Production numbers for January 2008 are out and we appear to have a new record. Total crude oil production for the month totalled 74,466,000 barrels per day, an increase of 168,000 barrels pers day over the May 2005 record. With each passing month, it appeared more and more likely that May 2005 would end up being the all time record month, but new megaprojects that just came online, including a rather large increase from OPEC members Angloa, Iraq and Saudia Arabia were enough to offset terminal declines elsewhere. So what does this mean? Well, officially it means the clock has been reset, at least on a monthly basis, but in reality it just doesn't make an ounce of difference.
We've been on an undulating plateau for several years now and in hindsight, it's easy to see that there is a lot of movement up and down with several months having come very close to topping the record. That didn't happen until January, though the EIA has a record of significant downward adjustments over time, so it's still possible that May 2005 will still stand as the record. The undulating plateau is just what one would expect when global production peaks. We've been unable to significantly raise production despite ever increasing demand and record prices being paid for oil. The only way we've even come close to meeting demand is through crude subsitutes, including biofuels, coal to gas and other non traditional means. Eventually that too will fail to keep up with demand and at that point, we enter terminal decline with regards to oil.
So what does the future hold? Well, when one digs a little deeper, it begins to look a bit scary. Using year on year production, 2005 is still the all time peak in global crude production and OPEC is down one million barrels per day versus May 2005. Russia is now showing three months of falling production, indicating that they too have peaked. Global decline rates, on a year to year basis, are averaging -0.3% a year, similar to what happened when the lower 48 peaked in 1970. That's all bad news, but what's even more troubling is that the current top five net oil exporters are on track to approach zero exports in just 23 years.
We're still on the plateau but with decling exports from key producers, terminal decline in Alaska and the North Sea, Saudi Arabia unwilling or unable to raise production and the possiblity of China and Russia peaking, well, the downslope is coming quickly and when it hits, watch out, it could be rather steep. Make no mistake, this new record is a good thing, but the increase is so miniscule as to make little difference. Expect February to possibly exceed January with a rather steep decline in March followed by most likely, gradual increases and decreases over the next 12 months. Best of luck.