Peak oil is here if I’ve understood what the peak oil argument is properly. From what I understand at some point we get to the end of cheap oil we’ve only expensive oil left …
We seem to have actually reached that end of cheap oil part at least we have if this analysis is true:
Tracking data from the 50 largest listed oil and gas producing companies globally (ex FSU) indicates that cash production and unit costs in 2011 grew at a rate significantly faster than the 10 year average. Last year production costs increased 26% y-o-y while the unit cost of production increased by 21% y-o-y to US$35.88/bbl. This is significantly higher than the longer term cost growth rates highlighting continued cost pressures faced by the E&P industry as the incremental barrel continues to become more expensive to produce. The marginal cost of the 50 largest oil and gas producers globally increased to US$92/bbl in 2011 an increase of 11% y-o-y and in-line with historical average CAGR growth. Assuming another double digit increase this year marginal costs for the 50 largest oil and gas producers could reach close to US$100/bbl.
It’s the marginal not the unit or average costs which have the greatest influence upon prices in a market. Obviously so: those supplies with the highest marginal costs will be the first to disappear if the market price drops.
So again assuming that this analysis is correct we seem to have come to the end of the age of cheap oil. At least cheap oil in the sort of volume that we are used to using.