Transportation Management Focus : Our Weekly Feature Article on Transportation Management Strategies, Best Practices and Technologies for the Transportation and Logistics Practioner  
 
 
  - April 16, 2008 -  

Logistics News: Is Dramatic Slowdown in Russian Oil Production Another Proof Point for Peak Oil Theorists?          

 
 

As Oil Continues Continuous Climb, Lack of Output Growth in Russia a Worrying Sign; Will be Hard even to Maintain Current Levels, one Exec Says

 
 

 

SCDigest Editorial Staff

SCDigest Says:
Logistics and transportation professionals, get ready for a wild ride. 

Click Here to See Reader Feedback

With oil prices now at something like $114 per barre,l and rising it seems almost daily, despite a slowing US and global economy, and shippers facing dramatically increasing transportation and fuel surcharge costs, is there any relief in site?

According to Peak Oil theorists, who have been arguing global oil production has already or soon will reach its maximum output (See Is Saudi Arabia Running Out of Oil?), any such pricing decline would be only temporary. They believe continued growth in global demand, combined with soon flat or declining output, will create tremendous upward pressure on prices until other sources of oil (such as potentially shale oil) or alternative energies are developed.

Peak Oil theorists, who include both some fringe elements along with very serious, mainstream engineers and other experts, got a boost this week when the International Energy Agency (IEA) announced that for the first time in a decade, Russian oil production levels dropped in the first quarter, contributing to the further rise in oil and gas/diesel prices the past few days.

While Russian officials first blamed the weather and spotty electric capacity, they also pointed to some potential issues with the aging oil fields found mostly in Siberia – the exact type of scenario that Peak Oil advocates would predict would happen.

In fact, after the story first broke, Leonid Fedun, vice-president at Russia’s Lukoil company, told London’s Financial Times that “He believed last year’s Russian oil production of about 10m barrels a day was the highest he would see in his lifetime.”

If true, this is an incredibly important development, as steady growth in Russian output has helped somewhat mitigate the rising demand for oil over the past decade from China, India and other Asian markets.

(Transportation Management Article - Continued Below)

 
 
CATEGORY SPONSOR: SOFTEON

 

 
 

At about 10 million barrels per day, Russia is the world’s second largest oil producer behind Saudi Arabia, which is showing its own signs of oil well fatigue.

To understand the potential scope of the issue, and what is likely to happen to oil prices over the next decade, Fedun says Russia’s oil industry needs $1 trillion in investment over the next 20 years just to maintain the current production levels.

The only good news: The IEA also announced a sharp downward revision in the growth in oil demand for 2008, reducing projected demand growth worldwide to just .5% for the year versus previous estimates of 1.5% growth.

Logistics and transportation professionals, get ready for a wild ride.

Do you think the Russian news further supports the notion of Peak Oil? What do you think is going to happen to prices? Let us know your thoughts at the Feedback button below.

 
     
Send an Email
     
     
.