The Non-OPEC Oil Peak

Written By Brian Hicks

Posted July 21, 2008

While the International Energy Agency’s oil supply forecast won’t be released until November 2008, there’s growing fear of a sharp downward revision in supplies. That means supply could be much tighter than previously thought, a nightmare scenario if proven true.

Any pessimistic IEA view will shock the market, spawning oil super spikes. We’ve already seen prices rocket to $130, doubling year over year. And it’ll only get worse on a dismal IEA forecast.

For years, the IEA has said that crude supplies and other liquid fuels would keep up with rising demand, topping 116 million barrels a day by 2030. But now there’s fear that the IEA, basing findings on aging oil fields, could revise sharply lower and warn of a struggle to keep up with 100 million barrel a day demand over the next 20 years.

That’s called Peak Oil. And it’s a dangerous situation.

But IEA pessimism is nothing new. Just last summer, the IEA warned that spare OPEC capacity could fall to "minimal levels by 2012."

Even the U.S. Energy Department is embarking on its own supply studies, which could be finished by summer. But they, too, may have nothing positive to say. They already suggest that daily 73 million barrel daily output will level off at 84 million barrels. To then reach 100 million barrels a day by 2030, we’ll need a sizeable boost from other fuel sources.

Your best bet in this market. Buy and hold energy stocks. They’re going much higher.

Listen, I’ve said this before. I’ll say it again. We’re not economically pessimistic at Wealth Daily. But we won’t put on the rose-colored glasses, and tell you everything’s okay. We’re simply trying to profit from an eventual "blood in the streets" investing scenario.

Further energy bullishness comes from TimesOnline.com:

"Oil production in non-Opec countries is set to peak within the next two years, leaving the world increasingly dependent on supplies from the cartel of exporting nations, according to one of the world’s leading energy experts.

Fatih Birol, chief economist of the International Energy Agency (IEA), said that falling production from key regions such as the North Sea and the Gulf of Mexico would leave international oil companies such as Shell and BP increasingly sidelined at the expense of national oil companies, such as Saudi Aramco.

The North Sea is one of the fastest-declining energy-rich regions in the world, with output falling by an average of 7.5 per cent a year since 2002.

"The days of the international oil companies are coming to a glorious end because their reserves are declining and they will have difficulty accessing new reserves," Dr Birol told The Times. "In future we expect most of the new oil to come from a very small number of national oil companies."

Dr Birol, who is leading an investigation into the condition of the world’s largest oilfields, said that the world was entering a "new oil order".

"Demand growth is no longer coming from the US and Europe but from China, India and the Middle East," he said. "Because their disposable incomes are growing so fast and because of subsidies, high oil prices will not have a major impact on demand growth." This meant that prices would remain extremely high for the foreseeable future and that the fundamental dynamics of the global oil market increasingly were outside of the control of Western countries.

Dr Birol sidestepped questions over how close he thought Opec oil production could be to a peak. "Oil will peak one day, but we don’t know when," he said. "There is a lot of oil in Opec countries and also unconventional oil … I don’t think oil will peak because of the geology … but conventional, non-Opec oil is going to peak very soon."

He said it was imperative that governments acted urgently to reduce their dependency on oil and to address the issue of climate change. He said that the IEA would publish the results of its study of the world’s oilfields in November."

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