Charles Maxwell a former energy exec who is now an analyst at Weeden & Co. says “peak oil” will drive oil prices to US$300 a barrel over the next decade.
Alternative energy won’t save us he says: It’s just too small a percentage of the overall energy market to matter. And neither will natural gas coal and other fossil fuels which come with their own problems.
What will save us — because we’ll be forced to do it — is conservation: We’ll find ways to do more with less.
Remember we won’t run out of oil for thousands and thousands of years. There will always be some kind of drilling going on in some isolated place in the world and new supplies will be available.
What we’re saying is that there are oil fields around the world that are young and vigorous and still full of gas with good pressure—remember it’s the gas that drives oil out through the rock. But the older mature fields have had a good deal of their gas taken off and with pressures dropping they’re slowly reaching the stage where they can’t move the oil through rock and production begins to falter….
Globally I believe we’re quite close to the peak simply because we’ve gone from 6% increases in production to 3% per year increases to half a percent per year increases. I think peak will come between 2015 and 2017. So we’re nearly on it.
What we have to keep in mind is that oil is particularly useful in the transportation sector — starting with airplanes and boats and going on to trucks and trains and cars. About 97% of transportation depends on oil. So when we talk about oil production slowing down and reversing you’re talking about a huge cost to the transportation sector.
The supply and demand of oil in the world today are pretty close to each other and there shouldn’t be too much deviation in 2010 and 2011. We think prices will stay within a band roughly between US$67-$87 a barrel. When it gets up toward $87 it seems to retreat and when it gets down toward US$67 it seems to take off again. That’s because supply and demand are in rough balance.
But as the economic recovery continues as more people use oil because there are more people in the world and China and India continue to progress with rapid expansion of cars and the roads they are offering their people demand for oil will continue to climb between 1 and 1.5% per year. That combined with the depletion of these mature oil fields we’ve talked about will bring us to a plateau by 2015-2017 where the rising production of newer oil fields will equal the falling production of old fields.
At that stage prices will break through this $87 boundary — in about 2013 I’m thinking. And by 2015 we’ll be up to around US$130-$150 a barrel. And then by 2020 when we have 1.5% increases in demand each year and 0.5% declines on the downside then we’ll really be in a fix. At that time I’m looking at $300 a barrel in money of the day.