Right. But the question is, will global capitalism stay in business? If the answer is yes, it is safe to bet that oil consumption at the global level will continue to rise into the foreseeable future: "In the IEO2006 reference case, world oil demand grows from 80 million barrels per day in 2003 to 98 million barrels per day in 2015 and 118 million barrels per day in 2030. Demand increases strongly despite world oil prices that are 35 percent higher in 2025 than in last year's outlook. Much of the growth in oil consumption is projected for the nations of non-OECD Asia, where strong economic growth is expected. Non-OECD Asia (including China and India) accounts for 43 percent of the total increase in world oil use over the projection period" ("International Energy Outlook 2006," <http://www.eia.doe.gov/oiaf/ieo/oil.html>).
The hitherto existing alternatives to plain and simple capitalism -- state socialism, state Islamism (Iran), and Bolivarian socialism (Venezuela) -- do not appear to change the overall production and consumption patterns based on the fossil-fueled industrialization model developed by capitalism (as a matter of fact, state Islamism and Bolivarian socialism, practiced by oil producers, are more addicted to oil consumption subsidies -- the cheapest gas in the world! -- than plain and simple capitalism, though that may be changing now).
> So, one has to wonder: Why hasn't those theories persuaded big money
> (which can buy the best available geological and economic expertise)
> to hike the price to levels consistent with the peak-oil story?
The White House's wars have certainly done their share to hike the price, but they are unlikely to be motivated by the "peak oil" theory, and they have had an unintended consequence of making exploration and exploitation difficult in the invaded countries and can spill over into the rest of the Middle East, endangering oil supplies.
In any case, though, the oil industry outside the West has suffered from severe underinvestment, due to low prices and other factors, which go far beyond corruption as a barrier to investment.
<http://www.forbes.com/home/free_forbes/2006/0724/042.html> On My Mind Oil, Oil Everywhere Leonardo Maugeri 07.24.06
We're not running out of oil--but high oil prices are needed to find it, says the head of strategy and development at Italian energy company, Eni.
There is an alarmist theory that the world is running out of oil. Quite the contrary. There is plenty of oil in the ground, and high prices are just what's needed to tap the earth's vast reserves.
For two decades low prices have discouraged the search for new resources in areas with the largest deposits of crude. Over time this has thinned out global production capacity and virtually eliminated the safety margin needed to provide a cushion against sudden crises. Today spare capacity is a mere 2% of world consumption, holding the price of oil hostage to every kind of political or climatic crisis, and fueling rumors and speculation.
Starting in the mid-1980s and continuing until the early years of the new century, the price of oil mostly oscillated between $18 and $20 a barrel, held down by oversupply. In 1986 and 1998--99 prices dipped below $10. In this environment oil producers, terrified by the specter of overproduction, held back on the search for new oilfields. Some countries limited production to already active fields.
The scope of this phenomenon is extraordinary but barely understood outside the industry. During the last 25 years more than 70% of exploration has taken place in the United States and Canada, mature areas that probably hold only 3% of the world's reserves of crude. The Middle East, on the other hand, has been the scene of only 3% of global exploration, even though it harbors 70% of the earth's reserves. In the Persian Gulf, holding 65% of the region's reserves, fewer than 100 exploration wells were drilled between 1995 and 2004. During the same period, 15,700 such wells were drilled in the U.S.
Looking back over a longer time frame, you find the same lopsided ratios. In Saudi Arabia only 300 oil and gas wells (including developmental wells) have ever been drilled, as opposed to several hundred thousand in the U.S. The contrast is even more striking with respect to Iran and Iraq, and Russia is still paying the price for the technological backwardness and poor management of its fields during the Soviet era. Even today it is scarcely expanding its productive base, although its recent groping toward Western capital and expertise may change that picture (click here to see story).
Venezuela could double its production of crude in ten years with the help of foreign capital and technology, but political considerations drive it in the opposite direction, and its production is falling.
In fact, the vast majority of prime producing countries get their oil from old fields, most of which have been in production since their discovery in the first half of the last century. And in many instances they are operated with 50- and 60-year-old technology and equipment.
There is little that the small or large Western oil companies can do to alter this situation. They control only 8% of global reserves of crude, while more than 90% of the world's reserves are in countries that do not allow foreign access and are unwilling or unable to develop new reserves on their own.
While the industrialized world is concerned with future energy supply security and price, the producing countries have been driven by concern over future demand. Will consumption of crude hold up in the future, they ask, or is the current scenario only a bubble, bound to explode as it has done so many times before?
Only relatively high prices for oil can provide a painful but effective antidote for the current situation. The process has already begun, but the cure will take time. Thanks to high prices, investment in oil exploration and development has exploded during the last two years worldwide. A plausible forecast is that by the end of the decade the daily demand for oil will have expanded by 7 to 8 million barrels. If global production continues at present rates, it could grow by 12 to 15 million barrels per day in that period. In other words, there is more than enough oil in the ground.
Leonardo Maugeri head of Strategy and Development at Italian oil and natural gas company Eni; Author, The Age of Oil: The Mythology, History and Future of the World's Most Controversial Resource. -- Yoshie <http://montages.blogspot.com/> <http://mrzine.org> <http://monthlyreview.org/>