BP adds fuel to the oil price debate

BP has now come forward to admit that peak oil is a reality and is occurring.

According to the oil producers' cartel Opec, the blame lies with speculators in the international markets. But Tony Hayward, chief executive of BP, describes that view as "a myth".

He argues that the main cause is the tight balance between global supply and demand. Which is in turn 'Peak Oil' - demand outstrips supply, simply because there is not enough oil left in the world or the oil that is left in the world is plentiful but it has become too costly, too energy intensive to extract or too difficult to extract.

BP's new Statistical Review of World Energy - a key information source for many people in the industry - highlights what has been going on.

Falling production

According to BP, global oil consumption grew by 1.1% in 2007, while total production fell by 0.2% or 130,000 barrels per day - the first decline since 2002.

Production in Opec countries was cut in November 2006 and February 2007.

The largest production cuts last year were in Saudi Arabia - the country which has by far the largest oil reserves in the world and is normally the world's largest producer. But BP says Saudi Arabia's 12.6% of global output was almost matched by Russia.

In 2008, BP expects Russian output to fall by around 1%. And although Saudi Arabia has committed itself to some small production increases, the balance between supply and demand looks likely to remain extremely tight.

The rise in oil prices has been remarkable. In 1997 the average price of a barrel of Brent crude was $12.72. In 2007 it was $72.39. And earlier this month it touched $137.

Source: News.bbc.co.uk

Read BP's 2008 Statistical Review of World Energy