'Peak Oil' Gathering Sees $100 Crude This Decade
Author: Neil Chatterjee
Speakers said oil production by major companies is set to peak in coming years while the huge reserves of OPEC producers are overstated, meaning declining output will not be able to meet rising world demand.
"The current tightness in global oil markets is likely to be a permanent feature as the world nears peak output," said Matthew Simmons, chairman of energy investment group Simmons & Company International.
"Prices are going to go way higher -- $100 isn't very expensive," he told Reuters on the sidelines of the Peak Oil UK conference in Edinburgh.
The theory of peak oil -- that describes when global production will peak followed by a decline -- attracted an unlikely alliance of oil geologists, greens, nuclear power advocates and bankers to the conference in Scotland, where North Sea oil production has already peaked.
The International Energy Agency, which advises industrialised countries on energy policy, says world oil output should not peak before 2030.
But it says about $3 trillion in investment may be needed to meet an expected 60 percent surge in consumption. Despite record profits, energy companies are spending cautiously on new projects since a price crash in 1998-1999.
Company reserves came under the spotlight after Shell made a series of downgrades last year, scaring investors.
"Oil companies are moving from denial to confession," said former oil geologist Colin Campbell. "Every beer drinker knows the quicker he drinks the sooner it is gone, and the bar shuts at 11 -- the same applies to oil."
Oil's surge this year to record peaks above $58 a barrel has convinced some analysts that prices have moved structurally higher, as rising demand led by China strains supplies.
The world's top exporter Saudi Arabia said last week it is ready to increase its output capacity to 15 million barrels per day, from around 11 million now, and sustain that level for 50 years.
"There's no proof," said Simmons. "Those resisting data transparency have something to hide. New reporting standards need to be made mandatory," he said, calling for standardised data on oil field production and third party verification of oil reserves.
US President George W. Bush will meet Saudi Crown Prince Abdullah in Texas on Monday, to seek the OPEC linchpin country's help in countering the economic threat caused by high oil prices.
"There's definitely a role for government intervention -- I don't think the markets can take care of it," said Jim Meyer, of the Oil Depletion Analysis Centre (ODAC). "Oil is not running out, but growth in oil is, and we need to talk about it."
Higher oil prices are expected to spur technologies to extract more oil, such as recovering heavy oil from shale or tar sands, as well as renewables such as solar that do not yet compete.
"While decline is inevitable, the pace of that decline will be slower than predicted. Globally there will exploration and discovery in ever-deeper waters while the tar sands resource of Canada remains virtually untouched," Brian Wilson, former UK energy minister, told the conference.