It’s in today’s mainstream media that the price of crude oil jumped to a record all-time high of US$120 a barrel yesterday due to a weaker US Dollar and supply concerns.
Supply concerns are not surprising because I’ve been reading a report by Forbes that global crude production has been struggling since May 2005. Producing countries are reporting declining production figures.
Examples:
- Kuwaiti and Mexican production are down 600,000 barrels a day.
- Nigeria is down nearly 500,000 barrels a day. Also, last Saturday, militants attacked a flowstation in the old-rich Niger Delta.
- Russian crude production is reportedly down 1.7 million barrels a day since 1987.
- Venezuela is down 660,000 barrels a day.
- Iran’s output is off 1.7 million barrels a day since their production peaked a few years ago.
- Indonesian production is down over 500,000 barrels a day.
- Iraq’s production is down about 1.5 million barrels a day since peaking.
- Libya produces about 1.5 million barrels a day less than they did at their top production.
- The North Sea is in decline.
- U.S. domestic production has been declining since the 1970’s, and at its lowest in 50 years. The U.S. now imports 75% of their crude oil.
Although global production has stayed flat because of new fields, the new production is beginning to fall behind the declines in old fields. Forbes says it is a losing battle and there’s no more easy oil.
Moreover, global demand continues to grow at about 1.5 million barrels per day per year. Some countries are already discussing the eventuality of having to halt oil exports altogether in order to direct remaining production to their own domestic needs. Even in Saudi Arabia, their domestic crude demand is growing.
Bottom line: the Forbes report speculates that crude oil prices may rise to US$160 per barrel this year. Everyone, be ready when this happens.