If you think oil prices are high today, you ain’t seen nothing yet
BP has no way to shut it off, short of drilling a relief well to divert the pressure, which will take three months. At 25,000 barrels a day, three months means a cumulative discharge of 2.25 million barrels of oil, or 94.5 million U.S. gallons (one barrel equals 42 U.S. gallons), or roughly eight Exxon Valdez spills. Even at 5,000 barrels a day, that’s almost 20 million gallons of oil. And to top it all off, by the time a relief well can be drilled, we’ll be smack in the middle of hurricane season.
SHOOT: Yep, Hurricane season starts next month, so BP better hurry up.
President Barack Obama has suspended his recent decision to open new offshore areas for oil development and has declared a moratorium on new drilling. You can imagine what the regulatory environment will be like after three months of the spill, just as you can imagine what those satellite photos of the Gulf of Mexico will look like.
But what you might not imagine are the implications for world oil supply. Conventional oil supply has not grown since 2005. Without a steady stream of oil from fields below the ocean floor, not only can’t world oil production grow, it can’t even stand still, since we rely on oil from new deep-water fields to replace the bulk of the four million barrels per day of global production we lose every year to depletion (out of a total of roughly 86 million barrels per day).
If the Deepwater Horizon disaster is the offshore energy industry’s Three Mile Island, then not only has world oil production already peaked, but it will also very soon start to shrink.