Tuesday, November 8, 2011

World Oil Production Finishes Six Years of No Growth

From the article:

We are entering what may be the longest stretch of no growth in world oil production since the early 1980s. But the reasons for that lack of growth differ in ways that ought to make us all uncomfortable.

Starting in 1980, production slumped because for the first time in history people needed less oil. After the huge oil price increases in the 1970s, cars suddenly got smaller. People became more careful about combining trips to save gas. A lot of people switched their home heating to natural gas which was considerably cheaper than heating oil. And, in the United States the Congress severely restricted the use of oil for new electric power generating plants. Those using oil began to switch to cheaper natural gas and coal. The whole globe went on an energy efficiency binge.

Beyond this, the world went through two recessions, one in 1980 and the second in 1981-82 which turned out to be the worst since World War II (until the current one). That curbed oil demand as economic activity sank. All the while, large oil discoveries in Alaska and the North Sea and furious drilling elsewhere produced a glut of capacity that sent prices from a high near $40 a barrel in early 1981 to about $16 a barrel six years later. As it turned out, all of these factors combined to keep world oil production below its 1980 peak until 1988.

Fast forward to 2005 when conventional oil supplies stopped growing and then fluctuated between 73 million and 74 million barrels per day on an annual basis through 2010. (Production averaged 73.8 million barrels per day this year from January through July, the last month for which data is available.) The chain of events following the 2005 peak are both different and worrisome. Following the cessation in growth of conventional oil supplies, the world economy continued to grow until the end of 2007 when it slipped into recession. Prices peaked in July 2008 at around $147 a barrel.

But then they plunged to around $35 a barrel in December 2008 as the world sank into an economic slump worse than anything since The Great Depression. With it oil demand and production slumped as well. Then the price did something that few people expected. It bounced back even as overall global economic recovery remained sluggish. Rapid recovery in the Far East, however, created robust demand for oil even as North American and European countries remained locked into an unusually tepid rebound. As a result, last spring prices for Brent crude vaulted above $125.

Read more:



Been a while since I lasted posted. Very busy and lots of crazy shit going on in my personal life (those on JDU) know what I'm talking about LOL. Wanted to add that the debate taking place around the world right now is GROWTH! How the fuck are these economies going to grow out of their debt problem. Watch the business new channels and they talk about "Greece, Italy and the US and how they will GROW out of their debt problem." The reality is with energy prices skyrocketing relative to a decade ago, the energy input has messed the equation. Simply put, a higher percentage of GDP must be allocated to the energy portion, something that was minuscule in the recent past. Now Italy teeters on the verge of a bond market implosion as the spread between Italian and German 10 year bonds surged to nearly 500 basis points (or 5%). Those are huge numbers.

Just yesterday the Italian 10 year hit an astounding 6.66% yield. The monkeys on wall street say that 7% is the point of no return, the event horizon if you will. I expect the powers that be to throw the kitchen sink at Italy's debt problem, such as the ECB, the Bank of Japan, the Federal Reserve and even the Chinese central bank to place bid after bid on Italian paper to prevent an all out holocaust on the financial markets. While little Greece was a problem, Italy has a monster $2.2 trillion debt market, one that can easily threaten the entire ponzi. TPTB will fight reality tooth and nail, but they will lose in the end as all sovereigns blow up.

With brent crude trading over $114 DESPITE the sluggish economy in the US and EU which constitute over 50% of global GDP, it is obvious that oil supply concerns dominate the energy markets. Throw in the potential of a Israeli-Iran conflict and all bets are off. This is probably the biggest reason why no action has taken place as the rulers know that $180 brent will sink every economy back into depression.

In conclusion, higher energy costs will act as quicksand to these sluggish economies that need higher growth to get out of their debt funk. Assuming growth returns, I can only imagine where brent will be trading at then. Until a new energy source comes into the picture, we will be sandwiched into this shit economy.


  1. 1. welcome back
    2. what is JDU
    3. solar cells are following a Moores-like law and should be cheaper than fossil fuel in 10-20 years (this is too long to avert the upcoming crises, but a silver lining nonetheless).

  2. 1. thanks
    2. JD Underground
    3. need to follow up on this

  3. eToro is the #1 forex broker for new and full-time traders.


Real Time Analytics