Petroleum

Petroleum (from Greek petra – rock and oleum – oil), crude oil, sometimes colloquially called black gold, is a thick, dark brown or greenish liquid. A widely believed myth is that the oil itself is flammable, however it is actually the gas that evaporates from the oil that is flammable. Petroleum exists in the upper strata of some areas of the Earth's crust. Another name is naphtha, from Persian naft or nafátá (to flow). It consists of a complex mixture of various hydrocarbons, largely of the alkane series, but may vary much in appearance, composition, and purity. It is an important "primary energy" source (IEA Key World Energy Statistics). Petroleum is also the raw material for many chemical products, including solvents, fertilizers, pesticides, and plastics.

Future of oil

Main article: Hubbert Peak

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The Hubbert peak theory, also known as peak oil, is a controversial theory concerning the long-term rate of conventional oil and other fossil fuel production and depletion. It assumes that oil reserves are not replenishable, and predicts that future world oil production must inevitably reach a peak and then decline as these reserves are exhausted. Much of the controversy is over whether past production or discovery data can be used to predict a future peak.

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The issue can be considered from the point of view of individual regions or the world as a whole. Originally M. King Hubbert noticed that the discoveries in the United States had peaked in the early 1930s, and concluded that production would then peak in the early 1970s. His prediction turned out to be correct, and after the US peaked in 1971 - and thus lost its excess production capacity - OPEC was finally able to manipulate oil prices, which led to the oil crisis in 1973. Since then, various regions have peaked, for example, the North Sea in late 1990s. China has confirmed that two of its largest producing regions are in decline, and Mexico's national oil company, Pemex, has announced that Cantarell Field, one of the world's largest offshore fields, is expected to peak in 2006, and then decline 14% per annum.

Related Topics:
M. King Hubbert - 1930s - 1970s - 1971 - OPEC - North Sea - 1990s - Pemex - Cantarell Field - 2006

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For various reasons (perhaps most importantly the lack of transparency in accounting of global oil reserves), it is difficult to predict the oil peak in any given region. Based on available production data, proponents have previously (and incorrectly) predicted the peak for the world to be in years 1989, 1995, or 1995-2000. However these predictions date from before the recession of the early 1980s, and the consequent reduction in global consumption, the effect of which was to delay the date of any peak by several years. A new prediction by Goldman Sachs picks 2007 for oil and some time later for natural gas. Just as the 1971 U.S. peak in oil production was only clearly recognized after the fact, a peak in world production may be difficult to discern until production clearly drops off.

Related Topics:
Accounting - 1989 - 1995 - 2000 - 1980s - Goldman Sachs - 2007

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One signal is that 2005 saw a dramatic fall in announced new oil projects coming to production from 2008 onwards. Since it takes on average four to six years for a new project to start producing oil, in order to avoid the peak, these new projects would have to not only make up for the depletion of current fields, but increase total production annually to meet increasing demand.

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