It's getting more and more difficult to deny that an oil supply crunch is just a few years down the road, especially now that WikiLeaks has released cables revealing that Saudi Arabia's oil reserves have been exaggerated by as much as 40%, or 300 billion barrels. Saudi Arabia is the world's largest oil exporter.
Peak oil, or the point when the maximum rate of global petroleum extraction has been reached and is about to enter terminal decline, is no longer the fringe theory it was just 10 years ago. Even Jeroen van der Veer, the chief executive of Royal Dutch Shell, has admitted that oil supply may no longer keep up with demand by 2015. But the just-released cables, which detail a back-and-forth between the U.S. consul general and geologist Sadad al-Husseini, the former head of exploration at Saudi Aramco, confirms that the situation is serious.
Here's an excerpt from one cable:
"In a presentation, Abdallah al-Saif, current Aramco senior vice-president for exploration, reported that Aramco has 716bn barrels of total reserves, of which 51% are recoverable, and that in 20 years Aramco will have 900bn barrels of reserves.
"Al-Husseini disagrees with this analysis, believing Aramco's reserves are overstated by as much as 300bn barrels. In his view once 50% of original proven reserves has been reached…a steady output in decline will ensue and no amount of effort will be able to stop it. He believes that what will result is a plateau in total output that will last approximately 15 years followed by decreasing output."
Other cables from the U.S. embassy in Riyadh go on to express fears that "Saudi Aramco is having to run harder to stay in place—to replace the decline in existing production," and that "Clearly they can drive prices up, but we question whether they any longer have the power to drive prices down for a prolonged period."
Only time will tell whether Al-Husseini's predictions are correct, but the possibility of imminent peak oil is enough to make Obama's goal of putting one million electric cars on the road by 2020 a little less overly ambitious.