Royal Dutch Shell Plc  .com Rotating Header Image Oil scarcity has ‘snuck up on us’, expert says

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Experts say the world’s major oil fields are declining. (AFP)

The idea that the world’s supplies of oil have either peaked or will soon start declining has suddenly gained new respectability.

The concept of ‘peak oil’ has been derided by the big oil companies for years, but at the end of last week came a turnabout.

The chief executive of the oil giant Royal Dutch Shell, Jeroen van der Veer, put out a paper on Friday forecasting the end of easy oil.

Mr Van der Veer said the result could be a worldwide scramble to mitigate climate change.

Dr Jim Buckee has just retired as president and chief executive of Talisman Energy, a major independent Canadian oil company with a market capitalisation of $25 billion.

Dr Buckee says he was not surprised when Royal Dutch Shell admitted oil supplies were getting tighter.

“I think it was only a matter of time before one of them had to say that, and the pronouncements of the majors are inscrutable at best and I believe they often have a very political overturn,” he said.

“I think it’s pretty alarmist if one or more of the world’s largest oil companies say, ‘listen guys, supplies of oil are going to get tight’. The ramifications are immense.

“Always the line of the major oil companies, Exxon, Shell, BP has been, ‘there’s plenty of oil, technology will overcome shortages; we’ll find it’.

“They changed a little bit to, ‘there’s plenty of oil, but access is difficult’ and then this is a change again saying, ‘well actually, it looks like it’s finite and we’re looking over the hill’.”

An ‘alarming picture’

Dr Buckee says ‘peak oil’ is either here, or very close.

“It is the underlying decline of the world’s major fields that is the dominant driving factor here,” he said.

“If you think that at the moment the world is consuming 30-plus billion barrels a year of oil and is finding seven or eight billion barrels a year, and this state of affairs has been going on now for 20 or more years.

“It’s obviously unsustainable and the world is increasingly drawing on the bigger, older fields. You couple that notion with the irreversibility of decline and you’ve got a very alarming picture.”

However he says the concept that oil will “run out” is not quite correct.

“It will continue to produce in large quantities, but increasingly less quantities at higher prices, so we’ll still be using a lot of oil in 20 or 30 years’ time, but it’ll be rationed by price to the most essential uses of oil, and that’s generally transportation,” he said.

“We pay more for water than we do for petrol at the moment, which is insane. But that sort of thing will rectify.

“Another point here is that the amount of carbon generated by hydrocarbons will be nowhere near that envisaged in, for example, the Stern report.”

Rising prices

Dr Buckee says the cost of a barrel of oil could reach as high as $200 by the third or fourth quarters of this year, and that prices would have to get that high before it would have any particular impact on demand.

“I don’t think that really we’ve seen any rationing of consumption by price,” he said.

“We did see it in ’79, ’80 and that was largely because of the sudden quadrupling of the price of oil. Now we’ve seen a relatively gentle approach and people have accommodated it.

“The situation is always very tight in the fourth quarter because Northern Hemisphere demand increases; it’s the sort of highest quarter for demands, so I’d say we’ll see stress again in the third and fourth quarter of ’08.”

He says the situation has “snuck up on us” and the increasing scarcity of oil will cause great changes in the way people live.

“It’s very important. I mean things like layouts of cities and future plans all have to take this sort of thing into account,” he said.

“I mean if you look at a city like Los Angeles, if the supply of gasoline became tight, it’d be a big problem, and the same problem, smaller in lots of other places.

“Where you have work at point A, residence at point B, shops at point C and they’re all miles apart.”

He says most Australian cities would face the same problem. and its also non-profit sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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