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Got Oil?
As we've seen recently, the Kingdom of Saudi Arabia is no longer willing to be the swing producer of oil. With the rapid rise in oil prices, even the previously-dismissed Peak Oil theory is being debated in the mainstream media. Believers cite a physical peak of oil production while skeptics like CERA blame speculation, but there is a geopolitical factor as well.
A few years ago, Jeffrey (westexas) Brown and Samuel (khebab) Foucher proposed their Export Land Model, both on The Oil Drum blog and on their own blog, Graphoilogy. The ELM sought to extrapolate how oil-producing countries would react when their wells were clearly in decline. Simply put, they believed that when faced with the loss of their cash cows, and with rising domestic demand, OPEC nations would choose to restrict the amount of oil they were pumping and exporting. The idea that they would save something for the future was largely neglected in previous extrapolations.
In fact these countries have begun to limit exports at a much steeper rate than the production declines extrapolated by other Peak Oil theorists. From our perspective as consumers of oil, what OPEC is willing to export matters much more than what they can produce. Hence the Export Land Model is now also being discussed in some media outlets. This recent article concerns the implications that the Export Land Model has for commodity investors.
More technical explanations can be found on Brown and Foucher's blog, here and here.
Comments (4)
That's like saying that Bill Gates is no longer willing to be a billionaire.
The Saudis LOVE being the swing producer, but they can't.
Also: limited exports might just be because domestic consumption is going up. For example, Mexico reducing it's export rates more rapidly than expected -- it's because they need the oil themselves.
We are in a serious bind and to blame outsiders is the height of denial.
May 20, 2008 3:53 PM | Reply | Permalink
They probably can't, and that certainly explains their actions better than their excuses do, but there isn't enough transparency to prove it just yet. I did mention domestic demand as a factor in the ELM. And I'm not blaming them. If I had a limited resource, I'd do the same thing.
May 20, 2008 4:06 PM | Reply | Permalink
Donal,
Does this suggest global peak oil has arrived already? If so, all bets are off.
May 20, 2008 5:53 PM | Reply | Permalink
It depends what you measure. We probably peaked on conventional crude in 2005, but optimists prefer to include unconventional sources like heavy crude, and petroleum-like substances like kerogen and bitumen. Including all that pushes the date back even though it is far more expensive to extract.
May 20, 2008 7:02 PM | Reply | Permalink
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