Only the first peak oil recession?
September 18th, 2009 by Jim JustAnalyst Steven Kopits notes in an interview at The Energy Bulletin that global oil production has been on a plateau since late 2004:
If I dispassionately just look at the numbers, the oil supply has not improved that much since the 4th quarter of 2004. And I don’t see anything on the horizon that makes it appear that we’re going to break out into a really new level of production that’s far different than what we have today. So if we’re talking about practical peak oil, my view is that it started in late 2004.
Kopits observes that decline rates, according to the IEA, are in the range of 6 – 7%. Even if oil supplies were still growing, with demand growing in developing countries we’re still vulnerable to the economic impacts of peak oil.
Kopits also draws attention to the correlation between oil prices and the health of the economy.
The US has experienced six recessions since 1972. At least five of these were associated with oil prices. In every case, when oil consumption in the US reached 4% percent of GDP, the US went into recession. Right now, 4% of GDP is $80 oil. So that’s my current view: If the oil price exceeds $80, then expect the US to fall back into recession.
Oil prices have been pretty stable lately, trading mostly in a $68 – $72 range. Any increase in demand from developed countries, which have been hit hard by recession, should put upward pressure on prices. We may soon see how prescient Kopits’ prediction proves to be.