Semi-Daily Journal Archive

The Blogspot archive of the weblog of J. Bradford DeLong, Professor of Economics and Chair of the PEIS major at U.C. Berkeley, a Research Associate of the National Bureau of Economic Research, and former Deputy Assistant Secretary of the U.S. Treasury.

Thursday, August 31, 2006

Oil in the Future Bloomberg.com: Exclusive

The Future of the Oil Business:

Bloomberg.com: Peak Oil Forecasters Win Converts on Wall Street to $200 Crude
By Deepak Gopinath: Proponents of this controversial idea say global oil production is now at or near its zenith. Once the flow crests and starts to decline -- and some geologists say it already has -- oil will no longer be able to slake the world's growing thirst for energy. The result will be the oil shock to end all oil shocks. The price of a barrel of crude will spiral to $200 -- and keep rising....

Everyone agrees we'll run out of crude eventually. Oil, after all, is a finite resource: The Earth holds only so much of it. The controversial issue is when a global peak will occur -- and what will happen then.... Exxon Mobil, which has reaped record profits as the price of oil has surged, has taken out ads dismissing peak oil in U.S. newspapers such as the New York Times. The Irving, Texas-based oil giant says the peaksters are being alarmist. In all, the world probably has 4 trillion barrels of oil left, four times the amount we have used so far, the ad says....

Predictions of an imminent oil famine are as old as the industry itself....

In the past, Campbell or his disciples have forecast the oil peak down to the year or even the day only to push back the fateful moment. In 1997, Campbell said it would occur in 2001. Now, he says total production, which includes oil from deep-water wells and fuel derived from natural gases, will reach its height sometime after 2010....

Like many oil-industry vets, Cranberg, 51, says market forces and technological advances will ultimately cure our energy ills. As oil prices rise, companies will be more willing to hunt for crude and extract it. They'll invest in expensive deep-water wells and new technologies to wring more oil from existing fields. Consumers will start conserving energy. Even now, stock market investors and Silicon Valley venture capitalists are pouring billions of dollars into companies developing ethanol, solar power and other alternative sources of energy....

High oil prices are only part of the story, however. The world is straining to feed its energy habit. Today, we consume 85 million barrels of oil a day, according to the U.S. Energy Information Administration (EIA). By 2030, the world will devour 118 million barrels a day, as China and India emerge as economic superpowers....

Coming Crunch: The world is not running out of oil -- at least not yet,'' Campbell and Laherrere wrote.What our society does face, and soon, is the end of the abundant and cheap oil on which all industrial nations depend.''...

Some investors and analysts see lots of opportunities in a post-peak world.... The oil sands hold vast stores of bitumen, a tarlike substance that is mined, rather than pumped, and then processed into oil that can be refined. The process is expensive -- and getting more so. Rising operating and capital costs have driven the price of mining and upgrading bitumen to as much as $40 a barrel, Camarta says. By 2020, Canada's oil sands will yield 4 million barrels a day, almost four times what they do now, according to CAPP. That sounds like a lot until you realize that 4 million barrels is just over a third of what Saudi Arabia produced per day in 2005....

It was just 84 years after Revere took his ride, on Aug. 27, 1859, that Edwin Drake struck oil in Titusville, ushering in the Oil Age. Exxon Mobil says the era of oil isn't about to end. In one of its ads, the company says, ``Oil is a finite resource, but because it is so incredibly large, a peak will not occur this year, next year or for decades to come''...

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