(Swedish blog below)
By chance I found an article that TT (Tidningarnas Telegrambyrå – Sweden’s “national wire service”) published in August 2005. It was published in a number of Swedish newspapers including in Svenska Dagbladet’s section titled “SvD Näringslivs” (SvD Business) and in Uppsala Nya Tidning. The price of oil had risen from $25 per barrel in 2003 to $67 per barrel in 2005 and the question everyone was asking was why this was so and how high could the price go. Here is the article:
Analysts: The Oil Price May Double
Last week the price of crude oil hit a new record. But an oil price of $67 per barrel is a trifle compared with what is coming if one is to believe the “oil pessimists”.
(15 August 2005, 17:53 hrs)
The oil analysts note that after last week’s record that the price of oil may soon reach around $80 per barrel. But it would not take much to drive the price up to significantly higher levels than that. A recently conducted crisis modelling exercise in the USA showed that political unrest in Nigeria followed by coordinated attacks in Saudi Arabia and the USA directed at the oil industry would drive up the price of oil to $160 per barrel within a year.
The question is what the consequences of this would be for the world economy?
– At some level there is a pain threshold where the economy will enter recession. Exactly where that threshold lies nobody knows. But if we are talking about an oil price of around $150 per barrel then it will not take long before the world economy crashes, asserts Klas Eklund, the chief economist at SEB [a Swedish bank].
Some analysts assert further that the world’s oil production will soon reach a peak after which production will fall regardless of new technology and more efficient extraction techniques. One consequence of this reasoning is that the price of oil will continue to rise into the future.
One of the foremost proponents of this is Kjell Aleklett, Professor of Physics at Uppsala University. According to him we have possibly already passed a peak in production or it cannot lie far in the future. Aleklett points out that the world’s consumption of oil is currently growing faster than new discoveries of oil are made.
– Today we consume 30 billion barrels of oil per year. Fifty years ago we consumed 4 billion barrels per year. Fifty years ago we discovered 30 billion barrels per year. Today we find around 5-7 billion barrels in new oil fields every year, says Aleklett.
But his theories have not gone unopposed. One of Aleklett’s most outspoken critics is Tommy Nordin, the managing director of the oil industry association, The Swedish Petroleum Institute. He asserts that there are large uninvestigated oil resources in the world that will secure production for a long time to come.
– Most of Saudi Arabia’s area is still uninvestigated. In Iraq no prospecting has occurred since the end of the 1950s. In both east and west Russia they have recently found large volumes of oil and all of eastern Siberia is still uninvestigated, says Nordin.
He adds that there are also large known but undeveloped resources in the form of oil sands that today are as great as all the oil that has previously been discovered.
We know that the oil price reached $US 147 per barrel in 2008 and that it did not require “…political unrest in Nigeria followed by coordinated attacks in Saudi Arabia and the USA directed at the oil industry” for the price of oil to approach $160 per barrel. Instead, we now know that we are still at the same level of production as in 2005, i.e. the analysis that I made in proved to be correct.
In regard to Tommy Nordin’s analysis it is true that production is increasing somewhat in Canada [from oil sands] but only marginally compared with what is required to increase total global production and the new fields in Iraq and Saudi Arabia are noticeable by their absence. Peak Oil is happening right now, i.e. that moment in history when we have maximal oil production and that has a great effect on the world economy.