You might think that the recent collapse in oil demand would put off the peak. But the price collapse and global credit crunch mean the reverse is true:

Non-OPEC crude oil production may have already peaked and international oil companies faced the prospect of both younger and older oil fields declining steeply, the firm said in the report released on Wednesday.

Merrill said “the cumulative decline of global oil production from today could amount to 30 million barrels per day by 2015.” What does world need to do going forward?

Steep falls in oil production means the world now needed to replace an amount of oil output equivalent to Saudi Arabia’s production every two years, Merrill Lynch said in a research report.

This matches what the normally conservative and staid International Energy Agency has been saying in recent months (see “Science/IEA: World oil crunch looming? Not if we can find six Saudi Arabias!” and “IEA says oil will peak in 2020“).

The global economic recession has cut funding for investment in oil production around the globe. Ironically — or tragically — the only thing that can save the world from a return to soaring oil prices by 2010 or 2011 is if economic slowdown turns into “a multi-year event where global oil demand was pushed down structurally for the next five years.”

Obama must keep a laser-like focus on jump-starting the transition to a clean energy economy if he doesn’t want to be burned by $4-plus gasoline as he is running for reelection. Fortunately, he understands that (See Must-read Obama speech: “No single issue is as fundamental to our future as energy”).

My point all along has been those six Saudi Arabias do not exist underground — they can only be found in the nation’s (and the world’s) cars, trucks, buildings, factories, power plants, and farms. America is the Saudi Arabia of wasted energy. And we now know what the winning low-carbon alternative fuel is (see “Why electricity is the only alternative fuel that can lead to energy independence” and “Plug-in hybrids and electric cars — a core climate solution“).

Greenwire ($ub. req’d) has a good discussion of the issues raised by Merrill:

Oil production from nations outside the Organization of Petroleum Exporting Countries (OPEC) has probably peaked thanks to the global financial crisis, Merrill Lynch energy analysts told investors today.

The sharp plunge in oil prices and tighter credit have slashed investments in oil production from marginal and difficult-to-manage fields in the United States, the United Kingdom and continental Europe, the investors said.

Spending on efforts to boost output from nontraditional sources like the Canadian oil sands is also sharply lower, with more than $200 billion in project spending already canceled or postponed in Canada because of tight credit.

Overall, output from non-OPEC fields is also probably declining faster than government experts initially believed.

Taken together, these factors probably mean that non-OPEC production has likely already peaked to about 49 million or 50 million barrels a day and could slide to 47 million barrels a day by 2015 at current decline rates.

By contrast, the International Energy Agency (IEA), a Paris-based organization that tracks the global oil market for the major consuming countries, prepared a forecast assuming that production in North America, the North Sea and other areas outside OPEC’s control would rise to 51 million barrels a day by 2015.

But the IEA reached that conclusion by assuming that annual production declines from the largest existing fields outside the OPEC zone would decline by about 4.7 percent. Merrill Lynch analysts say that number is too optimistic, pointing to indicators that suggest the annual decline rates will rise to closer to 6 percent as the credit crunch upsets the industry.

“In our view, the combination of low oil prices and a global credit crunch will prove rather damaging to the oil industry,” warned Merrill Lynch’s U.K.-based chief commodity strategist, Francisco Blanch.

Among the more ominous signs for the oil industry is that declining production rates in smaller oil fields coming online are much higher than those in older, larger fields like Alaska’s Prudhoe Bay or the giant North Sea fields.

Energy analysts say fields that were brought into production prior to 1998 and have since reached peak production are averaging annual output declines of about 4 percent each year, while the industry is witnessing production decline rates on an average of 18 percent per year for fields tapped after 2002.

Oil production declines in the largest non-OPEC fields are nothing new, but industry watchers worry that the trend could accelerate and spread to other large fields in Mexico, South America and Russia.

North Sea oil output has been falling rapidly since 2000. Oil production from Prudhoe Bay is also declining, and the vast majority of oil fields in the continental United States are considered marginal, with each well producing a few barrels a day. Oil production in Russia will also probably fall by 5 percent this year, analysts say.

Declining investor enthusiasm

Crude oil prices briefly dipped yesterday below $40 a barrel as the onslaught of disappointing economic data continued to weigh down investor and trader enthusiasm. At the start of the year, investment houses projected that cuts in output by OPEC should help lift prices by summer, with the cost of a barrel of oil averaging about $60 to $70 a barrel in 2009.

Although major new finds have been announced, including a giant field located in Brazilian territorial waters, energy industry experts warn that these fields will take several years to develop, with low oil prices and troubled financial markets probably pushing back the dates they come into production.

Experts also expect new production from such finds will not be enough to offset declines elsewhere. The latest report by Merrill Lynch suggests that the world will have to add the equivalent of Saudi Arabia’s entire annual oil production every two years in order to continue expanding global supply.

“OPEC’s market share will likely increase going forward,” Blanch said. “Oil production decline rates in non-OPEC countries are particularly steep, with the United Kingdom and Australia leading the pack.”

He added, “In our view, the credit crunch will only further exacerbate the decline rates.”

The global financial crisis has put a grinding halt to the frenzy in commodity investing seen for most of 2008.

This morning, CME Group — operators of mercantile exchanges in Chicago and New York — reported that trading last month fell 41 percent compared to January 2008 figures. Trading in energy futures and options at the New York Mercantile Exchange fell by 5 percent.

But output cuts by OPEC and the worsening oil production in countries outside the cartel could set the stage for another spike in energy and commodity prices in the years to come, experts say.

Analysts bullish on the long-term prospects of commodity prices say that oil could return to upward pricing pressure by as early as 2010 once demand growth returns to the world economy.

This post was created for ClimateProgress.org, a project of the Center for American Progress Action Fund.