Oil Shortage: a global crisis in the making

Iran’s representative at the Organization of the Petroleum Exporting Countries (OPEC) Mohammad Ali Khatibi said recently that the era of cheap crude oil supply is over and that the global oil crisis is approaching, the semi- official Mehr news agency reported.

Khatibi also said the global production of the crude oil will drop, adding that crisis over crude oil supply to the world market is approaching.

Talking ahead of the 158th meeting of the OPEC to be held in Ecuador, Khatibi also said studies show that in the mid-term perspective the crude oil prices will soar in the global market.

“In 2011, it is something natural for the crude oil to be supplied at 100 U.S. dollars a barrel,” said the Iranian official.

“A study by a German military think tank leaked to the Internet warns of the potential for a dire global economic crisis… and an irreversible decline in world oil supplies. The study was produced by the Future Analysis department of the Bundeswehr Transformation Center, a branch of the German military,” John Collins Rudolf wrote in an article published by the New York Times.

“The study states that there is “some probability that peak oil will occur around the year 2010 and that the impact on security is expected to be felt 15 to 30 years later,” he added.

The automobile industry will be hard-hit should the global oil crisis occur

Rudolf noted that the concept of “peak oil” is a controversial one, as it signifies the point at which global oil production reaches its maximum level and then enters a permanent decline. As oil is a finite resource, most energy experts consider the eventual peak and decline of world oil production to be an inevitable reality.

“But the timing of this zenith — whether in the near term, or some distant future — is a subject of fierce debate. Many prominent national and intergovernmental energy agencies, including the International Energy Agency, maintain that oil reserves are sufficient to meet demand until at least 2030,” Rudolf added.

However, “oil fields all over the world are now well past peak production, so much so that oil production is likely to peak less than 10 years from now — and a decade earlier than most have previously estimated. There are now also indications from the IEA that production may have already peaked! Moreover, in a recent survey of 800 oil fields worldwide, fully three-quarters of global reserves have already reached peak production,” Larry Edelson wrote for the Uncommon Wisdom.

“The key remaining question of the peak oil crisis is just when world production is going to start on an unstoppable decline.  A few years ago those analysts who were deeply enmeshed in the problem were saying that 2011 or 2012 looked like the fateful year. But then the unexpected happened — a great recession came along and the demand for oil plunged. Although global oil production set a nominal high during the great price run-up back in the summer of 2008, production soon fell away as the deepening recession cut demand by some 4 million barrels a day,” Tom Whipple wrote in his article, The Peak Oil Crisis: 2014 – The Year of Transition.

“These days, new oil production capacity, on the scale of millions of barrels a day, does not appear overnight from the drill of a lucky wild catter. Large new oil production projects take five, six, or seven years before the first oil can be shipped and cost billions of dollars.  If a major project is not already well along, we are unlikely to see any oil from it until the latter half of the decade. For the next five years we are stuck with those projects that are already underway. This train of thought seems to say that somewhere around 2014, world oil production, which has been on a rough plateau since 2005, will start to decline, perhaps rapidly,” he added.

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