Despite the recent drop in Oil prices, the Future is less Oil, more Demand, higher Prices

There are two reasons why the cost of oil has fallen recently, according to Larry D. Spears of Money Morning. They are; crude supplies were up 3.8 percent in April because of low demand in the U.S. and Europe as their economies continued downward plus the increase in the strength of the dollar.

However, the consensus for the rest of 2012 and into 2013 is that prices for oil will go higher. And if a global recession is avoided, oil shortages mean a continuing rise in prices, courtesy of the emerging markets.

(See OIL UPDATE, 06/22/12, at end of article.)

Demand for oil will continue to grow in the emerging markets in China, India and Brazil as their citizens demand a better lifestyle. The pressure on oil will include  a demand for better food,  home technology and the 6000 products made possible only with oil. But the big ticket that everyone in this growing market must have is their own vehicle.

Estimates are that this demographic will purchase one billion more vehicles over the next 15 to 20 years. That would be added to the already one billion vehicles in service globally. China, for example, has more than 400 Buick dealerships and customers buy the top of the line models.

Every expert will tell you that we are “meeting” our demands for oil now. But if we plan to have double the vehicles operating on earth over the next 20 years, we won’t have enough oil. While the demand for oil goes up over the next 2 decades, the  new oil wells coming on line will not keep up. The big, older fields are running out and that process will continue. Projections are we will demand 50 percent more oil by 2030 but we won’t have it. (

“According to the report [the International Energy Agency’s World Outlook 2010], by 2035 three quarters of currently operating oil fields won’t be producing anymore. In fact, current fields are only expected to account for less than one fifth of that year’s production. (Large old oil fields have been shutting down and the process is continuing.)

“That leaves over 80 percent of the IEA’s 2035 production projection coming from new oil fields, ones that have either production projection coming from new oil fields, ones that either haven’t yet been developed or haven’t  even been discovered. And the contribution from that undiscovered category alone is still far greater than the one from currently producing fields. That’s a tall order for new field discovery.

” Undeveloped or undiscovered oil fields, growth in tar sands production and increased alliance on natural gas liquids account for all the expected growth in world production over the next two and a half decades.”

However, according to Dr. Kent Moors, there are three more pressing problems that would nullify the current short-term projections if any or all of them take place:

  • One is a growing supply shortage in Europe – already suffering from the loss of Libyan oil, production problems in the North Sea and diversion of Russian oil to Asia – a shortage that could skyrocket to 600,000 barrels a day (18 million a month) if a proposed embargo of Iranian oil in protest of that country’s nuclear ambitions goes into effect July 1.
  • The second is  a threat by Iran to respond to sanctions by shutting down the Strait of Hormuz, through which 17 million barrels of Middle Eastern crude travel to Western refineries every day.
  • The third is the possibility that Israel could stage a pre-emptive strike against Iran to stop its nuclear weapons program, thus plunging the Middle East into war and disrupting the global oil-supply chain.

All three are possible. In that case Moors said the result could be up to $440 per barrel. (Twelve dollars per gallon or more-if you can get it? RK.)

Oliver Rech was a forecaster for “global” petroleum production at the International Energy Agency who now works for the private sector. He says that “oil production could begin to decline in 2015. He is part of a growing list of “leading sources portraying the threat of an imminent decline in global extraction of crude oil.”

An excerpt, interviewed by Matthieu Auzanneau:

MA: In that case, what is your view on the timing of the global peak and decline of total world and alternative liquid fuels output?

OR: It is always delicate to project a precise date. The recovery rate of existing fields is increasing. The US-onshore production is declining very slowly….

MA: Taking account of all these factors capable of slowing a decline, what conclusions do you draw?

OR: We will certainly remain below 95 mb/d for the combined totals of conventional and non-conventional oil.

MA: Therefore, you are clearly more alarmist than the IEA and TOTAL, the most pessimistic of petroleum companies. TOTAL evokes the possibility of maintaining production on a plateau of about 95 mb/d until 2030.

OR:  It’s true. The production of oil has already been on a plateau since 2005 at around 82 mb/d. [NB: with biofuels and coal-to-liquid, we approximate 88 mb/d for all liquid fuels.] It appears to me impossible to go much higher. Since demand is still on trajectory ( unless, possibly, the economic crisis engulfs the emerging economies). I expect to see the first tensions arising between 2013 and 2015.

MA: And after that?

OR: Afterwards, in my view, we will have to face a decline of the production of all liquid fuels somewhere between 2013 and 2015. This decline will not necessarily be rapid, however, but it will be a decline, that much seems clear.

MA: You state ‘not necessarily rapid.’ Why?

OR:  This will all depend on the speed of which streams of non-conventional oil will be able to be developed. Conversion of coal and natural gas to liquid fuels will remain infinitesimal. For first-generational  biofuels, I believe we are already approaching the maximal limit. As for second-generational, we are still at the stage of industrial pilot projects. It should take another quarter century before we achieve a significant production on a world scale. Let’s say around 2.4mb/d.

MA: In your view, will all of this be insufficient to compensate for the decline of existing conventional oil fields?

OR: Insufficient. Yes.

For the complete interview, see ‘Former IEA Expert: Oil Production Could Begin to Decline in 2015.’

Economically, the third world is about to change places with the developed world(Europe, U.S.). David Fessler of Investment U’s Energy and Infrastructure Specialist says that:

“Oil demand from OECD countries (the haves) has declined for the fifth time in the last six years. It’s on track to decline again this year. On the other hand, demand from non-OECD countries (the have-nots) is up a whopping 15% in just the last three years. That rate of growth is expected to continue.”

Demanding more oil means that a country has a booming economy and those that don’t (U.S.?) are on the way out. The “secret” to this reversal of fortune is the trade agreements nations and regions have with each other, courtesy of corporate input. These trade agreements benefit corporate CEOs and third world nations but destroys developed nations with a healthy middle class.

With Obama’s or (soon maybe) Romney’s blessing, our corporate CEOs will continue to send many of our jobs in all categories overseas, giving those jobs to the third world. They will also make use of H-1B work visas and import more skilled workers.  The goal in America is to destroy the middle class so that we can  compete with China’s workers. Mexicans will be the main workforce that will replace Americans.

In case you may have forgotten, corporate CEOs have admitted openly that their loyalty is to their company and not their nation. If the United States becomes  more like one of those third world rat holes, it doesn’t matter.

I have complained and I know that others have wondered why we are selling off our oil to our competitors (China) and our enemies (China). Once again, our CEOs are only interested with the deal, making a profit, even though it makes us more vulnerable to a guaranteed shortage over the next 20 years.

Once again. CEOs have no loyalty to our nation. It’s profit. If the former United States collapses into a Balkanized region, with constant fighting  among disparate groups, a CEO always has a safe haven somewhere else.

Fessler comments on selling a nation’s oil when oil decides if you can survive economically:

“The bottom line is this: Right now, oil dictates countries’ fortunes. Without it, or if it becomes prohibitively expensive, economic growth grinds to a halt.

“My prediction is that those countries that have oil are eventually going to realize this, and slowly start to curtail exports, just like China has with rare earths. They’ll want to keep an increasing percentage of what oil they do have for their own use.”

“If OECD countries (USA, Canada) are smart, clearly a debatable point, they’ll squarely focus on securing domestic energy supplies for their future sustainability. Especially if they want to remain “haves.”

Finally, this timely article will explain “Why the US Cannot Extract Most of its Oil Reserves.”

OIL UPDATE, (06/22/12):

In the last report above, oil prices would rise the end of 2012 and into 2013, barring a global recession. Well, the latest report on the economy was not good, causing a see-off in the stock market, including oil.

“Signs of a slowdown in manufacturing in China, Europe and the United States delivered another blow on Thursday.”  Another 389,000 Americans filed new jobless claims ending June 16th.

Thar means the price of gasoline should decrease. For how long?

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