Going in Circles – „The world better hurry up…“

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Here are a few slides based on OPEC’s latest World Oil Outlook, which was just released. The slides were compiled by Dutch oil analyst Maarten van Mourik from OPEC’s own data regarding the production expectations of conventional crude oil.

By Lars Schall

Going in Circles – What Goes Around Comes Around

Beyond Pooh & Evil:

….and there was Winnie-the-Pooh. Pooh was walking round and round in a circle, thinking of something else, and when Piglet called to him, he just went on walking.

Pooh Stories Chapter 3 – In Which Pooh and Piglet Go Hunting and Nearly Catch a Woozle.

Dear Reader,

the Dutch oil analyst Maarten van Mourik, who used to work in the past, inter alia, for OPEC, sent me this PDF here („The world better hurry up…“) today for my research.

He wrote:

Attached are a few slides based on OPEC’s latest World Oil Outlook, just released. I compiled from their own data the production expectations of conventional crude oil. The world peaked out in 2004/5 (and note that the numbers are flattered by the inclusion of some very heavy Venezolean oil). I included a chart on oil depletion, which is a simple extrapolation to show the impact if no new oil is found and/or developed. (given OPEC’s definitions, that difference is pretty obscure). It is clear that new oil will be found and developed and therefore my chart will not come to pass; it is only intended to show the underlying pressure which is mounting rapidly, especially since in the past few years discoveries have been horrible and new development decisions have been very few. And that goes to offset the numbers from OPEC. (Just sayin’ before somebody says I don’t understand how the process works and non-OPEC never has much more inventory than 10 years anyway. Issue is, that at current extraction rates, activity needs to increase and not decrease as has been the case for three years now.)

Now, the projections are that conventional crude oil will only slowly decline. That sounds all nice and well, were it not for the fact that the amount of reserves is fairly limited. And those very same numbers from OPEC don’t allow the oil to projected to be produced, well, to actually be produced. Only the assumption that everything produced will be replaced every year can sustain the OPEC outlook. And that assumption is now hinging on the fact that the oil companies have slashed spending and stopped exploring and wound down development. Either somebody is becoming horribly efficient overnight, which would raise the question, why did spending 1000 billion USD over the past 10 years result in falling conventional oil output and not spending stabilizes? Or the assumptions are flat wrong and we’re up for an epic mess.

That epic mess has been on the forefront of the planners for a long time. And instead of stepping back and let people decide their own course and live their lives, the sociopaths have only one solution: more of the same. This has now been going on for decades. At what point does the system break? I believe it is breaking already, and the faltering oil supply is the main culprit. That is because of its productive properties.

Here’s looking at you, kid!,

Lars Schall.

P.S.: Maarten van Mourik (born 1967 in the Netherlands) studied micro-economics / industrial economics and shipping economics at Erasmus University in Rotterdam, Netherlands between 1988 and 1991. Afterwards he worked with the Netherlands Economic Institute on transportation policy research, mainly maritime transport. For Petrodata Ltd of Scotland he was doing offshore drilling rig and marine support vessel market forecasting. From 2000 onwards he has had his own business, doing bottom-up field by field non-OPEC supply forecasting, oil market analysis as well as forecasting offshore equipment markets. The work was supplied to OPEC as well as investment funds. As an economist he has worked on port infrastructure feasibility studies around the world. Today, Mr. van Mourik works still for his own account and as an economist for North Sea Group in Holland. He favours independent analysis, Austrian economics and an eclectic approach to analysing and predicting market behaviour. He currently lives in France. Van Mourik co-authored (w/ Oskar Slingerland) the book “The Misunderstood Crisis – It’s the energy stupid!”.

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