Returning to the topic of energy of which we have discussed many times before, there was an interesting article in this week’s Nature journal.
In the article, James Murray and David King argue that since 2005, oil production has reached an effective cap at around 75 million barrels of regular crude per day. Production over the past six years, they conclude, has increased little despite continued upward oil prices.
This they argue has occurred as the oil industry passed a transition point and moved from elastic supply curve economics to an inelastic supply curve economics (see chart).
Source: Nature, Vol 481, 26 Jan 2012
While global oil demand remains relatively weak today, with the International Energy Agency predicting global oil demand growth in 2012 of around 1.1 million barrels per day, that inelastic supply curve could yet push oil prices back up to record levels in the not too distant future.
1st February 2012