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CIAO Focus, November 2012: The Surge in Global Oil Production

• Oil is not in short supply. From a purely physical point of view, there are huge volumes of conventional and unconventional oils still to be developed, with no “peak-oil” in sight. The real problems concerning future oil production are above the surface, not beneath it, and relate to political decisions and geopolitical instability.

• Other things equal, any significant setback to additional production in Iraq, the United States, and Canada would have a strong impact on the global oil market, considering the contribution of these countries to the future growth of oil supply.

• The shale/tight oil boom in the United States is not a temporary bubble, but the most important revolution in the oil sector in decades. It will probably trigger worldwide emulation over the next decades that might bear surprising results - given the fact that most shale/tight oil resources in the world are still unknown and untapped. What’s more, the application of shale extraction key-technologies (horizontal drilling and hydraulic fracturing) to conventional oilfield could dramatically increase world’s oil production.

• In the aggregate, conventional oil production is also growing throughout the world at an unexpected rate, although some areas of the world (Canada, the United States, the North Sea) are witnessing an apparently irreversible decline of the conventional production.

• The age of “cheap oil” is probably behind us, but it is still uncertain what the future level of oil prices might be. Technology may turn today’s expensive oil into tomorrow’s cheap oil.

• The oil market will remain highly volatile until 2015 and prone to extreme movements in opposite directions, thus representing a major challenge for investors, in spite of its short and long term opportunities. After 2015, however, most of the projects considered in this paper will advance significantly and contribute to a strong build-up of the world’s production capacity. This could provoke a major phenomenon of overproduction and lead to a significant, stable dip of oil prices, unless oil demand were to grow at a sustained yearly rate of at least 1.6 percent for the entire decade.

--.Leonardo Maugeri, Belfer Center for Science and International Affairs, Harvard University


From the CIAO Database:

Oil: The Next Revolution: The Unprecedented Upsurge of Oil Production Capacity and What It Means for the World

Global Oil Production is Surging: Implications for Prices, Geopolitics, and the Environment

Gasoline Taxes and Consumer Behavior

Oil market outlook

China’s Geostrategic Search for Oil


Outside Sources: *

International Petroleum Monthly (IPM) (U.S. Energy Information Administration)

Oil Market Report (International Energy Agency)

U.S. to overtake Saudi as top oil producer: IEA (Reuters)

Country Comparison: Oil Production (CIA: The World Factbook)

US set to lead world oil production (YouTube video)

* Outside links are not maintained. For broken outside links, CIAO recommends the Way Back Machine.