World will struggle to meet oil demand

Output from the world’s oilfields is declining faster than previously thought, the first authoritative public study of the biggest fields shows.

Without extra investment to raise production, the natural annual rate of output decline is 9.1 per cent, the International Energy Agency says in its annual report, the World Energy Outlook, a draft of which has been obtained by the Financial Times.

The findings suggest the world will struggle to produce enough oil to make up for steep declines in existing fields, such as those in the North Sea, Russia and Alaska, and meet long-term de­mand. The effort will become even more acute as prices fall and investment decisions are delayed.

The decline will not necessarily be felt in the next few years because demand is slowing down, but with the expected slowdown in investment the eventual effect will be magnified, oil executives say.

“The future rate of decline in output from producing oilfields as they mature is the single most important determinant of the amount of new capacity that will need to be built globally to meet demand,” the IEA says.

The watchdog warned that the world needed to make a “significant increase in future investments just to maintain the current level of production”.

Assuming supply destruction is greater than demand destruction, buying some oil futures is starting to look like a pretty good bet at some point soon.


  1. Author
    ptsp 8 years ago

    In a recent commentary I suggested that, due to the confluence of the unfolding economic crisis and Peak Oil, we have now seen the last of aggregate world economic growth—forever—if the word “growth” is conventionally defined. So far no one else seems to have taken up this idea. So, in forthcoming commentaries, I will seek to sort out the evidence that might confirm or disconfirm the notion, and also unpack some of its implications.

    Today I am somewhat exercised by a spate of recent articles that suggest the financial collapse may cause “developed” countries to forgo promised aid packages (i.e., loans) to “developing” ones.

    For many years I have resisted using the language of “development,” as the term can mean so many things. At its base, it is a metaphor for industrialization, if it is first assumed that industrialism is the goal and destiny of all human societies. Those that are already industrialized are “developed,” while those that aren’t are “developing.”

    However, if (as I believe is the case) industrialization was a consequence of the brief historical period of fossil fuel consumption, then it is not the destiny of all societies, and may not survive for long in any of them.

  2. Author
    ptsp 8 years ago

    Really interesting article. Highly recomended reading:

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