The International Energy Assocation's Medium-Term Oil Market Report

Many requests to bring this out to its own thread. Have at it. (There is also a very high quality discussion on this topic taking place in our DrumBeat today here...)

The IEA report can be accessed (for the time being) at this link:

(Thanks to Tim Iacono from The Mess That Greenspan Made for the tip on this free link.)

Very, very cool

For what its worth, front month crude (WTI) was down 75 cents today while crude for 2012 delivery was up 50 cents to an all time high ($72.30) today. Perhaps someone with money that doesnt read TOD read the IEA report....

That seems highly odd. By the IEA's assessment, given even moderate economic growth, demand outstrips supply by 2010.

Two and one half years away. That's the blink of an eye.

Nate Hagens quotes market at $72.30 crude for 2012 delivery...
Astounding, that would not even be rising to match
inflation! Astounding. If crude oil is "only" $100 per barrel
by 2012, for all practical purposes, that will be a pizz in the
sea compared to inflation in all other sectors.

In the meantime, check out todays market action on PV solar, text from
post to some of my own market friends

One day moves on solar PV today 7/9/07

Canadian Solar Inc. +8.87%
Evergreen Solar Inc. +6.09%
First Solar, Inc. +23.94%
JA Solar Holdings Co., Ltd. +14.79%
LDK Solar Co.Ltd. +8.47%
Solar Enertech Corp. +6.49%
Solarfun Power Holdings Co. Ltd. +11.38%
Suntech Power Holdings Co. Ltd. +4.16%
Trina Solar Ltd. +16.00%

First Solar went from normal volume of 1.98 to 9.0 million shares.
JA Solar went from normal volume of 1.72 to 4.0 million shares.
Canadian Solar went from normal volume of 241,279 to 862,894
shares. Volume increases were almost across the board.

The most astounding move must be consided First Solar
with a Price to Earnings (P/E) ratio of 516.62
Have not seen that sort of thing since the dot com days!

It is hard to believe that these kind of price moves and volume changes are
being triggered by the little "solo" investor, all calling logging on Schwab or
Scottrade at the same time.

We are now near or at a tipping point. The REALLY big money will be made early in this game, and will move in fast. Sadly, for me, I do not have the spare money at this time to take advantage in any big way, but for those that do, keep your eyes open! Of course, the "safe harbor" caveats still apply. Past performance does not predict, all investment involves risk, outside conditions could substantially change...
yada, yada, but keep your eyes open! :-)

Roger Conner Jr.
Remember, we are only one cubic mile from freedom

Nate, I'm not an expert but I have read about Options and traded them a few times.

Correct me if I'm wrong but futures in no way 'predict' the value at any given date, rather they are an indication of the probability of a future price based primarily on the current price, variability of price and how long into the future you are projecting.

The fact that Futures are not showing $120 a barrel for 2012 delivery in no way reflects the possibility that that is what the price will -or won't be... I.e. Futures are not a crystal ball for oil price somewhere down the line -to use them as such is highly misleading, especially as availabilty of the underlying asset may be reaching what could only be described as a 'chaotic boundary' or at best tipping point.

NEW SCIENTIST: On another note there is a cover story/article in this weeks UK New Scientist regarding how we are going to survice 'after oil. There's an interesting pie chart that shows the 3.4% petrochemicals market worth $375Billion - about the same as the 70.6% market for transport fuels. The article proposes that the feedstocks to the latter industry can come from Bio-based sources if the price of oil stays up around the $75 mark....



The price of a futures contract for what ever future month you are looking at, is just the dollar amount that people right now, are willing to buy and sell it for.

If the traders buyers and sellers think that the future amount will be much higher, they will buy or sell accordingly to what they can afford or according to the risk that they wish to take. The reason that the futures contract is $72.30 crude for 2012 delivery, is that is what the present buyers and sellers are willing to pay for that contract.

Those readers of "oil drum", who are sure that oil prices will be much higher in 2012, and were able to buy contracts for then, have bought them at the $72.30 or less, and only need to hold on to them until oil is high enough to sell out for a profit. They only bought as much as they could afford, and that has kept the price from rising much higher.

There is also the risk that if we have a complete monetary crash before then, those who bought 2012 contracts , can’t get there money out, losing it all.


Of course futures don't accurately predict the future. Nothing does.

However, broadly speaking future prices do give a more accurate view point of future price direction than any other forecasting method (except for looking backward, finding who was right and then saying that person is better than futures markets).

I haven't seen any quantitative studies regarding oil futures, however, there is good documentation that currency forcasters are not, over time, able to out forecast currency futures.

Some fodder for the has light sweet oil already peaked debate, from page 45:

Likely Evolution of Global Supply Quality

Global average crude and condensate quality for 2006 is estimated at 32.6°API and 1.18% sulphur. Looking at 2007-2012, the net change in global quality will be minimal, with gravity lightening from 32.7°API to 32.8°API. Global refinery feedstock becomes marginally sourer, as sulphur content increases from 1.15% to 1.16%. However, the five year trend masks divergent moves in the interim, as production first becomes both lighter and sweeter in the period through 2009, turning sourer thereafter. Despite becoming more sulphur-prone in the longer term, the global barrel continues to lighten.

Dissecting these trends regionally provides some explanation for apparently contradictory movements in quality. The surge in OPEC condensate supplies during 2007-2009 underpins the increase in global quality. FSU supply is also becoming markedly lighter and sweeter in this period, as Urals crude is progressively replaced by Caspian volumes and by lighter/sweeter Sakhalin crude. While these elements continue to drive global supply lighter through 2012, lower-quality supply from the Americas, (Canadian oil sands, Brazil, GOM) begins to play an increasing role. This curbs the lightening of the global barrel, while also turning it sourer from a sulphur low of 1.13% in 2009, to 1.16% in 2012.

The last thread on this subject made me wonder if peak light sweet has really occurred. The increasing sour effect seems real enough but on the same hand I never got a good handle on how this would effect refining. It seemed to me that its a problem that can and is readily dealt with.

Although a lot of people seem to believe in peak light sweet it seems that in looking at the data that we really are not seeing this. What seems to be happening is that refiners have moved to more complex refining with more of the product mix going to gasoline and other lighter products on top of a general peak in oil production. So for economic reasons regions that have advanced refining capabilities may be importing heavier oils but this is not the same as peak light sweet. I saw no clear evidence for a global peak in light sweet vs general oil production.

Your post seems to point out that indeed a peak of light sweet has not happened globally.

I posted this yesterday, ill post again

Photo Sharing and Video Hosting at Photobucket

This is USA FOB data from the EIA. The landed data was the same. Data is current to last month.

It shows the demand for light sweet crude by measuring the linear relationship between API gravity and price. Higher gravity means better oil(well sweeter). If the supply curve moves to the right or left(proportional changes in prices for ALL GRADES), the slope will remain unchanged, however IFF the price of the sweeter crude goes up more than the lower grades of oil... the slope goes up (blue line)

Red line is the correlation
Black line is the hypothetical cost of 0 degree API.

i used r and something like

for (i in 1:end){lintemp<-lm(price[i,]~gravity);summary(lintemp)}

and did some concating to bring it all together with a lowess smoothing of the resulting data to bring out trends.

In my opinion, light sweet crude has a strong chance of being in crisis at this moment. Using only the graph (which does not have data before 1983(eia limitations)) i can only say that the slope/correlation/hypothetical barrel have never moved this strongly together in the past 24 years)

/the coolest part of this graph is that given api gravity and price, i can guess the price of every other api barrel stream fairly closely. (esp now since the R^2 is .99something for a linear fit)

But this same conclusion can be drawn if the US has moved to more advanced refineries and is taking advantage of the price differential between light sweet and the heavier sour grades to make more money on refining. I agree that the US crude supply seems to have gotten heavier and sour but this is by choice not because of a global peak in light sweet oil.

You would have to have the same information for more countries to see if peak light sweet is real. As the spread price spread between light and heavy contracts over the coming years we may well see this curve move back.

So you need to show that we have not significantly upgraded our ability to handle heavy sour oils in the US. If I understand what Robert has said correctly the fact that the opposite is true and most of the refinery upgrades over the last few years included extensive support for refining heavier sour crudes.

I think you will find if you graph the capability of our refineries you will see that the correlation is actually between refining capability and not peak light sweet.

The widening price spread between light and heavy sour oils can easily be explained by the fact that its a lot easier to get a simple refinery in operation in a region that demand is growing. Also note that the asphalt and other by products used in construction such as roofing tar are in higher demand in these same regions since road construction is also growing. So its not exactly a bad thing to practice simple refining in areas that are developing a more extensive automobile culture.

So the global price differential that resulted in a move to complex refining in the US seems to be simply the result of growing demand for the mix of products from simple refining of light sweet in the developing world.

To me its common sense that the increasing demand for oil products in the growing second and third world economies would be met with and initial expansion of simple refining capacity and thus price pressure on the lighter and sweeter grades even though the overall mix does not seemed to have changed significantly.

I know this is a bit more complex than simple peaking of light sweet but the global data seems to indicate that both types are readily available but the price spread is being caused by other factors and driving the use of complex refining in the more developed world.

In any case this is a Robert problem IMHO.

It is a surprise to me to see WTI nearly $5/barrel higher than Brent. I thought WTI was a better grade crude than Brent and has most often in the past led Brent by $2-$4. Does this mean that oil is not truly fungible? Anyway I expect WTI to catch up with Brent or Brent to fall precipitously to WTI. Are we buying Brent and hoarding WTI? What's up?

hmm, i'll have to punch out a histogram stacked line graph over time of how imports are divided. it could get interesting then. if we show increasing heavy crude import and increasing light prices, then the US has effectively hedged against rising oil prices!

Exactly !

The US by upgrading its refineries to handle "junk" oil is optimizing itself for the long term case of ever increasing oil prices. This is probably the underlying reason that WTI has become decoupled from global oil prices in the US at least the need for light sweet crude has dropped dramatically.

I'd have to guess the same is happening in Europe and Asia.
It may well buy use several years of below 100bbl oil I don't know. But maximizing the abilities of the refineries to handle any oil and optimize for any product is probably whats keeping the current situation of zero production growth from causing price spikes over 100 now.

Overall the move to complex refining can only do so much before absolute supply begins to be a issue.

From the EB:
Prediction #1 (of 3) from Oil Expert Matt Simmons:‘Real Risk’ Gas Pumps Run Dry This Summer
Energy Tech Stock

...[Matthew] Simmons told that U.S. refineries simply aren’t capable of running at a sufficiently high capacity to produce enough gasoline for the many millions of American motorists who, despite ever rising pump prices, continue to drive more miles each year. “The refineries are too old,” he said.

Simmons made an analogy between an old house whose plumbing and wiring have been modernized and an old oil refinery which, like U.S. refineries, has had its equipment modernized. “It’s still an old house,” he said.

To be sure, thanks to increasing amounts of refined gasoline imported from Europe, up until now America has been able to quench motorists’ thirst. But Simmons believes that imports can no longer fill the breach. “We’ve pretty well drained that option,” he told, adding that it would take years before any new refineries that were built in the U.S. would make a significant difference in available supply.

How might the gas shortage that Simmons fears unfold?

“You won’t see it until it’s happened,” he said. It could start in any region of the U.S., he added, and once the media gets wind of it, Americans everywhere will rush to “top off” their gas tanks, exacerbating the situation until it becomes a full blown emergency.

Part 2 of 3 will appear tomorrow
(9 July 2007)

For those who know more than the rest of us casual observers, is this as bad as it looks? From skimming the report, it looks like an offical "brown smelly substance hitting a vortex", but not a SHTF announcement. Am I reading this right?

It may be better to be a live jackal than a dead lion, but it is better still to be a live lion. And usually easier. - Heinlein
To Ride, Shoot Straight and Speak the Truth - Col Cooper

My Two Rules Regarding Peak Oil Pronouncements From Public Officials:

(1) Generally assume the opposite of what they are saying, i.e., if they predict rising production, assume falling production;

(2) If they admit to supply problems, assume that things are at least twice as bad as what they say.

And contrarily, two rules for a cornucopian regarding oil forecasts by dissidents:

(1) Generally assume the opposite of dissenting opinion, ie, if dissidents are predicting permanently lowered annual production YOY, assume ceaselessly increasing production;

(2) If they declare that demand is going to go down because of massive price increases, assume that demand will double because things are inversely twice as good as the pessimists say.

WT, I think were seeing the sea-change when the powers that be start to admit to our long term supply problem. They're not going to admit to a peak-we've been labeled as cultists-but rather that supplies will be fine in the long term, we just need more money invested to straighten out the logistical problems. Yergin's not going to admit he's wrong, he's an expert. Exxon-Mobil and Cevron aren't going to admit that their reserve figures are not what they seem because they are including b.s. like the Venezuelan heavy oil, that would affect stock prices. Instead, they're going to blame environmentalists and political above ground factors.
And yes, we're going to get smeared because we're the Cassandras pointing out that the emperor has no clothes.
Bob Ebersole

To map this to another ongoing crisis we have brewing. The world wide housing bubble thats now popping in the US and I think New Zealand/Australia. The powers that be admitted that their was a problem but have claimed its contained next they apply remedies that in general will exacerbate the problem by tightening credit at the wrong time. The real situation is fairly easy to ferret out by reading the numerous blogs and website that use facts and reasonable theories to project a much worse situation unfolding for housing as the bubble deflates. Finally these sites made predictions in advance and to date the facts have supported the projects of the "alarmist" websites over the proclamations of the authorities.

So in my opinion the combination of a reasonable amount of information and a lot of fairly sharp people arguing a problem beats the hell out of anything that comes out of our public news sources as far as both truth and reliability esp in projections. When the powers that be finally take a position which is generally the least threatening of the results generated by the web bloggers I tend to believe the web model.

This web developed meta models approach seems to have accurately predicted all our current problems and how they will unfold. Its a probabilistic sort of answer and thus a bit hazy crystal ball but in the case of the housing bubble it seems to be following a fairly alarming consensus opinion that fits the facts. Not the more benign outcomes that are also presented.

The main reason that the more tragic outcomes seem to be the ones that are coming to the pass is that the government/business's seem to always act in such a way to ensure that the worst situation becomes unavoidable. This this one of the key requirements for the more dire outcomes and its seems to have held with flying colors with the housing bubble and Global Warming. I see no reason it won't for peak oil. The only way to get the more benign projects is for governments to pro actively and aggressively combat the problems that they are just now beginning to acknowledge.

The number one failure across the board is thus the attempt to maintain business as usual at all costs by our current governments and ignore the increasing number of serious issues our world is facing which is in reality a choice for the more dangerous outcomes.

(1) Generally assume the opposite of what they are saying

(2) If they admit to supply problems, assume that things are at least twice as bad

If you assume the opposite of what they say shouldn't supply problems = glut?

Supply problems = not meeting demand, but perhaps this is a naive non-economist POV. Last time I checked, CERA et al predict glut, ie--rising demand to 2030 will be easily met by expanding supply. Chevron et al try to play advertising games, but by and large in the corporate, financial, hedge fund world people are not very concerned with PO any time soon. Projected global growth is pretty much in line to keep ever-expanding. Which means energy production must increase, if it can't, growth will certainly suffer. Did I address what you are saying? Or did I misunderstand it? Maybe others have some thoughts...

Did I address what you are saying? Or did I misunderstand it?

No, you did not address what I was saying; and yes, you misunderstood it.

I was pointing out the obvious contradiction between westexas's two statements.

To avoid confusion next time he should say what he really means:

1) Ignore any statements that contradict what westexas says.

2) Blow way out of proportion any statements that may support what westexas says.

Ah, so it was flamebait... Sorry for taking the bait.

Headline from 7/10 Drumbeat:

Norway: Energy Minister admits knowledge of energy crisis

Oil and Energy Minister Odd Roger Enoksen admits that the authorities were aware of the approaching energy crisis, and that too little has been done to prepare for it.

In a word, yes.

One need only look at the previous releases of the WEO to see that this does not bode well (although the WEO 2006 seems like it is the first issue to suggest very real trouble. Previous editions, notably the WEO 2004 hinted at the sort of items that would badly skew thier predictions and interestingly, they have all come to pass)

Is this the "pre-spin" that occurs before the fan because of a lack of straightening vanes or one induced by spin vanes for flow control (in either case angular momentum is conserved).

In regards to the "fan," this IEA report is starting to look like a discussion as to whether it's going to be axial flow or radial blade and if it's radial blade whether it's forward-curved, backward-inclined (airfoil or non-airfoil), or straight-blade radial.

I cannot help but suspect that the IEA is slowly climbing on the peak oil bandwagon. The secret to never admitting you were wrong is to reverse your position slowly! The beginning of the Executive Summary reads: "Despite four years of high oil prices, this report sees increasing market tightness beyond 2010, with OPEC spare capacity declining to minimal levels by 2012."

"The secret to never admitting you were wrong is to reverse your position slowly!"

How right you are! As I said a couple weeks ago in a comment--a classic example of this is troop levels in Iraq. War begins, military wants more troops--Wolfy say "no! we have enough!" Next, wait four and one half years and you get "we need more troops! We need to surge!"

Biding-time is our species hyphenated middle name. Homo biding-time sapiens.

Also, another major component here is that one can criticize mistakes but not the fundamentals of the underlying cultural problem. If the elite lets society see a little glimpse of their hand through the mirror, then it is all the easier to absolve oneself of blame or guilt. We can criticize soldiers on the ground in Iraq for being in a stressful situation and perhaps killing people indiscrimately because they're upset, psychologically unbalanced, at wits end, etc. Court marshall them and punishment... However, somehow the people at the top slip away from real criticism, or responsibility, Rummy etc. They were just trying to do their jobs as best as possible and they can't be held accountable for their actions because how could they predict that soldiers would torture people, or indiscrimately kill? Same goes for PO, I'm sure when some underground political magazine goes to track down the Bush family and all their partners in crime down in Paraguay for an interview in twenty years, that they will declare they "tried their best" and aren't responsible for an outcome they didn't forsee--they "thought" Iraq would go fine... Of course, they'd still be lying, since they obviously knew it was going to be a disaster--hence, that's why we invaded in the first place... Our official foreign policy is to act as a catalyst for disaster.

Despite my distaste for Neocon policies I actually think they are sincere in their attempts to ensure that the American way of life continues. They fail to mention they mean the American way of life for the rich and powerful but I'm sure they will realize they made a small omission and explain exactly what they mean any day now.

The Neocon premises are clear:

1. The rich and powerful (corporate CEOs, politicos, the intellectuals who justify all, the media moghuls, bigtime lawyers, university presidents, big bankers/brokers/merger-meisters, fifth-generation inherited wealth, etc.) are nothing more than public servants. That's right, public servants who do the important tasks that need to be done for the welfare of lesser folk. After all, without the super rich, who would set fashions?

2. The U.S. has a monopoly on superpower military ability, and this proves superior U.S. wisdom and virtue and also that God is on Our Side.

3. Inequality is good, because it rewards the virtuous and intelligent and keeps the lower orders in line; it is a great motivator. Thus more inequality is better than less.

4. Tax cuts on the wealthy is the unique way to prosperity for all. (All who matter, anyway.)

5. Immigration to the U.S. is good, because it keeps those uppity union types down. Illegal immigrants are a great boon for keeping wages reasonable and legal citizens from thinking that is too big for their boots.

6. Globalization and markets and technological advances will solve all our problems.

7. Peak Oil is a subversive myth; CERA is the fountain of truth.

8. Global warming is good--especially for countries in temperate or northern climates. Bring it on!

Well, I could go on, but you get the picture. Of course there is nothing "new" or "conservative" about this position at all, but the neocon term is needed to distinguish current positions from those of old conservatives, such as Barry Goldwater, guys with some coherent view of the world based on the ideas of thinkers such as Edmund Burke.

"sincere in their attempts to ensure that the American way of life continues"

Semantics and intentions, difficult to pin down, but not impossible. These guys are way more cynical than the media play them out to be. The media does indeed attempt to paint them as cynical. But it's glossed over, no one pays attention. It's the faux neoliberal critique made for soccer moms and cornucopians pining away for the American dream, yet still trying to maintain some self-respect and honesty. Washington is a town where everyone just imbibes deceit ritualistically. It's all posture, and rhetoric, propped up by power politics and realpolitik. Money, and influence. Rummy was such a tricky bastard Tricky Dick didn't even trust him! This lot sold weapons to Iran to fund death squads in South America. Targeted assassination of political figures. The list is long and tired and no one even cares about it. Ollie N has his own radio show now...

These people are products of greedy corporate apology, and only exist to maintenance power and their own personality disorders.

We all know the Powell Doctrine. Dubya's daddy invoked it because all the intelligence on an Iraq invasion yielded the exact same results... Namely, what we see today. The fact is that Dick *CHEE-NEE* was Defense Sec. during "Operation Desert Storm" and he is well aware, as is the entire military establishment with much knowledge and foresight that this war was hard-pedaled through our democratic institutions sold on false premises and with a rosy outlook consciously known to be false but maintained in order to execute the plan. It is inconceivable that these hardened conservative politicians would think Iraq would be anything other than it is today... In fact, their calm in the storm seems to show, at least to me, how unphased they are by the situation--almost as if everything is going according to plan (so far). Viceroy Bremer was more evidence of this.

I think you are right, that they probably do not see themselves in such a cynical light... They all probably believe that what they are doing is in the best interests of the country. I'm not sure where I stand on this... I'm not sure where most of the Left stands on this--it would be interesting to get some polling data on people who consider themselves to be a "liberal" and ask them how cynical the Bush Admin is... I'm sure a lot of people on the far left would go the "mentally insane" route, but I think that is uncalled for--it leads quickly to conspiracy theory territory, because if they are literally insane they really are capable of anything. I would put them in totally sane, but extremely cynical and ruthless, cutthroat to the max. All of their functions serve power... As long as it seems to serve power, money, influence, they take that strategic route. PO could be soon or now, and Iraq is obviously about control of oil. It's about anticipating crisis and creating it as opposed to waiting for it to happen. It is about instigating instability, rather than responding to it. That way, it's on our terms (from the neocon POV.) There was a window after 9/11 and they took it--they fit their bad intelligence to make a deceptive case for war and iced the cake with "it's-all-going-to-be-fine-there-will-be-no-mushroom-cloud-as-a-smoking-gun-if-you-just-go-along-with-it" window dressing... Even if it can't enter into any academic discussion since crude is supposedly completely "fungible" so we must just be "spreading democracy" and "fighting the Global War on Terror" with our 14 permanent bases and multi-billion dollar embassy... Meanwhile in the "Drug War" we're building some new prisons... The War on Poverty is really having a blast, for all their talk of evangelical "compassion", it sure seems they were just sucking up some more morons into their voting demographics with their "faith based" plunderings of the constitution... Too many wars to keep track of with us humans--we should just invent a new term that encompasses all the "practical" wars we've invented for PR reasons.

I'm wondering if you watched that Trivers & Chomsky discussion that's on google video:

It's boring at first but gets a little better... They seem to agree with you that Bush Rove Co. probably see themselves as entirely benign and even helpful. Another liberal friend of mine agrees with them... I don't think he, or they (Chomsky and Trivers) are right about this particular matter of psychology--although I agree with all of them generally when it comes to politics, the irrationality of the Republcians and the pathetic meekness and, really the only word for it is "phoniness" of the Democrats. All three of us agree that these people aren't insane as the 9/11 truth meme of mostly the fanatical far left (Charlie Sheen--go back to making crappy comedy movies, we'll need 'em!) and the paranoid right (Alex Jones) would dictate.


Great write up.

Bush has now got almost every law in place that would allow him to be a dictator, while congress does nothing. Since Bush is being driven by his whole team, do you think he actually knows what he has done to the constitution, or even cares ??
Does he actually think he is doing this for the peoples benefit ??

Thx.. Yes, I think he sees himself as governing for "the peoples benefit". I say this with reservations, because you can never really know these things. Also, it's semantics. How serious is Dubya? How much power does he actually wield? He seems to defer a lot, so he basically doles out power. I think the people he doles out power to are radically cynical realpolitik practitioners. They make Henry Kissinger blush.

You can only infer these "value judgments". How conscious is he of how "correct" these people are--I would say it borders on religious faith for him. It seems to me that George W. Bush is sincere in his "love" for this country. He's just another person like you and me (except really powerful), operating in the world. He probably gets scary reports everyday that embolden his conservative edge--he certainly surrounds himself with some very hawkish neo-conservative strategists. He's probably a mix of delusion, honest do-gooderism, hardened corporate conservatism that he got growing up and much else--just like any adult human. He delegates, so I think his personal psychology is "I trust these people, I share their values, this is the best thing for the country..." If he was cynical to the degree that he knew what he was doing is really making everything worse then that would make him a heartless cynical bastard... He's not that good of actor, he fucks-up/goofs-up often... To some of us, it may seem like a perverted love, but it is a love nonetheless. Conservatives love this country just like liberals, it just manifests itself differently (but there are a lot of similarities--the priorly mention soccer moms.)

I remember a few years ago some liberal wrote an article about George W. Bush being a "dry drunk". Personally, I think premises like these are pretty absurd. The more likely premise is that these people are not very unstable, that they are hardened politicians "playing the game" and hoping for the best--even if that seems contrary to their actions, I swing to that conclusion, which I believe to more in accord with reason and parsimony.

if the iea trys to climbs onto the wagon well after it has set off it cant catch up.

i am in the position of putting the iea as a "business as usual" publication. they will only admit peak oil when irrefutable evidence is upon us (5 -10 years of year on year declines) by then everyone will already know, the iea is the last to know and the last to announce.

(kindof like tv, once tv announces a fad, you are too late)

Thanks for the clarification. Its time to invest in that wood stove. I hope this doesn't create a panic in the next year.

It may be better to be a live jackal than a dead lion, but it is better still to be a live lion. And usually easier. - Heinlein
To Ride, Shoot Straight and Speak the Truth - Col Cooper

From Green Car Congress:

"Peak oil? The IEA report notes that “The concept of peak oil production and its timing are emotive subjects which raise intense debate.”

Much rests on the definition of which segment of global oil production is deemed to be at or approaching peak. Certainly our forecast suggests that the non-OPEC, conventional crude component of global production appears, for now, to have reached an effective plateau, rather than a peak.

Having attained 40 mb/d back in 2003, conventional crude supply has remained unchanged since and could do so through 2012. While significant increases are expected from the FSU, Brazil and sub-Saharan Africa, these are only sufficient to offset declines in crude supply elsewhere. Put another way, all of the growth in non-OPEC supply over 2007-2012 comes from gas liquids, extra heavy oil, biofuels (and, by 2012, 145 kb/d of coal-to-liquids from China). As overall non-OPEC liquids capacity increases, this plateau reduces the share of non-OPEC conventional crude supply from 77% in 2000, to 74% in 2006 and 67% in 2012.

While there might be a temptation to extrapolate this trend, citing a peak in conventional oil output, a degree of caution is in order. Firstly, the concept of ‘conventional’ oil changes with time, technology and economics. In the early 1970s, much offshore production was deemed unconventional, but this portion of global supply has since grown to account for 30% of the total. Evolving economies of scale and infrastructure development could do the same for GTL, oil sands and ultra-deepwater reserves in the future, shifting today’s unconventional resource into tomorrow’s conventional supply category.

Moreover, rapidly-growing condensate and NGL supply is scarcely ‘non-conventional’ in a technical sense now. We also note that for certain regions, notably the FSU and West Africa, the turn of the current decade is likely to mark a hiatus in crude supply growth. Strong growth is expected to resume here towards the middle of the next decade. Whether this will be sufficient to offset the declines expected for mature OECD crude supply, preventing overall decline for non-OPEC, is less easy to predict.

Finally, we note that focussing on non-OPEC crude alone is a rather selective way of considering the sustainability of global oil production. Peak or plateau production is frequently taken as shorthand for impending resource exhaustion. While hydrocarbon resources are finite, nonetheless issues of access to reserves, prevailing investment regime and availability of upstream infrastructure and capital seem greater barriers to medium-term growth than limits to the resource base itself.


I found it interesting that the IEA report made a special point to describe the situation as a "plateau", instead of a peak.

The concept of peak oil production and its timing are emotive subjects which raise intense debate. Much rests on the definition of which segment of global oil production is deemed to be at or approaching peak. Certainly our forecast suggests that the non-OPEC, conventional crude component of global production appears, for now, to have reached an effective plateau, rather than a peak...

CERA can say they are right! It's an undulating plateau, not a peak! (snark)

if you dig a little deeper in their report, they only were able to define it as a plateau by calling the Canadian bitumen (tar sands) oil reserves, and including biofuels. They also include an increase in Saudi Production which is problematical, if we can believe Stuart and Euan, which I do.
Bob Ebersole

My CERA comment was "tongue and cheek" :-)

What you are saying, however, is even more alarming. Based on their assumptions, the word "plateau" or "peak" may be overly optimistic. The word "decline" may be more appropriate.


What people actually care about is all liquids, so maybe they can keep juggling. The main problem I see is that everything they see as increasing is problematic and very expensive. Even the US production-its in extremely deep water with serious production problems that haven't been worked out. The Russian production is experiencing water problems, and they're counting on Mexican production from wells that haven't been drilled yet while Pemex has money problems and decreasing production. The Canadian tar sands are expected to add an additional 1 million barrels per day, but the capital investment required is $100,000,000,000.00 to get it that high. They're counting on 2,000,000 barrels a day from Iraq-and thats with a worsening war and Iraquis of all sides opposing the puppet parlement's "oil law".

I guess if they hold their fingers along side of their nose and click their heels three times the Crude Fairy might grant their wishes!

Bob Ebersole

"All liquids" has some sort of logic to it, but they are double-counting some of those liquids, since the EROI of some of the unconventional stuff, not to mention ethanol, is low enough to make a big difference. This is reflected in the monetary costs, but the net-energy accounting is more stark and resistant to fudging.

An undulating plateau is nothing more than a series of peaks and valleys. One of those peaks, is the highest peak. That is the "true" peak, which will not be known until we have enough data to pinpoint it.

Years from now, when we have enough data on the lower side of the undulating plateau, this data will be graphed, curve-fitted and will look much more like a symmetric peak.

It is really just a semantic argument (sharp peak vs. undulating plateau) based on resolution of data, scale and timing. "Undulating plateau" is really used as an euphemism by those unwilling to succumb to the term "peak".

For a plateau to be stable, there needs to be perfect balance between two opposing forces. Snow on the ground is either accumulating or melting (sublimating), so snow depth is rarely constant. Similarly, world oil production is afflicted by the opposing forces of discovery and depletion -- an oil production plateau is therefore a transient phenomenon that cannot last.
Tuesday, July 10, 2007. Issue 3695. Page 5.
The Moscow Times: Alfa Report Sees Trouble Looming in Russian Oil Sector
By Anatoly Medetsky
Staff Writer

Alfa Bank warned on Monday that "production stagnation is unavoidable" at the country's oil fields and further downgraded its target prices for shares in most Russian oil companies.

The dramatic worsening in its outlook was the result of the government's reluctance to consider lowering taxes on oil firms and a higher proportion of water in the declining output, the bank said in a research report.

Alfa has led the way in cautioning investors about oil sector profits over the last six months, with other brokerages following suit in reducing expectations. . . .

. . . Alfa Bank first downgraded its projections in the sector in March, saying that oil majors were depleting existing fields while heavy taxes on the industry were preventing the development of new fields.

In Monday's report, the company described the situation as "substantially more dangerous" than it had suggested four months ago.

The increasing proportion of water in total output was a major source of concern, the bank's analysts wrote. This causes a quickening in the rate of natural production decline at most fields.

Hello WT,

Thxs for the info. This is an interesting dichotomy forming between FF-company shares being downrated, and ThatsItImOut Roger Conner's upthread post of solar-company shares going thru the roof. Overall, I think it is a hopeful sign of a developing transition and mitigation shift from detritus to biosolar fundamentals in the marketplace.

What will also be fascinating to watch is when the transition shift occurs between the desire to wastefully burn natgas vs the conversion to all the fertilizers, pesticides, and herbicides, along with all the other chemical applications, for hoarding and later usage.

Recall the Quote: "Burning natgas is like burning a Picasso painting."

IMO, this will be primarily due to the ease of FF-fertilizer transport and plant growth ERoEI versus the huge obstacles of geographic collection, processing, then distribution of huge amounts of biomass as we go to relocalized permaculture. Feel free to disagree, of course, but the market shift from natgas burning to chemical conversion could be extremely fast if food shortages start to arise.

Recall my earlier posting on the rapid rise of fertilizer company stocks. Come crunchtime: the ability to juice harvest yields will far outweigh the desire for cheap heat or A/C. I suggested long ago that we should be stockpiling a Strategic Reserve of FF-fertilizers and such: to help us bridge the transition, and it would also help force home insulation and families doubling up to defray costs, along with jacking up Peakoil Outreach and relocalization. Such is life.

I hope TODer ThatsItImOut is still expanding, then submitting his earlier natgas post to the editors. =)

Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

If you hoard ammonia they'll arrest you for cooking meth, and if you hoard ammonium nitrate they'll imprison you for terrorism. Isn't this a wonderful country?Bob Ebersole

Thigs are like that everywhere...

The nice thing is that you can always stockpile sodium (if you can get some of it, what is quite easy), so one can always safely terrorize people.

The key point about the article on Russian production is the repeated references to rising water cuts, which is the same problem that we are seeing worldwide. Matt Simmons called a lot of production "Oil stained brine."

As I have said several times, many giant oil fields are on their way to where the East Texas Field is now--1.2 mbpd of water, with a 1% oil cut.

As I also said several times, IMO the recent rebound in Russian production was largely just making up for what was not produced after the Soviet collapse. Based on the HL model, Russia should show a sharp decline in oil production, even as domestic consumption is growing rapidly. Needless to say, this would have a highly detrimental effect on world oil exports.

Is such a field still worth producing?
At what percentage of water cut does it become uneconomical to produce?
Also, what happens to the water? Does it not have to be handled like a toxic material?

Fields are produced past a 90% water cut for many years.
The water is generally either reinjected or treated and released. In the US at least expense of handling water is generally the controlling factor for producing high water cut wells not actually running out of oil.

Understand that 30% or more of the original oil in the reservoir is still their once primary and secondary extraction ceases so you can continue to extract small quantities of oil from very old fields for a long time.

The problem is the production rate is say 100-1000 times less than at the peak in general it seems that most wells are capped when production drops below a few barrels a day. Figure once cost are subtracted a two barrel a day well may net you say 50-75 dollars a day of profit you can see that its still economic to produce even at very low flow rates if you have infrastructure in place.

The time between when production peaks and when its not economical to keep producing some oil out of a field is pretty long. But the actual amounts are not that large. In the US we have I think 300,000 stripper wells this is probably greater than all the wells drilled in KSA but it proved about 1/3 of our production or about 2 mbpd or so. The EROI is probably lower so the net is say 1-1.5 mbpd maybe. You can see they are averaging about 6bpd or so from stripper wells. contrast this with about 10,000 bpd or more from a good well. Its easy to see that production from watered out fields although significant in aggregate is simply not that important.

Memmel, quick question: what powers the stripper wells?


Most stripper wells are powered by internal combustion engines with nodding donkey head pumps. I am not sure if they use gasoline or diesel.

I worked as a roustabout, (general flunkie), in the oil fields around Odessa, Texas for a while in 1959. I worked for a pump installer.

Ron Patterson


Most fields in the US abandoned before our peak in 1970 were abandoned with 60%-90% of the original oil in place. Since the peak, its more like 50% of the original oil in place What determines that level is 1. original drive of the reservoirs, with solution gas drives abandoned earlier that water drives and 2. market price of oil. Companies don't produce unless they are making money over production costs. Since EROEI calculations include drilling and capital equipment costs, they are not relevant except as to drilling at a greater density to increase productivity. Instead, its the production sales price minus the costs of production.

Also, capped wells is a misnomer. Oil leases expire after the wells aren't making money. Companies are required to plug the wells, and the cheapest methods involve filling the casing with cement at the formation, and then drawing the casing above for recycling to the base of the freshwater sands, then putting in more concrete to the surface. Needless to say, this is often a very expensive proposition with workover rigs going for $4,000 a day or more, so many operators just walk off and the state plugs the wells. The state doesn't have all the money it needs for plugging, so unless there is a pollution problem it may be several years before plugging. And many of the field maps are inaccurate as to the location of the wells and their plugging status, particularly on wells drilled before 1950.

People can make good money recompleting old wells. Its not worthwhile for a large company with high overhead costs, but for a small operator the money can be great. Lets do the math:
Cost of acquiring a 40 acre lease $4,000-$12,000
2 days workover rig time $8-$10K
Pump, used tank, assorted equipment $20K
Wireline logs, perforating $10,000
Total Costs $50,000

10 bbl/day at $60/bbl X 30 days $54,000
Royalty (25%) $13,500
Lease operating expenses (pumper salary, $20,000
chemicals,electricity, water disposal

net to the operator per month $20,000

which shows the real return on investment is perhaps 400% per year. Not bad!
Of course this is a hypothetical example. To make that kind of oil an operator may have to look at dozens of old wells. There's also opportunity costs-it may be more profitable for an operator to drill on new leases, or purchase production.
I could elaborate, but another thing is its easier to raise $2,000,000 than to raise $50,000, because you can add a lot more overhead and even a profit on a $2m well. And, there's a shortage of guys who can operate strippers profitably-it takes experience, and many old time small independents are dead or retired.

I noticed in the past that the US had excess oil post peak because so many wells where abandoned early. All this does is point to the fact that the worlds decline rate post peak may be sharper than what we have seen historically.

Needless to say full models that take WT HL/ExportLand model and attempt to add in additional declines because of better extraction methods pre-peak followed by far lower investments post peak simply make the outcome that much worse and you have to account for Nigeria/Iraq style above ground issues.

This is why I'm not convinced more rosy scenarios are possible since WT approach is in itself a rosy picture. The other proposals of peak need to have some very strong reasons for being right and right now its simply the assumptions that the oil industry will go on a massive investment bing and KSA is telling the truth. I don't find these arguments comforting. I think its crazy to assume that the above ground factors that have had large effects on the oil supply in the past won't continue to occur post peak.

And the problem post peak is simple to keep decline rates low investments have to basically double every year and everything has to run smoothly.

Ain't gonna happen.

DocScience To memmel

Great posts, but could you please click on edit, and put some commas in, to make it easier for me and a few others, to read ??

Read his profile. He's dyslexic. That's why his grammar and spelling are sometimes sloppy.

I'm going to attempt commas I figure extras are better than none at all. I tried to google for tricks to add commas if your dyslexic with no success.

I did find this.

We also focus on punctuation because our experience has been that many dyslexic students often don't see, understand, or respond to punctuation. Our particular approach reinforces the habit of recognizing and responding to certain punctuation marks that signal a pause or stop in speech when the text is spoken. These include commas, periods, semicolons, and quotation marks.

Gee thanks how about how the hell do I add them when I'm trying to write. Everyone focuses on getting us to read, which actually is not that hard once you figure out how to trick your mind. The trick is you have to play a game like when you look at clouds or ink blots and create a picture in your head basically you guess what the sentences say then you can see the real sentence and match it with your guess.
I suspect people that read lips do a similar trick.

Now tell me how to write dammit :)

One of those commas has to be right :)

Thanks memmel and all for responding. Good info.

Creating small plants to produce various petrochemical products and feed stocks based on syn gas is readily available.

So I'm pretty sure we can and will continue to produce high
value products from both petrochemical and natural sources in the future the micro channel approach makes smaller local processing plants near either a remote NG source or natural product source viable. Its not clear we need our huge petrochemical plants today. Another nice feature about the micro channel approach is its a lot easier to combine various feed stocks and products to create a desired products without the waste streams common in large focused plants.

Hopefully we will get a lot better with our use of plastics and move to biodegradable and recycling but it seems that plastic and other petrochemicals will be used in significant quantities for the foreseeable future although they will be more expensive than today and for example its not clear that petro/agriculture with no organic farming is viable.

I think we will see primarily organic (in the soil sense) farming with much smaller amounts of ammonia fertilizer used. I also suspect that pesticides and herbicides will continue to be important as long as we continue to plant large swaths of a single crop. I think we will need to move to a far more varied agricultural model before we see a decline in these the use of these chemicals. In this case its up to public opinion to force the issue since the cost/benefit ratio for pesticides and herbicides is high.
Maybe the need for higher organic content soils and living topsoil will cause a decrease in the use of herbicides and pesticides. Full organic farming an ELP seem to have a synergistic relationship.

As a related example in California we are seeing a move to stronger reusable plastic bags in stores as apposed to disposable ones.
This more sensible use of plastics seems to be the future.


In my area, the large grocery stores are selling a large size reusable grocery bag, with their logos on them, for $1 dollar. They are also guarantying (no time limit) to replace them for free if they ever break.


My wife carries tons of schoolbooks in those 'bags for life' - really screwing her side of the bargain. I bet thats one contract [of many] that gets reviewed when we 'make other arrangements' - as someone famously said.


That is what the stores want you to do.
Free advertizing !!


The New Scientist article was an eye-opener. The fact that such huge value is created from such a tiny % of oil clearly indicates that even if oil prices where to double, triple, whatever, it would hardly impact the end cost of all those things we make from petrochemicals.

This is why I am increasingly failing to see 'die-off' scenarios coming about.

It's clear that transport is the key issue that will need to be addressed and from what I see the US is so hugely inneficient in this area that there are vast economies to be had by a fairly simple mechanism: demand destruction and a shift to smaller more efficient vehicles.

All this talk of civilization die off is simply projecting an exponential problem without considering the exponetial solutions that will be applied. Ugly-period yes, End of humanity -I now doubt it.


Its more the end of out type of society based on relentless consumption. For the American style consumer it will be effectively the end of humanity. I would be surprised if the genie of science/technology is lost or if so lost for long.

But I do see it taking a completely different direction from today with a very different culture and we will have to solve the intrinsic problem of population. This may well be via migration into space but either way we can no longer avoid coming to grips with the need for a finite and stable population/consumption level on this planet. Solving this shakes almost all societies and institutions to the core if you think about it.

Initially the solution may well be inhumane but long term we have no choice but evolve into a species that can limit itself and still be technically advanced.

WT: You nailed another one.

Frankly, I don't see how we get 3 or 4 years down the road without the world economy going into the crapper. The American economy is so jacked up that they are cooking every statistic they can to make things look swell! China and India are burning down the barns with +12% growth, and we know how sustainable that is. The world speculation in credit derivatives is what, 3 times Global Production? Pakistan is trying as hard as it can to implement 'Nukes to Kooks'.

If we make it to peak we will be lucky. All it will take at this point is some freak incident, and 1929 looks like a passing shower.

Your forgot to mention peak oil and global warming.

Obviously you don't understand the real problem.

Its not that we are going to crash and burn thats obvious its trying to figure out if we can guess the chain of events that will take us out that's the hard part and to some extent when. Global Warming is losing right now because its simply to slow. Right now its a race between peak oil and economic insanity with political mayhem in the ME or South America or Nigeria vying for hard for third place. As far as time goes on the economic side we seem to have less than two years.

Also note only WT model with additional negative assumptions about investment makes peak oil a important cause for crashing our global economy since shortages and high prices would then be the key of a global crash. If we crash because of the crazy economic conditions currently occurring demand will taper off and peak oil will then effect us by ensuring that economic recoveries fail as they lead to increasing demand and shortages and high prices.

Right now unless WT model plays out it looks like economic collapse and fairly low oil prices i.e less than 100 a barrel with spike later as economies try and recover. At this point GW can play a bigger role as natural disasters also work to ensure our economies continue a fairly slow death spiral.

This economic meltdown is probably the least dangerous way for our economy to unwind and right now its the front runner. Certainly makes me wonder if its not being done on purpose since its obvious we can't continue pumping our economies even for five more years since we would run out of a vast array of resources quickly at our current growth rates. Everything from water to metals to food and a myriad other resources needed for a technical global civilization will have peaked within the next five years and even if oil has not peaked its impossible for us to grow our oil supplies to meet projected demand even 5 years out.

So economic collapse and a deep recession is certain within 2 years.

WT exportland model give at best 5 years and at worst two.

A vast range of other issues hit within 5 years.

Global Warming is the laggard with serious effects occurring further out at about 10 years right now but recently its been gaining ground and depending on how the current accelerated melting of the arctic it may jump forward.

I've been shocked by the recent melting.

This may mean major climatic shifts as early as next year.
So its never save to discount mother nature. The effect of adding a new ocean to the planet is one thats effectively impossible to understand.

In any case the number of converging catastrophes makes it hard too be a doomer as to many bad situations vie for your attention. But we do seem to have at least one to two years before things begin to get obviously bad and at best five.

The OPEC spare capacity calculations are as much nonsense as ever, but there are several amazing statements in this report.

the implied net non-OPEC decline rate for baseload production is around 4.6% per year. This covers not only fields in decline, but also older supply which is at or approaching plateau. With net decline from OPEC assumed at 3.2% per year, this gives a global annual decline of 4%, suggesting that 3.2 mb/d of new production must be found each year just to stand still.

Moreover, this net global decline for existing assets masks fairly aggressive assumptions for parts of the OECD and for deepwater projects elsewhere. Development schedules for the latter can show rapid ramp-up followed by abrupt annual decline in a 15%-plus range.

This is from the IEA, not a peak oil bottom-up forecaster! They do slightly temper that by going back to above-ground factors:

Without minimising the importance of this variable, particularly given a shortage of comprehensive fieldspecific production and reserves data, our analysis suggests that variance from the original non-OPEC forecast in recent years has not primarily been due to understatement of field decline rates.

No one has yet presented a convincing argument that the massive amounts of investment needed to achieve a plateau in production going forward are actually going to happen. I see no reason to expect the same level of investment in maintaining maximum production post peak as happened in the US on the global scale. In fact we are generally seeing the opposite with the investment rate actually decreasing globally as the world peaks across the board oil companies regardless of their status as national or private seem to be pulling back from investments in maintaining and expanding oil production. In addition we face the maintenance nightmare coming from years of underinvestment from the long period of cheap oil.

I'd love to see a graph of past current and future investments in oil production to see if this observation is supported. I've never seen a source for these stats but just collating it by hand we seem to have had a fairly brief burst of investment when the prices initially increased and then a continued decline in investment caused I suspect by the fact that the returns simply don't justify the investment.

This goes along with my opinion that the Texas crash was not caused simply by the availability of cheap oil elsewhere but because the massive investment made as Texas peaked failed to alter the decline rate and give a good return on investment. So I just don't think the shallow decline rates we are seeing now will continue for that much longer since I'm not seeing a repeat of the massive drilling campaign that marked the peak of American oil production.

"No one has yet presented a convincing argument that the massive amounts of investment needed to achieve a plateau in production going forward are actually going to happen"

-The argument is simple: $120+ a barrel oil. High prices=new investment.

-We are currently in "A great Bull Run" on oil prices and commodities, when oil was $10 almost everyone but SA was making a loss. This is how the plateau is created, doesn't mean oil prices won't keep heading slowly North though as even with the high prices of the last 4 years and ever increasing investment it is looking like non-OPEC below ground factors are kicking in.

The major difference (and what will probably lead to eventual decline) is that OPEC is increasingly back in the driving seat and it is NOT a business, it is a cartel. It's aim is simple: make large amounts of money for it's member Nations by selling just enough oil to keep the price as high as possible but not so high as to cause a recession in it's markets. Their oil ministers must be in a state of bliss cat the moment: demand is racing ahead (2.2% PA) even with these high prices.

It seems to me the IEA recognises this and the statements like 'tight markets' in there are a warning. If there's no spare capacity outside OPEC and afformentioned investment takes time to ramp up there will be a problem (higher prices). With the ExportLand model (and I am eagerly awaiting the report guys!) OPEC Nations themselves are growing internal demand and will eventually lose the ability to export -they will have less NET oil. When this happens there will be a huge price spike rather than just 'tightening hikes' and a deep recession in the West is virtually gauranteed.




"-The argument is simple: $120+ a barrel oil. High prices=new investment."

I would agree with memmel on this one.

When crude was $40 they said $50 crude would increase investment so much that it would bring massive new supplies on the market.
When crude was $50 they said $70 would do so.
Higher oil price means higher drilling cost, and all associated infrastructure .

We must come to the realization that price is not the solution.


With the ExportLand model (and I am eagerly awaiting the report guys!) OPEC Nations themselves are growing internal demand and will eventually lose the ability to export -they will have less NET oil.

IEA Medium Term Oil Market Report July 2007

Pg. 70-

Global trade of crude oil and condensates (excluding intra-regional trade) is forecast to rise by 5.2 mb/d between 2007 and 2012, or 3% per year on average. This marks a continuation of the growth in crude trade seen since 2003, as centres of crude supply and demand become increasingly disparate.

Global trade of crude oil and condensates (excluding intra-regional trade) is forecast to rise from 34.9 mb/d in 2007 to 40.1 mb/d in 2012. This equates to a 15% total increase, or 3% per year compound growth, and marks a continuation of the growth in crude trade seen since 2003.

Pg.72 -

Middle Eastern exports to OECD North America are forecast to rise by around 0.8 mb/d (5% annually, 29% in total) over the medium term, to reach 3.7 mb/d in 2012. Nearly half of this extra crude could potentially come from Saudi Arabia (overwhelmingly lighter crude) while imports from Qatar and UAE are also forecast to rise. This reverses the decline in flows (-4%) seen between 2001 and 2006.

African crude and condensate exports are projected to grow by 19%(4% per annum) over the medium term, from 7.6 mb/d in 2007 to 9.1 mb/d in 2012. This continuesthe strong growth trend over the last five-year period (2001-06) when exports rose by, on average, 7% per year from a lower base. Export growth earlier this decade was driven by significant supply increments in Angola and Algeria (over 500 kb/d growth from 2001-06 each) alongside relatively slight domestic demand growth. The US absorbed many of the extra cargoes from both of these countries alongside surging Chinese imports of Angolan crude.

Over the next five years, African exports will be boosted primarily by higher output from its OPEC members, with Europe and China the main recipients of incremental flows. Volumes bound for Europe, including extra cargoes from Nigeria (geopolitics permitting) and Libya, are projected to reach 3.3 mb/d by 2012, compared with around 2.7 mb/d in 2007. Chinese imports of African crude are projected to rise from 1 mb/d in 2007 to 1.8 mb/d in 2012, growing by 11% per year, with notable increases in cargoes from Angola and Sudan in the next couple of years and Equatorial Guinea from 2009.

Pg. 73 -

Exports from the Former Soviet Union are forecast to rise in the medium term by 4% per annum,from 6.3 mb/d in 2007 to 7.6 mb/d in 2012. This follows five years of strong export growth, which averaged 11% between 2001 and 2006, as improvements to export infrastructure allowed rising FSU supplies to increasingly flow to other regions. One key improvement has been the development of Russia’s crude outlet through Primorsk in the Baltic, where exports have risen by at least 500 kb/d between 2004 and the present. The BTC and CPC pipelines have also been developed in recent years, allowing Caspian flows to other regions via the Mediterranean and Black Seas. Prospective expansions of outlets for FSU crude to the North and South, plus a new pipeline to the East and various Bosporus bypass projects, may all contribute to higher FSU exports in the medium term.

FSU exports to Europe, having already risen annually by 10% in the last five years, could rise by a further 0.5 mb/d to reach 5.8 mb/d in 2012. Azeri and Kazakh exports will drive this growth, potentially replacing some of Europe’s sweet crude supplies lost to North Sea field decline, outpacing reduced flows of sourer Russian Urals which may be increasingly processed in complex Russian refineries. FSU countries are set to provide over half of European crude imports as of 2010.

Exports from Latin America may increase from around 1.9 mb/d in 2007 to 2.1 mb/d in 2012. This equals 2% growth after approximately 4% annual growth seen between 2001 and 2006. Incremental exports in the last five years were driven by slight increases towards OECD North America and the first cargoes headed for China. In the medium term, trade to OECD North America is projected to increase by another 240 kb/d. Despite large supply additions in Brazil in the medium term, crude export growth from Latin America will be limited as increasing amounts of crude are diverted to the domestic market. Crude demand should be inflated by rising refinery utilisation and some capacity additions, mainly in Brazil itself. Furthermore, small amounts of crude currently imported from West Africa and Middle East are likely to diminish as heightened domestic refinery sophistication allows Latin America to process its own heavier crudes.

Certainly our forecast suggests that the non-OPEC, conventional crude component of global production appears, for now, to have reached an effective plateau, rather than a peak.

To put some meat on this religious conversion on the part of the IEA, on page 31 they have a chart of non-OPEC liquid supply. Crude oil and condensate plateau is highest ("peaks") in 2010-11 and is (ever so slightly) lower in 2011.

Have they ever shown that before? I doubt it. A tiny increase in decline rates, which they concede as possible in the text, would bring non-OPEC peak oil forward to 2009 (for crude and condensate).

Peak Oil presentations are going to be so much more fun now. I can quote the IEA on every slide :-)


Yes, but on that very same page (31) they say:

Peak or plateau production is frequently taken as shorthand for impending resource exhaustion. While hydrocarbon resources are finite, nonetheless issues of access to reserves, prevailing investment regime and availability of upstream infrastructure and capital seem greater barriers to medium-term growth than limits to the resource base itself.

Thus again the basic response (by any politician) to any measured decrease in production can be blamed on "access to reserves", "infrastructure", etc.

Hello TODers,

I obviously have no way to prove this, but I think all Peakoilers, Peak websites, Peak blogs, Peak books, Peak videos, etc have helped contribute to this more realistic posture by the IEA.

From the books by Deffeyes, Heinberg, Simmons, Campbell, et al.

From the websites: TOD =), EB, LATOC, Peakoil, etc.

From the Orgs like: ASPO, ODAC, Willits, etc.

From the blogs: R-squared, Graphoilology, etc, [more down the left side of page].

From the videos & audios: Bartlett's Exponential [IMO, priceless!], Global Public Media feeds, etc, and assorted DVDs.

From the ceaseless MSM writing by Tom Whipple, plus the other reporters/writers who have the cojones to tell the truth. Big tip of the hat to Congressman Roscoe Bartlett, too.

From the exasperating work done by James Hansen and other climate researchers, RealClimate, IPCC, etc. PO + GW are inextricably linked, IMO.

I feel we should all briefly thank ourselves for keeping the heat turned up by our mutual efforts, but we are only just starting.....

It is a huge ongoing effort, but maybe, just maybe, the rudder might have imperceptibly moved with this latest IEA report. Time will tell.

Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

Hi Bob,
Someone on this site mentioned the term a preponderance of evidence. Is that enough for a conviction?
Chimp, care to weigh in?

Preponderance of evidence is the legal standard of proof used in civil cases. Beyond a reasonable doubt is the legal standard of proof in criminal cases (i.e., for a conviction).

Thanks for that.
It looks like we have an "OJ conviction" then.
No crime but plenty of foul.

One wonders why you are labeled 'cultists'?

You all seem so overjoyed by the 'amazing' statements from the IEA. But it's clear that only words from a powerful international bureaucracy aren't enough, you all need to see chaos - riots on the streets over gasoline; grass spurting up on the interstate highways; animals inhabiting old suburban tracts; death; war; misery...

You yearn for it. You wait for that magical day, where the monotony of cheap-oil fueled life is thrown violently to a standstill; where we are forced to learn, again, the skills of food production; hand holding; and local smiling amongst one another. Why do you all yearn for such a seemingly disastrous path?

Because you all are dissatisfied with oiled life. It really is ridiculous isn't it? All of us living on the shoulders of 1 billion years of sunlight; in the space of a geological blip, we erect a complex that does nothing more than reveal ALL of time.

But really it is your dissatisfaction that causes you to yearn for disaster. And that I conclude is kind of sick. We need a different politics than - lets wait for the crisis and say "we were right - stupidheads!" We need a politics that connects issues of "peak oil" - which is really just a energy issue - and the distribution of energy to people. How will (can?) energy - of all kinds, including food - be distributed in this peak oil 'future' you map out? And don't give me - we'll all be in self-sufficient local communities enduring the collapse. No. Any capacity to produce energy - food, wood, oil, coal, etc - will be a matter of concern for various competing interests. Understanding the dynamic social and political relations between those interests is the most pressing concern. NOT perusing yet another mathematical logarithm predicting the decline of this or that field, revealing, yet again, the biophysical fixity and stubbornness of 'nature' - damn her. Fuck that.

We must understand oil and power. A politics of 'peak oil' must direct its attetntion away from biophysical fixities, and toward a human politics.

Oh bullcrap.

It's very common for people to want to be recognized for being right. That's all that many here feel. You projecting your own psychological problems on others is more telling of you than it is of the rest of the peak oil community.

Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett

The problem is sustainability. Just recently I had a chance to discuss the real history of the mythical American pioneer. The family that settled the land my parents bought still own a small section of the land and its history is well known. It was settled three generations ago as a 300 acre land grant.

By the time the third generation owned the land it was no longer a productive farm with the last cows sold about ten years ago. The final two sons will inherit 20 acres of the original farm the rest of the farm is split into unproductive 5-20 acre mini-estates. In general most of the residents don't even grow most of their food. A lot of former farm and pasture land that is not dense suburbs has reverted to these under utilized small private holdings.

So you can see that even the pioneering approach with free land was unable to create a sustainable agricultural region and failed in less than 100 years.

In the interim a lot of wealth was created in the form of more homes and rising land values but its not clear that even these will exist in 100 years.

So claiming some sort of superiority with a civilization that certainly wont last a thousand years is laughable at best if the fact your so smitten with it was not so alarming.

In the long run the oil age will be a footnote in history and probably considered the hight of error and stupidity for the human race. One thing is certain the shame of what we have done to this planet will last long after we are gone.
We are certain to be cursed for thousands of years.

I can only hope a few recognize that not everyone had your arrogant attitude and realized what we have done.

All right mhuber, defend your words!
Most TODers see the present use of "1 billion years of sunlight" as a tragic, unnecessary waste. Rather than use this wondrous gift for sustaining and enhancing intelligence on this planet, we see it used to wait in line at the drive-thru of a fast food merchant or being flared off as a nuisance gas or in the paving over of perfectly good farm land.
We see the emmissions of the burning of this gift wreaking havoc in all of our natural world.
We see a "powerful international bureaucracy" determined to drive all of our loved ones (since it ain't on TV it can't be true) off the same cliff of energy dependency they have. Fully aided and abetted by the lack of any MSM acknowledgement.
We don't "yearn" for it, rather we try to learn from it and help teach others not to make the same disastorous choices that got us to this overheated, frantic state we are in.
Yes we are disastified with oiled life, especially when it wakes us from our sleep in the form of thunderous lust, belched out by massive drive-by woofers.
We don't "yearn" for the disaster we see approaching with relentless speed, we dread it and spend our free hours here devising plans to cure our fellow man of his "sickness" of ignorance.
If you have spent any time here at all and truly read the posts you would know that virtually every mitigation plan, post peak community solutions, energy alternatives, ANYTHING related to Peak Oil has been discussed exhaustively here at TOD.
If persuing yet another mathematical logarithm is what it takes to wake our fellow Man from his slumber, rest assured the analytical element of TOD will be there in force.
Are we seeking acknowledgement? You bet we are.
And watch your language, I want my son to read these pages and he is still far too young for me to explain your lack.


To: mhuber

RE: “1 billion years of sunlight”
In my article, I try to explain that we are destroying our future.


I like, "thrown violently to a standstill" : )

The seriousness of this problem is utterly lost in much the blogosphere and MSM. Here's an example from the MSM:

I fail to see how this is a "bullish" report.

Similarly, I've seen a lot of blog posts about this. Many are promoting the technology will save us angle:

We need to be sinking major dollars into the development of new technologies and focusing on making them affordable to all consumers, not just the rich (e.g hydrogen/electric transportation -cars, planes, trains). Time is quickly running out for the environment and our way of life.

Maybe we should think about the term "consumers" a little more deeply.

Many are promoting the technology will save us angle:

This is self-evidently true. We will move to different technologies as oil and other fossil fuels decline in availability.

Speaking for myself, I would prefer to have to same effect, (lots of cheap, easy transport, warmth and electricity) from the new technology.

I think there is every chance such technology will arrive at an initially slightly higher price. The transition to this new way of powering our civilization should start ASAP. However knwoing where to place your bets and which technologies will win is not always obvious.

I imagine some technologies will indeed replace some of the energy lost by conventional oil peaking, they already have to some extent. That surely is self-evident. However, I think the notion that we can continue to live the way we are accustomed to will reach an end, either voluntarily or by some external factor.

My concern is that most folks still do not recognize this. I think the sub text of posts I quoted quite clearly suggests "business as usual" rather than a profound change in our ways of life. The Globe post wants us to profit, and the blog post wants us to invest in some magic technological bullet. Perhaps an entirely new socioeconomic approach is needed, hence my reference to thinking about the term "consumers."

It conjures up an image of some sort of enormous organism with a big mouth and a slimy tongue gobbling up things. Yuck! Not an image to take forward towards a bright and shiny future.

I often wonder what the replacement term should be.

How about a return to the somewhat old-fashioned "people".


Piggly: Eventually, you may be right. However, it won't happen overnight. Certain canaries in the mine, such as trucking and suburban development, are still singing. IMHO, "civilization" and economic growth will continue many years after both of these are downsized to a fraction of their current importance.The whole defeatist mentality is a waste. Having said this, if $10/gal gas would hit you directly, you should change your lifestyle immediately, IMO.

wanted to spread some good news on the drum.

The process generates energy from plastics or rubber, and can produce up to 18 times the energy that is used to fuel the machine. For instance, a 10 ton per hour unit operates on 950,000 btu per hour, and the process can generate on average of 17,300,000 btu per hour output.

18 times!! helluva EROEI!!! More info on their site:

This is huge folks and if it works on oil shale like they say, then say hello in the future to American oil independence.

Member for one hour, and linking to the press release for the magical new technology that will save us all.

If you are not a shill (and I am sure that you are), you really should learn about this site before you start throwing out crap like this.

This 'magical device' is also being heavily funded by DOE and has already been verified by them. Geez, just posting some info.

Hello theantidoomer,

Since you are a newbie--I feel you deserve a break.

Please read up on Thermodynamics, then you can be a TODer. There are lots of recycling possibilities, but none will create additional output energy greater than the input energy.

Bob Shaw in Phx,Az Are Humans Smarter than YEast?

That is one of the mysteries of official statistics:
Burning oil in the form of plastics or for that matter burning garbage is counted as "renewable energy" in Austria and also elsewhere.
This story reminds me of an old tale by the Grimm brothers:
Hans im Glück. (Hans in Luck : Hans gets his life time earnings payed with a gold lump and ends after trading it for a cow, the cow for a swine, the swine for a hen, the hen for a stone, with a stone)

There are, however, a few hundred billion barrels of oil equivalent locked into our landfill plastics :P


I think your leaving out a lot by claiming 18:1 EROEI for this microwave retorting process.

First of all the input energy to the device is electrical, the energy output is chemical potential. If the electricity is going to be produced by burning some of the product we know we are going to see losses at that generating plant on the order of 2/3. so that gives us a starting point of more like 6:1.

But its not going to be anything like this good, because according to their claims here:

they can extract 5 gallons of oil per ton of shale. (30% of the 15 gallons per ton they quote as being present to start with)

So for each bbl of oil you need to include the energy costs of mining and crushing on the order of 9 tons of shale and then disposing of on the order of 9 tons of contaminated waste "ash like" material.

On a tonnage basis I think this on the order of 4..5 times worse than the Canadian Tar sands projects, where they need 2 tons or so of raw mat'l to get a bbl of oil. The devistation such a scheme would cause is hard for me to imagine, but maybe thats just me...

Your probably better off mixing the oil shale with poor coal and either burning it directly or using a blast furnace like arrangement to retort it. This combination might put you down around about twice as bad as the tar sands. Plus you can generate electricity with the waste heat. I'd think the combination is better than doing CTL directly. Your right though the pollution is horrendous esp C02 no matter how you do it. Trying to produce significant amounts of our oil from oil shale without using nuclear energy would probably double or triple our C02 output.

So the final result is probably only nuclear electricity looks viable. But at that rate you can just couple nuclear electricity with natural carbon source and electrolysis to produce oil.

From the site:

Shale, whether it's in-situ (its original location) or on the earth's surface, on average contains about 50% to 70% hydrocarbon (hydrogen and carbon – i.e. fossil fuels) and kerogen by weight making it the most abundant source of fuel in the USA next to the hundred of thousands of capped-off oil wells.

Only hundreds of thousands of capped off oil wells?
Shoot, I thought there must've been millions of 'em. 'Specially after what I read in that $1000 CERA report I ponied up fer!

IEA’s July 2006 Medium Term Oil Market Report (MTOMR), under the heading “OPEC Crude Oil Capacity Developments”, pp 39-40

disclosed this about Saudi Arabia:

Saudi Arabia drives the expected increase in crude capacity, adding 1.6 mb/d on a net basis by 2011. OMR estimates of current Saudi capacity have typically come in lower than announcements from the Kingdom itself. However, this is more due to definitional differences than any inherent scepticism over Saudi physical capability. OMR estimates for OPEC correspond to capacity which can be activated within 30 days and sustained immediately thereafter for 90 days. Surge capacity is disregarded under this definition, as is capacity shut-in due to gas-flaring restrictions. In the case of the estimate for Saudi Arabia, the OMR also attempts to exclude condensate volumes and Bahrain’s share of production from the Abu Safah field, amounting to a combined 300-400 kb/d.

Saudi Arabia has well documented plans aimed at pushing capacity to 12.5 mb/d by the end of the decade, with a further optional increase to 13.1 mb/d by 2013. The later increases are seen dependent on demand. Sequentially, the projections in this report assume new field start-ups as follows:

* Khursaniyah (Arab Light), 500 kb/d beginning in late 2007;
* Shaybah (Arab Extra Light), 200 kb/d starting in the second half of 2008;
* Nuayyim, (Arab Super Light), 100 kb/d from in the second half of 2008;
* Khurais (Arab Light), 1.2 mb/d starting from 3Q 2008;
* A 200 kb/d expansion of Partitioned Zone capacity shared with Kuwait, beginning in late 2009 and early 2010;
* A further 200 kb/d expansion from Shaybah entering service at mid-2010.

(only Saudi Arabia forecast capacity figures extracted, rounded to mbd)
2005, 2006, 2007, 2008, 2009, 2010, 2011
10.44, 10.73, 10.80, 11.17, 11.47, 12.26, 12.33

(also another column but only Saudi Arabia)
National Government Forecast of 12.50 mbd in 2010

Longer-term plans to add up to 1.0 mb/d of mothballed Arab Heavy crude at the Manifa development by 2013, with start-up in 2011, have been excluded from this forecast. Although this project has been sanctioned by Saudi Aramco, construction start in 2008 is believed subject to underlying demand. While increased volumes of Arab Heavy might be diverted by new-build complex refining capacity within the Kingdom, it is uncertain whether sufficient refiner demand will exist at that time in import markets elsewhere.

Decline rates for Saudi Arabia have been held within a 1-3% range depending on location. There has been much controversy lately over actual performance at baseload Saudi oilfields such as Ghawar. Clearly, if Aramco fails to meet its aspiration to boost drilling activity threefold by the end of the decade, it may struggle to attain target production levels. However, the company in the past has been adept at pre-ordering drilling capacity well ahead of requirements, making it well-placed relative to some of its competitors. With the bulk of Saudi expansions coming from onshore fields, for which prevailing global tightness in drilling capacity is less pronounced, so delays in obtaining rigs may be less prevalent than for other, notably non-OPEC, producers.

Saudi Arabia disclosure under same heading for July 2007 MTOMR page 42, was much less than last year

(only Saudi Arabia forecast capacity figures extracted, rounded to mbd)
2006, 2007, 2008, 2009, 2010, 2011, 2012
10.73, 10.80, 11.17, 11.46, 12.17, 12.31, 12.57

Saudi Arabia is responsible for almost half of expected OPEC capacity growth to 2012, as capacity reaches 12.6 mb/d in 2012, a rise of 1.8 mb/d from 2007. The 900 kb/d Manifa project (Arab Heavy) is now included from 2011, with crude here likely destined for new complex Saudi refining capacity. Otherwise, Saudi crude expansion largely centres on its lighter/sweeter grades from Khursaniyah, Shaybah and Khurais, together with associated gas liquids. Questions over Saudi and other OPEC members’ capacity expansion plans in the face of demand uncertainty are believed related to the next, post-2012, phase of expansion rather than the current cycle.

What’s the difference between this year and last year?

Last year there were four paragraphs about Saudi Arabia’s crude oil capacity including projects; this year just one paragraph with no detail about the projects. Last year Manifa, 1 mbd, was excluded from the forecast; this year, it is included at a lower rate of 900 kbd.

Last year there was disclosure of decline rates of 1-3% (per annum) for Saudi Arabia. This year on page 30, an OPEC decline rate of 3.2% pa was assumed. However, a quick calculation on last year’s forecast implies a very low decline rate of only 1.53% per annum on Saudi Arabia’s 2006 production of 10.73 mbd. This gives a 2011 production rate of 9.93 mbd before capacity additions. Last year’s capacity additions are 2.4 mbd and when added to 9.93 mbd give 12.33 mbd which is equal to last year’s 2011 production forecast. This tells us that the IEA is using a decline rate of 1.53% per annum for Saudi Arabia instead of their stated 3.2% pa.

Last year, there were two capacity additions scheduled for 2009/10 of 200 kbd for the Partitioned Zone (aka Neutral Zone/Al Khafji) and another 200 kbd for Shaybah expansion. Given that the 2009 and 2010 forecasts are similar for both last year and this year, it’s safe to assume that these two projects are also included for this year. However, last month these two projects are no longer included in Saudi Aramco’s project schedule.
Maybe the IEA forgot to read Aramco’s latest project schedule and exclude the capacity expansions from these two projects.

This year and last year, the forecasts for Saudi Arabia’s capacity show a clear uptrend from year to year. Last year Saudi Arabia’s national capacity forecast of 12.5 mbd for 2010 was disclosed; this year no forecast was disclosed.

The IEA forecasting method is misleading. It appears that the IEA uses Saudi Arabia’s forecast capacity target of 12.5 mbd and then calculates a decline rate for current production to calculate forecast production, without capacity additions, which when added to forecast capacity additions is approximately equal to 12.5 mbd. Their calculate decline rate for current fields is about 1.53% per annum.

The tone of this latest July 2007 MTOMR is exceptionally conservative. The IEA should probably issue a stronger warning about total liquids production probably being on a peak plateau but instead statements like these are made about above ground risks and peak oil:

Page 27
“All told, the forecast suggests the industry needs to generate 3.0 mb/d of new supply each year just to offset decline. Notwithstanding, above-ground supply risks are seen exceeding below-ground risks in the medium term.”

Page 28
“A levelling off in non-OPEC conventional crude supply is notable, but is inconclusive as evidence for an imminent oil supply peak.”

Page 30
“Without minimising the importance of this variable (the annual decline rate), particularly given a shortage of comprehensive field specific production and reserves data, our analysis suggests that variance from the original non-OPEC forecast in recent years has not primarily been due to understatement of field decline rates. Rather, we believe that project slippage, weather, and unplanned production
stoppages for technical, economic and geopolitical reasons, have been, and will continue to be in the next five years, the main risk factors. Put another way, while
we continue to monitor and actively adjust for shifts in field and aggregate decline, we see above-ground risks more prevalent, for now, than below-ground risks.”

Page 30
“The concept of peak oil production and its timing are emotive subjects which raise intense debate. Much rests on the definition of which segment of global oil production is deemed to be at or approaching peak. Certainly our forecast suggests that the non-OPEC, conventional crude component of global production appears, for now, to have reached an effective plateau, rather than a peak.”

Page 31
“Finally, we note that focussing on non-OPEC crude alone is a rather selective way of considering the sustainability of global oil production. Peak or plateau production is
frequently taken as shorthand for impending resource exhaustion. While hydrocarbon resources are finite, nonetheless issues of access to reserves, prevailing investment
regime and availability of upstream infrastructure and capital seem greater barriers to medium-term growth than limits to the resource base itself.”

Page 31
Upstream Operating Environment Remains Stretched
In last year’s MTOMR, we identified several factors which characterised the upstream operating and investment environment for 2006-2011. These were:
1. Rising crude oil price assumptions employed by operating companies;
2. Increasing spending and activity levels;
3. The expanding reach of consumer country NOCs;
4. A declining trend in exploration expenditure as a share of IOC total spending;
5. High costs and tightness in construction, drilling and service capacity;
6. Correspondingly, a tendency for new upstream project delays;
7. A compounding impact of delays to new pipeline and gas processing capacity ;
8. Proliferating geopolitical risks and barriers to oil company access.

Arguably, the first three factors could accelerate the pace of expansion in non-OPEC and OPEC supply. However, the balance of risks deriving from factors 4-8 lies heavily on the downside and would seem to argue for slower growth in global production capacity relative to historical trends.”

In a sense they are right that above ground factors in particular lower investment than common in western countries will be a deciding factor. Underinvestment is and easy way to bring peak forward and its effectively impossible to make up the lost ground. The requirement of 3mbpd of increased production to just stand our ground means that any above ground delays quickly put us post peak.

This is why I'm pretty sure we are post peak now. We have a deficit of close to 6mbpd of production that would need to be brought online to overcome the depletion thats occurred since 2005 I just don't see this is possible. Every year this gap will widen. Starting next year we are effectively to far behind for any of the projects scheduled to be able to offset decline much less increase production.

I actually don't quite understand why peak now is even controversial since we can only expect decline rates to increase. Although I can see how you can get a peak in 2010 assuming perfection it makes sense that above ground factors will be the cause for a "early peak". And more worrisome they will probably also be the driving force in the real decline rate post peak.

So its technically correct to focus on above ground issues since they are controlling real oil production. The sad part is they are not admitting that even if above ground issues went away we still face peak and decline over the next few years. No one thats not peak oil aware is willing to simply ask why we have so little oil coming on stream that project delays suddenly become critical. Peak Oil is of course the underlying factor that causes these above ground factors to assume so large and effect in the first place.

ace - thank you for doing that comparison, most useful.

I should remark, the front page story in the FT today is:

World will face oil crunch ‘in five years'

Admittedly it then softpedals on OPEC capability, missing much of the good stuff. However the business community will take note.

Is also being talked about on BBC World Service today, probably because of the FT article.

What I fail to understand is how little this topic is known about by the general public. It's astounding. Even those people I have told remain mostly in mild denial.

Will we be having 'Earth Day' type global concerts to mitigate the worst effects of PO in 2015. Bob Geldoff telling us to "Switch off our ****** light bulbs, NOW!"

Possible response:

a) "technology will fix it -it always has". Possibly true in the long term but 'life as we know it' will be very different in the interim, no easy tech fix...
b) "Not going to happen, lot's of Oil Doomongers b4 and it ain't happend yet"
c) [a variation of b] "Not in my timeframe". This one is especially bad coming from people with kids...
d) "It won't be so bad". Maybe not -how can we know how bad it might be? There's lots of slack/inefficiency in the system...
e) "More important things to worry about". Some good posts here on TOD regarding this -Hyperbolic DF.

Anyone got any links for some PO scenario analysis work? E.g. Oil rises to $200 -likely impact.


As a "bottom-up peak oil forecaster" -- thanks, Phil Hart (his remark above) -- I wanted to point you to some columns I've written over at ASPO-USA that anticipate everything the IEA says and more.

First, look at my 2nd column Decline Rates and Non-OPEC Supply in which I show how various non-OPEC supply forecasts have failed (including Wood Mackenzie, who I excoriated the other day in a Drumbeat). In this column, I calculate the IEA's 4% net decline rate.

Second, look at The Call on OPEC? in which I show how the IEA and OPEC duke it out by revising their required non-OPEC supply forecasts.

Third, look at The Gulf of Despair? in which I point out the problems in the GOM. The IEA notes these problems, talking about Thunder Horse. There are many other projects that are in trouble or have large associated uncertainties.

I must say, at this point, that it is somewhat satisfying that Fatih Birol has read the writing on the wall. On the other hand, after a moment of reflection, I must admit the chilling and depressing emotional effects of being right.

Hi All,
Mandil & Birol have been saying roughly this for a while now. In fact Birol said similar things here a while back:

and we ain't all gonners just yet! :)

Don't forget the difficulty in assessing future demand, costs, and economic impacts thereof!

Hope you are all well. I enjoy the site loads...
All the best

You're right Adam, but you can also read this as if the IEA has been genuinely scared since 2004... and this being the IEA, they have to carefully chose they wording. All in all, and being a citizen of an OECD country, I think the IEA is doing their part. Not much by a peak oil activist standard, but at least their are making the headlines.

regards from the sweet Penedès... ;-)

Page 26, Saudi Arabia oil demand will grow almost +4.3% per year reaching 2.8 mbpd in 2012:

At this rate, domestic demand could reach 5 mbpd in 2025! Also, the productive capacity forecast for Saudi Arabia (blue dashed line noted "IEA, 2007") is not very different from the previous forecasts (very close to the 2005 forecast):

Click to Enlarge.

This is a nice case for Westexas export land model.

My usual disclaimer, I was building on work by Simmons & Deffeyes, et al, using Khebab's excellent graphs.

Note that Saudi Arabia is pretty much the "best case" net exporter, in terms of total production and consumption level, albeit rapidly increasing consumption.

Key point: even flat production = declining net exports (assuming increasing consumption).

As I said over on the Drumbeat thread, the HL based math on this whole net export situation is going to be pretty horrific.

I view Electrification Of Transportation as an absolute necessity, not an option.

Is electric rail actually viable?

Look at the timeline for the later trolley lines starting in 1980. It was about 1986-87 before they had a decent network in place.

You figure that people will do nothing until problems really surface lets say 2009-2010 for debating time this puts us at a
start date of 2011 and say its a crash program we see a decent network by say 2015. According to the ExportLand model we won't have a whole lot of oil well before this time. You can move the start date forward or back but the time lag of 4-5 years at a minimum between approving electric rail and having a good network seems unavoidable.

It look to me like we simply don't have the time for the electric rail option.

Has anyone worked out how fast we would have to put in electric rail to cut our transport fuel use in step with the
export land model ? It simply does not look feasible to me.

A lot of people will have to carpool or walk and put up with a lot of inconvenience for a few years until the transit systems get built. Either that, or pick up their guns and machettes and go on a rampage. Which do you think YOU will be doing?

One of my thoughts is that oil price will only go a bit higher then it is now, maybe $90 crude.
Then unemployment increases about 3 percent a year.
Unemployed don’t use as much oil per lack of income.

So in ten years, unemployment would only be about 35 % .
In 20 years about 65 % and so on.
So , no problem, we can have business as usual as long as you or I are not one of the unemployed.




WT, love ya' man, but replace Suburban with hybrid = instant 75% reduction in fuel use. Still a lot of big cars on the road. Average fuel economy is sticky but in a crisis very quick as allocation of resources (small cars to long commuters, big to short commuters). 75% reduction gives us a lot of time even with increases in domestic consumption by the exporters. Electrification will happen but we might have 20 years to do it, or at least 15. Hybrids are a start.

Also, I wonder about your thoughts regarding some of the exporters' domestic consumption being substitutes for OECD consumption (i.e. all the petrochemical plants going up in the Gulf;) won't that ameliorate the problem to some extent?

Hi Westexes, where you and khebab working on an ExportLand model for the top10 producers?

Any idea when it will be ready?


Khebab is still working on the HL plots. I'm going to ask the ASPO-USA guys if we can post it on TOD, for a review, before we finalize it for October meeting.

There is a problem with the link to the second image:

Steve Andrews is debating the IEA report and Peak Oil on CNBC.


Some points on the IEA Oil Market Report

Don’t know if this has been done to death already, but the report implies a decline in non-OPEC output if you exclude OPEC NGL (the IEA include this as non-OPEC since it’s not suhject to quota) and biofuels

IEA numbers (all here and below mm bbs/day) 2007 2012
Non-OPEC incl. biofuels, OPEC NGL 50.0 52.6
- OPEC NGL 4.9 7.1
- Biofuels 1.1 1.75
=Conventional Non-OPEC output 44.0 43.75

The IEA’s disclaimer is “A levelling off of non-OPEC conventional crude supply is notable, but is inconclusive as evidence for an imminent oil supply peak” and they also point out that the definition of ‘conventional oil’ does change over time, but even so this their numbers are very suggestive.

Again, not sure if this has been done to death also, but the OPEC projections are interesting for a couple of different reasons

Firstly, the very high dependence of their projects on Saudi capacity expansion with low depletion rates

2007 2012
IEA Projected Crude Capacity for OPEC 34.4 38.4
Increase +4.0

o/w Saudi +1.8
o/w UAE +0.5
o/w Angola +0.5
o/w Kuwait +0.4
o/w Nigeria +0.4

Analyzing the Saudi net increase of 1.8m bbl between 2007 and 2012 we see that it compares to the known project sizes as follows

Saudi net increase +1.8

o/w Khursaniyah +0.5
o/w Shaybah +0.25
o/w Khurais +1.2
o/w Manifa +0.9
o/w Nuayyim +0.1
Total gross expansion projects +2.95

(note the IEA explicitly include Manifa, which is somewhat controversial!)

Total implied depletion/writedown between 2007-2012 -1.15m bbls
As % of claimed Saudi current capacity (10.8mm bbls) 10.6%
Implied % decrease over 5 years 2007-2012 2.1%

(NB: Natural gas to liquid projects are not included in any of the production or projects listed above, since under IEA methodology they are included with Non-OPEC production since are not subject to quotas)

Note that Khurais and Manifa, the two Saudi megaprojects account for more than 50% of the IEA’s global projected capacity increase between 2007 and 2012!

This analysis, although using slightly different numbers to ace’s analysis in this thread, comes to pretty much the same conclusion, that the IEA’s net capacity numbers, the gross capacity numbers published by Saudi Aramco, and the IEA’s claim that they’re using a decline rate for (presumably all of) OPEC of 3.2% do not add up.

Furthermore, we can see the extreme importance of the Khurais, Manifa and (to a lesser extent) Khuransiyah to making the IEA’s numbers add up.

The second point that is interesting is that the IEA assumes (they have no choice really I guess) that the current Saudi capacity is 10.7m bbls/day and this is the basis for their future projections. I don’t know anyone who believes that Saudi capacity is this high and I think there are signs the IEA don’t (comments by both Fatah Birol and Claude Mandil mentioned previously on TOD). What other assumption could we make for Saudi capacity given the complete lack of transparency?

1) We could assume that their capacity is at most the highest production rate that they have pumped in the last 3 years – on the basis that anything which hasn’t pumped in 3 years is probably dead – this is 9.6m bbls/day
2) We could assume that their effective, sensible, non-surge capacity is what they’re pumping now, since we are at near-record prices for crude oil and they haven’t uttered a squeak about supplying more – this is 8.55m bbls/day

Taking the average of these two numbers gives 9.1m bbls/day – ie ‘writing off 1.6mm bbls/day of claimed Saudi capacity

2007 2012
IEA estimated total OPEC Capacity 34.4 38.4
o/w Saudi Arabia 10.7 12.6
- 1.6 mmbbls/day ‘writeoff’ -1.6 -1.6

Adjusted estimate total OPEC Capacity 32.8 36.8

IEA estimated ‘call on OPEC’ 36.2

Given that oil consumption (and hence call on OPEC) varies seasonally this would mean that the world would be running at absolutely flat-out capacity in Q1 and Q4 2012.

My overall conclusion is that this IEA report is a very high quality piece of work, I’m more and more impressed the more I delve into it, and I read economic and financial research for a living. Also that the IEA is calling for help as loudly as it possibly can. Bear in mind that the IEA’s mandate is business-as-usual. They simply cannot say ‘we’re all stuffed and we may as well go home’. And it’s not really their job to propose solutions either – so I think the balance they’ve struck in this report – making the problem very clear but not panicking – is entirely the one they ‘should’ be striking.

P.S. I can’t help but wonder if this report wasn’t made public immediately (which it shouldn’t have been) as a deliberate ploy (or possibly a thank-you to TOD ☺ )


WT ELM model pushes your 2012 projection up quite a bit into 2009-2010 time frame but the fact that we are seeing converging projects is encouraging. Inclusion of above ground factors as I'm sugessting ensures a 2009-2010 problem period.

I think if you simply take your bottom up and add exportland and use HL for depletion rates you will get the same answer.

The problem with this bottom up approach is the depletion rate have almost no support for their values.

Thanks for the feedback.

I knew I'd missed the audience by posting this late in the thread! But still, I think that it takes time to digest the IEA report -there's alot of reading there.

To reply to your points though - I'm not making forecasts. I'm not that smart! And as you say, the above ground stuff is VERY important. The IEA say this too (why do I sound like an IEA shill?) You can't predict that sh**

Tell me more about "the bottom up approach..... no support for their values". What do you mean?