Abstract

The discovery of the giant East Texas Field in 1930 started a period of inherent oversupply of oil that ended in 2004. The oil price has tripled since 2004 while conventional oil production has remained static. Production has not been able to respond to the price signal provided because it is constrained by geological factors. Logistic decline plot analysis indicates that the world consumed half its conventional oil endowment by 2005. Ten years later, production is on the cusp of a long decline at a rate of 1.5 million barrels/day/annum. OPEC production will start declining later than non-OPEC production with both at 27 million barrels per day in 2030, 27% lower than the current plateau level. Tight oil production in the US is expected to peak at about 4 million barrels per day in 2018. A contribution to supply from tight oil production elsewhere in the world will be delayed due to geological, cost and regulatory factors. The price response to the contracting supply of conventional oil will lead to price-driven substitution of liquid fossil fuels by natural gas and synthetic fuels from coal, in turn enhancing the economics of nuclear energy in the electric power market. World coal production will peak in 2021 due to the peak in Chinese production that year. Ultimately the level of civilisation humanity will enjoy will be dependent upon the cost of nuclear power and the production of synthetic liquid fuels using hydrogen electrolysed from water and carbon from farmed sources.

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