INTERNATIONAL. Peak oil supply will be hit this year after the economic crisis and low prices in the first quarter of 2009 slashed much needed investment, a senior executive at Australian investment bank Macquarie said.
“This is our view – capacity has pretty much peaked in the sense that declines equal new resources,” Iain Reid, head of European oil and gas research at Macquarie, told Reuters.
Reid's latest research report – The Big Oil Picture: We're not running out, but that doesn't mean we'll have enough – sees global oil production capacity topping out at 89.6 million barrels per day (bpd) this year, a far more pessimistic view than most other banks or traditional forecasters.
Underinvestment in mature fields, rising resource nationalism, and the cost and difficulty of retrieving oil from discoveries in ultra-deep water could see global production capacity fall to 87.3 million bpd by 2015, according to Reid.
Reid, who spent 16 years with oil firms Shell and Amerada Hess, saw the current spare capacity cushion of around 5.2 million barrels wiped out by 2012.
“With the reduction in spending on mature fields, that's the major driver. Then really it's about, ‘where do the new sources come from?'” Mr. Reid said, adding the economic crisis had further restricted investment.
“If you look around the world it's either locked up in countries which are difficult to access or it's locked up in countries where they are tightening access or it's in these huge mega-structures which are very difficult to develop technically and cost-wise.”
The International Energy Agency, adviser to 28 industrialized nations, has predicted global supply will continue to rise through 2015, but that demand might grow faster than that.
Macquarie saw the potential for a huge supply deficit to emerge, with global oil demand predicted to rise to 90.9 million bpd by 2015 from 84.2 million bpd today because of rising consumption from China and other emerging markets.
“Adding sufficient productive capacity on time is nearly impossible,” Reid said in his report.
Episodes of higher oil prices would be an obvious consequence, without either a greater political push for efficiency savings or new technological advances, he said.
But his price forecasts were still relatively conservative.
He expected the benchmark US crude contract will average US$84 a barrel in 2012, compared with around US$71 now. The bank's “long run” forecast is for an average price of US$75.
The level of nearly US$150 hit last year was unlikely to be repeated, Reid said, because of its immediate damaging effect on the world economy and on fuel demand.
“One hundred dollars a barrel is perhaps liveable with in certain scenarios, but I would say gasoline will reach the US$4 level again and that will naturally force more efficiency in the United States,” Reid said, adding it was difficult to forecast when such levels would be hit.
Eventually, the trend could be towards peak demand, rather than peak supply as higher prices drive the quest for greater efficiency and alternative energy sources.
“(Oil near US$150) would very soon create another set of global economic drivers which would spell much lower demand in the future,” said Reid.
“In the very long term, we can see demand for oil falling quite substantially.”
The world will see oil production peak in 2020, about a decade earlier than most official government predictions, Dr Fatih Birol, the chief economist at the International Energy Agency (IEA) warned in August.
In an interview with UK newspaper The Independent, in Paris Birol said 'the public and many governments appeared to be oblivious to the fact that the oil on which modern civilisation depends is running out far faster than previously predicted'.
"One day we will run out of oil, it is not today or tomorrow, but one day we will run out of oil and we have to leave oil before oil leaves us, and we have to prepare ourselves for that day," Dr Birol said.
"The earlier we start, the better, because all of our economic and social system is based on oil, so to change from that will take a lot of time and a lot of money and we should take this issue very seriously," he said.
The theory of peak oil was first suggested by geoscientist Marion King Hubbert, who in 1956 predicted US oil production would peak between 1965 and 1970.
Figures from the US government Energy Information Administration show crude oil production peaked in the United States in 1970.
The Hubbert peak curve is a bell-shaped model of production for a particular country, region or the world, given an assumed total recoverable volume.
Critics of peak-oil assertions say it's impossible to know when petroleum production has peaked, given uncertainties estimating global reserves, and point out that previous theories pegging a specific date for peak oil output have been wrong.
They also point out to recent oil finds such as BP's 'giant' oil discovery in the Gulf of Mexico and BG Group's field off the coast of Brazil.