The International Energy Agency needn’t bother exhorting OPEC to pump more oil to fuel a global economy that now burns a record 87 million barrels a day. Confidential cables from the U.S. embassy in Saudi Arabia released recently by Wikileaks confirm what others have long suspected: OPEC’s kingpin producer, Saudi Arabia, has little more to give.

The cables from the U.S. embassy in Riyadh cites a number of conversations between embassy personnel and Dr. Sadad Al Husseini (left), a geologist and former executive vice president of Exploration and Production with Aramco, the Saudi oil monopoly.

The former Aramco exploration head contends neither the kingdom’s reserve estimates nor future production targets can be believed.  According to Husseini, Aramco’s estimates of its world-leading reserves are inflated by 40%.

More important, Dr. Husseini acknowledged Saudi production is never likely to get to Aramco’s 12.5 million barrel/day level target. Instead the country is struggling to produce even 10 million barrels/day and it may soon encounter a production peak after which flow rates will inevitably decline. Yet the International Energy Agency is counting on Saudi Arabia to produce no less than 14.6 million barrels/day by 2035.

Dr. Husseini’s revealing assessment of the Saudi oil industry goes a long way in explaining why President Bush’s personal pilgrimage there in 2008 during the height of the last oil crisis was only able to elicit a token 300,000 barrel/day production increase. Other than a limited amount of heavy oil that many of the world’ s refineries can’t process, the Kingdom has little more to offer today.

Chronic delays in new development and over reporting of reserves by Aramco, paints an illuminating picture of an oil industry that has struggled merely to keep up with depletion. Production is still below the levels reached in the 1970s. And thanks to the Saudi economy’s voracious appetite for its own massively subsidized oil, less of  its near-peak production is available for export every year.

While the U.S. embassy cables acknowledge Saudi Arabia still has the capacity to raise prices should it withhold supply, it no longer has the capacity to prevent prices from rising because it can’t boost production sufficiently to meet world demand.

If Saudi Arabia no longer has an ability to raise production, who does?

Still, one way or another the global oil industry will have to produce six million barrels/day more oil than last year to offset the four million barrels per day that is lost to depletion each year, and the nearly two million barrels per day of new crude demand that another year of global economic growth will generate. (Last year, Chinese oil demand alone increased by almost one million barrels/day).

If that supply can’t be found, there is only one solution: Higher oil prices will be needed to ration the ever-growing global fuel demand.

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  • Tone

    Or, the world moves from monolithic energy sources, like oil, to a variety of sources, based on region, cost, etc. Imagine a car like GM’s Volt, using a small turbine engine capable of burning anything from ethanol to kerosene to diesel traditional gasoline. Some of those might come from petroleum, some might be bio-based … but the point would be that the owner could dump whatever fuel is available at the best price.

    Might this not help spurn the growth of alternatives? Given the huge amount of oil production that goes to transportation, a diversification of energy sources might have a significant impact on oil demand and cost.

  • Jeremy

    For North America the path to low cost energy and self-sufficiency (prosperity) has to be excellerated oil sands development, more pipelines for oil and gas delivery and nuclear energy.
    Let us get on with it.

  • EMORTON96

    NEED TO DIVEST, OIL ENHANCEMENT TOOL,TECH, ETC
    USOIL4ME.COM
    PATENT

  • Jimmyb189

    How about getting african nations or unemployed westerners to grow hemp on unused land, convert to food/fuel/industrial material and bring a new fuel to local and national markets that take the load off crude oil.

    Its very clear from the recent IEA/wikileaks information (and the rest) that we are into diminishing returns territory where the black stuff is concerned, so isnt it time to tap into the vast reservoir of solar energy that is the hemp plant.

    I simply dont believe humanity is meant to fight over the earths blood when a plant can do the same job.

  • Jimmyb189

    I agree with you sir, perhaps crude oil will become an expensive fuel reserved for emergency services/international freight etc, with a mix of locally produced biofuels that give consumer choice and cost savings.

    Whale oil went out of fashion, so will crude, one way or another, pleasantly or unpleasantly. I reckon there are plenty of solutions that are sustainable and profitable, but can any penetrate the thick fog of politics and uninformed mass opinion?

  • Abitibidoug

    Does anyone know if development of the Bakken Shale (Saskatchewan, Manitoba, Montana, North Dakota) will be able to do much to alleviate supply problems in North America?

  • Richard Barber

    There is no reliable substitute for oil, there is no other material on earth that concentrates so much cheap energy/kilojules/BTU’s as crude oil and refined oils offer. Plus most of it’s by-products are just as important to manufacturing such as polyethylene, PVC, urethaine, resins, etc etc.
    What Mr. Rubin is saying is that once it is accepted or acknowledged we are at PEAK oil, pricing from that point will grow exponentially.
    Get to know your wife, partner, children, family and friends better because you will be seeing a lot more of them in the future. maybe that’s not such a bad thing.
    RB

  • Jeremy

    The sum total of politics and uninformed mass opinion is the market, and the market and only the market will decide the outcome.

  • Jeremy

    I meant “accelerated” of course.

  • UNC

    Jeff, now we can see some reality, why our cousins down south are so pleasantly pleased with wikkileaks Julian assange and why they have generously offered him a free, all inclusive trip to the US. with Sweden offering to be the travel agent, on the house.The enbridge proposal to the west coast is a pipe dream not only because of First Nations legitiment concerns but people in general. The enviromental lobby is strongly opposed and well funded from down yonder.The pipeline on rails aint a bad idea until there is a single derailment into the skeena or any other major river or lake enroute , then that will be a nightmare as well.The fact of the matter is that the way I see it is that every drop of heavy oil in Canada will be well spoken for in North America alone.This resource of oil that we are blessed with is captive and as the cheap middle east oil gets pricey, for a whole host of reasons, economics will prevail and nobody will have to worry about diversification of export.The clock is ticking.UNC.

  • Sagaboy_21

    What about the large US natural gas reserves? Although I shudder at the thought of compressed natural gas cars in the hands of most Americans it is still a possibility.

  • Terry

    I think this is a temporary solution … The Shale Gas is looking to be a bust.

    Realistically, I think that a lot of folks are going to have to be employed rebuilding a low energy civilization … Our current design just wastes way too much.

  • http://pulse.yahoo.com/_SMH33NWQAWMWFKWG5Q46YB26DY Neil Kitson

    But what do you think of all Husseini’s comments in the Arab News?

    http://arabnews.com/economy/article267042.ece

  • George I.

    Exponential oil prices won’t happen. Never. You underestimate the potential to supply.

  • FIAT

    GO GREEN

  • mythslayer

    There has been a 400+% increase in prices in the last decade. If that ain’t exponential, then what is?

    The ducks are lining up for even greater exponential increases in the comiong decade. Saudi Arabia is the first duck in the line, and there are many others.

  • George I.

    In China the colour green is associated with “going down” and red is “going up”.

    GO RED

  • ra

    What’s interesting about articles such as Peter Foster’s “Wiarton Jeff’s Peakanomics” (25 February 2011 is the open contempt and disdain displayed by those who, for whatever reason(s) don’t believe in the notion of the reality of peak oil. Mr. Rubin, Matt Simmons, and others routinely are portrayed as fringe characters who don’t really have a handle on the economic issues at hand. Peter Foster’s comments suggest less than a thoughtful argument against peak oil than an almost mean-spirited attempt to undermine the argument by going after people like Mr. Rubin, Simmons, et. al.

    Also, recent articles in the NYT and Baltimore Sun write about the bountiful supply of oil in the Middle East. My impression of these articles is that they’re an attempt to reassure their readers that our way life is in no way threatened, that all will be well.

    When you look at the arguments made by Mr. Rubin, and others, they don’t attack those those disagree with them personally.

    If you read Foster’s article, you’ll see that the goal is to discredit the idea of peak oil by demeaning Mr. Rubin. That, in itself, says something about their inability or unwillingness to make a clean argument based on facts, even suggesting that those whom they attack are enemies of the market, etc.

  • Bruce Haddad

    Are you for real dude? Oil already got close to $150 a barrel at its all time peak I think in 2008. Now, those kinds of prices will certainly spur new development, dollars will flock to the oil sands for example, but the new supply won’t come on line quickly enough to bring prices down quickly. Compounding this time lag is geopolitical instability and opposition from a left increasingly defining through environmental issues. Here’s the situation in a nutshell: demand grows steadily with no hindrances and supply grows slowly with technical and political problems. Bet on higher prices…