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Higher Oil Prices Blamed on Peaking Production

As oil prices reach record levels, industry observers ponder a future of increased demand and a possible peak in production. A European group announced last week that world production peaked last year and will decrease steadily in the years ahead, even as demand continues to grow. VOA's Greg Flakus went to a peak oil conference in Houston recently and filed this report.

On hand for the Association of Peak Oil Studies conference were industry representatives, engineers, analysts and investors all expressing concern about what the world will do when production reaches its peak.

Among the better known speakers was legendary oil developer and billionaire T. Boone Pickens, who expressed his belief that world oil production is unlikely to keep up with rising demand, meaning much higher prices could be ahead.

"The $90 a barrel does not surprise me. It would not surprise me if it went to $100 a barrel. I am not predicting that, but I do think it will go to 100 before it goes back down to 80," he said.

Pickens blamed some of the problem on inefficient production from state-owned oil companies that have not allowed more technically advanced private companies, like Dallas-based Exxon Mobil, to take a more active role in their fields.

"Could you get more than 85 million barrels a day out of the world? You could if they all turned it over to Exxon, but they are not going to do that, we know. But 75 percent of all the oil in the world is controlled by state-owned oil companies," he said.

Many industry analysts and oil experts dispute the peak-oil theory, noting that new technology, bolstered by the increased price of oil, has made it possible to extract oil from areas that were once overlooked. Many also dispute the idea suggested by some peak oil theorists that production will go into a steep decline after reaching the peak.

Many energy analysts also blame the recent run up in oil prices on speculation and fear of delivery disruptions in the Middle East, rather than a peak in production.

But the people concerned about peak oil are not alarmists, says the director of the Association for the Study of Peak Oil in the United States, Jim Baldauf. "We do not claim that we are running out of oil. We claim that we are running out of cheap oil, and I think if you just look in the financial pages today you will see that this is not some projection," he said.

Baldauf is executive vice president of Austin, Texas-based APEX Resources, a company that has exploited wells that were once considered depleted. He says exploiting them is is difficult. "All I know is that we have to drill deeper and smarter and at twice the cost to get about a third of the production that we used to get," he said.

He says many people in the energy industry see a peak in worldwide production coming soon and support various efforts to find a solution. "There is no silver bullet, single techno fix to solve this problem. More likely it is going to be an integrated mosaic of pieces that make up a jig-saw puzzle of solutions," he said.

One solution might be the use of hybrid-electric vehicles like one put on display at the conference by Jamie Mitchell of the Austin Energy utility company. "We need to find solutions to the problem and how cities like Austin and Houston will continue to thrive when we do not have cheap, abundant oil resources," Mitchell said.

Most conference participants expressed support for immediate conservation programs as well as development of alternative fuels, from liquefied natural gas to biofuels such as ethanol, as well as such ideas as solar and wind energy to charge electric car batteries.

Many at the conference also supported development of new, safer nuclear plants. They do not produce greenhouse gases and could provide support for an electric-vehicle system. But they recognize that will be an uphill battle, given the public's safety concerns.

Veteran oil and gas industry analyst Charles Maxwell favors full-scale development of all alternative energy as well as decisive conservation steps . He warns that it would be better to take strong action now than wait for an energy-shortage crisis. "The more we can do before that trigger is pulled, before some event sets this stuff off, the better off we are going to be," he said.

He says such an event, whether it be a natural disaster or political upheaval could happen at any time, with dire consequences for the entire world.