The Times has an opinion piece from ex Economist editor Bill Emmott on peak oil (albeit a fairly skeptical one, arguing that the oil age will end soon, but because of the greed of OPEC and Russia rather than because of depletion) - Opec’s greed will herald the end of the oil age.

This point in the analysis is where the planetary gloomsters start citing a concept called “peak oil” (or, to the real oil nerds, “Hubbert’s peak”). This is the idea that the planet’s oil reserves are nearing (or, in some eyes, are past) a time at which the output from oilfields starts to decline. Don’t pay them any attention. The world is not running out of oil. What it is short of has been investment in oilfields and production. And the reason for that can be found in a different four-letter word: Opec.

The oil producers’ cartel has deliberately cut production by nearly five million barrels a day, which is more than the drop in global demand, to keep prices high. Opec members account for only about 35 per cent of world supply, but Russia, a non-member, accounts for a further 11.5 per cent and is co-operating with their efforts. Moreover, the Gulf states that dominate Opec have the largest oil reserves and lowest production costs, so can most easily and painlessly turn their taps on and off.

In the early years of this decade the kingpins of Opec, Saudi Arabia, used to say that their ideal price range for crude oil was $20-25 a barrel. Now, they say that it is $70-75. Crucially, the nationalists in Opec and the extortionists in Russia have blocked the big Western oil companies from investing as much in developing their oil reserves as they would have liked, driving them into higher-cost fields elsewhere. Investment there, even before the financial crisis, has been slow as the sudden rush to explore and expand drove up the costs of engineers and equipment. Since the financial crisis, it has slumped.

That will change over the next decade or so, if prices stay high. Brazil has discovered a huge new offshore oilfield and Angola has shown just how quickly development can occur. In seven years it has trebled its oil output, joined Opec and is now challenging Nigeria for its status as sub-Saharan Africa’s biggest oil producer — and hence as the leading oil-rich basket case. That is why the US Secretary of State, Hillary Clinton, swallowed her human rights scruples and paid homage to the Angolans on her tour of Africa, lest they become overly friendly with China instead.

Yet by the time non-Opec oil supply has been boosted, something even more important will have occurred, if Opec continues to overplay its hand and support painfully high prices. In the 1970s, the rather quotable Saudi Oil Minister, Sheikh Zaki Yamani, had a nice saying: “The Stone Age did not end because the world ran out of stones. Nor will the oil age end because we have run out of oil.”

It will end when oil consumers run out of patience with greedy oil producers, and develop substitutes instead. The Arabs should surely see a warning sign in the fact that the first new product of which Fritz Henderson, boss of the fresh-out-of- bankruptcy (and quasi-nationalised) General Motors, emerged to boast was the Chevrolet Volt, a petrol- electric hybrid, which is claimed to do 230 miles per gallon.

They may just dismiss that as good politics, given the urge of governments all around the world to paint their fiscal stimulus packages a deep shade of green by handing out subsidies to anyone claiming to be developing cleaner technologies. Yet they should remember this. When the 1970s oil shocks gave Japan a second whammy after a sharp revaluation of the yen had given it a first, its Government and industry set about transforming themselves from cheap clunker-producers into the world’s leading makers of semiconductors, consumer electronics and fuel-efficient cars — all within ten years.

This time around, there are scientists and engineers all over the globe dying to bring about just that sort of transformation — but nowhere more so than in China, the world’s second-biggest oil consumer, whose policymakers fully expect their currency to have to be revalued, hitting cheap energy-guzzling producers, and where the need to clean up the environment is urgent.

There are also scores of governments keen to show their green credentials at the Copenhagen climate change conference in December this year by promising limits on the carbon dioxide emissions of which coal and oil are the biggest source — and keen to find tax revenues to plug their huge fiscal holes, for which fuel tax will come in very handy indeed.

The usual forecasts, based on extrapolation of past trends, do not see electric cars or non-fossil fuel power plants having a really big impact for another 20-30 years. Imagine, though, the effect on innovation of oil at $100-200 a barrel, of hundreds of thousands of Chinese (and Japanese, European and America) engineers trying to do for solar power and for car batteries what has been done in the past decade for mobile phones and computers.

Then, the usual forecasts will turn out to be wrong — as usual. The oil age, which began in earnest a century ago in America, will be at an end.

The Business Insider reports that OPEC is expecting oil at US$75 a barrel by the end of the year - Even If Oil Hits $90, OPEC Won't Increase Production.

Oil prices could reach $80-$90 a barrel by early next year, but OPEC will not increase its output until a huge amount of over-supply has been absorbed, the group's Secretary General said on Tuesday.

OPEC officials have been nudging up their price aspirations since Saudi Arabia's oil minister said last week an oil price of around $75 could be achieved later this year and would not undermine a tentative global economic recovery.

"The price will go to $80-$90 maybe at the beginning of 2010," OPEC's Abdullah al-Badri told the Reuters Global Energy Summit.

"I don't think the price will go down... By the end of the year we'll see $75. $80-$85 is possible -- not with the demand we see at this time, but if demand picks up month after month, then maybe we'll see this price."

Last week, Badri said he expected to see oil at $70 to $75 a barrel by the end of this year. U.S. crude has already more than doubled from a low of $32.40 reached in December, its weakest in nearly five years, to around $68 on Tuesday.

Badri made clear the Organization of the Petroleum Exporting Countries -- which has said it would reduce production by 4.2 million barrels per day (bpd) since September last year -- was not ready to increase formally its output ceiling.

A drop in oil inventories in industrialised countries to around 52 days' worth of future demand from around 62 days now would be needed for the group to consider doing so, he said.

"OPEC will move and act when they see that overhang reduced to a normal level and they see that demand is really picking up, then OPEC will move. At this time, there is no real threat to the market. There is no shortage of oil."

Kevin Drum is also looking at oil prices - Chart of the Day.

As I've mentioned before, one of the big problems with reaching peak oil isn't just that oil prices will go up, but that they're likely to spike up and down fairly violently. In 2006, for example, demand for oil pretty much bumped up against the total available supply, which meant that even a small amount of additional demand was enough to send oil prices spiraling up past $150 in little more than a year. The ensuing recession reduced demand by only a modest amount, but that was enough to cause oil prices to plummet to under $50 in the same timespan. And this isn't just a demand-side problem: a small glitch in supply could easily have caused the same kinds of violent price spikes.

As a general rule, the world can handle high oil prices. In fact, to the extent that high prices get us off our butts and looking for cleaner, more sustainable sources of energy, high oil prices are a good thing. But what the world economy can't handle is constant, huge gyrations in oil prices: nearly all of our recessions since 1973 have been jump started by a sudden spike in oil prices.

So what happens next? Via Ryan Avent, Paul Kedrosky points us to this projection from McKinsey, which shows that demand will once again bump up against supply very shortly: probably within a couple of years, but almost certainly within four years at the outside. And when that happens, prices will once again rise unpredictably. A strike in Venezuela could cause oil prices to double in less than a month. A rumor of new supergiant field or a small recession could cause a subsequent collapse. Price changes of 100% in short periods will become common.

You can probably already figure out where this post is going, can't you? Wild spikes in oil prices are very bad news for the global economy, and the only way to avoid them is to permanently reduce global demand for oil so that we once again have enough spare pumping capacity to keep prices relatively steady — high and rising, perhaps, but at least rising fairly predictably. That means we need higher mileage cars (global warming isn't the only reason for stronger CAFE standards), electrification of transportation, better conservation and efficiency measures, and more investment in solar, wind, and biofuels. And all this needs to be done fairly quickly if we want to avoid an economy permanently at the mercy of OPEC oil. Even 2013 isn't that far away.

Upstream Online reports that Russia is considering establishing an oil reserve that would let it exert greater influence over the oil price (the exporters version of a strategic petroleum reserve) - Russia 'weighing up oil reserve'.

Russia may create an oil reserve to influence global prices, Deputy Prime Minister Igor Sechin said as Opec secretary-general Abdullah al-Badri was due to hold a first meeting with President Dmitry Medvedev. "The Ministry of Energy is considering creating an oil production reserve, which would allow it to work more efficiently with prices on the market," Sechin told Reuters.

When asked how big the reserve should be, he said: "Enough to reach efficient pricing parameters."

Al-Badri, who came to Moscow on Tuesday, said he would meet Medvedev to discuss the exchange of market data and will not raise the issue of oil production cuts. "I will meet the president this afternoon. I will not ask Russia for a cut ... But I will ask for data on markets," al-Badri said ahead of the first ever meeting between Opec and the head of the Russian state.

Other Opec officials have called on Russia this week to join opec in cutting production. The organisation will hold an extraordinary meeting on Friday and is widely expected to reduce its deliveries to global markets.

Moscow agreed to reduce exports several times earlier this decade in tandem with Opec, but market watchers then said the pledge never materialised as private companies raised shipments instead.

Russia has long toyed with the idea of an oil reserve, which could allow it to become a swing producer. But the expensive and logistically difficult plan was never implemented as the government and private companies failed to reach a compromise. The current oil production scheme in Russia does not allow the country to change its flows significantly.

International Energy Agency (IEA) boss Nobuo Tanaka, attending the same industry conference as Badri, said he was worried by Russia's production outlook as the country heads this year for its first annual output decline in a decade.

"We see worrying signs in some producing countries, including Russia, in the ability to invest enough to meet demand," Tanaka said. "We see Russian supply growth slowing, with all projects declining in production over the next decade. Further government incentives would be welcome to increase production," he said.

The WSJ reports that Iran, Qatar and Russia are considering creating a gas exporters cartel - Iran, Qatar, Russia Plan OPEC-Style Gas Group. As Iran currently isn't a gas exporter (in spite of holding a large amount of global reserves) and most of Qatar's and Russia's sales are via via long term contracts, there probably won't be any impact on gas prices in the medium term.

Iran, Qatar and Russia have agreed to form an OPEC-style organization for gas exporting countries, the Islamic Republic's oil minister said Tuesday after a trilateral meeting in Tehran.

The move would give Russia a greater say in international sales of natural gas and comes on the same day that OPEC Secretary General Abdalla Salem El-Badri arrived in Moscow to meet government officials.

Observers are watching those talks closely for signs of exactly what Russia wants from closer ties with the cartel, although there is no suggestion at this stage that Moscow is seeking full membership or would participate in an expected supply cut to be discussed Friday.

"The meetings went well and big decisions were made, and the groundwork was laid for the creation of a technical committee," Gholam Hossein Nozari said after Tuesday's meeting with Qatar's oil minister, Abdullah bin Hamad Al-Attiyah, and the head of Russian energy giant Gazprom, Alexei Miller.

The results of today's meeting will serve as a basis for cooperation so that other countries may join the association of gas exporting countries, Mr. Nozari said.

BusinessWeek has an interesting article on tensions within OPEC between producers who want maximise income from the declining fields now (while they still can) and the Saudis (whose reserves will last longer and thus want the rest of the world to avoid kicking the oil habit just yet) - Saudi Oil, OPEC's Ire.

t happens almost like clockwork. A few days before the end of every month, marketing executives from Saudi Aramco, Saudi Arabia's national oil company, ring up the likes of ExxonMobil (XOM) and Royal Dutch Shell (RDS), sounding them out about the oil they need and the price they would be willing to pay. The Saudis crunch the numbers, set a price, then call the global customers back to see how much they'd be willing to buy. By the 10th of the following month, customers—there are about 80 in all—are told how much crude they'll actually get.

It's all part of an elaborate dance that goes on continually at OPEC's biggest producer. While the cartel may set production quotas for each member, the Saudis and a few other top suppliers frequently exceed those limits in order to meet world demand. And these days, the dance looks more like a tug-of-war, as the Saudis and their allies in the organization seek to contain crude prices while Iran and others want to keep them as high as possible. Saudi relations with OPEC "depend on where prices are; when prices are too high [the Saudis] side with consumers," says Vera de Ladoucette, senior director of consultancy Cambridge Energy Research Associates in Paris.

The tug-of-war is a key factor in the extraordinary volatility in prices lately. After soaring to $147 per barrel this summer, crude plummeted to below $90 in early September. On Sept. 22 it jumped again to $130 as traders scrambled to cover short positions and fretted about the U.S. economy, then fell to $107 as those pressures eased.

Why wouldn't the Kingdom want to squeeze the maximum out of customers? The Saudis have long memories and recall how high prices can cut into consumption; it happened in the 1980s and it's happening again now. Any threat to oil's leading role as a source of energy is a big worry for a country that sits on reserves of some 260 billion barrels. "We are concerned about the permanent destruction of demand," says a senior Saudi official. "Those who buy hybrid vehicles are not going back to SUVs."

OPEC hardliners such as Iran and Venezuela, by contrast, have less oil in the ground and are running short on cash, so they're more interested in maximizing revenues today.

The New York Times has a report on "geopolitical peak oil" and the declining relevance of western oil majors - As Oil Giants Lose Influence, Supply Drops

Oil production has begun falling at all of the major Western oil companies, and they are finding it harder than ever to find new prospects even though they are awash in profits and eager to expand.

Part of the reason is political. From the Caspian Sea to South America, Western oil companies are being squeezed out of resource-rich provinces. They are being forced to renegotiate contracts on less-favorable terms and are fighting losing battles with assertive state-owned oil companies. And much of their production is in mature regions that are declining, like the North Sea.

The reality, experts say, is that the oil giants that once dominated the global market have lost much of their influence — and with it, their ability to increase supplies.

“This is an industry in crisis,” said Amy Myers Jaffe, the associate director of Rice University’s energy program in Houston. “It’s a crisis of leadership, a crisis of strategy and a crisis of what the future looks like for the supermajors,” a term often applied to the biggest oil companies. “They are like a deer caught in headlights. They know they have to move, but they can’t decide where to go.” ...

The new oil order has been emerging for a few decades.

As late as the 1970s, Western corporations controlled well over half of the world’s oil production. These companies — Exxon Mobil, BP, Royal Dutch Shell, Chevron, ConocoPhillips, Total of France and Eni of Italy — now produce just 13 percent. Today’s 10 largest holders of petroleum reserves are state-owned companies, like Russia’s Gazprom and Iran’s national oil company.

Sluggish supplies have prompted a cottage industry of doomsday predictions that the world’s oil production has reached a peak. But many energy experts say these “peak oil” theories are misplaced. They say the world is not running out of oil — rather, the companies that know the most about how to produce oil are running out of places to drill.

“There is still a lot of oil to develop out there, which is why we don’t call this geological peak oil, especially in places like Venezuela, Russia, Iran and Iraq,” said Arjun Murti, an energy analyst at Goldman Sachs. “What we have now is geopolitical peak oil.”

Reuters reports that there are some political manoeuvrings in Brazil over the profits likely to be obtained from Petrobras's offshore finds (when they are eventually developed) - Brazil's plans to control oil could cause delays. Note that Brazil may soon join OPEC.

The Brazilian government's plan to take greater control over huge new oil discoveries will face obstacles in Congress and could delay its ambitions to become a global oil player, experts said on Thursday.

President Luiz Inacio Lula da Silva wants to change the structure of oil control to give the government more funds for social welfare and education while reducing the power of state-owned oil firm Petrobras and its partners. "Some think that the oil is for Petrobras. The oil is for the union," Lula said on Thursday at an event in the Amazon state Para.

In neighboring Venezuela, President Hugo Chavez has tightened controls over oil to fund social projects. But in Brazil the plan could face a long battle in Congress. "The debate in Congress won't be easy, it's a debate over trillions (of dollars)," Ideli Salvatti, Senate leader for the ruling Workers' Party, told Reuters.

Petrobras shook the oil world last November when it discovered a deposit with estimated reserves of 5-8 billion barrels, the world's second-biggest find in 20 years. Other reserves thought to exist in the area could vault Brazil from 17th to 10th among world oil producers. The government has said it plans to join The Organization of Petroleum of the Exporting Countries (OPEC).

CNN money has a look at the gap between OPEC's words and actions when it comes to pmuping more oil - OPEC's empty toolkit .

In recent weeks, while Congress has been holding dozens of hearings to try to figure out who to blame for the rude price of crude, the Secretary-General and his colleague Chakib Khelil, the president of OPEC and head of Algeria's oil ministry, have offered a variety of explanations. Khelil has cited the falling value of the U.S. dollar, referenced tensions between the U.S. and Iran, and pointed the finger at hedge fund speculators. (It's hard to argue with the first two, but I generally side with my colleague Jon Birger in believing that it's bogus to blame speculators.) Saudi Arabia called an emergency oil summit last month, the main purpose of which seemed to be to get out the message that rising prices weren't the cartel's fault.

But it's disingenuous for OPEC's leadership to suggest that reduced production had nothing to do with rising prices. OPEC pumps 44% of the world's daily oil production and, by its own count, has 78% of the world's proven reserves. In an increasingly tight market, there's no room for the largest group of producers to drop its output without directly affecting prices. And indeed, in announcements before and during the summit, the Saudis pledged to boost production by some 500,000 barrels a day.

The scary thought - held by observers like peak oil guru Matt Simmons and commodities investor Jim Rogers - is that the cartel can't do much more than that because the easy oil is already out of the ground.

"They've been telling us for years that they have between two and three million barrels of [daily] spare capacity," says Gal Luft, the executive director of the Institute for the Analysis of Global Security. "If you have it and you don't use it then you are deliberately denying liquidity to the market when it needs it. If they have it, why don't they use it? And if they don't have it, we need to know that. We need to put more oil in our strategic reserve."

OPEC has apparently given its members the green light to pump all they want, according to a survey released by energy news service Platts last month. The Platts press release about the survey says that "OPEC has a 'tacit' understanding that those members capable of boosting crude production should supply as much oil as world oil markets needed."

In other words, the leaders of OPEC are trying to regain control of oil prices and offer relief to their agitated customers, although Platts Global Director of Oil John Kingston sounded skeptical about how successful OPEC could be. "It's clear that with non-OPEC output continuing to sag, and world demand staying flat regardless of high prices, that any additional supply most likely must come from OPEC," he is quoted as saying. "But...its ability to put much more oil on the market looks severely constrained."

Over the weekend, another important OPEC figure offered his thoughts on the price of oil. Venezuela's Hugo Chavez said on Sunday that crude is in a speculative bubble and that it might hit $200 per barrel. (He also took the opportunity to threaten to cut off supplies to the U.S. and drive the price up to $300 if Exxon didn't back off in a dispute over its assets in his country.)