Baltimore, MD--The longer we wait, the worse the consequences will be. I can't but wonder how many people will be saying over the next decade, "We should have done something about this years ago."
I'm growing more restless with each passing day. And after the conversations I've been having with readers for the past few weeks, it appears that a lot of you are too.
And it's quotes like this that fuel it . . .
"You cannot convince any (OPEC) member to add more crude to the market because we have enough crude, there's enough oil in the market, we don't know what to do with it." --OPEC Secretary General Abdulla El-Badri.
More oil than we know what to do with? I can't help but wonder if they would be comfortable with oil prices over $80 or even $90 a barrel.
It was only a few weeks ago that oil broke past $78 a barrel. Since then, prices fell briefly below $70 before rebounding again. Not surprisingly, oil prices are higher than last year, when a barrel of crude cost roughly $66.45. Around this time in 2004, a barrel of oil was only about $39.39.
The next few months are going to be critical.
In the past, oil prices typically dropped as we get closer to winter. Last January, prices tumbled into the mid-$40 range. Yet there are still some reports estimating that we'll see $95 a barrel before next year.
The truth is that 2007 and 2008 are going to put peak oil to the test. Although I've been saying this all year, it's imperative that we understand this: The world's demand for oil is going to levels that cannot be met by global production.
Production simply will not be able to keep up.
Take China, for example. Last month, the country imported 39% more oil than last year. The massive discovery at Jidong Nanpu is turning out to be smaller than first estimated. Is it still a significant find for China? Absolutely. But it won't be nearly enough to satisfy their oil thirst.
Here's what I'm waiting for . . .
When the world is consuming more than 88 million barrels every day next year and begging OPEC to increase production, will they?
We don't know whether they are even capable of doing so. With the amount of water they're pumping into Ghawar nowadays, it's probably more of an aquarium than an oil reserve.
According to the Hirsch report published a few years ago, "The peaking of world production presents the U.S. and the world with an unprecedented risk management problem." I couldn't agree more.
Furthermore, the longer we wait to do something, the worse the effects will be.
And just imagine how much energy we'll be consuming when there's over nine and a half billion people in the world in 2050! Or when it becomes apparent that countries like China aren't able to slow their momentum.
One of the worst things that could happen is for oil prices to retreat this winter. It would give us a false sense that everything is just fine and dandy.
Lower oil prices would lead to several problems:
There would be less money available to develop unconventional sources like deep water deposits, oil shales and tar sands.
Development of alternative and renewable energy projects would be delayed.
The lack of new exploration and development would be disastrous as oil production remains stagnant.
Things are going to get very interesting over the next few months, that's for sure. Personally, I'm not too concerned that oil prices will slip below $60 a barrel. We ran out of $50 oil this year.
Maybe restless was the wrong word to use. I think a better one is excitement. Oil field discoveries peaked decades ago. And the last barrels of oil are going to come from unconventional sources.
There's going to trillions of dollars invested in oil. Naturally, the question is where it'll go, which is precisely what has me buzzing around lately. Trust me, the last thing we want to do is sit on the sidelines and watch someone else's wallet grow.
I'd like to invite you to see for yourself, though. On September 13-16, 2007, you can join me at our conference 2007 Angel Research "Profit from the Peak" Summit in Philadelphia. But there are only a few days left to sign up, so if you're interested, visit here now. I look forward to hearing from you personally.
Until next time,