Oil markets are settling down this morning as analysts report Saudi Arabia has boosted their oil output to over 9 million barrels / day.

Holy smokes. Are we gullible!

Have the Saudis really boosted oil output?

Fresh Saudi oil output or are they just tapping storage?

In spite of this short term respite, it’s becoming increasing evident; we are in one heck of an oil related economy crunching quagmire. Oil prices are moving to catastrophic levels and there doesn’t seem to be much we can really do about it. Contrary to what’s been foretold by economists, new energy supplies aren’t gushing into these higher oil prices. Nor is it really curtailing the global demand.

So how did we get into this crucial societal dry hole?

I’ll contend we’ve been led astray by a false faith in economics, a misunderstanding of basic geologic depletion and an intentional false yarn spun about prolific oil supplies.

Although most think oil producers withhold supplies to evoke higher prices, it might well be that oil producers- including Saudi Arabia- are currently producing flat out. There’s just no more there! This is exactly the definition of ‘peak oil’. With the world’s voracious consumption of +87 million barrels / day, we are now up against the limits to growth. Oil production might not ever be able to expand from here. It’s either a downhill slide, or it soon shall be. Sure there will be new oil fields brought on line but this fresh output won’t even counter the current depletion rates of existing aging fields. After all, the average age of the world’s giant oil fields (+500,000 barrels/ day) is 55 years! We aren’t out of oil, but we are out of the capacity to produce more.

How did we miscalculate so badly on something so crucial?

One of the main reasons was oil producers wildly exaggerated their reserves and future oil production potential. If Americans could be led to believe that the world is capable of producing 120 to 130 million barrels a day, as was projected on many former reports, there would be no need for oil conservation policy. In fact we’ve seen wildly overstated oil production projections from our own U.S. government Department of Energy EIA (Energy Information Agency) for years.

Americans we’re encouraged to buy and drive bigger more-profitable-to-produce vehicles. Prudent mass transit projects were depicted as silly. The drive-more, consume-more American dream was actively promoted.

BIG OIL’s escapades shouldn’t surprise us. But why did the U.S. media and even our Department of Energy EIA play right along with this dangerous & indubitable charade?

It’s the same reason they went along with deregulating financial derivatives, Triple AAA ratings on junk paper or the Enron debacle. Big bonus pool money is now running the show. And in this case, its BIG OIL – both the western majors and foreign producers, especially Saudi Arabia. And just like the financial meltdown in late ’08, main street America is going to bear the brunt of this ‘miscalculation’. The corporate Fat Cats will reap the resultant unprecedented windfall$. But this will be much worse than the financial debacle of ’08 because these ill gotten gains will also be flowing overseas to the Mideast, Venezuela, Russia and a whole host of adversarial regimes.

If you don’t want to take my word on this, let’s go back to the important archived threads from my peak oil message board. Tom Whipple wrote a piece entitled The EIA. The Greatest Failure of Them All?

Who is Tom Whipple? Retired CIA analyst who spent his whole career studying energy matters. I love retired guys. They can be such straight shooters!

“The only bright spot in all this official nonsense is that it is so out of touch with reality it can’t go on for much longer. Some day in the next few years, it will become so obvious that projecting continually increasing oil and gas production and steady to lower prices is as unrealistic as the concept of “winning” in Iraq.”

Ok that was Dec of ’06. Guess what? That ugly day is now here!

And here’s another Dec of ’06 piece on the fallacy of our EIA from a French Professor of Astrophysics entitled Tracking the EIA Short Term Forecasts

It’s even got that snazzy graphic that shows how the EIA pumps out bogus projections that never really panned out. But they didn’t stop them from doing it again and again. And the media played right along, and still does.

Back then I added the following commentary:

*“Poster’s Note: The EIA oil and energy growth projects are finally being refuted by actual production stats. The conventional oil peak -or plateau- has arrived. This is it. The limits to growth.

The Mideast producers will increasingly recognize that, unlike the 80s, there isn’t much non-OPEC oil to develop and flow into the higher economics. We’re initially seeing it from Iran but others will follow. Why max out output for fiat currency to help the US? But the US wont put up with any “anti-west” production curtailments. Soon the US (and China) will recognize the importance -but not the folly- of militarily securing the remaining prolific Mideast oilfields and the big 21st century oilwar has begun. Why do you think we are increasing troop levels in Iraq when +70% of Americans and Iraqis want US troops out?

Its important to recognize how these bogus EIA oil growth projections have contributed to this ensuing no-win oil war. The triad of the Saudis, major oil and the US gov have fostered the BS prolific oil reserve and growth projections that have precluded saner energy policy and adequate preparation. We’ll all now pay the price.”*

Now over 4 years later, the false assessments still flow. Its tough to refute the fact that decades of false optimism has now been undermined by actual production stat reality. So now the question becomes…

Why do we still believe them?

If you’re smart, you won’t!

U.S. oil production peaked in 1970. The global peak is now upon us. Its probably all downhill from HERE!