The Next Oil Revolution
Contrary to what most people believe, oil supply capacity is growing worldwide at such an unprecedented level that it might outpace consumption. This could lead to a glut of overproduction and a steep dip in oil prices.
Based on original, bottom-up, field-by-field analysis of most oil exploration and development projects in the world, this paper suggests that an unrestricted, additional production (the level of production targeted by each single project, according to its schedule, unadjusted for risk) of more than 49 million barrels per day of oil (crude oil and natural gas liquids, or NGLs) is targeted for 2020, the equivalent of more than half the current world production capacity of 93 mbd.
After adjusting this substantial figure considering the risk factors affecting the actual accomplishment of the projects on a country-by-country basis, the additional production that could come by 2020 is about 29 mbd. Factoring in depletion rates of currently producing oilfields and their “reserve growth” (the estimated increases in crude oil, natural gas, and natural gas liquids that could be added to existing reserves through extension, revision, improved recovery efficiency, and the discovery of new pools or reservoirs), the net additional production capacity by 2020 could be 17.6 mbd, yielding a world oil production capacity of 110.6 mbd by that date – as shown in Figure 1. This would represent the most significant increase in any decade since the 1980s. see: belfer Center _ Maugeri: Oil the Next Revolution from Executive Summary
In the Maugeri PDF report linked above, oil analyst Leonardo Maugeri details where the expected new oil production capacity will be developed, and how much increase in production capacity should be expected.
Above you can see the projected country-by-country increase in production capacity, per Maugeri. The report suggests that oil prices may have been pushed above supply and demand fundamentals recently and prior to the 2008 price peak, due to what are essentially non-market forces.
There is a definite risk of an oil price collapse, says the report, should the global economic situation worsen — particularly should a severe recession hit China. Such a price collapse is defined as oil below $50 /bbl.
Maugeri expects that if such an oil price collapse occurred, that market forces would self-correct within 2 years, with minimal damage to long term oil production.