The world was running out of oil and the global economy was about to collapse as a consequence ten years ago. Imminent peak oil doom was everywhere and one of its leading proponents was banker Matthew Simmons. Among other things, Simmons based his prognostications on the claim that oil production in Saudi Arabia was about to peak and fall steeply, presaging an era of permanent global oil shortages. Simmons further suggested that global oil production had peaked in 2005 and would fall at a rate of 5 percent year thereafter.
To be fair, Simmons like most peak oilists fuzzied up his numbers and timelines enabling him to be vague about just what level Saudi production would achieve before beginning its inevitable decline. For example, one of the analysts over at peakist The Oil Drum site declared in 2009 that Saudi production had peaked at 9.6 million barrels per day in 2005 and projected that it would fall to around 7 million barrels per day by now. Simmons was a bit more canny and suggested that if Saudis worked really hard to boost production, they might briefly get to 12.5 million barrels per day. Even so, Simmons’ main assertion in his book Twilight in the Desert was: “My research has convinced me it is unlikely that Saudi Arabia could sustain any higher oil output than it now produces, and that even the current production rate may be too high.”
Simmons was sufficiently confident of his predictions that he took New York Times columnist John Tierney up on a bet in 2005 for $5,000 that the global price of oil would exceed an average of $200 per barrel in 2010. He lost.
So what did happen to Saudi Arabian production? According to Bloomberg News, Saudi production reached 10.7 million barrels per day in November and, as part of an agreed Organization of Petroleum Exporting Countries’ (OPEC) cut in production, dropped back to 10.5 millon barrels last month. World oil production in 2005 – when it supposedly peaked – averaged 85 million barrels per day. The global average stood at over 97.2 million barrels per day in 2016. Of course, the peak oilers also failed to see the shale oil and gas revolution made possible by fracking and horizontal drilling that boosted U.S. oil production from 5.2 million barrels per day in 2005 to nearly 9 million barrels per day today.
If the OPEC production cuts don’t hold, some analysts see oil prices falling back toward $30 per barrel later this year.