Quote:
Originally Posted by Old Mechanic
I think in Saudi Arabia, at one time, water was more expensive than oil. They have one export product, one chance to finance their economy for the rest of their existence. Their only hope is to use that asset very carefully. Maybe solar energy could be their future.
As far as oil and proven reserves versus potential, as yet undiscovered reserves, my thinking is there is probably much more potential supply, however I would like to see more competition for petroleum based energy economies. I think the transition will take a significant amount of time, probably beyond my lifetime.
regards
mech
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The problem with the idea of Peak Oil is the understanding of what it is and how oil reserves fit into the picture.
The problem behind the idea of Peak Oil is the constant growth and demand of the world market especially in areas such as China and India. Once the demand exceeds the ability to supply the "easy oil", the price for oil must rise. This brings into play the oil resources that were ignored at lower prices. The oil sands are the biggest example of this along with smaller traditional geographical formations which would not have been economical at lower oil prices. Also, "tapped out" wells can be exploited with advanced extraction techniques. As oil prices rise even more, resources such as tar sands and deep water deposits become economically viable. All this does not mean Peak Oil is the end of oil. It just means that economic growth in the future must deal with much higher oil costs. At a certain point, that economic growth becomes stunted and can collapse. Growing countries such as the aforementioned regions of China and India will be the first to feel this as they have little to no oil reserves of their own.
The idea that there is more oil to be found is true. The problem is the difficulty of extracting it and at what cost. If the costs exceed what an economy is willing to pay, that oil will remain untapped. Economies will then look to economize and diversify their energy needs. We have seen this already happening across the globe.
The current price drop is being driven by Saudi Arabia. The Middle Eastern oil deposits still have large proven classic reserves. However, they are not unlimited. Published numbers for extraction are as low as 25 USD per barrel. Actual costs are most likely lower. However, the Saudi economy is almost wholly dependent on oil exports. Published numbers for their break even are around 85 USD per barrel. The fact that they are driving the prices below this number means they are willing to take a loss for the foreseeable future and cover the losses with their national reserves which are reported to be considerable. Why they are doing this largely unclear as there is no long term advantage to this. They may be able to stop or stunt the growth and exploration of competing oil areas, but that will not help them in the long run. The small oil producing country of Kuwait is an example of the forward thinking needed by many of these countries as they have moved to become a regional leader in banking, education and a hi-technology development hub. Their oil deposits are relatively small and are drawing down. In their wisdom, they are preparing for the future by investing the oil money in their people and infrastructure.
An interesting aside to all this is how the United States Government views this action by an avowed ally as this action attacks the foundation of the US economy as well as the closely allied economies of Canada and South America.