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Summary of oil supply points

by Jan Lundberg

This was originally developed as an aid to the Campaign Against the Plastic Plague, Feb. 2005.  Slightly augmented May 2005.

Ten oil supply basics vis-á-vis Peak Oil and sudden shortage

l Daily world demand of oil is over 80 million barrels a day, and approximately one quarter of this is in and by the U.S. 

l Half the oil refined in the U.S. is made into gasoline, the main product a refiner is concerned with.  Other products such as asphalt, pesticides and plastics are minor parts of the crude-oil barrel to be disposed of (profitably only if possible). [source: Jan Lundberg, veteran petroleum industry analyst]

l World oil supplies are at the approximate historic peak of maximum production, due to depletion setting in.  Oil production in 18 producer countries has passed its peak and is declining faster than previously thought: at about 1.14 million barrels a day.  "Those 18 countries between them are now producing 1.14 mbpd less than they were at their height."  [Adam Porter,]

l The maximum possible production-capacity utilization is the order of the day among the petroleum exporting countries: "The planet is operating at anywhere from 95% to 99% capacity.  There is no margin for error.  The only way the system can respond is continued price increases." [ Stephen Leeb, Wall Street investment advisor and author.]  At a time of no spare refinery capacity, demand has outstripped all expectations. []

l Regarding rising world demand, "China and India use the energy-equivalent of 5.5 barrels of oil per person per year, while rich nations use 39. No matter how rosy your thinking is as to the global supply of oil, there is no way there is going to be enough to satisfy the demands of an extra 2.3 billion people coming online." [Forbes magazine]

l U.S. oil demand is rising as well:  "U.S. petroleum demand in 2004 grew at its strongest rate in five years."  The system is straining: "Refinery utilization rate last year was the highest annual rate in six years at 92.8 percent of capacity."  [American Petroleum Institute]

l  The " bell curve" of petroleum extraction cannot be changed by any one big new discovery.  The world trend in declining oil discoveries has been relentless for the past four decades.  Fifty years ago, the world was consuming 4 billion barrels of oil per year and the average discovery was around 30 billion.  Today we consume 30 billion barrels per year and the discovery rate is approaching 4 billion barrels of crude per year.  [ASPO;]

l An International Energy Agency report from August 2004 indicates Saudi Arabia needs up to 800,000 barrels per day of newly discovered oil each year just to offset declining fields and maintain its current production level. - This can't happen [Jan Lundberg]. 

l What about renewable energy and other alternatives?  They are not ready, and will never be as long as oil is king.  (This is something not acknowledged by the boosters of the technofix.)  The price of oil is kept under the price of most alternatives.  When oil abdicates because great quantities are no longer available at affordable prices, no other fuel/material can fill oil's shoes.  [Jan Lundberg, from a prediction originally published in the National Petroleum News in 1988]

l The next shortage could be soon and be the last one -- that lasts and lasts, as the watershed event of passing the peak of global oil extraction could be right around the corner.  The "market factor" in paralyzing the supply/distribution system, through panic-buying of crude and refined products, will usher in virtual but extreme shortage, bringing much economic activity to a halt in a matter of days.  History taught us:
"What the U.S. went through in 1979’s oil crisis, based on the  Lundberg Letter's projection of a 9% shortfall in gasoline deliveries, can happen again. The difference will be that global production of oil will be falling instead of increasing." - Jan Lundberg, at The Institute of Petroleum, London, February 17, 2003
_ _ _ _

Culture Change Letter #88 February 17, 2005 Peak oil in a nutshell - Here comes the nutcracker
See Fall of Petroleum Civilization, top right green bar link on Culture Change.

Additional sources used for above: 
Association for the Study of Peak Oil and Gas (ASPO)  
Find Adam Porter's oil coverage at
See our "Fall of Petroleum Civilization webpages:
for more data, insight, and links on oil issues.
A huge list of links and resources is at Life After the Oil Crash
Energy Information Administration
American Petroleum Institute

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