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Weekend: Goldman Says Saudi Oil Has Peaked

Energy and Capital's Weekend Edition

Written by Nick Hodge
Posted July 10, 2011

Welcome to the Energy and Capital Weekend Edition — our insights from the week in investing and links to our most-read Energy and Capital and sister publication articles.


Sometimes we need to pause, reflect, and figure out what the hell it is we're doing here.

We're not just rolling around in the surf...

There is a thesis and carefully thought-out rationale behind all the information I and my fellow editors present to you in this newsletter.

Our entire existence stems from a firm belief the world is running out of cheap oil. And our mission is to inform as many people as we can what that means for their pocketbook and their way of life.

So we're all on the same page, here's a snippet from our "About Section":

Energy has become fundamental to the very basic functions of contemporary civilization. And it is imperative to the future growth, prosperity, social stability, and security of nations around the world. Without energy, everything comes to a grinding halt.

Today energy is at a crossroads. Like a lit fuse, a catastrophe of immeasurable proportion is looming...

And like the ancient phoenix, a great opportunity will rise from the ashes of this crisis.

There will be those — like Energy and Capital subscribers — who will be given the foresight and vision to exploit the commercial opportunities of a post-oil economy.

I share this with you for a simple reason...

After sounding our warnings and offering preparedness tips for over five years, the peak of oil production is now fast approaching.

Tullow Oil (LSE: TLW) warned this week output at its Ghana Jubilee field — currently producing about 120,000 barrels per day (BPD) — will reach peak production by the second half of this year.

The world's most revered investment bank was out with even more damaging news. According to Thursday's Wall Street Journal:

Goldman Sachs Group Inc. said oil supplies will become "critically tight" in 2012, largely because production leader Saudi Arabia won't be able to pump as much extra oil as many people believe.

Robust global economic growth will continue to drive oil demand that outstrips supply, so "it is only a matter of time before inventories and OPEC spare capacity become effectively exhausted, requiring higher oil prices to restrain demand," Goldman said.

Goldman maintains that Saudi oil production peaked in 2008 at 9.5 million barrels per day and will never reach that level again, and has raised its 2012 forecast price to $140 per barrel.

~~SIGNUP_EAC~~

Barron's has gone even further, saying:

Despite the recent 20% decline from April highs, new highs on crude, heating oil, diesel fuel, jet fuel and gasoline seem likely over the next 12 months. Following some further easing over the summer, the second leg of the long-term bull market in petroleum–the first occurred in 2007-08–probably will begin this fall.

As oil producers' spare capacity gradually declines to worrisome levels, the average monthly price could reach a record $150 per barrel by next spring, with spikes to $165 or $170. With this, $4.50-a-gallon gasoline will become the norm. That will put a huge dent in consumer wallets, while ramping up the desirability of fuel-efficient cars.

This is exactly the event we've been saying would happen for years.

For some, this may come as a shock. It's not like governments and major news outlets have been advertising the world is about to enter a state of terminally declining oil production.

They remember what a mere 5% drop in supply did to the world after the OPEC oil embargo in the 1970s...

If you want to learn about Peak Oil — what it means, how it'll affect you, and how to prepare — you're going to have to do it on your own. We've known that for some time. That's why we produce and publish this newsletter.

And now that major banks and oil-producing nations are realizing this threat is real, you need to be aware of what's coming next now more than ever.

So instead of rambling on, trying to prove to you the world is running out of oil by compiling quotes and pieces of reports that acknowledge Peak Oil is real, I'd like to instead call you to action.

You see, the time for debating this topic is over. Cheap and easy oil is about to be gone forever.

Now is the time to prepare.

So if you don't do anything else this weekend, spend a few minutes viewing our new Peak Oil survival guide.

When oil crests that $150 mark again, you'll be glad you did.

Call it like you see it,

Nick Hodge
Editor, Energy and Capital

 

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