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Experts agree: Oil prices today are not being driven by the remaining global oil reserves, but instead by too low a production rate of this sought-after raw material.
Today the global economy consumes almost as much oil per day as can be pumped from the ground. A daily demand of about 84.43 mio. barrels faces a situation where the maximum amount that can be produced is 84.5 mio. barrels. This means that there is very little opportunity to expand production in response to a strongly growing demand.
This relationship, known as “peak oil”, is systematically dependent and has now become the price driver on the petroleum market.The fact is: As production progresses, an oil field’s rate of extraction drops once half the oil it contains has been pumped. This is because the pressure within the oil field declines continuously. Water is then injected deep into the wells to maintain adequate pressure. This then means that an oil-water mixture has to be pumped out, which later must be separated back into oil and water – an expensive and time-consuming process. The more oil extracted, the more water you need to maintain equalized pressure, which in turn leads to ever greater amounts of water in the mixture being pumped. As production increases, the amount of oil produced per unit of time decreases.Worldwide petroleum production will therefore decline as soon as half the world’s available oil has been depleted. The oil fields in Texas, Alaska and the North Sea are already exhibiting significant declines in production volume – while the amount of oil produced globally has not risen since the year 2005.The only way to stop the dynamics of peak oil is to find new oil fields. However, and despite tremendous exploration efforts on their part, oil companies have for decades been locating far too little oil to manage the decline in production.Even the Strategy 2030 - Energy Resources study that was prepared jointly in 2005 by the Hamburg Berenberg Bank and the Hamburg Institute of International Economics (HWWI) reaches the conclusion that this strong growth in demand can no longer be covered even by an increase in production volume and the exploitation of new oil deposits. Regarding the developments on the markets for energy raw materials, the HWWI director Prof. Dr. Thomas Straubhaar notes: "With the world economy growing at an average annual rate of 2.8% in the forecast period, the price of oil could climb to $120 per barrel in the year 2030 based on a starting benchmark of $40 per barrel in 2004.“ In the current study of 2008 the respected bank Goldman Sachs considers an increase in the price of oil to 200 dollars a barrel at the latest in 2010.
In the future, the economic success of a company will therefore depend significantly on its resource efficiency, meaning its ability to increase output while simultaneously decreasing the use of raw materials. Japan already recognized this more than ten years ago when it elevated resource efficiency to become part of its government program.
According to a 2003 study by the University of Delaware in the United States, international maritime shipping with its approximately 280 million tons of fuel consumes more than twice as much oil as the Federal Republic of Germany (ca. 125 million tons).
Ship operating costs are skyrocketing because of high oil prices. Even today fuel costs account for more than half of a ship's operating expenses. This is why shipping companies often utilize special "fuel-saving groups" to reduce consumption in newly constructed ships.
In the case of ship's diesel, however, the potential for increasing its efficiency is for the most part exhausted or would be extraordinarily expensive. According to a ship propulsion expert's calculation, shipping companies would have to invest up to 500,000 euros to reduce one ship's fuel consumption by 1%. According to Niels Stolberg, the managing partner of the Bremen-based Beluga Shipping GmbH, fuel savings of 5% would be an absolutely fantastic performance on the part of shipping companies in this day and age. Depending on the prevailing wind conditions, a ship’s average annual fuel costs can be reduced by 10 to 35% by using the SkySails-System. Under optimal wind conditions, fuel consumption can temporarily be cut by up to 50%.
Maritime shipping is completely dependent on oil. Even today, marine fuel costs from $500 to $1200 or more per ton depending on the grade and quality – a price that seemed inconceivable just a few years ago. Since 1987 the average annual increase in the price of oil has been more than 10%, whereby prices have risen disproportionately since 2002. The cause of this rise in prices lies in the fact that the oil production rate no longer suffices to supply the demand.
In their recent study (May 2008), the Energy Watch Group (EWG), an international panel of experts in the fields of economics, science and politics, points out that global oil production capacity has peaked as early as in the year 2006.
While the IEA predicts a gap in supply at continuing increase in oil production, the EWG forecasts that the oil production rate will decline and reach a level of only 58 million barrel per day in the year 2020. Instead of drawing on projections of allegedly existing oil reserves that could be developed at considerable expense, the EWG bases its conclusion on a survey of the actual production rates – and these are on the decline.
An analysis of the production rate of the 17 largest private oil companies worldwide – ranging from ExxonMobil / USA to TNK / Russia – reinforces this trend: Since 1997, their daily production volume has steadily been totaling about 13 million barrel, even less in the last few years. However, and despite tremendous exploration efforts on their part, oil companies have for decades been locating far too little oil to manage the decline in production volume and increase their output in light of the high demand and oil prices.
This gap in supply will lead to shortages and dramatic price increases in the near future.
Regardless of any increases in the price of oil, the most recent worldwide climate protection regulations will lead to a doubling of the cost of fuel for shipping companies starting in 2012. Tougher standards are also expected in 2008 from the worldwide regulation of ship CO2 emissions.
Experts believe that fuel prices will go up once more by enacting the ban on heavy fuel oil. Here the reason is that refinery capacity is inadequate to cover the demand. And when it comes to the demand for fuel it’s important to keep in mind that ships will be competing with cars, trucks, heating oil and all other onshore oil consumers in the future. In light of these circumstances experts no longer expect fuel prices to double, but to triple instead.
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