Charles Maxwell presented this at the Advisors Money Show...
In 1956, Dr. M. King Hubbard predicted that oil production in the lower 48 states would peak in the early 1970s. He based his predictions on geology and the fact that the circumstances that originally resulted in the creation of oil reserves in the Triassic and Jurassic periods have not occurred since then. There is no ongoing creation of oil reserves.
The cheapest oil is shallow but once that is tapped then drillers must go deeper to discover new oil fields. Going deeper whether on land or offshore then becomes increasingly complex and expensive.
Since the early 1970s oil production in the lower 48 states has decreased. The reserve base is slowly being liquidated without natural replenishment.
Globally, oil production is expected to decrease between 2015-2017.
- OPEC's peak oil is anticipated 2023-2025.
- Non OPEC countries peak oil is projected to 2010-2011.
- Saudi Arabia is expected to peak oil around 2030.
The maximum that can be harvested from oil sands production is 3.5 million barrels per day.
Exploitation of new oil fields is complicated by nationalism, political instability (Africa), rising costs, and political decisions (Gulf of Mexico deep-water drilling suspension). Alaska's Prudoe Bay can only produce 700,000 barrels/day, not nearly enough to offset the Gulf of Mexico moratorium.
Today 10 billions barrels are produced daily but 28 billions barrels are used daily.
Expect the price of oil to significantly increase to support new exploration and production. For an investor, this could bode well for major oil company earnings. Analysts predict the price of oil to increase to $120 barrel by 2015 and $300 barrel by 2020.
In addition to major oil companies, expect the oil service companies will achieve similar profits. Those are: Halliburton (HAL) and National Oilwell Varco (NOV). Expect growth in these industries for the next ten years.
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