Oil forecasts and peak production
The interesting article by Richard C. Duncan (OGJ, May 26, 2003, p. 18) analyzes three oil production forecasts predicting peaks between 2003 and 2016. Although much current interest centers around when world oil rates will actually peak, a much more important issue is the rate at which it will subsequently decline.
Duncan suggests two answers: –2.52% and –0.23%; a ten-fold difference! Simple extrapolation at these two rates yields apparent future world "reserves" of either 950 or 10,500 billion bbl (using 2002 production of 66 million bo/d excluding NGLs). A Hubbert-type "fit" of world oil history yields a 7% decline over much of the future, identical to past world oil growth rate, and "reserves" of only 340 billion bbl. US oil production history offers some guidance. From 1862 to 1938 (76 years), growth was about 8%/year, then 3.3% from 1938 to a peak in 1970, and has subsequently declined at 1.6%.
Forecasting future world oil production rates, or even when they might peak, is an extremely hazardous occupation, and Duncan is to be commended for shedding some analytical light on the subject.
Arlie M. Skov
Retired
Santa Barbara, Calif.
Gasoline lines in Baghdad
The lead article in The Wall Street Journal on June 9, 2003, shows long lines for gasoline in Baghdad. An initial reaction by American readers might be that the allied forces in Iraq are fumbling the post-war reconstruction.
It would be beneficial to the public discussion on post-war Iraq if the Oil & Gas Journal would put this development into an historical-economic-political context. What were the political and economic ramifications of the long gas lines in the US as a result of the second "OPEC crisis?" What is the retail price of gasoline today in Iraq and other OPEC countries, and what portion is the total government take (or subsidy)? Contrast that with the total government take out of a retail gallon of gasoline in Japan, Europe, and the US.
I would conclude that long gasoline lines in Baghdad may serve a great good if the local population comes to appreciate that gasoline is not a free good, to be subsidized by export oil earnings.
Contrast the recent retail gasoline price under Saddam Hussein with today's Baghdad price, and make an estimate for a price based on current world oil prices and a reasonable refining and marketing return on capital. Then input a reasonable government tax to maintain the highway system to determine a reasonable, free-market gasoline price.
Are the allied forces in interim control of the Iraqi petroleum industry receptive to such a fact-based suggestion from the authoritative Oil & Gas Journal? We can hope so for the sake of democracy in Iraq and for reform in the neighboring OPEC countries where retail gasoline prices are not based on free market economics.
Douglas Jones
Nerstrand, Minn.
