oil price

A review is given of the nature and origins of crude oil (petroleum) along with factors relating to its production and demand for it. The modern globalised world economy and its population has grown on the assumption of limitless supplies of cheap crude oil. Almost all agriculture now is completely dependent on available oil and natural gas to run machinery and to make chemical fertilizers. Our complacent regard for oil is however invalid and a gap between the relentlessly rising demand for oil and its supply is expected to appear at some time in the period 2010 - 2015. The global peak in oil production "peak oil" predicted by M. King Hubbert in 1956, will exacerbate the situation, and the world must seek to run and organise itself in an imminent reality where supplies of conventional crude oil are both limited and increasingly expensive. Providing the equivalent of 30 billion barrels of oil a year as is currently used across the globe, by unconventional kinds of oil, e.g. from oil shale and tar sands is not realistic. Since most of the oil produced in the world is refined into liquid fuels to run transportation, human survival will depend on devising localised economies and communities that necessarily rely far less on personalised transport (cars).

Published in: Science Progress, Volume 91, Number 4, December 2008 , Pages 317-375
Available from: IngentaConnect

This paper examines three issues related to both the U.S. and world oil supply: (1) the nature of the long-term, postpeak production profile for the U.S. and, by inference, other regions (the Hubbert curve is used as a “strawman” model); (2) implications on U.S. energy security of using a modified Hubbert-type conceptual model of prepeak production, testing the adequacy of Latin America to be the primary source of U.S. oil imports; and (3) the cyclic behavior of oil prices. it shows that U.S. production will exhibit a more attenuated decline than that simulated by the Hubbert curve and not decline to zero. it asserts that U.S. production is better predicted by past reserves than past production, but that this argument does not apply to nations that keep a much larger proportion of reserves in the ground. Such nations could considerably expand production without any growth in reserves. The paper concedes that the potential total production for these nations could be examined with a Hubbert curve model linked to reserves, but with great uncertainty. Such an uncertain optimistic forecast predicts that the cumulative production of Latin America could far exceed that of the United States. Nevertheless, a statistical model of oil prices since 1870 implies that real wellhead oil prices in the United States are on a long-term upward path, underlying a much more “noisy” cyclical pattern estimated to include 22- and 27-year cycles. The statistical model predicts a severe oil shock within a few years (of 1998) but also predicts that through 2030, real oil prices will not reach 1981 levels again. The paper examines U.S. and world trends in seismic exploration, drilling locations and depths, drilling costs, oil/gas reserves, oil/gas use rates, and oil demand. After taking these factors into consideration, it concludes that the statistical model of oil prices cannot be disputed, despite its lack of basis in economic theory.

Published in: Natural Resources Research, Volume 7, Issue 2, Pages 101-121
Available from: SpringerLink