CRUDE OIL AND PICK THEORY
EXCLUSIVE CRUDE OIL REPORT
Yes, Crude Oil Prices can touch to New Highs and Beyond...
Yes, Crude Oil Prices can touch to New Highs and Beyond...
“ACCORDING TO ‘PICK OIL THEORY’ THE PRICES OF CRUDE OIL MAY TOUCH $300 PER BARREL”
BELL CURVE:
The production of crude oil normally follows the shape of a ‘bell-curve’ in which we can say it to be peak production when on the graph this curve comes in the centre top. At this level the production has been peaked i.e. this is the time and quantum of maximum production and from here on the production decreases. (see figure). Paring some exceptions this phenomena is true for a single oil well, a whole oil-field, a country and the whole wordl.
“Peak-Oil doesn’t mean we will become ‘oil-less’, but is surely means we become ‘cheap oil-less”.
The pick oil theory which was made by American Geologist King Herbert, is also known as Herbert Pick Theory. According to this theory’s conclusions, due to declining exploration and sharply decreasing production ; we may see tremendous blast and rocket pace rise in prices of fossil fuels, mainly crude oil. This Pick Oil theory works on the basis of principle based on long-term production and declining reserve rate of fossil energy sources such as coal, crude oil, natural gas etc.
We will try to evaluate this theory through various facts, figures, logics and arguments in this special ‘$300 CRUDE OIL SPECIAL REPORT’.
- There are many reasons behind the strengthening fears of decrease in the reserves/availability of traditional sources of energy such as fossil fuels (like crude oil etc.) such as,
o The technology relating to acquisition and analysis of geological information, is improving day by day.
o The number of finds and exploration by way of drilling activity is decreasing day by day.
o Question mark on the so-called and claimed ‘proven reserves’ of many countries and regions.
o The present supply of word’s need is coming from such mega-oil fields which are very old and over-exploited and becoming less and less productive. Out of which most are located in Middle East countries and surrounding regions.
o Many experts believe the global “pick oil’ production year will be the year of 2010 or anywhere between 2010-2020. But research suggests that we have already reached ‘pick oil’ production stage probably in year 2004. This phenomena can be understood in Figure no.1.
Figure No.1:
o Moreover, the ‘proven reserves’ stated by ‘OPEC’ countries is also allegedly overstated by almost more than 300 barrels. The OPEC stand for the Organisation of the Petroleum Exporting Countries.
About global ‘Proven Reserves’ of crude oil:
According to a survey undertaken at the end of year 2007, it has been concluded that presently only 1000 billion barrels of producible reserves have been left on the earth.
Moreover adding into this other 1000 billion barrel i.e. in total only 2000 billion barrel of crude oil reserve is out there in total for usage including explored, production able and still to be explored. Out of which 1000 billion barrel has already been produced. If we follow this calculation then the crude oil was at its maximum production level in the year 2006 and from now onwards we may start witnessing declining trend in everything ranging from exploration, production (and usage? Not really.). But if we deduct the allegedly so called overstated reserves of 300 billion barrels of the OPEC countries, then in that case few might have doubts that we already have passed the ‘pick crude oil production’ in the year 2004!
Other Reports raising concerns on the issue of declining reserves of crude oil, supply shortage and possibility of severe price rise:
Recently in a report published under title ‘Energy Trends and Their Implications for US Army Installations, by Pentagon also addresses this issues of ‘pick oil’. The report signals that the ‘pick’ has probably passed us or is very nearby and the global supply of crude is in shortage and will remain in such condition. Moreover the report also suggests that the previous run up in crude oil prices to as high as $150 per barrel was not purely due to speculation only but also due to demand-supply mismatch. It also signals more bad news from the demand supply front and indicated that the $150 price was merely a trailer and we may see the full picture in near future!
One another report published in March 2007 by the USA Government Accountability Office (GAO) titled ‘CRUDE OIL- Uncertainly about Future oil Supply makes It Important to Develop a Strategy for addressing a Peak and Decline in Oil Production”, also states similar concerns regarding crude oil production and its impacts. It states that the crude oil production may pick anywhere between now and 2040 and also warns that the US government is not at all aware and prepared to cope with this situation.
“January 2006 issue of “Petroleum Intelligence” weekly depicts that according to internal secret documents of Kuwait, the proven oil reserves of the country are only around 25 billion barrels which is wrongly being claimed to be 100 billion barrel. Moreover out of this 25 billion barrel 15 billion are from its Bergan oil-field.” OTHER NON-TRADITIONAL SOURCES OF OIL. HOW MUCH SUFFICIENT? Crude oil’s other forms i.e. traditional sources of crude oil includes (1) tar sand oil (2) extra heavy oil (3) bitumen and oil shell as well. The total reserve of the above mentioned sources of oil has been estimated at 6.5 billion barrel. Out of which only 745 billion barrel is classified as acquirable out of the said reserves, 315 billion barrel of tar oil reserves in Canada, 270 billion barrel of extra-heavy oil and bitumen oil mass in Venezuela, and other globally dispersed 160 billion barrel of oil shell type mass is estimated to be in reach. But the question is how much is oil is produced out of these types of reserves? The National Energy Board or Canada puts a figure of 1 million per day of production of tar sand oil. The petroleum producers’ association of the country claims this figure to come to 3 million per day in/by year 2015. Now the problem is that to extract tar and sand to produce oil we have to use natural gas; and bad news is that the availability of natural gas is declining in Canada. This means that there will be less and less natural gas in days to come in Canada which can be deployed to extract oil out of tar and sand oil sources. There will be shortage of natural gas and we have to consider the prices of natural gas at respective times and the priority of usage, cost of opportunity for the commodity as well. According to estimated calculations if the production of tar and sand oil is aimed to increase by 2 million per day as mentioned above, then there will be 2.5 billion cubic feet of extra pressure and stress on the usage of natural gas or 15 per cent of the present 16.8 billion of usage. It is estimated that by the year 2010 the contribution of the such types of non-traditional sources of fuel shall be only 2.80 million barrels per day, which is further expected to remain million per day by the year 2030. The research also suggests that by the year 2010 and 2030 respectively 3 per cent and 5 per cent of the pressure of fulfilling world’s oil requirement shall be on the said types of oil non-traditional oil resources. During the year 2007 the said types of sources of oil contributed only around 1 per cent for the satisfaction of world’s primary energy and fuel needs, which is expected to go up to 6 percent in year 2025 and 13 per cent at the maximum in 2050. See Figure No.C2 for more figures and estimates. Figure No. C2. The contribution of non-traditional types of crude oil in global demand and usage of crude oil: 2007-2030:
All figures are million barrels per day unless stated otherwise. Sources: European Bio-diesel Board, answers.com, …….
Non-traditional=such as tar and sand oil, extra heavy oil, bitumen and shell oil etc. All figures are in million barrel per day unless otherwise stated. Sources: US Department of Energy’s ‘Energy Outlook-2007’, IAEA’s ‘World Energy Outlook-2007’, BP Statistical review of world energy-June 2008, and other sources. Usage of primary energy. Year 2007-2050.
All figures are in million ton unless otherwise stated. Sources: Shell International Scenarios in 2050, ………… WHAT COULD BE THE EFFECTS OF PICK OIL ON NORMAL POPULATION? In the pace for becoming more and more advanced and modern; man has made oil become an integral and inseparable part of his life. Presently on lands, in water, and in air; 90% of transportation is fueled by using oil as energy. Moreover according to research and survey, 90 per cent of material or goods available for sale and consumption in shops and malls of the world require oil as important ingredient for its use and consumption. GEO POLITICS OF CRUDE OIL AND ‘PICK’ PHENOMENA: USA is the number one consumer of crude oil. In year 2007, USA consumed about 20.70 million barrels per day. Out of which only 6.87 million barrels was produced in USA and the rest 13.83 million barrel was imported from outside of the country. The foreign dependence of USA for oil increased from 34% in 1973 to 67% in 2007. Moreover this dependence is expected to increase upto 72% in 2010 and 84% in 2025. This could literally mean that the interference of USA in oil rich countries will continue and infact rise. Also the autocracy structure in some oil producing countries, violence and violent protests against US as well as the competition for declining supplies is making things look even grimmer. The US strategy for oil would, over and above the five gulf oil producing countries, include another main eight sources of crude oil namely; Russia, Maxico, Azerbaijan, Colombia, Venezuala, Kazakhistan, Nigeria, Angola. But the oil production and supply in these countries is entangled with rampant violence, terrorism, corruption, mafia, political upheavals, and weird dictatorships or communism. Thus the US is forced in deep relation with such states. The point is that political upheavels, corruption and violence in these countries could trap US troops and may cause a situation of putting military forces of the world one on one. Because all the countries (most importantly powerful ones), want to secure their oil supplies and would badly want. Moreover, we could we could see China taking closer and serious interest in middle-east politics. As well as try and strike various deals and contracts with these and the other eight problematic oil producing countries. This could also involve supplying arms, weapons, technology and other dangerous materials such as ballestic missiles, nuclear technology etc. and all these would help the agitators and anti-US groups to take their fight further and strengthen their position against the US. On the other hand if we look into the past, the policies of US have remained quite clear. Sine second world war, most US presidents have for one or the other reason, taken military activities in middle-east regions. To the extent that in 1980 the then president Jimmy Carter officially declared that the US must hold strong in the Persian Gulf region at any cost. And the same seems to have been followed till date, although many billions of dollars have been wasted in this practice. Iran: in last two years, the political action in crude and gas geo-politics has heated up. It is not proved how much oil reserves it has; although is continuously reiterates the threat that if US and internation agencies continue to unfairly try to pressurize Iran for putting control and surveillance on its nuclear enrichment activities; it would divert the flow of its oil and gas supply to only and only China and stop supplying to US and its allies. Venezuala is also teasing US for similar and variety reasons. Russia has also threatened Ukrain to raise gas prices for its supplies or else it will stop production. This could have direct impact on Europes’ supplies, because Russia supplies the majority of Europe’s gas consumption. Earlier, Russia stopped supplies to Belarus. Another worry some matter in geo-politics has been the practice of nationalizing oil and gas corporation in latin American companies. The US understands that in the way india’s economy is growing and demand and consumption of oil and gas is rising. It also understands that the Iran-Pakistan-India pipeline project could strengthen the relations of Iran and India. For this reason it is doing all the possible efforts to block this deal and put a standstill and consequently a full stop on the tri-nation developments and it seems to have succeeded in so much extent. |
The Soudi Arabia has claimed a reserve of around 265 billion barrel within its territories. However the international oil experts have clearly negated this figure and puts it at only 100 to 120 billion barrel, almost half of what Soudi is claiming to have remained in reserves.
HOW MUCH PRODUCTION LEFT AND HOW MUCH EMPTY IN DIFFERENT OIL PRODUCING REGIONS:
Please refer to table A1.
Table A1.
Crude oil-exploration, production, reserve depletion and pick:
COUNTRY | YR OF (PICK) FINDS | YR OF (PICK) PRODUCTION | % OF EXPLORED OUT OF TOTAL | % OF CONSUMED/ DEPLETED | FINAL REMAINING PRODUCTION (BN BARREL) |
CHINA | 60s | 2006 | 93 | 47 | 57 |
CANADA | 50s | 1973 | 95 | 76 | 25 |
IRAN | 60s | 1974 | 94 | 76 | 130 |
IRAQ | 70s | 2019 | 87 | 20 | 135 |
INDONESIA | 50s | 1977 | 93 | 65 | 31 |
KUWAIT | 50s | 1971 | 93 | 34 | 90 |
LIBYA | 60s | 1970 | 94 | 42 | 55 |
MEXICO | 50s | 2002 | 94 | 55 | 55 |
NORWAY | 70s | 2001 | 93 | 48 | 33 |
RUSSIA | 40s | 1987 | 94 | 61 | 200 |
SOUDI ARAB | 40s | 2013 | 96 | 31 | 300 |
UAE | 60s | 2014 | 94 | 23 | 78 |
UK | 70s | 1944 | 94 | 63 | 32 |
USA | 30s | 1972 | 98 | 88 | 195 |
VENEZUALA | 50s | 1970 | 96 | 48 | 95 |
WORLD | 62 | 05-10 | 94 | 49 | 2100 |
Sources: ASPO, Peakoil.net, theenerrgyfiles ltd., chevron, petroleum review and others.
Moreover, three of the world’s major oil-fields have already picked. These includes Kuwait’s Burgan which is the world’s second largest oil-field and supplies 60% of Kuwait’s crude oil production. This oil-field is said to have picked in the year 2005.
The big Cantarell oil-field of Mexico is also picked in the year of 2006. From which in place of earlier daily 1.99 million barrel; last year only 1 million barrel production was witnessed.
Soudi Arab’s world’s largets oil-field Ghavar; which likewise Kuwait’s Burgan oil-field contributes about 60% of the oil production of the Gulf State. This oil-field produces daily 5 million barrel and it is said to have been picked in the year 2006, as well as registering a decline of 8% per year.
Soudi’s four big oil-fields namely Ghavar, Hanifa, Afji, and Safania; are more than 50 years older now. And the majority of Soudi’s oil during the last 5 years has been produced out of these fields.
The more worrisome thing is that recently a huge water treatment has been supplied to this oil-well by infusing water into it-and this treatment is very serious. Because these oil-fields shows full possibility of 30-40 per cent decline in normal production which could be in next three-four years or may be three-four months! Who knows!
Table-A0.
Use of primary energy globally (consumption in %) yr 2007.
CRUDE OIL | NAT GAS | COAL | NUCLEAR ENERGY | HYDRO-ELECTRICITY | TOTAL |
36% | 24% | 29% | 5% | 6% | 100% |
Table-A2.
World oil reserves, depletion rate, remaining reserves etc. (year 2007).
x | Billion Barrel | Particulars |
Total Reserves | 2100 | Figure of total produced when production will completely stop. |
Till date produced | 1087 | Uptill the end of 2007 |
Still remain to be produced | 1013 | Total reserves-produced (2100-1087=1013) |
Till date explored | 1994 | Total produced+remaining |
Till date still remains to be explored | 106 | Total reserves-explored (2100-1994) |
Rate of exploration (million per year) | 6 | Addition in new oil reserves |
Depletion/consumption rate | 3 | Annual production rate out of the remaining to be produced. |
Caption:
Due to London’s status as a financial center, and its increasing dependence on financial services revenue. The production of crude oil from UK has been over and it was exporting crude oil for 26 years and now due to this phenomenal change its currency pound’s value (exchange rate) will decrease.
Caption:
“the basic funda of peak theory has been that from beginning the type of crude oil’s exploration and production method has been; on that basis the explorable and producible crude oil of that as well as the maximum producible-time; i.e both of these has been on peak in terms of plain figures. Which shows that the peak has passed us.”
Caption:
The production of crude oil normally follows a bell-curve. Where we can predict peak production when on this graph the curve is exactly in the centre of in the middle top. At this point it can be said that the half of the oil has been produced. (see figure.)
GEO POLITICS OF CRUDE OIL AND ‘PICK’ PHENOMENA:
USA is the number one consumer of crude oil. In year 2007, USA consumed about 20.70 million barrels per day. Out of which only 6.87 million barrels was produced in USA and the rest 13.83 million barrel was imported from outside of the country.
The foreign dependence of USA for oil increased from 34% in 1973 to 67% in 2007. Moreover this dependence is expected to increase up to 72% in 2010 and 84% in 2025. This could literally mean that the interference of USA in oil rich countries will continue and in fact rise. Also the autocracy structure in some oil producing countries, violence and violent protests against US as well as the competition for declining supplies is making things look even grimmer.
The US strategy for oil would, over and above the five gulf oil producing countries, include another main eight sources of crude oil namely; Russia, Mexico, Azerbaijan, Colombia, Venezuela, Kazakhstan, Nigeria, Angola. But the oil production and supply in these countries is entangled with rampant violence, terrorism, corruption, mafia, political upheavals, and weird dictatorships or communism. Thus the US is forced in deep relation with such states.
The point is that political upheavals, corruption and violence in these countries could trap US troops and may cause a situation of putting military forces of the world one on one. Because all the countries (most importantly powerful ones), want to secure their oil supplies and would badly want.
Moreover, we could we could see China taking closer and serious interest in middle-east politics. As well as try and strike various deals and contracts with these and the other eight problematic oil producing countries. This could also involve supplying arms, weapons, technology and other dangerous materials such as ballistic missiles, nuclear technology etc. and all these would help the agitators and anti-US groups to take their fight further and strengthen their position against the US.
On the other hand if we look into the past, the policies of US have remained quite clear. Sine Second World War, most US presidents have for one or the other reason, taken military activities in middle-east regions. To the extent that in 1980 the then president Jimmy Carter officially declared that the US must hold strong in the Persian Gulf region at any cost. And the same seems to have been followed till date, although many billions of dollars have been wasted in this practice.
Iran: in last two years, the political action in crude and gas geo-politics has heated up. It is not proved how much oil reserves it has; although is continuously reiterates the threat that if US and international agencies continue to unfairly try to pressurize Iran for putting control and surveillance on its nuclear enrichment activities; it would divert the flow of its oil and gas supply to only and only China and stop supplying to US and its allies. Venezuela is also teasing US for similar and variety reasons. Russia has also threatened Ukraine to raise gas prices for its supplies or else it will stop production. This could have direct impact on Europe’s’ supplies, because Russia supplies the majority of Europe’s gas consumption. Earlier, Russia stopped supplies to Belarus.
Another worry some matter in geo-politics has been the practice of nationalizing oil and Gas Corporation in Latin American companies.
The US understands that in the way India’s economy is growing and demand and consumption of oil and gas is rising. It also understands that the Iran-Pakistan-India pipeline project could strengthen the relations of Iran and India. For this reason it is doing all the possible efforts to block this deal and put a standstill and consequently a full stop on the tri-nation developments and it seems to have succeeded in so much extent.
THE OPTIMISTS' VIEW
The optimists believe that still in the world there is 2 trillion barrel of crude oil reserves to be eand produced. Whereas other rationalists group believe that this figure to be even less than 1 trillion barrels. But in case if we go by the figure of optimists of 2 trillion barrels; the peak in crude oil could well be as far as in the year 2025.
WHAT COULD BE THE EFFECTS OF PICK OIL ON NORMAL POPULATION?
In the pace for becoming more and more advanced and modern; man has made oil become an integral and inseparable part of his life. Presently on lands, in water, and in air; 90% of transportation is fueled by using oil as energy. Moreover according to research and survey, 90 per cent of material or goods available for sale and consumption in shops and malls of the world require oil as important ingredient for its use and consumption.
Together with this we can give several other figures, surveys, facts and studies to show the high dependence of mankind on oil. Even more worrisome fact is that in spite of all the advanced technological development, we have not found any strong alternate source of energy.
EROI ratio (Energy Return on Investment ratio and crude oil):
For doing valuation of source of energy, this “net energy” or “EROI-energy return on investment” ratio becomes helpful. The countries of world have been growing at a rapid pace and one of the important reasons for this is high EROI ratio for the crude oil. In the beginning days of crude oil this ratio was 50:1 i.e. to produce 50 barrels of crude oil it take 1 barrel of crude oil as input. But recently this ratio has come down to 5:7, and at many production places it also equals to ratio of 1:1. Interestingly and apparently the EROI ratio of Ethanol and biodiesel has been even below 1. While the EROI ratio for wind-power is better than that. But the problem is that the kind of demand that has been built into the routine of the industrial and emerging nations; the supply and capacity of such alternative sources are incapable.
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