moment, and we can continue to find oil for a long time to come.”
It does seem to become a race against the clock though, which will eventually on the long term be lost.
“On the long term oil will run out, it is a finite resource. So on the long term we need to shift to different energy sources. The question is whether we have sufficient time to switch to energy sources such as sustainable energy, solar energy. For the time being we should maybe also use more nuclear energy. One can call that a running match, a race against the clock. Will we have other sources of energy in time before oil runs out? What we say is that this will not happen as quickly as the peak oil theory which you are talking about predicts. The IEA thinks that we have more time. This does not mean that we do not need to worry, as I just explained, a shortage of oil is looming on the horizon.”
Not so long ago large adverts have been published by a number of large oil companies in all financial newspapers in the world. Didn’t it become clear from these that we have consumed the first half of oil reserves already and that the second half will be consumed in the next 30 years?
“These adverts were published by one oil company, other oil companies have a different take on the situation, they are more optimistic. It is of course about the entire picture. If one looks at western oil companies, their supplies are decreasing. These companies are not always allowed to areas where there still is a lot of oil, the Middle-East and Russia, to look for new reserves. So specifically for that oil company, or specifically for the Western countries we are already more or less at the plateau of maximum production. All that we need in additional supplies needs to come from either the Middle East or Russia.”
Isn’t it dangerous for the IEA to anticipate on oil discoveries that have not yet been made?
“This is an experience that has been built up as time passed from which we have learnt that when new areas are being explored more oil will be found. So far this has been proven to be the case. In the eighties we have started to search for oil in the North Sea, there we found oil at locations of one hundred to two hundred meters deep. At the time that was called non-conventional oil. Nowadays it is very normal to search for oil at such depths, even a depth of one thousand meters is considered as normal. Oil companies are now searching for oil at a depth of three thousand to four thousand meters on the bottom of the ocean, and even there large oil fields are being found. So a lot of locations have not yet been explored, and at these oil can still be found."
But, isn’t it true that in any case whether we find new oil fields at a depth of 3000 to 4000 meters or not, that a shortage will occur and that prices on overall will rise?
“Yes this will inevitably happen. Not only because of a shortage but also because it is simply to expensive to find oil at such depths. So an oil company will only do so if it is rewarded with a firm price for their oil. And then we are no longer talking about the 10 to 20 dollar oil of which we spoke about six years ago. This means talking about the 60 to 70 dollar oil that is needed to develop such risky projects.”
The oil price has already reached 90 to 100 dollars per barrel?
“On this price there is a premium that is to our opinion caused by a temporary scarcity of oil. It is not the structural oil price that is needed to bring new projects to the market.”
So the price increases of late is the work of speculators on the market?
“That’s what is being said, I think that this is correct. But only under the present conditions that makes it possible to speculate due to the artificial shortage on the market that has been caused by OPEC. By brining insufficient production to the market. “
And this artificial shortage is caused by insufficient dollars?
“Well I can not peer into the minds of OPEC and what they are envisioning by creating an artificial shortage. If we look at the latest remarks, and believe those, then we see that OPEC is also not that happy with the high oil price of today. What we are now seeing for the first time is that in the past quarter the worldwide demand for oil is falling. This is not what OPEC was expecting and also the IEA did not expect this to happen. But this is the effect of the high oil price and I cannot imagine that OPEC is happy with this situation. That the worldwide demand for oil starts to decrease. Because in the end they still have a lot of oil that they want to produce and sell. At these prices people will start to drive more sparingly, start to drive less, and look for alternatives for oil. Maybe much faster than OPEC itself would want."
Your function is head of crisis management, when is a crisis occuring according to the IEA?
“If there is a sudden shortage of oil, that is different from the situation that we just spoke about which can be described as a gradual mismatch between supply and demand. We call something a crisis if there is an incident or war or something somewhere that causes a significant temporary shortage of oil. In such a situation we have mechanisms, especially strategic oil stocks that can be brought to the market to meet the difference between supply and demand. Depending on the size of such a shortage the gap can be filled for a year, or maybe two years. In anyway there is quite substantial amount of oil stored in strategic oil stocks. But insufficient to fill a gap between supply and demand for years and years. That is why in the case of a gradual mismatch of supply and demand these stocks will not be used.”
As the oil price rises and the energy hunger of the large powerful countries increases, we see that these countries are increasing their aggressive stance. How do you see Europe maintaining itself in such a world?
“Energy politics are of all ages. That energy politics and geo politics have always been intertwined. A wonderful book has been written about this that described that at the end of the 19th century this was already the case, and that the 1st and 2nd world war were finally decided because of energy availability. At the moment, for Europe specifically we still have quite a substantial amount of natural gas but not so much oil anymore. The North Sea is depleted which implies that we need to import more from outside of Europe. In itself this is not bad at all, world trade exists simply due to the fact that one product moves from place A to B. In the Netherlands we also no longer grow coffee but we still drink it. So there is no real basis for concern, where we do have to invest in though is good relations with countries were there is still energy. And for Europe there is certainly a role to play in the direction of Russia, the Caspian Countries and the Middle East. To make sure that our relationships with these countries are good and being looked after."
Aad van Bohemen: “The theory of Peakoil says that we have currently used about half of the oil production that is available under ground. That implies that we can no longer produce more than we are currently doing, and that oil production is going to drop sooner than later. At the IEA we do not believe this, we think that we know that we are still not nearly halfway....." Interesting, "we think that we know that we are still not nearly halfway..."
That part got me also. I liked how he reframed the question to meet his answer. In addition to it being convoluted.
I'd like a more direct question and answers.
Do you think we will hit the highs seen in 2005 again and how many concurent months do you think that rate could be maintained?
Keep in mind, this is being translated from Dutch transcript. Unless you're intimately familiar with how Dutch people habitually structure their speech - and this is speech, not a written document - there's very little to be gained by looking at the minor details of his phrasing.
He is being polite.
"we think we know..."(say what?)
...and if he is wrong he gets to keep his job...
Ahhhh hah!
"still not nearly"
Are we 99% of the way to halfway?
It is what he doesn't say that seems most obvious.
It annoys me when they use the phrase "the theory of peak oil". It is not a theory. Provided you recognise oil is a finite resource then there MUST be a point at which you pump the most, and that past that point there is a decline. No theory there, just a statement of fact.
The only matter for debate is when that peak is and what shape it follows on the decline. Given that the shape is theoretically derivable, the only question is the precise when. The IEA needs some serious evidence if they are going to suggest their theory that there is much more oil to find. We need to get this the right way round.
Its the fact of peak oil
The theory of large amount of new discoveries to move the peak later.
Agreed. I forget who said it, but I love the quote:
Peak oil is a theory like the "round world theory".
The world is not round, not exactly. More elliptical and having a rather chaotic surface.
I'm convinced that we're in for a rough ride with lots of surprises...
Could we get past the flat earth stage and get into the ellipsoid phase now, please. Like in WGS 84.
That definition would be correct only with a symetrical "bell" curve, where mode = median = mean.
More likely, the actual curve is going to be skewed far to the right. In other words, the mode (peak) is far to the left of the median. In other words, it is quite possible for peak production to occur long before we reach the 50% mark. The reason: That 2nd 50% (and actually, quite a bit before that) is much more difficult and costly to get, and thus doesn't come on line at the same pace that the first 50% did.
The curve might be skewed to the left. Humanity might be so addicted to oil that it invests every last dollar in beating the logistic bottleneck and develops every remaining 10 barrel/day puddle simultaneously to keep the economic growth cycle going, followed by catastrophic collapse. Time will tell.
That is an alternative hypothesis, and time will tell. However, the extent of investment in new projects is not presently consistent with your hypothesis. It is more consistent with the hypothesis that as new oil becomes more costly to find and develop, the investments will become fewer and farther between, thus delaying the onset of new flows to < the flows lost to depletion.
Even without some sort of hyper development regime, it is not at all self-evident that the global, all-time production distribution is going to be symmetric around the peak. After all, in the past the world GDP and demand was significantly lower at the same time as big finds were easy. Now we are going to have to shrink demand by force, while no more large fields are available. World population and demand are not going to reverse in the future in a mirror image of the past. More likely is that there will be massive inertia trying to keep the status quo, leading to a catastrophic transition. Who knows, maybe magical new power sources will show up and save the day but until then, oil, gas and coal are going to be exploited (gas and coal will delay the crash).
Normal curves are symmetrical, but Lotka-Volterra (predator-prey) cycles are skewed to the left (crash is faster than growth). It depends on what assumptions you put into the model.
You can include a "effort function" in the D.E. that approximates how the market responds to scarcity. If the effort function is linear($X increase in price of oil always results in $Y increase in investment), there is no change to the shape of the resulting curve; it is still a normal curve, just a bit taller and shifted to the right.
To change the shape will require an "unreasonably aggressive surge in investment".
My technology effect concept is exactly a predator prey relationship. In this case the predator is advancing technology. And the prey is a poor little oil drop. Advancing technology is what transforms a symmetric relationship into a asymmetric one. Noye Moore's law effectively has this form. Eventually it reaches a real physical limit and transistor size no longer shrinks. In my opinion just about every example of refining technology to increase some variable results in a predator prey like relationship.
Thanks for real name for the curve I've been using shark fin.
Still like shark fin though :)
http://science.reddit.com/info/629ks/comments/
thanks for your support...
Its funny but his statement denying peak oil did not really fit in with the rest of the talk. My opinion is he still thinks production can increase esp considering OPEC reductions but on the same hand he seemed to be saying that we can expect demand to be greater than supply for the foreseeable future.
So the message is we have a lot of oil left but its going to be really hard to get and expensive and development will probably not keep up with demand ?
Also outside of Opec he did not actually say the rest of the world could increase production rates just that it could find more oil. No one is saying we won't and we will find oil till till its not worthwhile to extract.
We have plenty of oil left but please prepare like we don't ?
I like how he says the North Sea is in Depletion. Cant say the North Sea has peaked :)
Overall its a pretty weird interview. You can probably read any message you wish into it.
There's nothing contradictory or inconsistent about that.
If demand is increasing at 2% per year and supply is increasing at 1% per year, then we need to prepare for demand destruction, despite no peak.
If that 1% supply increase is from nonconventional oil that requires $70/bbl prices, we need to prepare for perpetual high prices, despite no peak.
Does the particular terminology matter? Perhaps "depletion" is simply the term he's used to, or is the term most common in Dutch. Fundamentally, which word he uses to describe it is irrelevant.
Watch how fast it takes you to wear out your welcome. Oil Drum editors are notoriously harsh. My advice: present Christmas presents sooner rather than later.
If one is prepared, then it doesn't matter what Pitt says.
'in depletion' implies to me the naughty side of peak while 'in accretion' would imply an increase in production, the yummy side.
(Now to get serious, how about a rating on the terms 'naughty' and 'yummy':))
AND it does matter what Pitt says unless a mutual congratulatory society is what this site is all about, no?
Pitt the Elder, as we sometimes day around here " would argue with a rock".
"Does the particular terminology matter?" he opines.
Does it matter he asks? Well as I read most of his posts this is just about all he argues over..it being what some one says or the terminology..yet here he takes the opposite tack...
Debate can be carried to ridiculous extremes as in most of his replies. It can get on one's nerves quite easily,hence I skip most of what he blathers on about. This one I couldn't resist.
The man most certainly does not have a life beyond extreme TOD debate flogging.
Also I have yet to see a language he does not tend to assume expertise in.
Rocks don't make dubious claims with no evidence.
Then I suggest you haven't read my posts all that carefully. If you had, you might have noticed things like "numbers" and "evidence" in them, rather than whining about whether someone's using my favourite word or not.
Please explain how my most common phrases - "that you believe something does not make it true", and "provide evidence" - are "ridiculous extremes".
Is there a point to your gratuitous (and, you'll be happy to know, incorrect) insult?
You have yet to see one where I have.
If you'd understood what I wrote, you'd notice that I was claiming neither expertise nor ability in Dutch. What I was doing was pointing out that obsessing over particular choices of wording in a transcript translated from another language is foolish.
Were you paying attention, you'd have noticed that the two are very different.
It could be the translation. But, if he did use the equivalent of the English word depletion, then I think it would matter. A resource begins and is in depletion the second you start using it, so you can say that about every field. Terminology does not matter only if the terms mean the same thing.
I should probably go back and look at my intro economics texts, but isn't demand always represented on as a curve, such that the amount demanded is a function of the price at which it is offered?
So, a statement like "oil demand has surpassed supply" just means to me that the price is too low... or "demand exceeded supply at a too low price."
In a functioning free market the price rises to the point where supply (the available stock) equals demand (the amount that is sought and purchased).
Only if there is no stock at any price can demand be said to exceed supply. If there is a functioning market, a price is reached which is just low enough to attract buyers to all of the available supply, and just high enough to discourage purchase of the last marginal unit.
The whole discussion of "price" sees it as a problem. But it is the solution. The only market solution.
The interview notes that oil demand is highly inelastic. But as long as it is not perfectly inelastic, there is a price that solves the problem.
I gather from this interview that the IEA spokesperson thinks price is currently related to "speculators" and other factors. Aren't they otherwise known as traders, who are reflecting the collective wisdom about the current and future price point that clears the market (sells all the supply at the price that maximizes value while failing to discourage sale of the last marginal unit?)
"Demand exceeds supply?" Every time I hear that my poor little mind boggles. It's like hearing the sound of one hand clapping... it's not a clap, unless elasticity is 1.
"At current prices, demand exceeds supply." That's a statement I can understand. So let prices rise until it doesn't, and then work out your response to the resulting problems through a taxation regime, or by creating an empire to re-extract that money from the oil producing states.
Whatever.
I think everyone understands this. The "demand will exceed supply" talk is just a way of characterizing "upward price pressure."
Come to think of it that's really the fundamental difference between the Aad van Bohemen picture of the future (high prices, tight supplies) vs. the peak oil picture of the future (high prices, tight supplies). Does future price pressure stem from the demand curve shifting to the right or, as peak oil advocates argue, from the supply curve shifting to the left?
It may not really matter much which it is, except of course if both are happening simultaneously.
It seems like a very illogical expression. It would make more sense to say "demand is increasing and supply is not." Price will resolve the issue because demand and supply are always balanced (absent severe market inefficiencies.)
(I always wonder when people talk about demand destruction whether they are referring to destruction of demand for oil at higher price points because there is less you can do when the energy inputs are so much more expensive... or destruction of demand for consumer goods and everything else as oil costs filter down through the economy first, resulting ultimately in a reduction in growth and a reduction in the demand for oil itself?)
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Regarding demand and supply curves, I'd say both are happening. The growth in demand is a function of investment and development... the plateau and decline in production is a function of geophysics and extraction efforts... two different functions that are always in a balance that is represented by price.
"In a functioning free market the price rises to the point where supply (the available stock) equals demand (the amount that is sought and purchased)."
In the first place, the oil market is not a free market. In a free market, all producers are free to make as much as they're physically capable of, and all buyers are free to buy as much as they can afford.
However, OPEC being a cartel, production is kept below the physical maximum, and "who shall we sell to?" is a politicalor diplomatic decision.
Secondly, oil demand shows very strong price inelasticity. That is, there's a certain amount you need to live your particular lifestyle, and if the price rises you won't reduce consumption by much. If you need 20lt of petrol to get to work to earn $500, so long as that 20lt of petrol costs less than $500, you'll pay for it, because that spending enables your earning. That's a simple case that you can poke plenty of holes in and show alternates where it turns out different, but it shows the basic principle, that oil is like our daily bread - there's a certain amount we need to consume to enable earning and thus other consumption.
Interesting question what constitutes a "free market"....
In the oil market, it seems likely that producers are producing pretty near everything they can... but it wouldn't be less free if they weren't, would it?
Aren't buyers now free to buy as much as they can afford? Or are you saying that OPEC is turning down hard cash to sell below the market price to someone? (Could be, but I'd like to hear about that.)
So by your two criteria (which I don't think constitute a proper definition of a free market)... it looks like there is a free market (unless OPEC really is turning down offers of higher payments for political reasons....)
So does it make sense to speak of a market (or free market) in oil? Well isn't there a free futures market?
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Second, as long as demand is even slightly responsive to price (and it is), it has some elasticity, and so there is, ipso facto, a price point at which demand and supply balance. Only if demand is completely inelastic (n=0) would it make sense to say that demand could exceed supply.
Isn't the futures market a pretty accurate reflection of the price that traders think will clear the available supply at a certain date in the future?
When and where is demand ever greater than supply without an immediate price correction that reduces demand to a level exactly equal to supply? There may be momentary inefficiencies and time lags, but if the amount that is sought for purchase is significantly higher than the available supply, are you saying that sellers are still selling at a lower price for more than an hour or a day?
I would be surprise to learn that... but maybe I'm naive.
So, again, when is demand greater than supply? And for how long? (minutes? days? months?) And in those days or months, the price doesn't change to bring them into balance?
Does not price rise pretty much in real time until enough purchasers drop out of the bidding war and those remaining purchase the existing supply at a new higher price point?
The IEA does not take into account that continuing discoveries are not only more difficult to access, but also generally smaller in size relative to growing demand for oil.
When Ghawar (sp?) was a young field and world demand was much smaller, a certain complacency with regard to peak oil can be understood.
Now that the mega-giant fields are aging and declining, new discoveries are still relatively small, and demand is sky-rocketing.
The current resource availability is a set up for terrible resource war -- already well underway -- and for various kinds of economic and social disruptions related to unjust distribution of this critical resource.
Combined with other resource and ecological issues, Peak Oil is a very big deal now -- not in some vague future.
I think that the IEA is doing a disservice to all by painting a picture of virtually endless new discoveries combined with current market dogma as solutions to this problem.
"What? Rome? Mighty World Bestriding Rome could ever Fall? You're daft man!"
Doesn't this seem like what the IEA is saying?
Do you have any evidence that they're not taking this into account, or is that simply your assumption? Because that's an obvious thing to take into account, so it would be very surprising if they did not.
How is this "current market dogma"?
“The IEA is not optimistic. We see a gap developing in the future between demand, if nothing is done to curtail demand, and production. So something has to happen, either more investment in production or more investment in substitution for oil or the curtailment of demand. All these three things will probably happen at the same time. Such developments don’t happen on their own, it can very well be that this is going to hurt. Meaning that we are going to enter a period wherein oil prices are quite a bit higher then even the near all time high price of today, before we have found new solutions. If your question refers to the optimistic stance that it will all be fine, then I am not optimistic.”
"Invest in demand reduction and substitutes, or it'll hurt." How is that "current market dogma"?
Interestingly, the EIA position seems pretty close to the recent NPC Report.
Not hysteria, but real concern concerning the price/supply impalance.
For the mass consuming nations, the recommendations seem clear and balanced....work toward production, but also work toward demand reduction, and try to narrow the gap as advanced technology is developed to bring down the demand for fossil fuel.
It's amazing that we can spend so much time arguing about how many angels can dance on the head of a pin, and exactly what word was used in what sentence, when the overall all message is once again the same as has been repeated by so many sober knowledgable people:
Reduce consumption. Diversify. Work toward alternatives.
Panic and screaming and gnashing of the teeth achieve nothing.
The truth is, most folks just don't want to hear that message. Making noise is so much fun. But the grunt work continues in the shops and labs, and out in the open sea on oil rigs that would have been science fiction only a few years ago.
RC
Hi Pitt,
Well, I can see the point about "current market dogma" or "BAU" (now let me explain...) as being implied in the statement:
"In the Netherlands we also no longer grow coffee but we still drink it. So there is no real basis for concern, where we do have to invest in though is good relations with countries were there is still energy."
These two sentences seem to have a couple of premises. The analogy to coffee - the coffee *can* be obtained, just "at a price", and "from elsewhere".
The point about "good relations" is well taken, if somewhat idealistic - and not taking into account any current situation, ie., "what good relations? where?" But let's put that aside - theoretically, all countries *could have* "good relations" and perhaps adopt the Oil Depletion Protocol, etc.
So, the first assumption/premise does appear to be in line with an idea of somehow "the market" fixing the problem - as long as everyone gets along. (or something.)
My take on the objections to this are as follows:
The problem is serious - he says as much in parts of this.
The people who are in a position to actually gauge the gravity of the situation are sitting in his chair - and those nearby.
It is morally incumbent upon those who know to tell, or as Aleklett put it - they are like those who knew about the impending tsunami and did not tell others in its path.
Now, it may be the case, that the IEA - most members - do not know what a good plan is, or what to do or say. Or how to reconcile their jobs w. their knowledge, or their knowledge of economics with their knowledge of oil - many things could be going on (we can't read their minds).
Still, then - the honest thing would be to say that. I believe the objection is not (as Roger seems to say) - that "fear and panic" is not spread. But rather - it's about honesty. What is the honest and most ethical stance?
That's the issue. (As I see it - and also the way I interpret some of the TOD responses.)
-but what they can do is give warning by framing the situation in langauge that cannot be subsequantly denied. If we don't do this then that will happen... etc. E.g. We don't believe a Tsunami is coming but unless we invest in an early warning system the consequences could be severe...
I think basically what he is saying is that the end of cheap energy is over and that without massive investment (enabled by much higher prices) things will get a lot worse.
I also thought it interesting that he says we have loads of unexplored areas where oil may exist but then goes on to say we are basicaly reliant upon Russia and the ME for the increases...
It looks like the US/Uk and some parts of the ROTW are heading into slowdown and possibly recession in 2008/9. this is going to lower demand. If this should happen and prices don't fall substantially that's a sure sign that the game plan has changed IMO. If we don't see $200 oil at some point within the next 5 years I would be very surprised.
Nick.
Pitt,
I was inspired to start posting because of you. I have been reading the Oil Drum for several months and am quite impressed with your ... I don't know what to call it.
I think it is appropriate that "That's It I'm Out" responded to you. He is also one of my favorites.
Your offensive nature and knowledge of the subject are rare. That's why I like you. When I say offensive, I mean "challenging in a winning kindof way" .