WASHINGTON — Global oil production is not likely to peak anytime soon, contrary to talk that has helped propel prices close to $60 a barrel, although lower prices may still be a few years away, a prominent energy consultancy said Tuesday.
Cambridge Energy Research Associates said that, instead of a crest being reached sometime this decade, an inflection point in world oil output will occur sometime beyond 2020, after which production will plateau for several more decades.
In a report that builds upon earlier analyses by the Cambridge, Mass.-based consultancy, CERA said it believes that between now and 2010 there will be a substantial increase in worldwide oil production capacity. It said that "as a result, supply could exceed demand by as much as 6 million to 7.5 million barrels per day later in the decade" that will lead to an extended period of lower prices beginning as early as 2008.
The price of oil could "slip well below $40 a barrel as 2007-08 nears," CERA said.
Today, the supply cushion is only about 1.5 million barrels per day and that has markets extremely nervous about the possibility of a supply disruption. Oil prices are up more than 55 percent over the past year, in part because of the threat of hurricanes, terrorist attacks and labor strife in key oil production regions, such as the Gulf of Mexico, Iraq and Nigeria.
"Today's high prices are the result of an exceedingly tight and precarious supply-demand balance," CERA chairman Daniel Yergin said in a statement. "Yet significant new capacity will be coming on stream... The addition of that new capacity is what is required to improve the supply demand balance."
The CERA report is a counterweight to the predictions of some energy experts, who in recent years have been publishing books filled with charts and graphs that aim to prove that world oil production is about to peak, if it hasn't already.
The most recently published book to make that claim is called "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy," which was written by Matthew R. Simmons, a Houston-based investment banker who is well-known in the petroleum industry.
Simmons argues that Saudi Arabia's best oil fields are aging rapidly and that the rest of the world needs to question the veracity of the kingdom's claim that it still has 260 billion barrels of petroleum left to pump.
The CERA report acknowledges that there will be fewer giant oil fields found and produced after 2010, but it argues that with new technology and multibillion dollar investments the petroleum industry has the ability to provide more than enough supply to meet rising demand.
"The main risks to our supply expansion scenario are above ground, not below ground — changes in the political and operating climate that could delay expansion," Yergin said.
The debate about whether global output is on the cusp of an irreversible decline is not new — petroleum engineers and executives have been hashing it out for decades. But it has garnered extra attention amid soaring prices and the revelation last year that Royal Dutch/Shell Group overstated its reserves, a key measurement of an oil company's future profit potential.
Lawrence J. Goldstein, president of PIRA Energy Group in New York, said he was present when Simmons met with Saudi officials to gather information for his book and that he remains an "agnostic" when it comes to the peak oil debate.
It isn't entirely clear, Goldstein said, whether today's tight global supply reflects a geologic limit that is being reached or if it merely signifies that the industry hasn't made the necessary investments to keep up with rising demand.
"The truth is, I don't know whether we're resource-constrained or effort-constrained, and neither does anybody else," he said.
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