Guardian UK:

The energy watchdog is warning for the first time that oil output could pass its peak as power shifts from "super-majors" to national companies controlled by producer states. It highlights a potential oil-supply crunch.

The unprecedented wake-up call comes as the European commission says in a report due out tomorrow that while oilfields decline, the balance of supply and demand will become "increasingly tight, possibly critically so".

The IEA’s latest World Energy Outlook predicts that global energy demand will increase 45% between now and 2030 and oil prices will rise to $200 a barrel by then – or $120 at 2007 prices.
It says the recent surge in prices to just shy of $150 this summer has highlighted the "ultimately finite" nature of oil and gas reserves.

"The immediate risk to supply is not one of a lack of global resources, but rather a lack of investment," the report says. "Upstream investment has been rising rapidly in nominal terms but much of the increase is due to surging costs and the need to combat rising decline rates – especially in higher-cost provinces."

"Expanding production in the lowest-cost countries will be central to meeting the world’s needs at reasonable cost."

My comment: That last sentence is going to prove to be the Achilles heel. The various exporting countries like Russia, Saudi, Venezuela etc know this is their only valuable resource. They also know it is finite Saudi Aramco’s protests to the contrary notwithstanding. They are not going to be motivated to export their only valuable resource so that people in other countries can enjoy cheap gasoline. In fact the consumption in these exporting countries is exploding upward and that will leave less fuel for export. The other laughable idea is that $360 billion will be needed every year in oilfield investment just to cut the depletion rate in half. Even when oil prices were double their current level investment was lacking in new production. This is a very serious problem but an excellent investment opportunity for long term investors as we are able to buy reserves and production right now for cheap money. As I have said before the world will not end and eventually economic growth will return and with it increased petroleum demand. I think it will be interesting how widely this IEA report gets circulated in the US. My guess is it will be a page 16 story when in fact it should be on the front page.

John Polomny
The Real Deal