October 18, 2006
Energy Outlook - Disaster or Opportunity
Charles Maxwell
Senior Energy Analyst at Weeden and Co.
Minutes of the Sixth Meeting of the 65th Year
At 10:15 AM on October 18,2006, Joe Giordmaine called the sixth Nassau Old Guard meeting of the year to order with 108 members in attendance. John Marks led the singing of one verse of "My Country 'Tis of Thee." The following members introduced their guests: Bob Thompson, Mrs. Mary Thompson; John Rassweiler, Nancy Hale; Joe Bolster, his wife, Tink, the speaker's wife, Ginny Maxwell and Phoebe Ballard.
Joe Bolster then introduced our speaker, Charles T. Maxwell, Senior Energy Analyst with the Weedon Company, Greenwich, Connecticut. He said that Charles was an exceptional athlete and scholar whom he had met while at Princeton University. Charles worked for Mobil Oil in the Middle East, Europe, Africa and the United States. His topic was "Energy Outlook -- Disaster or Opportunity."
Maxwell began his presentation by stating that America is a heavy user of energy. An early geophysicist, H. King Hubbard espoused the theory that the world's oil supply is finite and that there would be a day when oil production would decline and what remained would be difficult to extract and consequently very expensive. Hubbard, said that the supply curve for oil is bell-shaped and thus supply would decrease as the large oil fields were depleted. Hubbard predicted that oil production would peak in 1970 forcing a revolutionary change in living standards in the United States. He did not foresee that the oil industry would move overseas to the large oil deposits in the Arab states, Africa and Russia. Today, 60% of our oil comes from foreign sources.
Maxwell then referred to a graph (Oil Gap Graph) which showed the billions of barrels of oil discovered each year up to 2005 and projected to 2050. He also plotted the billions of barrels of oil consumed per annum in the past and projected this consumption into the future at a 2% growth rate. This consumption will reach a point when, limited by the diminished reserves and the declining discoveries of oil, the curve declines. The graph shows that in 1964 a peak of 48 billion barrels were discovered. After that, the annual volume of oi discovered dropped until, in 1988, the volume of oil discovered equaled that consumed. Because the amount of oil to be found is finite, the quantity to be discovered is less and less until only 2 billion barrels per year are projected to be discovered in 2050. The peak of oil consumption will occur between 2015 and 2020.
A second graph developed by Exxon showed the World Liquids Production Outlook. The non-OPEC nation's crude production will peak about 2010 and with Canadian oil sands the total production will top out around 2030. The world demand is projected to be 120 million barrels per day at 2030, 70 million barrels per day being supplied by non-OPEC nations and 50 million barrels by OPEC.
Maxwell stated that the OPEC countries are too smart to keep using up their oil at such a rapid rate. They would prefer to get a higher price by controlling their production. In the future, at about 2010, we will have to depend on OPEC for the incremental barrels of oil and they will then be able to determine the price per barrel. By 2010 we will see $170 per barrel prices; by 2015, $180; by 2020, $300 per barrel. We will have to have diesel and electric cars that weigh one third of what they do today, turn off lights, improve efficiency of heating, use bicycles and walk. We will have to develop other forms of energy such as nuclear, wind, and coal, but the greatest new source of energy is conservation.
The next administration will have to solve this energy transition problem. There will be harsh debates about the solution. These changes will be made by investments in new technology, increased efficiency and conservation. Maxwell believes that by 2020 we will have changed to more diesel power, plug-in electric cars and greater use of nuclear and coal generated electricity thus reducing our financial and physical dependency on oil. Until this time, we must depend upon our government to look after our supply of petroleum from overseas.
Respectfully submitted,
Dick Jesser
Joe Bolster then introduced our speaker, Charles T. Maxwell, Senior Energy Analyst with the Weedon Company, Greenwich, Connecticut. He said that Charles was an exceptional athlete and scholar whom he had met while at Princeton University. Charles worked for Mobil Oil in the Middle East, Europe, Africa and the United States. His topic was "Energy Outlook -- Disaster or Opportunity."
Maxwell began his presentation by stating that America is a heavy user of energy. An early geophysicist, H. King Hubbard espoused the theory that the world's oil supply is finite and that there would be a day when oil production would decline and what remained would be difficult to extract and consequently very expensive. Hubbard, said that the supply curve for oil is bell-shaped and thus supply would decrease as the large oil fields were depleted. Hubbard predicted that oil production would peak in 1970 forcing a revolutionary change in living standards in the United States. He did not foresee that the oil industry would move overseas to the large oil deposits in the Arab states, Africa and Russia. Today, 60% of our oil comes from foreign sources.
Maxwell then referred to a graph (Oil Gap Graph) which showed the billions of barrels of oil discovered each year up to 2005 and projected to 2050. He also plotted the billions of barrels of oil consumed per annum in the past and projected this consumption into the future at a 2% growth rate. This consumption will reach a point when, limited by the diminished reserves and the declining discoveries of oil, the curve declines. The graph shows that in 1964 a peak of 48 billion barrels were discovered. After that, the annual volume of oi discovered dropped until, in 1988, the volume of oil discovered equaled that consumed. Because the amount of oil to be found is finite, the quantity to be discovered is less and less until only 2 billion barrels per year are projected to be discovered in 2050. The peak of oil consumption will occur between 2015 and 2020.
A second graph developed by Exxon showed the World Liquids Production Outlook. The non-OPEC nation's crude production will peak about 2010 and with Canadian oil sands the total production will top out around 2030. The world demand is projected to be 120 million barrels per day at 2030, 70 million barrels per day being supplied by non-OPEC nations and 50 million barrels by OPEC.
Maxwell stated that the OPEC countries are too smart to keep using up their oil at such a rapid rate. They would prefer to get a higher price by controlling their production. In the future, at about 2010, we will have to depend on OPEC for the incremental barrels of oil and they will then be able to determine the price per barrel. By 2010 we will see $170 per barrel prices; by 2015, $180; by 2020, $300 per barrel. We will have to have diesel and electric cars that weigh one third of what they do today, turn off lights, improve efficiency of heating, use bicycles and walk. We will have to develop other forms of energy such as nuclear, wind, and coal, but the greatest new source of energy is conservation.
The next administration will have to solve this energy transition problem. There will be harsh debates about the solution. These changes will be made by investments in new technology, increased efficiency and conservation. Maxwell believes that by 2020 we will have changed to more diesel power, plug-in electric cars and greater use of nuclear and coal generated electricity thus reducing our financial and physical dependency on oil. Until this time, we must depend upon our government to look after our supply of petroleum from overseas.
Respectfully submitted,
Dick Jesser