Wall Street Journal: Demand for Oil Could One Day Outstrip Supply
The Wall Street Journal, September 09
By BHUSHAN BAHREE, Staff Reporter
NEW YORK -- A respected oil-forecasting group predicted that the energy industry may be unable to produce enough oil to meet projected demand by the end of the next decade, in a study that lends support to a small chorus of analysts who warn that a peak in petroleum output is looming in the years ahead.
In a presentation yesterday, analysts from Washington-based PFC Energy warned that the world won't be able to produce more than 100 million barrels of oil a day, only some 20% more than current output of about 82 million barrels a day, and well below demand projections for the end of the next decade.
"Even production of 100 million barrels a day can only be sustained for a few years," said Roger Diwan, a PFC analyst. "Every year since the 1970s, we have been consuming much more oil than we have been discovering."
The world's energy appetite has become a hot issue this year as prices have soared on the back of growing demand in China and a series of supply outages, notably in war-torn Iraq. A small number of oil analysts have been predicting a peak in oil production, though they remain in the minority, with most oil companies insisting the industry will be able to meet future demand. Predictions of a peak in oil output often spike during times of oil prices -- most notably during the oil shocks of the 1970s -- but have so far been proved wrong, as exploration and production technology have enabled oil companies to keep the world sated.
After a country-by-country study, PFC concluded that if oil consumption continues growing strong, at a pace of 2.4% annually, even the Organization of Petroleum Exporting Countries' huge reserves would be insufficient to meet global demand as early as the middle part of the next decade. Its more optimistic scenario of 1.8% demand growth showed only a little more leeway, with global consumption outstripping output in the latter part of the next decade.
Oil demand this year has been unusually strong. According to the latest data from the Paris-based International Energy Agency, demand is on track to grow by 3.18% to 82.16 million barrels a day.
PFC's study shows that production in non-OPEC countries, with the exception of the former Soviet Union, has been stagnant and likely won't grow through this decade. It will peak just after 2010, and then begin a long-term decline, the study found. OPEC will then have to pick up the slack and also meet rising demand. PFC projected output in the former Soviet Union countries will peak at some 14 million barrels a day, up from a little over 11 million barrels a day currently, by the end of this decade. Output will then decline in the next decade.
PFC concluded that the limits to global oil production will mean that demand for oil will have to be curbed, and alternative sources of energy found.
Herman Franssen, a former chief economist for IEA who is now president of an energy-consulting company, said the conclusions essentially tell policy makers that "they have a decade to put our house in order; for instance, it takes that long to retool the car industry" to use another fuel. |
