While most experts say it is hard to know what is really going on with Saudi oil supplies, “What we do know is that, for whatever reason, Saudi Arabia produced 600,000 fewer barrels each day in 2010 than it did in 2005, and with growing Saudi consumption of their own oil, the drop in exports from Saudi Arabia has been even more dramatic.”
That is the opinion of UC San Diego economist James Hamilton who brings a fresh perspective to peak oil.
We who write about clean tech see it in the inexplicable Saudi moves towards solar power – Saudi Arabia to Replace Oil with Sun Power for Desalination Plants, It Must be Peak Oil Driving Saudis to Solar, Could Saudi Arabia Become the Saudi Arabia of Solar? – and The Oil Drum has written frequently about the evidence for peak oil.
But Hamilton considers peak oil from an economic perspective in his paper Oil Prices, Exhaustible Resources, and Economic Growth. His findings suggest that the peak in oil production may be much closer than we think.
Until recently, he says, Saudi Arabia has often made a deliberate decision to alter its own production in an effort to mitigate price increases and decreases. That that behavior has now slowed is a sign that it is no longer able to increase production enough to export and supply its own rapidly rising demand internally. For example, the kingdom cut production to try to hold up prices during the weak oil market 1981-85 and recession of 2001, and boosted production during the two Persian Gulf wars, to make up for output lost from other producing countries.
Its huge Ghawar field has produced prodigious amounts of oil since 1951, and in recent years had accounted for perhaps 6% of total world production all by itself. Athough this is difficult to confirm, many experts believe that Ghawar has peaked and is declining already.
Total production from OPEC has essentially been flat since 2005, mostly due to the decline in Saudi production. Although China, Brazil, Africa and Canada have increased production (and Canada’s is coming from oil sands; the dregs) it is difficult to see these ever accounting for a major fraction of total world oil production.
The bottom line is that even with more production from other parts of the world to make up the Saudi losses, global production of oil from all sources was essentially flat from 2005 to 2010.
Image: MSFS in Arabia