.....The dynamics of both the first (2007-08) leg of the bull market and the second leg, likely to begin this year, are essentially the same. The thirst for oil by non-OECD nations puts pressure on supply, and the increase in output from non-OPEC producers is inadequate to quench this demand.

Since 2000 -- despite the post-9/11 economic downturn, the global stock-market swoon of the early 2000s, the 2008 financial crisis and the 2008-2009 Great Recession -- global oil consumption has advanced by a yearly average of 1.1 million barrels per day, while non-OPEC output has risen by a yearly average of less than 0.6 million per day. In 2000, non-OECD demand amounted to 37.7%, or a little over a third, of the world's consumption; now, it amounts to 48.5%, or nearly half.

The upswing in demand is adding urgency to concern about the availability, or lack thereof, of spare capacity, technically defined as crude that can be produced on a sustained basis within 30 to 45 days. Perhaps the most important thing to know about spare capacity is that only the OPEC producers have any. The non-OPEC gang is probably already pumping out all it can.....

Daniel Yergin's typically sunny outlook on oil in his recent Wall Street Journal piece, "There Will Be Oil," suggested that technology and new energy discoveries would avert any of the economic disasters portended by peak oil. We found Mr. Yergin's dismissal of these risks premature and repetitive. After all, he has asserted since 2004 that global oil production was nothing to worry about, and that there would be few effects on the economy.

We counter that managers who would see their businesses survive the next few decades of extreme economic volatility will need to develop some literacy about oil and its complex relationships with the economy. They would be wise to consider the long list of peak oil analyses by the world's militaries, and they would take heed of the sobering outlook offered by veteran analyst Robert Hirsch for the Department of Energy. And we must correct some of Mr. Yergin's assertions.

Conventional crude ended its 150-year-long growth trajectory in 2004 and flattened out around 74 million barrels per day. Crude supply did not budge when oil prices tripled from 2004 to 2008, but global demand remained firm, shrugging off a recessionary dip in 2009. All the growth in supply since then was not crude but unconventional liquids, including natural gas liquids, biofuels, refinery gains, synthetic oil from tar sands, and other marginal resources. These liquids are by no means equivalent to crude. Yergin's calming charts include these unconventional liquids and hide the fundamental issue of the depletion of mature fields. They also hide the declining energy density, higher cost, and lower flow rates of these new resources.

As Shell, Chevron, Total, the IEA, and a host of other serious observers have openly declared since 2005, the age of cheap and easy oil has ended....

If Citigroup is right, Saudi Arabia will cease to be an oil exporter by 2030, far sooner than previously thought.

A 150-page report by Heidy Rehman on the Saudi petrochemical industry should be sober reading for those who think that shale oil and gas have solved our global energy crunch.

I don't wish to knock shale. It is a Godsend and should be encouraged with utmost vigour and dispatch in Britain. But it is for now plugging holes in global supply rather than covering the future shortfall as the industrial revolutions of Asia mature.....