THERE were two conflicting pieces of news from the oil world yesterday. Shell announced a 71 per cent increase in profits for the third quarter of the year; this followed BP's announcement a few days earlier of a 148% profits surge. Yesterday also saw the publication of The Oil Crunch, a report by a task force set up by eight UK companies which are major users of oil, Virgin and Stagecoach among them. This report says that global oil production will peak between 2011 and 2013 and then begin to decline and it predicts that the consequences for British industry (and presumably more widely) would exceed the threats from terrorism and climate change.
Oil companies disagree with this forecast and says that oil production will continue to rise until 2015 and remain at that level into the 2020s. The British government says that proven reserves are large enough to meet rising demand until 2030. But the unanswered question is whether sufficient exploration for new oil fields is now taking place to ensure that growing demand -- which seems inevitable -- will be met in good time. When oil companies are criticised about their huge profits they always point out that exploration costs are very high and growing higher as more difficult locations have to be searched. It would be interesting to hear from Shell and BP what the relationship is between the inflated profits they have just declared and the current level of their exploration activities.