Increasing numbers of analysts and policymakers are warning of another super price spike for oil and the likelihood of "peak oil" more generally.

Peak oil is the point at which global oil production reaches a maximum and then declines. The speed of the decline is a key unknown and if it is relatively fast, the results could be truly dire for economies around the world.

We saw prices as high as $147 a barrel in mid-2008 (the dominant factor for gasoline prices well over $4 a gallon), which played a strong role, perhaps the dominant role, in the global Great Recession -- as high oil prices have in most recessions over the last fifty years. Once the recession hit, oil demand dropped and prices plummeted as low as $33 a barrel.

Prices steadily recovered since their low in early 2009 and are back to dangerous levels in early 2011 (about $90 a barrel). We can expect far higher prices as the global recovery continues. An increasing number of analysts are projecting prices as high or higher than the 2008 peak in the next couple of years.

More importantly, global net exports of oil continue to drop as major oil exporters increase their own consumption at the same time as their production is stagnant or falling. Even if global oil production increases in the coming years, if there is less available for oil-thirsty nations like ours the situation will be far worse than total oil production figures would otherwise suggest.

It is time for public discussion of this issue to reach the same prominence as climate change. Indeed, many solutions to these "twin crises" are the same because reducing petroleum dependence will ameliorate peak oil and climate change.

Global oil production has plateaued since 2004, despite the fact that oil prices have risen dramatically. Figure 1 shows this history, demonstrating that oil production has not been very response to market forces, suggesting strongly that we are at a global peak.

Figure 1. Global oil production and oil price 2004-2010. (Source: EIA, chart courtesy of www.TheOilDrum.com).


A number of comprehensive reviews of the global oil supply situation have appeared in the last year.

   * Lloyds and Chatham House: "We are heading towards a global oil supply crunch and price spike." "A supply crunch appears likely around 2013.given recent price experience, a spike in excess of $200 per barrel is not infeasible."

   * The U.S. Department of Defense issued a stark warning in its 2010 Joint Operating Environment (JOE) report, including discussion of "peak oil": "By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day."

   * Similarly, the German military is taking peak oil very seriously, made clear by a report leaked to Der Spiegel in 2010: "[The report] warns of shifts in the global balance of power, of the formation of new relationships based on interdependency, of a decline in importance of the western industrial nations, of the 'total collapse of the markets' and of serious political and economic crises."

   * The same article reports on secret British government planning for peak oil: "The leak has parallels with recent reports from the UK. Only last week the Guardian newspaper reported that the British Department of Energy and Climate Change (DECC) is keeping documents secret which show the UK government is far more concerned about an impending supply crisis than it cares to admit. According to the Guardian, the DECC, the Bank of England and the British Ministry of Defense are working alongside industry representatives to develop a crisis plan to deal with possible shortfalls in energy supply."

   * The UK's Industry Task Force on Peak Oil and Energy Security (a non-governmental group) issued its second major report on peak oil in late 2010, concluding: "[W]e face a situation during the [next few years] where fuel price unrest could lead to shortages in consumer products and the UK's energy security will be significantly compromised. This has the potential to hit UK business and commerce as well as the most disadvantaged in society with yet another crisis."

The world is heading for a catastrophic energy crunch that could cripple a global economic recovery because most of the major oil fields in the world have passed their peak production, a leading energy economist has warned.

Higher oil prices brought on by a rapid increase in demand and a stagnation, or even decline, in supply could blow any recovery off course, said Dr. Fatih Birol, the chief economist at the respected International Energy Agency (IEA) in Paris, which is charged with the task of assessing future energy supplies by OECD countries.

As we continue a global economic recovery in 2011, higher oil prices are inevitable, super price spikes are a strong possibility, and even shortages are not out of the question. We must ask ourselves: should we manage the decline in a way that avoids economic catastrophe or do we continue our generally laissez faire attitude toward this major problem?

Link -
http://www.energypulse.net/centers/article/article_display.cfm?a_id=2393
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Capitalism mark 1 suggests that anything can be done, if you throw enough money at it.

That assumption, is wrong, we live in a finite world!

Analysis: "Peak Everything" may mute Fukushima backlash

(Reuters) - Political support may be holding for nuclear power and offshore oil, despite the Fukushima and Macondo disasters, as decision-makers confront climate change and dwindling domestic energy reserves.

A theory of "Peak Everything" suggests we are running short of vital assets such as clean water, carbon-free air, some minerals, fish stocks or the cheap fossil fuels which have powered the world economy and helped curb the price of food.

If you want to secure domestic supplies and curb carbon emissions too, then energy options are limited. And that fact has clearly dawned on governments.

Take for example the deadly blowout last year at BP's mile-deep Macondo well in the Gulf of Mexico, which all but stalled U.S. deep-water drilling.

Licensing there has now resumed, while other countries dismissed a deep-water freeze from the start, including Britain whose output is dwindling in the shallower North Sea.

It is early days to tell how the world will respond to the nuclear crisis caused by Japan's devastating earthquake and tsunami on March 11, but a bump in the road looks more plausible than a full stop.

President Barack Obama, for instance, last week laid out a plan to cut oil imports by a third -- diversifying toward renewable energies and also relying on nuclear.

Italy and China plan a one-year pause on new build for nuclear, and Japan plans a policy review. Underlying voter unease, German chancellor Angela Merkel's conservatives lost power in a regional stronghold last week, partly because of her party's pro-nuclear stance.

PEAK EVERYTHING
Others say the driving force for offshore drilling, nuclear power and other resources is the simple need to provide for a population set to reach 9 billion by 2050 from 7 billion now.

"We could see some continuing support for nuclear, despite what is happening in Japan but it won't be fueled by climate change concerns," said Emmanuel Fages, head of analysis of European energy at Societe Generale in Paris.

"It will be because of economic and energy pragmatism," he said. By that argument, nuclear power may be hit most by rising safety and insurance costs after Fukushima.

The International Energy Agency, the energy watchdog to industrialised countries, says global crude oil output peaked in 2006, meaning the world is now forced to glean oil from unconventional sources like oil sands and natural gas liquids.

Those alternatives, as well as renewable energy and nuclear power, are more expensive and would force the world into a more frugal future, according to Richard Heinberg, who coined the notion of "Peak Everything" in his 2007 book of the same title.

Fukushima could stall nuclear power, he added.

"The real upshot is the strong likelihood is we'll have less energy in the future and it will be more expensive energy. We're really looking at a different kind of society," at least for the next 20 or 30 years before new breakthroughs emerged, he said.

Of course, theories of impending shortages have often turned out wrong, like the 1798 prediction by British scholar Thomas Malthus that population growth would outstrip food production. At the time, the world population was just one billion.[/b

"Energy policy is about balancing risks - all forms of energy carry risks," said James Acton of the nuclear policy program at the Carnegie Endowment for International Peace.

And the tsunami was beyond the design of the Fukushima plant. "The real challenge is to improve our ability to predict natural and manmade disasters," he said.

Some green groups say there is no trade-off, and renewable energy coupled with energy efficiency can solve the problems.

Sven Teske, director of renewable energy at environmental group Greenpeace, said big shifts were under way with developed nations closing more coal-fired plants than they open.

"There is a phase-out of coal already. The reality is that everybody is moving toward renewables and gas. But some of the government rhetoric will remain in favor of nuclear," he said.

Link -
http://www.reuters.com/article/2011/04/03/us-energy-peak-idUSTRE7322W320110403?p...
==================================
It is correct that Energy mirrors life and that it is all one big balancing act.

However, to glance over that the "tsunami was beyond the design of the Fukushima plant", does no one justice, as there have been other "examples" that the sea walls at Fukushima & elsewhere in Japan were too small, but no action was taken at Fukushima or elsewhere, Hamaoka comes to mind.

The Malthus analogy is often raised, but it is erroneous, as the situations are completely different, because now, it is no longer a theory, we are living it and we can see the outcomes!

In fact, Peak everything is demonstrably on its way to reality, as can be seen in Energy, Food & Climate Change, all of which are driven in small or large part, by the growth of human Population from 1 Billion in 1800, to 7 billion today.

I doubt that the global Population will make earlier estimates of 9-10 Billion, in fact it may struggle to make 8 Billion, before starting the long decline, back to around 3-4 Billion, by sometime next century!

Somebody (else) will find an answer.

Year      US Crude Production            US Net Imports
            (Thousand Barrels P/Day)     (Thousand Barrels P/Day)
1950       5,407                                 545
1955       6,807                                 880
1960       7,035                                 1,613
1965       7,804                                 2,281
1970       9,637                                 3,161
1975       8,375                                 5,846
1980       8,597                                 6,365
1985       8,971                                 4,286
1990       7,355                                 7,161
1995       6,560                                 7,886
2000       5,822                                 10,419
2005       5,178                                 12,549
2009P     5,310                                 9,700      

This is the USA experience, in their own Oil Production and the effects on imported Oil (Net Imported), over nearly 60 years.

As can be seen US Crude Production increased until 1970, it has since steadily declined, exception for the initial period when Alaskan Oil came on stream, between 1978-1988.  
Obviously, Oil must be discivered before it can be extracted/Produced and in the case of the USA 1930 was their Peak Oil discovery year, so there was a 40 year gap between Peak Discovery & Peak Production and that is indicative of the time lags involved!  

The other side of Production is Consumption and the Consumption of Oil in the USA & Globally has GROWN STEADILY along with Demand directly linkded to Population grow, with a couple of noticeable exceptions, over this period, the first during the Global Recession which started in the early 1980's and again during the current GFC!

During both of the above Recessions, the Price of Crude Oil increased dramatically.

However, after the 80's Recession, the Oil Price reverted to form and came back down for a soft landing, as did the Global Economy.

That will not, in fact can not happen this time, this time is different!

Why?

Because, as with the USA, who started the great Global Oil love affair back around 1859, there is a direct timeline link between Peak Discovery & Peak Extraction/Production.

In the case of Global Discovery, Oil Peaked around 1965 and if the USA example held true, with 40 years being the period between Peak Discovery & Peak Extraction/Production, then Global Extraction/Production would Peak around 2005, AND IT DID!

So, whilst Oil Extraction/Production was able to bounce higher & the Oil Price was able retrace lower, after previous Recessions, this time is different because whilst Demand will continue to rise with Population growth, Extraction/Production can not recommence tracking Demand, UNLESS THE GLOBAL ECONOMY AGAIN SLOWS DRAMATICALLY!

Good luck & watch the Debt!

April 15 (Bloomberg) -- Crude oil prices may increase on speculation unrest in the Middle East will curb exports as Saudi Arabia reduces production, a Bloomberg News survey showed.

Fifteen of 33 analysts, or 45 percent, forecast crude oil will increase through April 21. Nine respondents, or 27 percent, predicted prices will decline and nine projected little change. Last week, 49 percent of respondents said futures would gain.

Prices have advanced 18 percent this year as unrest spread from Tunisia to Egypt, Libya, Yemen, Bahrain and Syria. Iran may be helping Syria’s government suppress political protests, U.S. State Department spokesman Mark Toner said yesterday in Washington. Human Rights Watch said in an April 12 report that at least 130 people have been killed in the Syrian crackdown.

“There are no signs that the situation in the Middle East is getting any better,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “Syria is looking downright ugly right now.”

Saudi Arabia, the biggest producer in the Organization of Petroleum Exporting Countries, reduced its crude oil output in April by 300,000 barrels per day, John Sfakianakis, chief economist at Riyadh-based Banque Saudi Fransi, said yesterday in a telephone interview.

“The Saudi headlines are a major worry,” O’Grady said. “It’s a big deal.”

Crude oil for May delivery fell $3.13, or 2.8 percent, to $109.66 a barrel this week on the New York Mercantile Exchange. Futures are up 28 percent from a year ago.

The oil survey has correctly predicted the direction of futures 47 percent of the time since its start in April 2004.

Link -
http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=arQ0rjLjil94
======================
The question is, where is the much vaunted Saudi spare production capacity that was going to make up the shortfall during the current M/E unrest?

Jeff Rubin is a Canadian economist who soon after the year 2000 started talking about much higher oil prices in the near future. At that point in time the Peak Oil crowd was small and considered to consist of few people wearing tinfoil hats conducting meetings in the woods.

A decade on we can see Rubin knew what he was talking about. So I’m willing to take time in my day to read what he has to say. I think he is a little extreme in his views and maybe a little deaf to any contrary opinions at this point, but he has credibility. He recently wrote the memo below which hits on an issue that concerns me (and I’m sure many others) and that is at what point does the price of oil create another recession that craters the price of oil ?

I hope to reduce my oil exposure long before that happens, but that is much easier said than done, especially if the stocks you own are still considerably undervalued.

With very limited excess capacity in Saudi Arabia and the rest of OPEC, further production shutdowns in the convulsing Middle East will soon push oil prices to new record highs. The Brent futures contract, the world’s benchmark price, almost reached $120 per barrel in London last week. With gasoline soon to cost six pounds a gallon (£1.32 pounds/liter), the British government is already considering alternative rationing systems to the brute price mechanism at the pumps.

Amid the chaos sweeping through the Middle East, it is easy to lose sight of where oil prices were trading before the political protests began. Brent was north of $100 per barrel before protestors started sweeping into Cairo’s Tahrir Square. The triple-digit price for oil was due to runaway global demand, which by the end of last year had soared to more than a record 87 million barrels per day. It was yet not about potential supply shocks from Libya or anywhere else in the Middle East.

Now throw in supply disruptions from the world’s largest oil producing region, and it isn’t hard to find a path to $200 per barrel oil.

When I first predicted $200 per barrel oil prices in 2008 as the chief economist of CIBC World Markets, it was in the context of expecting another four years of global economic growth. Of course, that didn’t take into account the impact of triple digit prices on fuel-dependent GDP growth. Even $147 per barrel prices brought global economic growth to a screeching halt.

It is all the more remarkable that despite triggering the world’s deepest post-war recession and a rare, albeit temporary decline in global oil consumption, oil prices had already soared back to triple-digit levels even before the Arab revolt.

And it will be difficult to keep prices from moving even higher as investors start piling on the oil bandwagon, particularly when they see most of Saudi Arabia’s much touted four million barrel a day excess capacity is largely of the fictional variety while, at the same time, noticing how little effect monetary tightening is having on restraining China’s exploding fuel demand.

What speculators will have to worry about is where things are going. If we learned anything from the last recession, it was our oil dependent, transport heavy, global economy doesn’t run very well on $147 per barrel crude.

And other than bailing out bankrupt investment banks and automobile companies at the cost of record public-sector deficits, not much has changed in our economies over the past three years to suggest our next encounter with that these kinds of prices will lead to a different result.

We are moving inexorably closer to another oil price induced recession. And when we get there, oil demand and oil prices will once again collapse.

The only question is, will we see $200 per barrel oil first?

Link -
http://www.gurufocus.com/news/129488/jeff-rubin--only-a-recession-stands-in-the-...
================================
What will happen after the next leg down of this current GFC, is far from easy to predict, as their are so many unknowns & unknowables.

That said, the next leg down is likely not far away and so the Oil Price will decline again, along with the Global fall in Oil Demand.

But what happens next will depend on whether it becomes clear to all that Oil Production has Peaked.

If it does become clear that Oil Production has Peaked or when that does become the case, the future of Oil Prices will remain locked firmly northward, whilst the Global Economy becomes fixed into a downward spiral, unless techonology unlocks a hereto unknown Energy force, that can do all of what Oil does, at the same old, cheap prices?

muso wrote on Apr 24^th, 2011 at 5:33pm:


There are various problems in Bio-Fuel markets, including a lack of ability to scale up production, to the levels that will be required, but it seems that the Bio market may well be called on to make a bigger contribution.

Pretty much all Oil Producing countries are moving toward a time when they will only produce for domestic usage.

In fact, of the top 5 current producers -
1) Russia
2) Saudi Arabia
3) USA
4) China
5) Iran

Both the USA & recently China are pretty much producers for self use, already, with China recently cutting off Export.
http://www.silverbearcafe.com/private/04.11/sinopec.html

Of the remaining, there are many who say the Saudi's are now running up against Production problems, instead of having spare capacity and an article today has raised the spectre of the Saudi Production having fallen to 8.292 million barrels per day in March, down from 9.125 million barrels per day in February.

It had been expected that the Saudi would make up for the loss of some 1.3 million Libyans barrels per day, not decline another million barrels a day themselves, so if this article bears out to be correct, then it will add to growing pressures on the Oil Price.

Btw, it is being suggested that Russia Production will also Peak either during 2011 or 2012.
   
In any event, a couple of things seem clear -
1) It is likely that the combined Fuels market, particularly in Transport is set to shrink, over the next decade, even if Bio-Fuels to manage to scale up production, at least by as as much as is possible.
2) Unless there is a substantial Economic downturn, the combination of declining Fuels Production and increasing Demand, via increasing Population & higher expectations in Developing countries, such as China & India, the Price of Fuels will skyrocket!