A recent Joint Operating Environment report issued by the U.S. Joint Forces Command suggests that the U.S. could face oil shortages much sooner than many have anticipated.
The report speculates that by 2012, surplus oil production capacity will dry up; by 2015, the world could face shortages of nearly 10 million barrels per day; and by 2030, the world will require production of 118 million barrels of oil per day, but will produce only 100 million barrels a day.
Although this is hardly a scientific prediction -- a preface to the report clearly states that it's "speculative in nature" -- it still raises the provocative question of how the U.S. will proceed when oil runs out.
Few analysts or experts can even agree on when oil production will peak, much less when the U.S. will suffer shortages. Five years ago, the topic was widely debated as oil prices escalated, and many experts concluded at the time that oil production should have peaked by now. Still, some argue that the peak is "decades away," while others say oil production peaked two years ago.
Bullied to Overstate Supply?
Some of the signs that would supposedly precede an oil peak are volatile pricing, lower oil reserves and a lack of excess production capacity. Although the U.S. has certainly experienced "overheated" oil prices and pricing volatility, it's been recession-related.
As for oil reserves, many industry watchers have expressed concern about an oil glut over the last couple of years. (Earlier this week, however, oil prices climbed on news that oil reserves dropped by 2.2 million barrels, while analysts had expected a 1.1 million barrel increase, according to a Dow Jones survey.) A Guardian report published late last year claimed the International Energy Agency was bullied by the U.S. to overstate the world's oil supply, and that low reserves may be a real concern.
The topic of oil shortages is equally contentious. Some say the U.S. will see them in the not-so-distant future -- others think it will be in another 10 years. Goldman Sachs analyst Jeffrey Currie thinks we could see oil shortages next year, but presumably the shortages he's talking about will be short term, and not because the world has run out of oil. Currie expects demand for oil will be almost fully restored by the third quarter of this year, thanks to the economic recovery. But because oil companies weren't able to invest in new capacity over the last couple years -- as a result of the credit crisis -- supplies will be short, he says. Similarly, the IEA also warned last year that a decline in oil investments could lead to another economic crisis in 2013 as oil reserves start to dry up.
U.S. Military Warns of Oil Shortage as Early as 2015