Jim Jubak Gets Religion, NPC Endorses Peak Lite
“World will face oil crunch in five years.”
That’s not exactly the kind of headline you want to read when crude oil is already at $73 a barrel. When things are this bad — crude prices are up 12% in the past two months as of July 12 — you don’t want to hear that they’re going to get worse.
Yet that’s exactly what consumers — and investors — should expect, the International Energy Agency said in its latest Medium-Term Oil Market Report, issued July 9. The market for oil will get even tighter over the next five years. (And in case you’re looking for a way out, natural-gas markets may be even tighter.)
He also highlights an argument that I have been making for 5 years. Contrary to the beliefs of many that the oil industry is a dying industry, or that declining reserves will cause the value of oil companies to decrease, I have argued that oil companies will become even more valuable as they supply an increasingly valuable resource. Jubak writes:
You can debate whether the world is running out of oil all you want. It is certain, however, that the world has run out of cheap oil.
Almost any oil stock will profit from that scenario, especially if the company owns oil still in the ground. In an era of rising prices for oil, such companies are sitting on an appreciating asset.
That is exactly right. I don’t like to provide investment advice, but I really believe that investments in oil companies will be good for a very long time. In a time of constrained supplies and rising demand, profits will be solid quarter after quarter. The cyclical days are over, because if this view is correct it will no longer be possible to crash prices by overbuilding capacity.
That’s why I went to work for an oil company, and that’s why I believe job security will be very good. That’s especially true in light of Robert Bryce’s excellent article on the impending shortfall of labor in the industry:
Funny story. I didn’t realize I had been quoted in the article until I had already sent the link to several people after seeing the opening two paragraphs at The Oil Drum on Monday. I need to elaborate on that theme at some point, because it is shaping up to be a very big problem.
National Petroleum Council Endorses Peak Lite
First the IEA, now the NPC are endorsing Peak Lite. All I can say is that it took these guys long enough.
World oil and gas supplies from conventional sources are unlikely to keep up with rising global demand over the next 25 years, the U.S. petroleum industry says in a draft report of a study commissioned by the government.
The findings suggest that, far from being temporary, high energy prices are likely for decades to come. “It is a hard truth that the global supply of oil and natural gas from the conventional sources relied upon historically is unlikely to meet projected 50% to 60% growth in demand over the next 25 years,” says the draft report, titled “Facing the Hard Truths About Energy.”
The conclusions appear to be the first explicit concession by the petroleum industry that it alone can’t meet burgeoning global demand for oil, which may rise to as much as 120 million barrels a day by 2030 from about 84 million barrels a day currently, according to some projections.
Hey, I have been making that explicit concession for a long time, and critics are always telling me that I represent the petroleum industry.