Why 'peak oil' may soon pique your interest

World oil production peaked in 2005, says one expert, and that presents serious problems in the future.

from the August 6, 2007 edition

Page 2 of 2

Page 1 | 2

Mr. Chalabi says forecasts for the world oil industry cannot be relied on, having proved wrong in the past. Today's forecasts do not fully take into account the impact higher prices have in reducing demand and encouraging alternative energy sources, he adds.

However, concern over the world's oil supply is mounting. Last month, the International Energy Agency (IEA) issued a report warning that world oil demand will rise faster than previously expected. The result could be a supply crunch – "extremely tight," one IEA economist told the BBC. The report sees world oil demand soaring 2.2 percent a year to 95.8 MB/D by 2012. That's up from the 2 percent annual growth rate it forecast in February.

The Paris-based IEA advises 26 industrial nations, and, in Simmons's view, it now has a more realistic chief economist, Dr. Fatih Birol. So the agency, Simmons says, is no longer "a cheerleader for cheap oil," always saying crude oil supplies are so large that oil prices will surely fall.

In July, the National Petroleum Council, a federal advisory group representing the oil industry, published a 476-page study titled "Facing the Hard Truths About Energy." Simmons, one of 350 participants who prepared the study, holds that its wording is not stern enough considering the statistics on the oil demand/supply situation it includes. The study states, "The world is not running out of energy resources, but there are accumulating risks to continuing expansion of oil and natural gas production from the conventional sources relied upon historically."

Simmons uses such terms as "hogwash" and "junk report" in describing the study.

For years, many in the oil industry viewed the peak oil forecasts by Simmons as odd. Now his position has a lot of company. Several websites publish sophisticated material on the issue. There's the Oil Drum (www.theoildrum.com), featuring "Prof. Goose" and "Gail the Actuary." Those pseudonyms hide a full professor at Colorado State University and an actuary in an Atlanta suburb. There's also the Energy Bulletin (www.energybulletin.net). The site's coeditor, Bart Anderson, say it receives 11,000 visits a day. Peak oil enthusiasts, he says, have now divided into a majority seeing life after an oil crunch and those he calls "doomers."

In Britain, Douglas Low, director of the Oil Depletion Analysis Centre (www.odac-info.org), foresees a "crisis coming up" with a real shortage of oil. In June, he notes, the world used 1.5 MB/D more crude than it produced. He expects much higher oil prices in the future.

"It's not a very happy message," he says. "A lot of people want to slip it under the carpet."

1 | Page 2