Energy analysts: world may have reached peak oil by 2008

Production drops despite price

Steve Hawley, May 07, 09.

A recent report from analysts at Raymond James & Associates, Inc. indicates that the world may have reached peak oil by early 2008, according to the Wall Street Journal.

The company says that this “represents a paradigm shift of historic proportions. Unfortunately, mankind better get ready to live in a peak oil world because we believe the ‘peak’ is now behind us.” It notes that oil production outside the Organization of Petroleum Exporting Countries (OPEC) peaked in the first quarter of 2007, while OPEC production peaked in the first quarter of 2008. Raymond James bases this conclusion on the fact that oil production fell despite prices above $100 per barrel, which should have encouraged additional production.

According to Oil & Gas Journal, the analysts reported:

Of course, we cannot definitively prove that this marks the all-time peak (that is, that global oil production will never again surpass the 79.3 million [barrels per day] mark). That is something that will only become clear with the benefit of years of hindsight as was the case with the US in the 1970s. However, it is entirely intuitive to conclude that if both OPEC and non-OPEC production posted declines against the backdrop of $100/[barrel] oil—when the obvious economic incentive was to pump at full blast—those declines had to have come for involuntary reasons such as the inherent geological limits of oil fields. To summarize, we believe that the oil market has already crossed over to the downward-sloping side of Hubbert’s Peak [based on the production curve model developed by geophysicist M. King Hubbert].

The report added:

With demand as weak as it is now, of course, inadequate future supply is hardly what the oil market is worrying about these days. Nonetheless, reaching peak oil still represents a transformative moment in the history of the oil market, and, if we’re right that this moment is already behind us, it is only a matter of time before prices begin to reflect the reality that oil scarcity may become a fact of life in the not-too-distant future.