T. Boone Pickens forecasts $3 gasoline

Oklahoma oil baron T. Boone Pickens says peak oil has arrived. Pickens turned 77 in May. He launched Mesa Petroleum with $2,500 in 1956 and built it into a leading independent producer of oil and gas.

Pickens recently addressed the National Clean Cities Conference in Palm Springs, Calif. He commented on natural gas, nuclear power, wind energy and especially oil.

According to the Association for the Study of Peak Oil & Gas, Pickens minced no words in his assessment of the present day energy scene. He did not predict any rosy future for hydrocarbon fuels.

“Let me tell you some facts the way I see it,” he told the group. “Global oil [production] is 84 million barrels [a day]. I don’t believe you can get it any more than 84 million barrels. I don’t care what (Saudi Crown Prince) Abdullah, (Russian President Vladimir) Putin or anybody else says about oil reserves or production. I think they are on decline in the biggest oil fields in the world today, and I know what it’s like once you turn the corner and start declining, it’s a treadmill that you just can’t keep up with.

“So, when you start adding in the reserves in these countries, you’re not even replacing what you’re taking out. Eighty-four million barrels a day times 365 days is 30 billion barrels of oil a year that we’re depleting. All of the world’s [oil] industry doesn’t even come close to replacing 30 billion barrels.

“So, if you accept that 84 million barrels a day is all the world can [produce], and then look at refining capacity, I think it’s just a coincidence that refining capacity…world capacity…is 84 million barrels a day. So, we’re in balance…84, 84.

ASPO said Pickens pointed out demand is rapidly outstripping supply. “Now you see the projections for the fourth quarter of ‘05, I mean like tomorrow; it is 86 to 87 million barrels of oil a day required. China [and] India [are] growing fast. Just assume that the [U.S.] economy is slowing, but China is still ramped up; it is still 86,87 million for the fourth quarter.”

As for what we can expect in the domestic oil market, Pickens said: “Some of the experts say we’ll be down to $35 oil by the end of the year. I think it’ll be $60 oil by the end of the year. You’re going to see $3 gasoline 12 months from today, or some time during that period. I know you’ve already experienced it in California, but in the Midwest you’ve probably got $2.20 today. That’s the way I see it unfolding.”

Pickens had only positives to say about alternative energy. Speaking of these potential fuels, he said: “I don’t think any of them can miss. I think some will be further out than others. Hydrogen, I think, is going to take a long time.”

He said he blames both Republican and Democrat administrations for failing to do long-range planning for the nation’s future energy needs. He was asked if he agrees with energy investment banker Matthew Simmons that Saudi Arabia’s oil fields may be in decline. Pickens said he agrees with Simmons.

If that assessment is correct, then Crown Prince Abdullah’s promises to boost production in the next 10 years to 15 million barrels a day is just a pipe dream. That means Saudi Arabia’s past role as a swing producer and a stabilizer of market prices may be over.

Oil prices may start to feel unprecedented volatility, and that will put much stress on a planet not ready for the end of cheap oil and gas.

From the June 15-21, 2005, issue

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