Did anything change?

Isn't it nice to go away for a couple of weeks and find that, while you were gone, the problems of the world were all solved? Thanks to Dave, I have just read the CERA Press Release, from June 21, which describes the coming glut in global oil production, where, by the end of the decade supply will exceed demand by 6 to 7.5 mbd. The full details were apparently presented at the International Energy Conference in Istanbul, last week. Glancing at the meeting schedule, however, the report authors Peter Jackson, and Robert Esser were not on the Speaker List.

And then, thanks to Jack, I meandered over to today's Business Week, and the discussion by four economists, three of which would again assure us that there is no immediate problem. Although, to be fair, two of the participants points out that this is going to be a very short-lived balance. Even by the end of the year three of the participants could be taken to be concerned about supply. Given that the fourth was our good friend Michael Lynch, who expects oil to be down to $40 by then, what else needs to be said!

The situation will not likely be cleared up by the new World Oil Data base located in Riyadh, since the opening of this has been postponed apparently because of the poor quality of some of the data supplied.

So what is going on? Well, short of reading the entire CERA report, which promises a "field-by-field bottom-up analysis", the first thing that catches attention is that they are not exactly comparing apples and apples.

For example in looking at world production:
"Jackson and Esser argue that "unconventional" oil will play a much larger role in the growth of supply than is currently recognized. These unconventional oils include condensates, natural gas liquids (NGLs), extra heavy oils (such as Canadian oil sands), and the ultra-deepwater (greater than 2,500 feet deep). By 2020, they could be almost 35 percent of supply."
"Total OPEC liquids capacity will expand significantly to 45.6 mbd in 2010 from 36.8 in 2004, with the proportion of condensates and NGLs rising to almost 18% of total capacity. Post-2010, OPEC has the hydrocarbon resources to continue expanding capacity at a slightly lower rate than the current decade's 10.9 mbd growth. CERA believes OPEC will accelerate key projects in anticipation of a non-OPEC slowdown in capacity growth."
What this is projecting is that OPEC other liquids – currently being produced at around 3.8 mbd will rise to a level of 8.2 mbd. This will come from condensates and natural gas liquid (NGL) increases. In which regard it is useful that the OGJ had an article last week which listed anticipated increases in NGL and condensate production that can be anticipated. Qatar, for example has planned production of 95,000 bd of condensate, Saudi Arabia has Haradh which is a natural gas project, but will produce 170,000 bd of condensate, Abu Dhabi will produce 125,000 bd of condensate. While, in themselves, these are significant numbers, they do not approach the levels that CERA are projecting.

And the CERA document does not appear to address current field depletions. Of those currently changing, perhaps Mexico is the most critical to our near term future. And the OGJ also reports that the arrival of Peak Oil there may well have already occurred.

Overall I suspect that the world really didn't change much while I was away, and those who predicted that oil would be back around $30 a barrel by now are still being given a hearing. Wonder why?

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I'm sure you've seen something like it, but I made a graph of DoE data on US consumption by sector (transportation, industrial, residential and commercial).

It surprised me.

I'm pretty handy with programming.

This just in from NASA; Scienctist at JPL announced that the comet Temple 1 is mostly llight sweet crude oil. and Nasa is preparing the shuttle to go out there and pull the comet into low earth orbit, and we should be able to be off loading the oil in the next couple of year. You believe that and I got a bridge up near Phoenix, that I'll sell you cheap.

The old hermit

HO's comments and Josh's graph stir up some of the issues going around the blog this weekend. Let me say it this way: data! data! data! the more raw the better, the more public the better. CERA can release a report, ExxonMobil can release another. They don't mean crap unless they release ALL of the data and detailed notes on how they proceeded with their analysis to the public. Why? Because reliable knowledge is ONLY possible when subjected to public scrutiny. The fact that people are attempting to release some "data" like a WODB, and that it is "postponed" because of "poor quality" data (and that it will be housed in Riyadh) doesn't pass my smell test. Who is collecting the data, how is it being collected, do we get to know their names? Can reasonable reporesentatives of concerned communities call those people up and ask them technical questions about the data. How about onsite inspections of data sources by third parties? Without such standards, you cannot trust a damn thing that comes out of anyone's mouth! All knowledge talk is political (both the paid for and the free kind), when the raw information that underlies such talk is kept from public scrutiny view, we have no means of evaluating anyone's claims.

One last thing, don't be so trusting that any claims of knowing this or that actually rest on hard core empirical study. Humans love a good story and will often repeat things as fact just because it is expedient (or feels good) to do so. Once things get repeated enough times, it becomes "common sense." When people feel they *know* something, well, because it is common sense ... God help us all.

Oh yeah, one more thing, common sense in academic circles is often called "theory" as in "economic theory predicts that ... [so much can fill this space] "

Josh, nice graph! Some elementary observations:

First off, look at the circum. 1982-84 nosedive in all four, with commercial only a very slight dip. Industrial starts back up again in about 1984 but on a slightly lower upward usage curve. Residential and commercial are pretty much flat at this point.

But transportation -- oh my! Again, the rise starts at about 1984 and despite a slight dip about 1991/92 -- a recession -- sky's the limit! When did the SUV Age officially begin? I can't remember. Are their any stats out there on the number of cars/trucks on the road over the years, increases in usage by the airline industry, etc. ?

I'd love to hear comments from the posters here that analyze this data.

Thanks for the encouragement.

I made another graph, upon request of blogger WIIIAI, of the breakdown of residential use.

One thing which I couldn't help notice was that it was a former President of General Motors, in his role as Secretary of Defense under President Eisenhower, who brought us the Interstate Highway System, and it is currently the Republicans (ever friends of oil?) who are trying to zero out Amtrak (again, in favor of cars over the far more efficient train).

And also, Tedman, I couldn't agree with you more. Yours is most certainly one of the better posts I've seen here. Absolutely right.

" Humans love a good story"

You bet they do! And let's not forget this one: "That's their story and they're sticking to it".


Josh--in the first graph, what's the difference between "commercial" and "industrial"? (Too lazy to go to the DoE site right now...)

Josh, I believe you are making a reference to General Motors CEO Charles Wilson, who famously said that "What's good for General Motors is good for America". Now, just substitute "ExxonMobil" for "General Motors" and you've pretty much got the picture.

Amtrack? The one and only time I lived in Europe, what I loved most about it was the trains....

In response to Dave's question. The big dip in transportation usage began with Carter emphasis on increasing mileage and smaller cars. The upswing after that began in 1982 with the relaxing of the mileage and safety regulations with Reagan in 1982. Then the second dip was the resession of the Bush I years 1989-1993. Then the Mini-Van/SUV age began in earnest starting about 1993.

The difference between commercial and industrial is that commercial stands for commercial real estate (office buidings). Industrial stands for industrial uses, e.g. manufacturing.

If the DOE numbers are correct, I am both heartened and awe struck (by different lines).

Residential and commercial uses flatlined and declined a bit after the oil shocks of the 1970's. (though I suspect there may have been an increase in natural gas consumption as people bought newer heating and cooking). I don't know about the others in this group, but I am keenly aware of my home energy costs and try and bring them to heel as much as possible -- two young kids and too many TV's make that effort difficult... Strangely, I feel I have less of a grasp of my transportation costs.

Anyway, I can remember my dad going on about not heating/cooling the neighborhood, not treating the house like a christmas tree, etc., etc. I find myself using those same tried and true complaints in my own house -- which occasionally makes me shutter ;-) -- I bet a weekend at the plaza that others have similar experiences.

So, what I am saying is, we have a shared sense (a cultural sense, if you will)of keeping our household energy costs down, and maybe this is reflected in this graph, maybe not. But, perhaps people can and do reduce consumption when it makes sense to do so,

Now I don't want to blame transportation solely on the residential traveler (globalization and the increase in transportation by truck must be part of that story) but, I wonder if people have the same sense of their transportation costs relative to their home heating and cooking costs.... My wife and I spend a whole lot more on fuel for our cars each month than we do for either electricity or gas... But, like I said, we have less awareness of exactly how much this cost is.... And my dad never said anything like, "what, are we doing all of the driving for everyone in town this month!" ... Now I kinda wish he had.



The reasons for the decline in Residential and Commercial energy use had more to do with building code changes that were made from 1974 to 1980, along with one time expenses for property owners (e.g. putting better insulation into home walls.) It was not because of a long term change of mentality on part of these property owners. If the Municipal Code changes had not been there, when the oil prices declined, the home builders would have reverted back!

The cheapest way to move things is by boat.
The second cheapest way is by train.

And the precise link to the DOE section where I got the numbers is here.