PEAK OIL

Seisma Energy Research, AVV (formerly Seisma Oil Research, LLC) presents this article as part of a series of articles on understanding the energy business. We hope you enjoy this series.

Peak oil is the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline.

Demand For Oil

The demand side of peak oil is concerned with the consumption over time, and the growth of this demand. World crude oil demand grew an average of 1.76% per year from 1994 to 2006, with a high of 3.4% in 2003-2004. World demand for oil is projected to increase 37% over 2006 levels by 2030. It will rise to 118 million barrels per day from 86 million barrels, due in large part to increases in demand from the transportation sector.

Thriving economies such as China and India are quickly becoming large oil consumers. China has seen oil consumption grow by 8% yearly since 2002, doubling from 1996-2006. In 2008, auto sales in China were expected to grow by as much as 15-20%,

India's oil imports are expected to more than triple from 2005 levels by 2020, rising to 5 million barrels per day.

Petroleum Supply

Discoveries

“All the easy oil and gas in the world has pretty much been found. Now comes the harder work in finding and producing oil from more challenging environments and work areas.”

— William J. Cummings, Exxon-Mobil company spokesman, December 2005

To pump oil, it first needs to be discovered. The peak of world oilfield discoveries occurred in 1965 at around 55 billion barrels per year.

Reserves

Conventional crude oil reserves include all crude oil that is technically possible to produce from reservoirs through a well bore, using primary, secondary, improved, enhanced, or tertiary methods.

Reserves in effect peaked in 1980, when production first surpassed new discoveries, though creative methods of recalculating reserves have made this difficult to establish exactly.