Alarming Trend of Lower Oil Production Continues

Ever since 2004, the non-OPEC world has struggled to increase its oil production from a plateau around 50 million barrels per day. Today’s EIA Short-Term Energy Outlook (STEO) now projects that 2008 non-OPEC production will actually decrease by more than 200,000 barrels per day. As I have been stressing in recent blogs, the EIA has been constantly lowering its non-OPEC production predictions throughout the year. As recently as February, they thought non-OPEC producers would supply 900,000 barrels per day more in 2008. Their current prediction couldn’t be too far off now that there are only two and a half months to go for the year. In the US, Hurricanes Gustav and Ike prevented US production from matching last year’s level — ensuring that 2008 will be the 17th year in a row that crude oil production has fallen. In fact, this year is expected to be the first since 1946 that US crude production is below 5 million barrels per day.

The EIA predicts that next year will be different (as they did last year) since two large new fields are scheduled to ramp up production by the end of 2009 (Gulf of Mexico deepwater projects Thunderhorse and Tahiti). But continued depletion in old fields, the 2009 hurricane season, and the tight credit market may prevent such an increase — at least from getting significantly above 2007 levels.

One of the exciting predictions in the STEO is that coal demand will fall almost 1% in 2009 as substitutes such as wind and natural gas generate more of our country’s electricity. The recent renewal of federal renewable energy tax credits could result in wind and solar alone fully replacing 2% of coal electricity. It should be exciting to see how this plays out.

Thanks to the many Princeton alumni who have endorsed the PACE statement in its first day!


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