"The Breaking Point" - 8 Years Later

Hard to believe that Peter Maass' New York Times magazine article "The Breaking Point" is 8 years old today. Re-reading it is an interesting step into the past.

  • There's Saudi oil minister Ali al-Naimi assuring a Washington DC audience there is absolutely no lack of resources worldwide - as oil stood at $55/barrel.
  • The Hirsch report, which had only been out a few months at the time, predicting the inevitable peaking of conventional world oil production. (It wasn't as common then to hear about total liquids and unconventionals as we do today)
  • There's Daniel Yergin misinterpreting Peak Oil and using the same "This is not the first time that the world has 'run out of oil'" line that he still uses today. 
  • There's Matt Simmons studying over 200 S.P.E. papers on Saudi oil fields.
  • There's Sadad al-Husseini suggesting that the world will need to find multiple Saudi Arabia's every year.
  • It's interesting to note what actually did happen to demand these 8 years. Demand growth did slow under high prices, hanging between 85-86 mbpd between 2006-2009, even dropping slightly because of the 2008 oil spike. But growth continued 2010-2012 and the world used 89.7 mbpd in 2012. 
  • And while the article doesn't necessarily predict the growth of shale (few did at the time) - it does pretty accurately describe what eventually happened as prices rose and how that affected the US and Saudi Arabia. 
  • Forbes would later call Peter Maass their "Dunce of the week" and the article indirectly led to the $10,000 Simmons/Tierney bet. (wiki)
Their point is not that we are running out of oil, per se; although as much as half of the world’s recoverable reserves are estimated to have been consumed, about a trillion barrels remain underground. Rather, they are concerned with what is called ‘’capacity’’ — the amount of oil that can be pumped to the surface on a daily basis. These experts — still a minority in the oil world — contend that because of the peculiarities of geology and the limits of modern technology, it will soon be impossible for the world’s reservoirs to surrender enough oil to meet daily demand.
— Peter Maass
I can assure you that we haven’t peaked... If we peaked, we would not be going to 12.5 and we would not be visualizing a 15-million-barrel-per-day production capacity... We can maintain 12.5 or 15 million for the next 30 to 50 years.
— Saudi oil minister, Ali al-Naimi
Saudi oil production never reached 12.5 mbpd ( Stuart Staniford ) 

Saudi oil production never reached 12.5 mbpd (Stuart Staniford

If consumption begins to exceed production by even a small amount, the price of a barrel of oil could soar to triple-digit levels. This, in turn, could bring on a global recession...
— Peter Maass
We’re going to look back at history and say $55 a barrel was cheap
— Matthew Simmons
Previous energy transitions (wood to coal and coal to oil) were gradual and evolutionary; oil peaking will be abrupt and revolutionary
— Hirsch Report
When crude costs $10 a barrel or even $30 a barrel, alternative fuels are prohibitively expensive. For example, Canada has vast amounts of tar sands that can be rendered into heavy oil, but the cost of doing so is quite high...
— Peter Maass
The odds of them sustaining 12 million barrels a day is very low... ‘The odds of them getting to 15 million for 50 years — there’s a better chance of me having Bill Gates’s net worth, and I wouldn’t bet a dime on that forecast.
— Matthew Simmons
[Simmons] does not know anything... The only thing he has is a big mouth. We should not pay attention to him. Either you believe us or you don’t.
— Saudi oil ministry spokesman, Ibrahim al-Muhanna
Oil is an industry in which not only is the product hidden from sight but so is reliable information about it. And because we do not know when a supply-demand shortfall might arrive, we do not know when to begin preparing for it, so as to soften its impact; the economic blow may come as a sledgehammer from the darkness.
— Peter Maass
The kingdom and Ghawar field are not the problem. That misses the whole point. The problem is that you go from 79 million barrels a day in 2002 to 82.5 in 2003 to 84.5 in 2004. You’re leaping by two million to three million a year, and if you have to cover declines, that’s another four to five million... That’s like a whole new Saudi Arabia every couple of years... It can’t be done indefinitely. It’s not sustainable
— Sadad al-Husseini
The E.I.A. forecast in 2004 that by 2020 Saudi Arabia would produce 18.2 million barrels of oil a day, and that by 2025 it would produce 22.5 million barrels a day. Those estimates were unusual, though. They were not based on secret information about Saudi capacity, but on the projected needs of energy consumers. The figures simply assumed that Saudi Arabia would be able to produce whatever the United States needed it to produce.
— Peter Maass
‘Everybody is looking at the producers to pull the chestnuts out of the fire, as if it’s our job to fix everybody’s problems... It’s not our problem to tell a democratically elected government that you have to do something about your runaway consumers. If your government can’t do the job, you can’t expect other governments to do it for them.
— Sadad al-Husseini
That’s the part that is scary. You draw some assumptions and then say, ‘O.K., based on these assumptions, let’s go forward and consume like hell and burn like hell.’
— Sadad al-Husseini
Sadad al-Husseini, former Aramco executive (Stephanie Kuykendal/Corbis, for The New York Times)

Sadad al-Husseini, former Aramco executive (Stephanie Kuykendal/Corbis, for The New York Times)