Oil Glut Forecaster Admits Faulty Math

“Move over peak oil, the world is heading for glut, according to a recent report by Leonardo Maugeri, a former executive with the Italian oil company Eni. Subtitled “the unprecedented upsurge of oil production capacity and what it means for the world”, the report claims the next decade could see the largest increase in production capacity since the 1980s, leading to prolonged overproduction and “a significant, stable dip of oil prices”. Good news for motorists and the world economy then, and bad news for tar sands producers and OPEC members who need more than $100/barrel to rub along these days. But is this scenario remotely credible? Maugeri claims his looming glut has three causes: a decade-long upstream investment boom, climaxing with $1.5 trillion spending in the last three years; the rise and rise of unconventional production such as US shale oil; and a tendency among forecasters to over-estimate massively the rate at which production from existing oil fields declines. The last point is the most important; without it, Maugeri’s glut evaporates. All told, Maugeri forecasts global oil production capacity will soar from 93 mb/d today to almost 111 mb/d by 2020. In a report sponsored by BP and published by Harvard, you might expect the basic sums to add up – but they don’t. When I interviewed him by phone and email, Mr Maugeri was forced to admit a mathematical howler that would disgrace the back of an envelope, and it also became clear he did not understand the work of the forecasters he attacks.”

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