Oil Production Fell Last Year
Eric alluded to this in his last post, but I think it bears repeating: a major global review of petroleum industry trends found that worldwide oil production fell last year.
Of course, the decline was so small -- 0.2% -- that it may fall within the margins of error of the measurements. You might think that oil production figures would be pretty rock-solid, but apparently there's always a bit of slosh in the data. When it comes to oil, even the numbers are slippery. (Yuk, yuk.)
Still, if the data are close to accurate, the news is sobering. Market theorists say that high prices should encourage the global petroleum industry to open up the taps, and start pumping more oil. But apparently, the market theorists were wrong -- and some other forces are now in play.
Lots of folks are claiming last year's production figures are a sign of a near term "peak" in oil production -- a point when geological limits kick in, and global oil production declines no matter what the oil industry wants. (More on peak oil here, and lots of other places on the internets.)
Of course, oil industry analysts scrambled to claim that the geological peak is a long way off, and that last year's shortfall was due to economics & policy:
"Political factors, barriers to entry, and high taxes all play a role here.
They might well be correct, of course; human decisions may have had a role in production shortfalls. For example, if I were an oil-producing nation or company, and I thought that oil would be more expensive next year than this year, I'd probably try to cut back a bit on production. That way, I could save my oil for next year, when it would command an even higher price.
Then again, that's exactly the sort of reasoning I'd use...if I thought that oil was nearing a geological peak!
[Image courtesy of the Great Valley Center Image Bank, on Flickr, distributed under a Creative Commons license.]
Gas Prices To Peak Soon?
If you believe the Energy Inormation Administration, US gas prices will peak at $4.15 per gallon in August.
Whew. That's a suprise for most Americans, 86 percent of whom believe that prices will top $5 by the end of the year. We can be confident that the EIA -- the agency that does the country's official projection of oil prices -- knows what they're talking about. Yessiree.
If you detect a note of sarcasm in my post maybe that's because the EIA has a hilarious record of forecasting world oil prices. And even when it comes to domestic gasoline prices, it's as if their forecasts are completely impervious to reality. To wit:
- In February, the EIA forecast that prices would peak at $3.40 in the spring.
- In March, they forecast that prices would peak at $3.50 in the spring.
- In April, they forecast that gas prices would peak at $3.60 in the spring.
- By early May, prices were at $3.57 and climbing, so the new official projection said that prices would peak this month, in June, at $3.73.
- By late May -- just weeks after the new forecast -- the average price was already at $3.94. And yesterday's national average gasoline price was $4.04. So now they're saying that prices will peak in August, at $4.15.
In fairness, maybe the EIA will get it right one of these days. Maybe gas prices will peak and start descending back to earth.
On the other hand, it's been reported that global oil production actually fell in 2007, despite record high prices. Less supply will, of course, tend to exert an upward pressure on prices. And it's getting a little hard to take the EIA seriously when they keep making the same mistake again and again and again and again...
If anyone wants to bet with me on August gas prices, I'll be taking the "over."
