In May 2005 world production of crude and condensate = 74,298,000 bpd, and in August 2007 world production = 72,512,000 bpd, a decline of 1,756,000 barrels per day of crude and condensate from peak month to most recent month. During this time prices have risen roughly 60%; in other words the market brought the decrease of supply and into equilibrium with demand via price. Just in case I need to spell it out for you: The market mechanism of increasing prices failed to stimulate increased production. Why? Maybe no increase is possible.

If we use annual averages, world production of crude and condensate stacks up like this:

2005 average production - 73,807
2006 average production - 73,544
2007 average production - 73,093

(My goodness, even an economist, or a politician, can see a trend forming…)

Peak production of “all liquids” (crude and condensate, natural gas plant liquids - primarily ethane, propane, butane, and isobutane, ethanol, bio-diesel, coal to liquids, etc…) in August 2006 = 85,467,000 barrels per day, and in August 2007 production = 83,920,000, a decline of 1,547,000.

If we use annual averages, world production of “all liquids” stacks up like this:

2005 average production - 84,631
2006 average production - 84,603
2007 average production - 84,335

In order to compare “apples to apples” I should use the crude and condensate production numbers from August 2006, but I won’t… I can see your eyes glazing over. Let us just leave it with: the rate of decline in “all liquids” is slightly less than the rate of decline for crude & condensate. (If you really are interested in the actual figure for crude & condensate production in August 2006 it was 73,760,000. You can work the rest out.)

But “all liquids” are not created equal. For instance: 1 gallon of gasoline = 124,000 Btu, while the energy content of ethanol is 83,333 Btu’s per gallon, and 91,000 btu’s for 1 gallon of propane. If your car could run on 100% ethanol you would need to buy roughly 50% more fuel to drive the same number of miles (or drive 1/3 fewer miles on a tank full).

Let me get to the point: While the decline in “all liquids” from 2005 to 2007 is .35 of 1%, the BTU decline is roughly double that. This does not take into consideration the energy consumption of ethanol, bio-diesel, and coal to liquids production, which to get back to comparing “apples to apples” would need to be subtracted from the “all liquids” gross Btu content.

The production data continues to support a peak of crude oil production in May of 2005, with 2.25 years of data, and the “all liquids” data is telling us not to expect any miracle from “alternative fuels”. I’ll let the academics split hairs over the date of Peak Oil. If you are a resident of the U.S., Peak Oil is in the past, and if you are an investor you have precious little time to do something intelligent.

I want to finish by saying that I do not “hope” for any particular outcome. I trade and invest for a living. If the data showed oil supplies were increasing, my strategies would change. I don’t fight the data, or as they say on Wall Street, “don’t fight the tape”.

Yours for a better world,

Mentatt (at) yahoo (dot) com