Dearth of new wells drilled could keep oil prices high

[ze_dscherman]

Some of the world's biggest oil-producing countries have reduced their investment in new capacity despite record oil prices.


The Organisation of Petroleum Exporting Countries this week revealed that its members drilled 6.5 per cent fewer wells in 2003, suggesting that the global supply crunch and high oil prices could last longer than expected, analysts said. The numbers appear to contradict statements by Opec members that they are actively building extra capacity.

SNIP

Opec's capacity has remained at about 31.5m b/d since autumn 2000, though demand increased by 6m b/d and prices recovered from the Asian crisis of the late 1990s during that time, the CGES said. During that time almost three-quarters of the increased capacity needed to satisfy the extra demand came from outside Opec.

But ageing fields, a difficult investment climate in Russia and a dearth of discoveries in other parts of the world mean that consumers will not be able to rely on countries outside Opec for additional oil. Meanwhile, US demand, which is expected to grow 4 per cent in the next four years, and that of China, forecast to increase 30 per cent, mean the world could be in for a longer period of high oil prices than expected, analysts said.


http://news.ft.com/cms/s/1393befe-f60c-11d8-b814-00000e2511c8.html

[Systematic Chaos]

1. Ya think???

the world could be in for a longer period of high oil prices than expected, analysts said.

Um, yeah, like until about the time the oil runs COMPLETELY OUT?? Give me a break.

[Athame]

2. more drilling doesn't help

http://www.oilcrash.com/articles/steps.htm

From the above site:
Efforts by the petroleum geology community to nail down the exact date of peak are interesting academically, but the real trouble begins with the loss of oil price stability. This loss is well underway. Price stability would be a reasonable expectation only if there were a good measure of excess production capacity. That is not the case now. Spare capacity is only about 2 mbd — probably the lowest since World War II.



{Please go to the site--I can't get the graphs to show up. This is the best site I have found for the quick read on oil and gas depletion}

Fig. 9: number of explorations (yellow line) and net increase in oil reserves <12>



Oil indeed will continue to flow for another 75 to 100 years — but in steadily declining quantities. What’s critically important to understand is that the price elastcity of supply is no longer working as it might in other industries. Higher prices no longer can bring forth rapid and significant increases in oil output. As early as in the 1970s it became clear that high prices ($80 to $100/b in 2003 dollars) might lead to much increased drilling but not to increases in oil discoveries. This time we cannot drill or militarily conquer our way out of this problem.