With crude oil hitting new all-time highs over $114 per barrel, everyone is concerned - to put it mildly. Some of the appreciation is surely attributed to misbegotten monetary policy factors, as the Saudis claim. The US dollar is the benchmark currency for oil pricing and Mr. Bernanke's Fed is throwing good dollars after bad in his attempts to bail out Wall Street, leading to the debasement of the dollar. Another factor is commodity speculation, with risk capital betting on even higher prices. Finally, and most important of all in my view, is the depletion of easily accessible high quality crude oil, i.e. the forerunner of geologic Peak Oil.
There have been millions of pages written about Peak Oil, both pro and con, and I don't claim to be an expert. But I do want to add just one fact based on common sense. Exxon is the world's largest non-state oil company and the largest publicly traded corporation by market capitalization ($478 billion). If anyone has both the incentive and the resources to find and sell more oil, it is them. But they can't. In the last five years, as the average price of oil more than tripled, their production has been flat (see chart below, click to enlarge).
Data: Exxon Annual Reports, NYMEX
And it's not as if they haven't been trying: their capital and exploration expenses for upstream operations have nearly doubled in recent years.
These are not comforting facts.
P.S. Senator McCain, he who wants to be President, today called on Congress to suspend the federal gasoline tax. Sure thing, Senator... and while you're at it, why not re-instate the draft? After all, we're going to need every boot possible on the ground to safeguard America's energy future. The hard way.