Peak Oil
I plowed thought Twilight in the Desert a while ago and it gave me a lot to think about. The book, by Matthew Simmons, talks about the eventual inevitable decline in Saudi Arabian oil and what it is going to do to the world economy. Today, Stuart Staniford over at the Oil Drum has up a post in which he crunches the numbers and comes up with a year on production decline of 8% for Saudi Oil in 2006. 8% is a big number when it comes to oil production, especially in a year where Saudi Arabia talked positively about bringing new wells online and boasted that had a maximum production capability of 10.7 million barrels a day.
As Simmons discusses in his book, Saudi Arabia has been drilling like mad for the last decade attempting to find another massive oil field to prop up their older fields. These older fields were (and still are, at least for right now) the most productive fields in the short history of the fossil fuel industry and Saudi predictions have them running strong for the foreseeable future. The only problem?
There is a small, but growing group of watchers who think the Saudi’s are full of it. Simmons, in his book, lays out very reasonable evidence as to how the Saudis are juggling numbers or just making up numbers to assuage the world’s fears about peak oil. The Saudi claims about mbd or about the total amount of recoverable reserves seem to have no correlation with the actual production levels that the Saudis are operating at or with their announcements of new discoveries. I wish I wasn’t traveling and had my copy of his book on me, because there is a great section where he discusses how those numbers have magically risen at times with no substantive proof.
Why would the Saudi’s lie? Because their sole political power comes from being the spigot for the world’s oil. Do you think that America really cares about Saudi Arabia? When all is said and done, they’re the country that has given the most support and aid to Al Quadi and the country which is probably doing more to aid the Sunni side of the Iraqi civil war than any other. But as long as they have oil, they are an inviolate American ally.
This is a small story right now. It will get bigger. The idea of peak oil has been kicking around for the last thirty years or more, but its starting to look like it might be showing up. Head on over to the Oil Drum. Look at the graphs, read the evidence. It is starting to look pretty convincing to me.
For those people predicting a recovery in the housing market, think about what a shock in oil prices is going to do to the construction industry and the American economy as a whole. It is not a pretty picture.