Legendary oil investor T.Boone Pickens warned Thursday, that crude oil prices are still headed upward and could top $125 a barrel in the short term.US crude futures touched a record $117 a barrel Friday, before retreating slightly. Pickens expects US natural gas prices to rise from the current level of $10 per million British thermal units to $12-$14 this winter, a further rise of 20%-40%.
Pickens feels the rise is inevitable given increasing demand and stagnant world oil output. Oil prices have gone up almost five times since 2002 due to increasing demand from China and other emerging world economies. Global output has not kept pace, and is unlikely to rise above the current 85 million bpd while demand is likely to reach 87 million bpd later this year.
Experts have been forecasting a peaking of oil production for a long time. Although some experts feel that production has already peaked around the year 2005, most of them believe that the peaking will occur sometime between 2010-2020. Shell however says that production will peak only after 2025 while Exxon Mobil says that currently there are no signs of peaking.OPEC on its part goes to the extent of saying that no such prediction can be correctly made.
All such forecasts are based on differing geological assumptions, and details are rarely given. No one knows when such peaking will occur because the data needed for an accurate forecast is kept secret by oil exporting countries and companies. In any case the world will do well to remember that oil and gas reserves are a finite resource and given even the most optimistic scenario there will come a time when oil production starts declining, maybe 10 to 20 years later from what is being predicted now.
So what can be done to tackle the problem? Peaking oil production presents the world with an extremely complex problem. It also requires that steps towards a solution be initiated at least 20 years in advance to prevent any large scale disruption of energy supplies. It is estimated that this would require an investment of more than $20 trillion from now till 2030 in the energy supply infrastructure. Similar investments will also need to be made in developing alternative sources of energy. Unless such a massive effort is undertaken, the days of cheap and abundant energy may well be over for good.