Now this is scary. Russia, the second largest producer of oil, only to Saudi Arabia has peaked its production. It appears that Russian production of oil has fallen for the first time in a decade, so reports the newspaper, Vedomosti. The decrease in Russian oil may portend the decline of world peak oil but underpins the reality that different sources of oil will peak at different times, thus shifting economic and political power around the globe. If it is true that oil production has indeed peaked in Russia, that leaves only three main oil exporting nations, namely Saudi, Kuwait and Iraq. I believe that Iran has substantial reserves of oil, similar to those under the sands of Iraq, and this suggests a further political tension in the Middle East if the rest of the world, the West in particular, wants to get its hands on it. I think we can expect further allegations over uranium enrichment, supplies of weapons into Iraq and so on as a subterfuge to access Iran's oil.
Since there is a massive U.S. military force throughout the Arab world, it is unlikely that Saudi will play silly-buggers with the West, but in this unstable economic realm, the issue of Iran is a rather brittle one. According to the U.S. Energy Information Administration, oil-production has increased by 23% during the past thirty years, while consumption has risen by 30%. The U.S. consumes more oil than the next top five oil-using nations combined, i.e. China, India, Japan, Russia and Germany. Germany uses about one and a half times the amount of oil that Britain does, more or less in line with its larger population.
If Israel were to launch a military strike against Iran, in retaliation, the Iranians could block supplies of oil through that narrow geological gap of the Persian Gulf, and inaugurate a full-scale war from which the oil-markets would respond in debatable but unhealthy ways, taking the world stock markets along with them.
Most likely, the price of crude oil would rocket, and during the global recession, we would find that worst of all worlds, "stagflation", where the economy is weak with ramping job-loses, but the cost of oil and hence everything surmounts whatever persists, i.e. less money in your pocket but more notes to be handed over in payment of basics like food. This reminds me of the history of Nazi Germany, where an economic meltdown meant that people were taking wheelbarrows of banknotes to the bakers to buy a loaf of bread, money had devalued by maybe a half in a single day and it was cheaper to paper the walls of your home with banknotes than to buy wallpaper.
If oil production has peaked in the second greatest oil producing nation on earth, the focus of dependence will issue upon the Middle East, and the fulcrum of the stability of the world will once again turn toward the "cradle of civilization" and which hand it decides to deal. Either way, we can only take this as a warning of the inevitable and imminent eventuality of peak oil.
"Peak Oil production in Russia Suggests Worldwide Supplies on the Brink." By Reggie Abaca,