SOCORRO, New Mexico (STPNS) -- We have seen that a global peak in oil production is imminent. This peak will herald in a permanent global oil shortage, as production declines at a rate of 1 percent to 2 percent per annum. Now this small annual decrease may not seem like much, but it will inevitably be magnified greatly in larger reductions in importable oil. Such reductions will be devastating to the major world industrial powers, all of which are currently heavily dependent on oil imports.

As table 1 (at right), a handful of countries provide the bulk of importable oil, while the United States, Europe, the Asian economic powers and the rapidly industrializing mega-giants China and India are all import-dependent. The reader will note several important points about the oil exporting nations.



First, of the 10 top exporting nations, the United States has unsatisfactory relations with at least three ? Russia, Iran and Venezuela. Second, supplies from several of these states are currently imperiled by internal chaos or external threats (Nigeria and Iran). Third, many of the these major suppliers are at or very near their own production peaks. World exports are dominated by two countries, Saudi Arabia and Russia. Russia is very near a peak, perhaps around 2010, while as we have seen Saudi Arabia may already have passed its production peak.

Of the remaining eight exporting nations, Norway, Venezuela and Mexico are clearly post-peak, while Iran, the United Arab Emirates, Kuwait and Algeria, like Russia, are so near to peak that large production increases seem very unlikely. Nigeria could substantially increase production, but the increasing internal chaos in this country may make that impossible. In short, world oil exports are unlikely to increase substantially, and will probably decline sometime in the next few years due to declining overall production.

Regrettably, available exports will decline even more rapidly due to economic factors. Note that the ten major importing nations have in aggregate over half the world?s population, and include the rapidly expanding billion-person-plus populations of China and India. Current estimates (International Energy Agency, 2007) are that world demand for oil imports will increase annually at a rate of 2.2 percent over at least the next five years. Hence just to meet this demand exports would have to grow substantially.

Worse, exports are severely constrained by increasing demand inside the exporting nations themselves. As oil production declines in an exporting country, exports are severely curtailed to meet citizen demands within the exporting country. Typically what happens, as in the case of Britain?s North Sea oil, is that this causes actual exports to drop to zero with startling rapidity, as Governments cater to the energy needs of their own citizens. Thus British exports peaked at 1.3 million barrels per day in 1999, but only seven years later, in 2006, Britain had become a net importer These demand constraints on export availability are likely to be especially pronounced in Russia, the UAE, Iran, Mexico and Venezuela.

The consequence of these internal and global demand factors is that oil exports may already have peaked. Figure 1 shows that such supplies reached a plateau by 2004, and show no signs of substantial further increase.

Hence importable oil is already suffering a major supply and demand problem. Demand is soaring, while supply is not increasing, due to both geological limits on production and the necessity of diverting dwindling oil supplies to internal needs of the exporting nations. The consequence is already apparent. Oil prices will continue to soar until demand is curtailed by unaffordably high prices.

Worse yet, these price rises will increase indefinitely, as production inexorably declines. Since the United States is by far the world?s single largest oil importer, this country will not be spared such price rises.  

Conclusion 1: Supply constraints will reduce exports more than over-all oil production.

Conclusion 2: This will result in a very rapid increase in the price of oil, until imported oil becomes unaffordable   to a sizeable proportion of the world?s population.

Conclusion 3: Since this country is the world?s largest oil importer, impact here will be severe.

Robert Holson is a professor of psychology at New Mexico Tech. His views do not necessarily represent the Mountain Mail.