Back in June BP (the same company that is being blamed for that oil spill in the Gulf of Mexico) released its annual statistical review of world energy. The report is highly anticipated by the energy industry, energy investors, and energy analysts because it contains data about the supply, demand, and availability of various energy sources like crude oil, natural gas, coal etc.
The 2010 edition of the BP Statistical Review contains some alarming data about the world’s future ability to meet oil demand. In this blog post I will highlight some of the alarming developments found in this report.
The first alarming item is found in BP’s data about global oil production. Global oil production declined substantially in 2009, including a major drop in OPEC countries, the world’s main oil producing countries. Figure 1 illustrates the change in global oil production around the world:
It’s a startling development because there are several prominent people within the oil industry along with the U.S. military that believe the world’s ability to produce more oil beyond what it produces now has peaked or will soon peak for good.
- Oil is the lifeblood of the global economy. The global economy cannot grow much further without an increase in global oil supply.
The oil production picture is more ominous when you look at the change in production of individual Middle Eastern countries. Some of the world’s premiere oil producers like Kuwait, Iran, the United Arab Emirates, and Saudi Arabia experienced declining oil output in 2009. Figure 2 illustrates this development:
A development like this is unlikely due to these countries just deciding to produce less oil. Each of these countries possesses major oilfields that are dying. Many within the oil industry expect this downtrend in oil production to accelerate in the future as these countries’ oilfields produce less oil as time progresses.
Finally, the other alarming development is that oil consumption in several major oil producing Middle Eastern countries is rising quickly. Figure 3 illustrates the change in oil consumption in several Middle Eastern countries in 2009.
The reason this development is cause for concern is that increased oil consumption in these Middle Eastern countries means that there will be less oil available for these countries to export to other countries. Even if global oil production were to resume growing (which is a big IF) oil prices would still rise because there would be less oil available for a country like the U.S. and China to import into their own countries.
The world is in an extremely difficult situation. The global economic and financial system is likely going to collapse from the weight of burdensome debt and political mismanagement. However, even if the world managed to overcome these obstacles it would still face an economic financial collapse because there is unlikely going to be enough oil to sustain any significant long-term economic growth. In fact, it is likely that there may not be enough oil to sustain current levels of economic activity in the long-term. In the end, the global economic and financial system is going to collapse one way or another.
You can access the entire BP statistical review at this link.
