 Oil Peak Projection and Assumptions
Kenneth J. Gerbino
Archives
Kenneth J.
Gerbino & Company
Oct 12, 2005
 Below
is a supply and demand projection for crude oil through the year
2020. The assumptions used are from authoritative oil industry
sources. The chart on the right shows a very different scenerio
than what is being presented by various recognized institutions
that have claimed the supply/ demand balance is not approaching
a critical level.
On the supply side, Cambridge
Research Associates claims a very optimistic assumption that
for the next 6 years planned supply increases will come on stream
delivering 4.5 million barrels of oil daily. This implies a giant
field (one billion barrels of reserves) will be added every 2.7
weeks for the next 5 years, a number well beyond other projections.
Our projections use 3.5 million bbls. The US Geological Survey
states that "global discoveries of new oil peaked in 1962."
The World Research Institute states " the amount found in
new fields per year is less than 10 billion barrels and falling."
We use 9 billion barrels per year of new discoveries, this would
imply that these fields would contribute about 2.05 million barrels
of oil per day to the global supply each year.
All oil fields face what is
called production declines. This is where less oil comes out
every year after a production peak is attained. The giant Prudhoe
Bay field is now declining at 11% per year and the giant Mexican
field Cantarell is expected to decline by 14% annually starting
next year. Globally, production declines are present in approximately
80% of the worlds oilfields. Sadad al-Husseini, PhD. Brown University
and ex-production head of Aramco, the world's largest oil company,
stated in the New York Times that " the global decline rate
is four to five million barrels a year." Our assumptions
use a decline of 4.5 million barrels a year, or a 6.9% annual
decline rate. Demand for oil changes based on economic activity.
Current demand is increasing by 2.5% annually. We have cut this
back to only 2% per year and this assumes only modest growth
from India and China.
Using supply and demand numbers
that appear very reasonable, it appears that currently a global
oil squeeze has started with little relief in sight. A severe
supply shortfall looks possible within 6 years and could have
profound social, political and economic consequences.
| Assumptions: |
.. |
| Decline
Rate: |
0.069 |
| Current
Global Production (millions bbls/day)* |
83.1 |
| Annual
New Prod. (mill bbls) in Progress to come Onstream |
3.5 |
| Percent
of Current Production in Decline |
0.8 |
| World
Oil Demand Annual Increase |
0.02 |
| New
Discoveries Per Year - Billions of bbls. |
9 |
For more commentaries please visit our website.
October 11, 2005
Kenneth J. Gerbino
Archives Kenneth J. Gerbino & Company
Investment Management
9595 Wilshire Boulevard, Suite 303
Beverly Hills, California 90212
Telephone (310) 550-6304
Fax (310) 550-0814
E-Mail: kjgco@att.net
Website: www.kengerbino.com Copyright ©2004-2016 Kenneth J. Gerbino & Company. All Rights Reserved.
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