6 August 2005

Saudi Arabia will in coming decades be unable to maintain its current level of oil production, with large-economic repercussions

Matthew Simmons, author of Twilight in the Desert participated in an online Washington Post live chat session on the topic of Saudi Oil and the World Economy. Simmons has been writing for the last few years on how the Saudis have over represented their oil reserves.
The biggest worry I have as a result of doing the research on Saudi Arabia's oil is that there is a real risk that they have already exceeded sustainable peak oil production and the longer the produce at current risk the higher the risk that they could start into a production collapse. If that turns out to be true than the odds are 95% that the world has then exceeded sustained peak oil production. What the people that get into the peak oil debate often don't think about is that peak oil is not the maximum amount of oil you could produce in a single day, it's realistically the amount you could produce per day for at least a half decade. Therefore it could already be happening. And we'll never know that until we get better data.

Simmons responds to a recent Washington Post article by Daniel Yergin, of Cambridge Energy Research Associates, who paints a much more rosy picture regarding global oil reserves.

I'm one of three co-authors of an op-ed piece that we have just submitted to The Washington Post that hopefully will get published. What the three of us collectively feel is that it is a very unrealistic assesment, it is not a detailed, bottom up field by field, they ignore by and large depletion issues, and it's based on an enormous belief that technology and enthusiasm and urgency will create new oil supplies. That is precisely the same logic that CERA used very loudly in 2001 and 2002 to dispute the critics views that natural gas in North America was running into trouble. And it took less than 24 months after they had dismissed any problems in natural gas before they made a discovery that we had a natural gas crisis. I think what they're doing being as casual on future oil supplies, let alone predicting we're headed toward another oil glut, is doing the world a great disservice.

On Friday, crude oil prices settled at a new high, $62 a barrel. Next week, oil prices are expected to "…break the all-time record…". Still, it would have to rise to $90 a barrel to equate the inflation adjusted high set in 1980.


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