Someday peak oil will be about high gas prices and lines at the pumps, but for the time being it is mostly about numbers – lots and lots of numbers.

There are numbers for prices, numbers for oil reserves, numbers for oil demand, numbers for oil supply, numbers for oil depletion and most importantly numbers for the rates of change for all these numbers. For most people, all the thousands and thousands of numbers that pertain to the supply, demand, and costs for petroleum products are of absolutely no concern. The only thing that matters is the cost of a gallon of gas or perhaps heating oil which recently have been highly affordable.

Those who fondly believe that our economic troubles will be ending soon and that economic growth will return any day now might contemplate what the Director of The International Energy Agency said earlier this week. His message is a simple one: investment in new oil production has fallen so low that whenever an economic recovery occurs, the oil to support the recovery is unlikely to be there. Supplies will be inadequate and prices will rise much as they did last summer choking off the recovery. In the words of the headline writers “Oil crunch in 2010”.

Even more sobering are the remarks made by the CEO of France’s major oil company, Total. He too believes that the lack of investment in future oil production due to the economic slump has eliminated the chances of world oil production ever getting much beyond the levels we saw in the last two years. In a nutshell, the near-steady growth in the world’s oil production that we have witnessed for the last 150 years is over.

Of the millions of numbers pertaining to the world’s oil production, there is only a handful that one needs to understand in order grasp what is likely to happen in the future. The two key ones, obviously, are supply and demand. Now neither of these numbers is easy to get a precise handle on. Worldwide supply figures are released each month by the OECD’s IEA and the US government’s EIA, but they do not always agree with each other by significant amounts and are frequently subject to revision as more information becomes available. More importantly, the overall numbers are composed of a mishmash of liquid hydrocarbons such as biofuels, tar coated sand, and liquids extracted from natural gas that are frequently lumped together and called “oil.” Moreover, current numbers related to the production and consumption of oil are frequently competitive secrets or are so costly to compile that even the major reporting agencies have trouble.

With all these caveats, where are we in the middle of February 2009?

Despite wild price gyrations, crashing economies, and endless talk about falling demand for oil in recent months, very little has really happened in the last year. Worldwide production of crude oil which makes up about 85 percent of the mishmash of hydrocarbons sometimes called “all liquids” has remained on a plateau moving between 73 and 74 million barrels a day (b/d) for the last four years. In recent months, OPEC has been cutting production, but the non-OPEC all liquids production seems to have been growing, if one believes the IEA numbers over the EIA’s numbers. All this has resulted in a decline in output of about 500,000 b/d last month out of a total production of about 85 million b/d. This does not sound like much for a world facing a serious recession. While OPEC cut production by nearly 1 million b/d last month, increases in non-OPEC production offset about half the cutback. One can easily see why OPEC is upset with the other oil exporters such as Russia, Norway, Canada and Mexico who are not members of their cartel.

World demand for oil products has obviously fallen due to the economic troubles, but the exact amount is somewhat elusive. The best consumption numbers, which come weekly from the U.S. government, show oil product consumption recently down by only 1.3 percent as compared with last year. Most of this is a big drop in jet fuel consumption as the airlines cutback flying and ground less efficient aircraft. Last week U.S. gasoline consumption was actually up a smidgeon over the same four weeks last year. Relatively cheap gasoline seems to be trumping massive unemployment and economic dislocation as the determining factor in how much we drive our cars. However, it is still the dead of winter and the summer vacation driving season may be an altogether different story.

The best indicator of demand is to look at monthly changes in world stockpiles, subtract the increase, if any from the production and you should have the amount of oil the world burned during the month. Here again nothing spectacular is taking place. The OECD countries which hold much of the world’s stockpile showed a drop of 20 million barrels in December due to demand for heating oil and a likely increase of 8 million in January. In recent months, however, there has been a upsurge in speculators chartering tankers to hold oil in floating storage while the owners wait for higher prices. This floating storage may now be on the order of 50 million barrels. Remember that it does not take much of a supply/demand imbalance to build an impressive stockpile. An excess of 1 million b/d will generate a 60 million barrel surplus in two months.

Putting all this together suggests that the world demand for oil, while down by a million or two barrels per day seems to be holding up pretty well. If there is obvious conclusion from the $100+ drop in oil prices during the last six months, it is that world oil prices have become highly sensitive to over-supply and shortages. Some of this is likely due to speculation, but the amount is still a matter of debate.

Currently OPEC is trying to cut its output by 4.2 million b/d from last summer’s highs and in recent days has been muttering about another million or two b/d cut as oil prices stubbornly refuse to move out of the $30s in face of so much bad economic news. If OPEC should succeed in cutting production by 4 or 5 million b/d, it looks as if there will have to be a hair-raising depression to pull demand down this much. There is going to be an interesting year ahead.