President Admits to Peak Oil

By Ian Cooper | Tuesday, May 20th, 2008

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Today's Wealth Daily: Peak Oil and Bakken

As oil prices continue their endless northern trek, those of us "in the know" knew this day would come.

The peak oil argument is no longer open for debate... It's here. We just need to figure out how to deal with it.

The "experts" used to say:

"I'll make a bold prediction... in 12 months, you're going to see oil down to 35-40 usd a barrel," said Steve Forbes in August 2005.

"It's a little hard to explain why the oil price is as high as it is at the moment, because there's plenty of oil and oil products around- it's not as if there's a shortage," said Shell UK Chairman James Smith in October 2007.

"If this market can continue going lower without OPEC disrupting it, it's very possible that by 2010 we could be substantially lower than anyone is imagining. Four to 8 years from now, we could come down and break $20 a barrel," said Peter Beutel, an old analyst at Cameron Hanover, in August 2007.

In 2006, Cambridge Energy Research Associates, Inc. (CERA) said, "This is the fifth time that the world is said to be running out of oil," says CERA Chairman Daniel Yergin. "It is no longer sensible to allow the issues about future supplies to be clouded in a debate grounded in a flawed technical argument."

And, much like the banking CEOs that'd have you believe in a mythical housing bottom, oil prognosticators were also embarrassingly wrong.

But as I said in Saturday's Energy and Capital, "They failed to take into account peak oil, rising demand, supply erosion, and the death of the dollar, despite strong dollar policies and a reactive Fed."

We, on the other hand, have been talking about Peak Oil for years. Take a look.

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But it finally happened

The President finally admitted to peak oil, warning the Middle East that, "The rising price of oil has brought great wealth to some in this region, but the supply of oil is limited, and nations like mine are aggressively developing alternatives to oil."

Yep, shortly after Saudi Arabia turned down production boost request, the President called for more aggressive domestic exploration, making the Bakken oil fields that much more attractive for investors.

Just how close are we to peak oil?

Since the early 1990s, oil output has skyrocketed nearly 30% to 83 million barrels a day, implying that we can squeeze more production if necessary.

But that may no longer be the case. The International Energy Agency predicts that oil demand could grow 50% by 2025, a scary stat given that a supply peak is expected long before this time. Unfortunately, with limited major oil field developments, rising demand becomes harder to meet, resulting in higher oil prices.

Without an oil solution, doomsday scenarios will become commonplace. We're talking