I recently found a pretty good NYT Magazine article on oil production. It’s definitely worth a read, if for no other reason than as a reminder of how much things have changed since the article was written in 2005. For example, on page 1 comes the quaint statement:

If consumption begins to exceed production by even a small amount, the price of a barrel of oil could soar to triple-digit levels.

Yes … yes it could. Here’s another one:

But will such a situation really come to pass? That depends on Saudi Arabia. To know the answer, you need to know whether the Saudis, who possess 22 percent of the world’s oil reserves, can increase their country’s output beyond its current limit of 10.5 million barrels a day, and even beyond the 12.5-million-barrel target it has set for 2009.

We now know the answer is a resounding “no.” Saudi production was 9.6 million barrels per day in 2005, 9.2 million barrels per day in 2006, and 8.6 million barrels per day from Feb. to Aug. 2007. They did increase production in Dec. 2007, but only up to the average production of 2006.

And in response to those who think that there’s plenty of oil out there:

One of the starkest warnings came in a February report commissioned by the United States Department of Energy’s National Energy Technology Laboratory. “Because oil prices have been relatively high for the past decade, oil companies have conducted extensive exploration over that period, but their results have been disappointing,” stated the report, assembled by Science Applications International, a research company that works on security and energy issues. “If recent trends hold, there is little reason to expect that exploration success will dramatically improve in the future. … The image is one of a world moving from a long period in which reserves additions were much greater than consumption to an era in which annual additions are falling increasingly short of annual consumption. This is but one of a number of trends that suggest the world is fast approaching the inevitable peaking of conventional world oil production.”

And …

The message he delivered was clear: the world is heading for an oil shortage. His warning is quite different from the calming speeches that Naimi and other Saudis, along with senior American officials, deliver on an almost daily basis. Husseini explained that the need to produce more oil is coming from two directions. Most obviously, demand is rising; in recent years, global demand has increased by two million barrels a day. (Current daily consumption, remember, is about 84 million barrels a day.) Less obviously, oil producers deplete their reserves every time they pump out a barrel of oil. This means that merely to maintain their reserve base, they have to replace the oil they extract from declining fields. It’s the geological equivalent of running to stay in place. Husseini acknowledged that new fields are coming online, like offshore West Africa and the Caspian basin, but he said that their output isn’t big enough to offset this growing need.

“You look at the globe and ask, ‘Where are the big increments?’ and there’s hardly anything but Saudi Arabia,” he said. “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.” In other words, if demand and depletion patterns continue, every year the world will need to open enough fields or wells to pump an additional six to eight million barrels a day — at least two million new barrels a day to meet the rising demand and at least four million to compensate for the declining production of existing fields. “That’s like a whole new Saudi Arabia every couple of years,” Husseini said. “It can’t be done indefinitely. It’s not sustainable.”

Scary stuff, indeed.