In 2007, my post "Peak Oil is Snake Oil" was met with much derision from peak oil theorists. Yet this month the Harvard Kennedy School's Belfer Center published an amazing paper titled "Oil: The Next Revolution -- The Unprecedented Upsurge Of Oil Production Capacity And What It Means For The World," by Leonardo Maugeri, under the auspices of 'The Geopolitics of Energy Project." The paper is a must-read for all who have an interest, or a stake, in all matters energy and oil -- and the issues derived therefrom.
Many salient points are made, such as:
"Contrary to what people believe, oil supply capacity is growing at such an unprecedented level that it might outpace consumption. This could lead to a glut of overproduction and a steep dip in oil prices"
"... the net additional production capacity by 2020 could be 17.6 mbd, yielding a world production capacity of 110.6 mbd" (currently 93 mbd or 107 percent of demand)
"... production capacity growth will occur almost everywhere, bringing about a 'DE-conventionalization' of oil supplies. During the next decades this will produce an expanding amount of what we define today as 'unconventional oils' -- such as U.S. shale/tight oils, Canadian tar sands, Venezuela's extra heavy oils and Brazil's pre-salt oils." (Please also see "$33 Barrel Oil Now And Forever -- With Leadership")
The most surprising factor of the global picture, however, is the explosion of U.S. oil output. Thanks to the technological brought about by the combined use of horizontal drilling and hydraulic facturing the U.S. is now exploiting its huge and virtually untouched shale and tight oil fields whose production, although still in its infancy -- is already skyrocketing in North Dakota and Texas. The U.S. shale/tight oil could be a paradigm-shifter for the oil world, because it could alter its features by allowing not only for the development of the worlds' still virgin shale/tight oil formations, but also recovering more oil from conventional, established oilfields.
(Also please see "Energy Independence, Our Oil Shale Deposits, Making OPEC Obsolete")
The oil market is already adequately supplied. Global oil spare capacity (the difference between the world's oil production capacity that can be reached within 30 days -- and sustained for 90 days -- and the actual global production) is probably at about 4 mbd which seems capable of absorbing a major oil disruption from a big oil producer such as Iran. In fact the mere dynamics of supply, demand and spare capacity cannot explain the high level of oil prices today... Only geopolitical and psychological factors... and a still deep-rooted belief that oil is about to become a scarce commodity, can explain the departure of oil prices from economic fundamentals.
(Perhaps speculative oil trading should have been added, as in "Are Our Leaders Hearing ExxonMobil CEO Tillerson")
The shale/tight oil boom in the United States is not a temporary bubble, but the most important revolution in the oil sector in decades. It will probably trigger worldwide emulation over the next decades that might bear surprising results -- given the fact that most shale/tight oil resources in the world are still unknown and untapped. What's more, the application of shale extraction key-technologies (horizontal drilling and hydraulic fracturing) to conventional oilfield could dramatically increase world's oil production.
The paper goes on in fulsome detail about the issues cited above and many more pertinent to the subject, including points touching on environmental concerns. Read it and understand how the oil nabobs have brainwashed us all to the adherence of this gross fallacy, holding us to that "still deep-rooted belief that oil is about to become a scarce commodity."