Oil Demand to Exceed Supply by 2014?

A U.K. former scientist is saying Oil reserves are exaggerated by 1/3:

The scientist and researchers from Oxford University argue that official figures are inflated because member countries of the oil cartel, OPEC, over-reported reserves in the 1980s when competing for global market share.

Their new research argues that estimates of conventional reserves should be downgraded from 1,150bn to 1,350bn barrels to between 850bn and 900bn barrels and claims that demand may outstrip supply as early as 2014. The researchers claim it is an open secret that OPEC is likely to have inflated its reserves, but that the International Energy Agency (IEA), BP, the Energy Information Administration and World Oil do not take this into account in their statistics.

It is that date which is of most interest, although I've seen this before as the date where global demand exceeds supply (as well as others). The site I always reference for questions on energy is the oil drum, but the main point of the Instapopulist is a 33% decline in actual projected global oil reserves is significant.

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Peak oil - China at the Margin

Any discussion about oil prices over the next decade must include an attempt to quantify emerging economy demand as an important driver at the margin. Here is a simple thought experiment using Chinese demand:
- China moves from 3 bbls/person/year to the South Korean per capita consumption level of 17 bbls/person/year over the next 30 years
- No peak in global production

In next 10 years we must find 44 million BOPD:
- 26 million BOPD to maintain supply - 30% of current production, almost 3 times Saudi Arabia’s output
- 18 million BOPD to keep up with demand - 22% of current production, almost 2 times Saudi Arabia’s output

If you superimpose peak production on top of this demand profile using the following parameters oil prices would increase approximately 250% in real terms over next 10 years:
- Oil demand elasticity of -0.3
- Current production 84 million BOPD, current price US$ 80
- Peak production 100 million BOPD
- Post peak decline rate of 3-4%

If you want to try the model for yourself using your own assumptions it can be found at the website of Petrocapita: www.petrocapita.com/index.php?option=com_content&view=article&id=128&Ite...

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