As the largest exporter of crude oil, Saudi Arabia has kept international oil prices reasonably steady. Until now. The recent instability in the region coupled with overambitious estimates and slowing production has cast serious doubt on the country’s ability to keep prices low. Even more troubling, The Guardian reports that recently leaked confidential cables show that peak oil could occur as early as 2012. Peak oil’s inevitability has long been known, but it was earlier thought that we had until 2020.
The United States Consul met with Sadad al-Hussein, a Geologist and former head of exploration at Aramco, the Saudi Oil Company responsible for so much of the world’s crude oil supply. Mr. al-Hussein disputes claims by Mr. Abdallah al-Saif, the current Aramco Senior Vice President, that the company will be able to produce 900 billion barrels of oil within the next twenty years.
According to one of a series of cables exchanged between the American Embassy in Riyadh and Washington, this number represents a 300 billion barrel or 40% overestimation. In one cable, the consul sums up Mr. al-Hussein’s reasoning:
“According to al-Husseini, the crux of the issue is twofold. First, it is possible that Saudi reserves are not as bountiful as sometimes described, and the timeline for their production not as unrestrained as Aramco and energy optimists would like to portray.”
Mr. al-Husseini believes that output will plateau for the next fifteen years and that it will thereafter decline.
This is in keeping with an earlier projection made by the International Energy Agency (IEA)’s chief economist Faith Birol, who told the Guardian that oil production would peak in 2020.
Putting an additional strain on international supply, Saudi’s local economic and population growth is usurping oil otherwise slated for export. A cable dated October, 2009 demonstrates that Saudi will have to double its generation capacity to 68,000 MW by 2018 in order to sustain its own demand.
Other Gulf countries such as Abu Dhabi, are experiencing similar conundrums, though to a less disastrous degree. As a result, belated efforts are being made to develop alternative resources such as solar in order to lessen the local demand for oil. Some of Saudi’s desalination plants, for example, will be solar-powered.
China – a major importer of oil – has set its sights on hard-to-reach African oil to compensate for Saudi’s dwindling monopoly, but it is only a matter of time before global demand outstrips supply. And the experts are gravely concerned.
“We are asleep at the wheel here: choosing to ignore a threat to the global economy that is quite as bad as the credit crunch, quite possibly worse,” Jeremy Legget, head of the UK Industry Taskforce on Peak Oil and Energy Security, told the Guardian.
:: The Guardian
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