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THE WALL STREET JOURNAL: Peak Oil? Industry Numbers Disagree

Posted by Keith Johnson
March 14, 2008, 10:45 pm

The supply of oil, one of the most crucial elements for all energy choices—renewable or otherwise—is a subject of dispute even among the denizens of the industry.

The “peak-oil” debate returned on the final day of The Wall Street Journal’s “ECO:nomics” conference, politely pitting a reluctant oil-industry worrier, Christophe de Margerie, head of France’s Total SA, against Daniel Yergin, head of bullish Cambridge Energy Research Associates. The question they hashed out: What does a $110-a-barrel price say about the supply of oil?

Mr. Yergin’s view: Not much that’s fundamental. Today’s high price is “not about the supply and demand of oil, it’s about the supply and demand of dollars,” Mr. Yergin said, citing a “flight to commodities” by investors skittish about the credit-market crunch. That shift is artificially inflating the price of oil as a hedge against inflation and a weak dollar, he said.

“This is the fifth time we’ve run out of oil,” he deadpanned, recounting past ostensible crises in the industry and talking up his company’s big database of global oil information. “With the data, you don’t see a peak.” CERA currently thinks the new ceiling of global oil production is 105 million barrels a day, and that’s only because personnel and equipment shortages are delaying new projects.

Mr. de Margerie was less sanguine. “There’s a virtual world, and then there’s reality,” he said. The crunch is due to a slate of “above-ground” factors that make it unlikely the world will ever produce the amounts of oil Mr. Yergin or the International Energy Agency think it will, Mr. de Margerie said. That includes sudden and voracious demand from China and India; cost issues that make exploration more expensive for companies; geopolitical barriers that make that exploration untenable; and environmental constraints that hamstring oil production in way they never did before.

The industry long relied on excess capacity, especially in OPEC’s biggest member, Saudi Arabia, the Total chief said. What little spare capacity the Saudis have—itself the subject of bitter peak-oil arguments—is needed as a global insurance policy. “We cannot reach 100 million barrels a day,” he said.

Yet the two sides may be drifting closer together. CERA’s forecast has been getting more bearish recently, something Mr. Yergin chalks up to personnel and equipment shortages throughout the industry.

“In two years, we will share the same figure” for global production, Mr. de Margerie told Mr. Yergin. and its also non-profit sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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