A barrel of truth about oil supplies
If a diplomat is 'an honest man sent abroad to lie for the good of his country', as author and diplomat Sir Henry Wotton once said, then oil industry executives used to be the business world's equivalent. The big international companies were chronically optimistic about the extent of their reserves, and state-controlled oil companies were even more prone to exaggeration. But now we have the spectacle of oil companies telling the truth about oil supplies - or at least more of the truth than usual.
The occasion was last week's Oil and Money conference in London, and the most spectacular truth-teller was Christophe de Margerie, chief executive of the French oil company Total. Last year his predecessor, Thierry Desmarest, caused a flutter in the industry by predicting that world oil output would peak around 2020. This year, Mr de Margerie said that '100 million barrels [per day] ... is now in my view an optimistic case'. He was referring to the International Energy Agency's estimate that world oil output would reach 116 million barrels per day by 2030, and the slightly more optimistic US government prediction that it would reach 118 million barrels per day by then.
Even these acts of faith are really a forecast of crisis, as calculations based on current trends (like a 15 per cent annual growth in Chinese demand) suggest 140 million barrels per day will be needed by 2030.
The implication of Mr de Margerie's remarks is that the crisis is coming a lot sooner than that. World oil output is nearing 90 million barrels per day now, but it is never going to reach 100 million. 'Peak oil' may be just a few years away, or it may be right now. (You will never know until after the fact, because it is the point at which global oil production goes into gradual but irreversible decline.)
Peak oil was first forecast by a US geologist, M. King Hubbert, who noticed that the curves for oil discoveries and oil production were a very close match, but with a lag of 30 to 40 years between the two curves. At that point, in 1956, Hubbert was director of research for Shell Oil, and his research focused on American oil production.
Oil discoveries worldwide peaked in the 1960s, so Hubbert's own forecast was that peak oil production worldwide would arrive in the 1990s. The discovery of two giant new oilfields in the 1970s (probably the last two) in the North Sea and the Alaskan North Slope pushed that date further forward, however. One of Hubbert's successors as chief of research at Shell, Colin Campbell, subsequently calculated that global production would peak this year.
The recent surge in the oil price, which may see it reach US$100 a barrel in the near future, is largely a mirage caused by the collapse in the value of the US dollar. But the longer-term trend, which saw the price rise fivefold between 1999 and 2005, was driven by the tightening supply situation as demand raced ahead while production did not.
It will get a lot worse if Mr de Margerie is right, and he almost certainly is.
Gwynne Dyer is a London-based independent journalist whose articles are published in 45 countries