Is World Oil Production Peaking?

Is world oil production peaking? Quite possibly. As I note in my Update Is World Oil Production Peaking? , Data from the International Energy Agency (IEA) show a pronounced loss of momentum in the growth of oil production during the last few years.

After climbing from 82.90 million barrels per day (mb/d) in 2004 to 84.15 mb/d in 2005, output only increased to 84.80 mb/d in 2006 and then declined to 84.62 mb/d during the first 10 months of 2007.

The combination of world production slowing down or starting to decline while demand continues to rise rapidly is putting strong upward pressure on prices. Over the past two years, oil prices have climbed from $50 to nearly $100 a barrel. If production growth continues to lag behind the increase in demand, how high will prices go? Globally, oil discoveries peaked in the 1960s. Each year since 1984, world oil production has exceeded new oil discoveries, and by a widening gap. In 2006, the 31 billion barrels of oil extracted far exceeded the discovery of 9 billion barrels.

The aging of oil fields also tells us something about the oil prospect. The world's 20 largest oil fields were all discovered between 1917 and 1979. (See data.) Sadad al-Husseini, former senior Saudi oil official, reports that the annual output from the world's aging fields is falling by 4 mb/d. Offsetting this decline with new discoveries or with more-advanced extraction technologies is becoming increasingly difficult.

Yet another way of assessing the oil prospect is to look separately at the leading oil-producing countries where production is falling, the ones where production is still rising, and those that appear to be on the verge of a downturn.
Among the post-peak countries are the United States, which peaked at 9.6 mb/d in 1970, dropping to 5.1 mb/d in 2006; Venezuela, where output also peaked in 1970; and the two North Sea oil producers, the United Kingdom and Norway, which peaked in 1999 and 2000.

The pre-peak countries are dominated by Russia, now the world's leading oil producer, having eclipsed Saudi Arabia in 2006. Two other countries with substantial potential for increasing output are Canada, largely because of its tar sands, and Kazakhstan, which is developing the Kashagan oil field in the Caspian Sea, the only large find in recent decades. Other pre-peak countries include Algeria, Angola, Brazil, Nigeria, Qatar, and the United Arab Emirates.

Among the countries where production may be peaking are Saudi Arabia, Mexico, and China. The big question is Saudi Arabia. Saudi officials claim they can produce far more oil, but the giant Ghawar oil field—-the world's largest by far and the one that has supplied half of Saudi oil output for decades—-is 56 years old and in its declining years. Saudi oil production data for the first eight months of 2007 show output of 8.62 mb/d, a drop of 6 percent from the 9.15 mb/d of 2006.

In Mexico, the second-ranking supplier to the United States after Canada, output apparently peaked in 2004 at 3.4 mb/d. Production in China, slightly higher than in Mexico, may also be about to peak.

The Energy Watch Group in Germany, which recently analyzed oil production data country by country, also concluded that world oil production has peaked. They project it will decline by 7 percent a year, falling to 58 mb/d in 2020. Bakhtiari projects a decline in oil production to 55 mb/d in 2020, slightly lower than the German group. In stark contrast, the IEA and the U.S. Department of Energy are each projecting world oil output in 2020 at 104 mb/d.
The peaking of world oil production will be a seismic event, marking one of the great fault lines in world economic history. When oil output is no longer expanding, no country can get more oil unless another gets less.
The United States is much more vulnerable to an oil decline than other countries partly because it has long neglected public transportation: 88 percent of the U.S. workforce travels to work by car.

We could have a gentler landing into this post-oil time if we started now to seriously reduce demand for oil--especially within the transportation sector. And since the United States consumes more gasoline than the next 20 countries combined, it must play a lead role in cutting oil use.

A campaign to reduce oil use rapidly might best be launched at an emergency meeting of the G-8, since its members dominate world oil consumption. If governments fail to act quickly and decisively to reduce oil use, oil prices could soar as demand outruns supply, leading to a global recession or -- in a worst-case scenario -- a 1930s-type global depression.

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Lester R. Brown is President of the Earth Policy Institute and author of Plan B 3.0: Mobilizing to Save Civilization (forthcoming).