Oil Prices and Production

Euan Mearnson the on OilDrum counters Daniel Yergin's latest denial of of the existence of peak fossil fuels:

In order for production to grow beyond the 82 mmbpd plateau the oil industry must add more than 4.1 mmbpd new capacity every year from an ever degrading pool of resources. To reach 110 mmbpd in 2030 would mean adding more than 4.1 mmbpd each year to 2030 reaching an additional 5.5 mmbpd new capacity in that year. Where is this new capacity going to come from? Yergin cites a list of new discoveries and new play concepts. But it has always been the case that new discoveries and plays have been developed and produced, and for the past 7 years these have been inadequate to provide new production in excess of declines.

In other words, the idea that difference between declines in conventional oil resources and consumption and increasing consumption have yet to materialize.  The article uses this fascinating graphic:

From The Oil Drum, click for a larger version.

The relationship between price and production is not simple supply and demand and increased demand and price does not immediately lead to increased production, the complexities of which are part of Mearn's piece. More importantly, if look at the overall production trend you see a steep rise until ~1980 followed by a slower rise and eventual plateau, the brief early-90s glut indiced dip does not obscure the overall trend.  This strongly suggests we are in a high plateau with no idea what the downslope will look like, in terms of either production or prices. But for the laisse-faire fundamentalists out there take heart - nobody is anything to control this journey.