Oil Development May Not Be Able to Slow Price Rise  

A recent conference in Houston saw some mainstream discussion of possible peak points.

ChevronTexaco Chairman and CEO David O'Reilly said he expects hydrocarbons to contribute to energy supplies through the midpoint of the century.

"Setting aside above-ground political and security issues, world oil production capacity through 2010 points toward continued growth in both non-OPEC and OPEC liquid-production capacity," Jackson said.

The research firm predicted total liquids capacity would rise nearly 20 percent to 101.5 million barrels a day. CERA said most of the increase would come from projects in the deepwater offshore Brazil, Nigeria, Angola and the Gulf of Mexico. The Caspian region and the Canadian oil sands are also expected to make significant contributions.

"To be sure, there are risks to supply growth," growth," Jackson said. Those include higher field decline rates and delays to major projects.

ChevronTexaco's O'Reilly also called for a new U.S. energy policy, saying "current regulations make it too hard to keep pace with the nation's growing energy demand".

I'm not sure that blaming the problem on regulation (rather than the simple fact of depletion) is a productive tactic - though no doubt the oil majors and "Its Morning In America" Republican politicians would like to have energy scarcity in the coming years blamed on someone other than themselves.

He also seems unaware that natural gas already seems to be past peak in North America.

O'Reilly, speaking at the Cambridge Energy Research Associates conference in Houston, said he didn't see the need for a policy until recently.

"But in light of changing circumstances, I now feel the administration must refocus our nation's energy policy to meet the new energy equation," he said, and pointed to Japan as a model.

In 1973, oil accounted for 75 percent of Japan's energy supply. It now accounts for less than half. Over the same period, nuclear power has grown to 12 percent, up from less than 1 percent, and natural gas use has increased more than eight-fold.

O'Reilly cited four factors for changing his mind about a U.S. energy policy: The country is becoming more energy interdependent, not less; demand is increasing and shows no signs of abating; reliable supplies "are critical to sustained economic growth;" and a policy debate would help people gain a better understanding of the issues.

Energy independence has "no grounding in reality," he said, adding "We need to make our policy tradeoffs clear."

"And we need alignment of energy policy with other policies central to our national interest - environmental, economic, trade and national security."

He gave natural gas as an example.

"Common sense would suggest that we develop natural gas supplies as quickly as economically feasible," O'Reilly said. But environmental restrictions put limits on natural-gas development in the Rocky Mountains, Alaska and offshore. "If a preference for natural gas is going to be our de facto policy for the generation of electricity, then our national policy should encourage and enable the development of natural gas," he said.

He also recommended that a U.S. energy policy consider coal and nuclear power; renewable sources of fuel, such as wind and solar; and energy efficiency.