[copious.abundance]

Lately I've been reading a lot of people stating that the run-up in oil prices in 2007-2008 didn't lead to an increase in production. This is false.

From the middle of 2007 to the middle of 2008, world crude oil production did, in fact, increase to the tune of 2+ million bpd, as this chart from October's TOD Oilwatch Monthly shows:



Compare this to the price. You can see the last big spike occurred starting around spring 2007. As recently as January 2007 the average price was around $54 (source).



Since the price crashed, as Economics 101 would predict, production has also crashed.


^
That was down to less than 72 million bpd as of January, but the April Oilwatch Monthly didn't put a handy-dandy world crude production chart on the TOD thread.

Pretty predictable stuff, actually.

[copious.abundance]

One other note . . .

Notice the smaller jump up in price starting somewhere in the 2003-2004 time period. But also notice the increase in production in 2004 from around 71.5 million bpd to around 73.5 million bpd. So once again, we see production responding to price signals.

[Tyler_JC]

If you'd like, I can calculate the price elasticity of supply. (the effect of price on oil production)

I'm guessing we're going to see a pretty strong correlation.

Economics works, imagine that.

Will it work in a world of geologically-enforced declining production? Of course it will. Prices will keep spiraling upwards to reflect scarcity. What happens to the world then is anyone's guess.

[copious.abundance]

As if anyone needed more evidence . . .

>>> Rigzone <<<

OPEC's April Output Rose to 28.09MM Barrels Per Day
Platts|Tuesday, May 12, 2009

The 12 members of the Organization of the Petroleum Exporting Countries (OPEC) pumped an average 28.09 million barrels per day (b/d) in April, the first rise in volumes since August 2008, according to a Platts survey of OPEC members, oil industry officials and analysts just released. This is an increase of 110,000 b/d from March.

Production from the 11 OPEC members bound by quotas rose 130,000 b/d to 25.74 million b/d in April from 25.61 million b/d in March. Iraq, which is struggling to rebuild its oil sector, does not participate in output agreements.

"It isn't surprising that as prices rise steadily, OPEC's adherence to its production restraints is weakening," said Platts Global Director of Oil John Kingston. "The markets are sending out mixed signals which will confuse things further. Rising prices are saying more output is necessary, while continuing inventory builds signal the opposite. These contrasting forces will certainly be on the agenda when OPEC meets May 28."

[...]

[Southpaw]

that's no proof you really are a propaganda machine oily. you never mention that all the opec countries where draining their spare capacity in the summer of 2008. and only 1 million barrel increase while the price has more then doubled?

I'm looking forward to see you in the city with an empty guitar box to beg for money because somehow you believe that shale gas will come to save the day lol.

while i'm sitting in my 3 storey house and have 5 hectare of land flled with 2000 coconut trees.

and you probably don't have work anyways because the only thing you do is sit on the computer trying to debunk peakoil .... wich btw you suck monkey balls in trying to do that

sad sad man.

[yesplease]

If you'd like, I can calculate the price elasticity of supply. (the effect of price on oil production)

I'm guessing we're going to see a pretty strong correlation.

Economics works, imagine that.

Will it work in a world of geologically-enforced declining production? Of course it will. Prices will keep spiraling upwards to reflect scarcity. What happens to the world then is anyone's guess.

Just based on the short run data, I don't think it'll work for more than the short run, provided we are seeing 3%/year declines or whatever we're at. Oil's fairly inelastic short run, and fairly elastic long run, so while it would work initially during whatever percent declines/year, in the long run, people will transition away from oil use and keep prices from spiraling upward compared to assuming the short run behavior applies over the long run.

[copious.abundance]

For those who have any doubt this phenomenon is repeating itself (yet again) with oil prices rising (yet again), we have out today . . .

>>> Bloomberg <<<

OPEC’s Oil Output Rose 1.5% in May, Survey Indicates
By Karyn Peterson and Mark Shenk

June 1 (Bloomberg) -- The Organization of Petroleum Exporting Countries increased oil output by 1.5 percent in May, the biggest gain since 2007, a Bloomberg News survey showed.

Oil output averaged 28.15 million barrels a day last month, up 405,000 from April, according to the survey of oil companies, producers and analysts. The 11 OPEC members with quotas, all except Iraq, pumped 25.76 million barrels a day, 915,000 more than their target.

OPEC agreed at three meetings last year that the 11 members with quotas would cut output by 4.2 million barrels a day to 24.845 million. The group, in a meeting May 28 in Vienna, decided not to reduce their production targets further because of concern higher prices might harm an ailing global economy. Ministers are scheduled to meet again on Sept. 9.

“Some members have been suffering because of recent cutbacks and have decided to take advantage of the higher prices,” said Michael Lynch, president of Strategic Energy & Economic Research, in Winchester, Massachusetts. “There’s a feeling that the market can tolerate greater production because of the recent rise in prices.”

[...]

[nobodypanic]

that's no proof you really are a propaganda machine oily. you never mention that all the opec countries where draining their spare capacity in the summer of 2008. and only 1 million barrel increase while the price has more then doubled?

I'm looking forward to see you in the city with an empty guitar box to beg for money because somehow you believe that shale gas will come to save the day lol.

while i'm sitting in my 3 storey house and have 5 hectare of land flled with 2000 coconut trees.

and you probably don't have work anyways because the only thing you do is sit on the computer trying to debunk peakoil .... wich btw you suck monkey balls in trying to do that

sad sad man.

i agree w/your point. however, if you think you're going to be allowed to calmly sit anywhere while everyone around you starves... haven't you seen enough zombie movies by now to know that that just won't work?