We may very well have arrived at the historic peak of global oil production two weeks ago. On Tuesday, August 3, OPEC president Purnomo Yusgiantoro announced that the cartel would be unable to help relieve the pressure of increasing global oil prices. "The oil price is very high," he said. "It's crazy. There is no additional supply."

Though he disavowed himself the next day, most likely under pressure from Saudi Arabia which insists that it has 1.5 million barrels of spare daily production capacity, the president's statement is right in line with what peak oil theorists have been saying for quite some time: Humanity is using the planet's supply of light, sweet, crude oil as fast as we are capable of pumping it out of the ground and at a much faster rate than we are discovering new reserves.

The historic peak of American oil production was announced and confirmed in an equally understated way -- essentially as an encoded message, understandable only to insiders. In his book, Hubbert's Peak, Princeton geologist Ken Deffeyes recalls seeing a one sentence item in the San Francisco Chronicle in the spring of 1971. It read, "The Texas Railroad Commission announced a 100% allowable for the next month."

To understand what the message meant, you have to know that the Texas Railroad Commission was actually the world's first government-sanctioned oil cartel. During the years when the US was the world's foremost producer of oil, the Commission was assigned the task of regulating domestic oil production and controlling prices. The Commission told each oil well operator what percentage of their capacity they were allowed to produce in order to maintain the price and not flood the market. When in the spring of '71 the Texas Railroad Commission announced that every oil producer was allowed to pump at 100% capacity, that was, officially, the moment of US domestic peak production. It meant that the demand for oil had become greater than supply. When OPEC formed in 1960 to coordinate oil production and unify prices, it actually modeled itself on the Texas Railroad Commission.

So, this month's announcement by the president of OPEC that "there is no additional supply" may turn out to be just as significant as that little-noticed Texas Railroad Commission annoucement of "100% allowable," 33 years ago. It may very well be that 2004 is the year of global peak oil production -- a critical turning point in human history. Only time will tell.

A side note:

It looks like the New York Times is finally, in its slow, conservative and indirect way, finally beginning to cover this important story. A reporter named Jad Mouwad writing about the oil industry has been reporting regularly on how recent price increases are due in large part to the fact that suppliers are just barely keeping up with the rapidly increasing global demand for oil. Better late than never, I suppose. Peak Oil is easily one of the most important ongoing news stories of the decade and linked intimately to the other big stories of the day -- terrorism, environmental degradation, and Middle East conflict. Yet, so far the Peak Oil story remains mostly unreported in the big, corporate, mainstream media. This is clearly about to change.



12:21 PM | Link |