An article in the New York Times questions the conventional economic theory that increased prices will give more oil. As oil prices have reached near 120 dollars/barrel no significant decrease in demand and no major increase in production have occured.

“According to normal economic theory, and the history of oil, rising prices have two major effects,” said Fatih Birol, the chief economist at the International Energy Agency in Paris. “They reduce demand and they induce oil supplies. Not this time.”

Full article available from: http://www.nytimes.com/2008/04/29/business/worldbusiness/29oil.html

Viktor Vekselberg, an owner of TNK-BP, stated that the Russian oil production has peaked and may decline the following years. He also said that the Russian oil industry need tax breaks to spur new exploration and more development.

Vekselberg has now joined the vice president of LUKOIL, Leonid Fedun who also recently claimed that Russian oil production have peaked.

Read more here: Bloomberg News

International Energy Agency boss Nobuo Tanaka warned yesterday that there is a risk record oil prices could tip the world economy into recession. Asked whether prices of nearly $118 a barrel could drive the world economy into recession, he said: "Yes, I certainly have some concern."

"High prices definitely dampen demand - it's happening now, definitely it will have some negative impact on economic growth - that's for sure," he told Reuters on the sidelines of the International Energy Forum in Rome. (source: Upstream Online)

The Acting Deputy Secretary of Energy Jeffrey Kupfer in the USA joined in:
"Oil prices are clearly too high. We are not happy with the prices or the direction they're going in," Reuters quoted Kupfer as saying.

Producer countries have blamed the weakness of the US dollar for the strength of the oil market and have said supplies for now are more than adequate. By contrast, Kupfer said fundamentals of supply and demand were a major factor.

On April 16 the US gasoline inventories fell more than expected and crude futures prices soared to record highs.

Input of crude into US refineries was down 113 000 b/d to 14.2 million b/d. Gasoline production declined to 8.8 million b/d. Wall Street analysts were anticipating a 1.8 million bbl increase in commercial US crude inventories, but the Energy Information Administration reported a drop of 2.3 million bbl to 313.7 million bbl during that same period.

All this made the May contract for benchmark sweet, light crudes hit an all-time high of $115.14/bbl in intraday bidding before closing at a record $114.93/bbl, up $1.14 April 16 on the New York Mercantile Exchange.

A new article from Financial Times discusses the emerging fears over Russian oil production. Russia is the world’s biggest oil producer and the second largest oil exporter.

Leonid Fedun, the 52-year-old vice-president of Lukoil, Russia’s largest independent oil company, told the Financial Times he believed last year’s Russian oil production of about 10 million barrels a day was the highest he would see “in his lifetime”.

Viktor Khristenko, Russia’s energy minister who is pushing for tax cuts that could stimulate investment, said last week: “The output level we have today is a plateau, stagnation.”

Read the article from Financial Times here: http://www.ft.com/cms/s/0/282adfd4-0a4c-11dd-b5b1-0000779fd2ac.html
Article also available from: here

Oil production is peaking and the world must rethink its energy-supply strategy, says Kjell Aleklett, professor in Physics, Global Energy Systems, Uppsala University, Sweden and president of ASPO, the Association for the Study of Peak Oil and Gas. Interview by Tom Nicholls in Petroleum Economist.

Aleklett: "You can play around with the words, but the hard-core truth is that something must come out of the ground at some time and that’s physics". He continues: "You can write down any demand figure you like, but if you can’t fill it with real production it doesn’t help you"

The interview and more information is available from: Uppsala University - Global Energy Systems

The world has a little bit over 500 giants oil fields, i.e. fields that contain more than 500 million barrels of oil in ultimately recoverable reserves according to the doctoral thesis made by Fredrik Robelius (available from here).

Xiaojie Xu, chief professor at the Institute for Geopolitics and Energy Economists at East China Normal University in Shanghai, has performed a new study on the topic of giant oil fields and their importance to the world. He states that the world was heavily reliant on ageing giant oilfields at a time when demand was growing fast, especially in China and India. To conclude he says: "In short, supply is too old and demand is too young"

Xu’s figures showed about 14 giant world oilfields, each with a capacity of more than 500,000 barrels per day, produce nearly 13.9 million bpd, contributing about 20 per cent of the world’s oil output.

Recent reports have shown that Russia has not been able to increase its oil production for three months in a row now (Reuters). The production have been hanging slightly below the maximum of 9,93 Mbpd that was reached last year in October.

Russia is also the worlds second largest oil exporter. If their oil production is stagnating, the impact is therefore going to be significant. Output has declined by between 0.5% to 1.5% for most major Russian producers, including the state-controlled Rosneft. Only LUKOIL and Tatneft managed to increase their output by 0.1% and 0.6% respectively.

Studies on Russian oil production have been performed by Aram Mäkivierikko and these latest figures are found be be in line with one of his lower estimates. The conclusion from this study was that the Russian oil export will drop fast. More details of this same study can be found here.

The last 8 years have been disappointing for the US in terms of new discoveries. Despite impressive increases in the number of wells drilled not much oil have been found. The harsh reality, that the United States already have accessed all big and easy oil fields within its border, is slowly setting within the administration.

Last week the White House admitted that complacency by previous governments has let the problem get worse. Edward Lazear, chairman of the White House Council of Economic Advisers said: “We could have been thinking about all of this 10 or 15 years ago when it comes to alternatives or new exploration, and we weren't.” Today’s efforts, he implies, are too little, too late.

Lazear also gave some other telling insights into the way the current administration assesses the U.S. oil situation. According to the White House’s research, global oil demand isn’t going to fade, as so many pundits have speculated, even if there is an economic slowdown in the U.S.

Read "More drilling and less oil" from Commodity Online here: http://www.commodityonline.com/news/topstory/newsdetails.php?id=6839

John Hofmeister, president of Royal Dutch Shell's US operations, was interviewed about peak oil and the supply issue on CNBC’s Squawk Box. He attacked the peak oil theory as popularized by Matthew Simmons, the author of "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy". The comments from Hofmeister and a summary of the interview can be found here and Matthew Simmons response can be viewed from this link.

Some of the most interesting statements from were:

“The peak oil theory has really swamped the world — God bless Matt Simmons,” Hofmeister told CNBC. Simmons is mistaken, said Hofmeister, because he is overly focused on a single country: Saudi Arabia, the world's largest exporter and OPEC swing producer.

Simmons is also off the mark, Hofmeister contends, because he excludes unconventional sources of oil such as the oil sands of Canada, where Shell is already active.

Matthew Simmons made the following remarks when he confronted the comments from Hofmeister:

CNBC: What's your response to critics like Hofmeister?