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Not Enough Oil

Energy and Capital's Weekend Edition

Written by Nick Hodge
Posted July 21, 2012

Get ready to be confused... and maybe even question your entire reality.

We already know LIBOR was being manipulated. That's the rate every single interest rate in the world is derived from: municipal bonds, money markets, your credit card — everything.

And it was all smoke and mirrors.

The rates being set at whatever level was needed for fat-cat bankers to make even more money.

We also learned HSBC (NYSE: HBC), a $165 billion bank, voluntarily laundered billions for terrorists and drug cartels.

So basically, in the past few weeks we've learned what most suspected: Wall Street is a Machiavellian Wild West where only those in charge know what's happening.

These stories are getting no Main Street traction.

And that's a shame, because they gnaw at the root of many of today's problems for the middle class.

But I digress.

I also have energy shenanigans to tell you about...

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The U.S. Energy Information Administration (EIA) is out with oil demand forecasts for the rest of this year and next.

In its view, the world will need 88.64 million barrels of oil per day (BPD) for the rest of this year. Next year we'll need 89.37 million bpd.

The International Energy Agency (IEA) was also out with its 2013 oil demand forecast. It says we'll need 90.9 million barrels per day next year.

So the IEA is a bit more bullish, but the numbers are pretty close.

But here's the thing: The world doesn't produce that much oil.

It never has.

Look at this info taken right from the EIA's website. It shows total world crude oil production for the last four years (click to enlarge):

2011 Crude Oil Production
The most oil the world has ever pumped is 74.05 million barrels per day.

That's about 16 million barrels per day shy of what we'll need next year.

We've been making up the difference with natural gas plant liquids (NGPLs) and other liquids.

Look what happens when we include them in total world production:

2011 Crude Oil and Liquids Production

Still, the most “oil” (that word is in quotes because it's not oil — it's total liquid fuel — and calling it oil is a lie and a cover-up) the world has ever produced is 84.7 million barrels per day.

And even that's over five million barrels per day short of what we'll need next year.

Saying there's plenty of oil is like saying the integrity of LIBOR is fine.

In the coming years, we'll need every BTU of oil, coal, natural gas, nuclear, solar, and wind that we can find.

As I've said before, it isn't either/or; it's and/when.

That's reality. Start living in it.

Call it like you see it,

Nick Hodge
Editor, Energy and Capital

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