Engdahl's theory looks to me to be as full of holes as a Dick Cheney hunting buddy (ok, a low blow, but hard to resist), but I haven't time to point them out...
Life's catching up, but to abbreviate an extensive argument:
As suggested above, I suspect that the peak we've reached over the last 5 years is less driven by absolute scarcity than by the limits of a production infrastructure constrained by two decades of underexploration and underinvestment.
Quite a few "analysts" point out that the price increases after 2004-2005 were not paralleled by production increases. The reason is simply that existing infrastructure had reached maximum output, and the time lag between the decision to invest and actual production is too extensive to allow higher prices to call up more oil overnight.
The GCC currently has about $300 billion worth of oil projects underway, aimed at raising production capacity by approximately 5mbpd. The Saudis have discussed adding another 2.5 above that, eventually raising their total capacity to 15mbpd. Some of these projects dropped to the questionable level as prices plunged, but with the fast recovery to today's levels I expect most of them to go ahead.
Note that this added capacity may not be used at any given time. The GCC has no incentive to produce more than demand requires, but they do see a real advantage in holding the bulk of the world's surplus capacity, and having the ability to use that capacity as they see fit.
Other areas are also raising capacity. Projects currently underway are expected to add 1.1mbpd in Angola. Caspian production could increase by up to 2mbpd if transport hurdles can be overcome. Libya plans to add 1.5mbpd.
Obviously none of this is guaranteed, but we are speaking here of up to 10mbpd potentially coming on line in the next decade. This is primarily a response to the recent price spike and the expectation of continued high prices, a response delayed by the reality that bringing new production onstream takes time.
There are other areas that have seen production declines, stagnant production, increases below capacity or underproduction due to political and security conditions: Venezuela, Nigeria, Russia, Sudan, Iraq, Iran, Equatorial Guinea. Some of these may stagnate or deteriorate further, but it is also possible that some will see significant production increases.
Of course there are areas where production is constrained by absolute depletion, particularly in the US, the North Sea, and Mexico (though Mexico could probably do more with additional investment and a lot less politics, and the US has sources it is not exploiting for environmental and political reasons).
The pattern of extended glut followed by abrupt shortage has ramifications on the demand side as well. One of the most striking comparisons of energy use in the developed west vs the emerging economies is in energy consumption per unit of gdp. Compare the US to China in this category, and the Chinese energy inefficiency is staggering. This is partly a function of early stage industrialization, but it's also because the physical and planning infrastructure underlying the Chinese boom was put in place during the oil glut, and built on the premise of cheap oil. The Chinese have seen exactly how vulnerable they are to price spikes, and I expect a very real effort to diversify and to improve efficiency. Demand will increase, but the pace of increase will slow.
In short: yes, there is a plateau, and yes, there are serious risks of shortage. Both plateau and risks, though, are primarily driven by political, security, and investment concerns, not by impending scarcity or the arrival of an abstract peak.
I shall return, like MacArthur... hopefully sooner, and with less company.
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