Or that the other forecasts are merely following trends. If you notice on the lower left hand corner of the graph, there was a period of 3-4 years in which oil production globally was on a similar plateau. Even the ASPO seems to think we will have a tick up in oil production for a peak in the 2010-2012 time frame.

I think that you will find his net export projections to be even more interesting. He did a low, middle and high case for both production and consumption, resulting in a range of nine estimates for when consumption = production in key exporting countries. It's not a pretty picture--to be delivered at ASPO-USA.

The three key points that we will emphasize are:

(1) Once a region peaks, only a small percentage of post-peak production will be exported (for the ELM, about 10%).

(2) Net Exports decline much more rapidly than overall production declines (-28%/year and -5%/year respectively for the ELM).

(3) A Net Export decline tends to accelerate with time (from an initial year over year decline of -12.5% for ELM to a final year over year decline of -47.5%).

boy (girl) he sure is.

Thanks

FF

Leanan: I see that- and he forecasts an 11 mpd drop in the next 8 years. Between B+B (Bakhtari and Bernanke) we might see four digit crude oil by 2015.

Yeah, Bakhtiari's WOCAP is the model that convinced me: Peak Oil is past history (2006), IMHO. It'll be interesting to see how close his projection holds over the ensuing years.

-best

Well, they are professionals, after all.

Show Me the Oil!

I'd say it's all those big LNG projects....

That's how XOM has replaced production the last 4 years.

Bring the gas out of the North Field (Qatar), strip the NGl's, freeze the Methane and sell it to China.

I don't like NGL's mixed with crude and condensate since it is just different stuff (not transport fuel).

FF

I think there's an alternate explanation beyond your two.

1) They cannot produce more oil in spite of the incentives

Bottlenecks

From 1986 to 1998, oil prices were trending down. The incentives for new production and capital were low, especially when there were still projects and equipment from the heady days of the early '80s around. When oil hit bottom in 1998, it crushed every segment of the oil industry. During the 1998-2002 period, major production projects were not begun because the industry feared a return to $10 oil like in 1998. Absurd, in retrospect, but it was a very real fear. Demand for new equipment or personnel dried up. The five-year lay-off led to a loss of skilled workers in the field and a decline in the amount of capital equipment on hand - rigs, ships, etc - and a loss of ability to make new capital equipment.

Now they are playing catch-up. In the face of high prices and high demand, the bottlenecks have moved back from the well-head to related support industries. Now there are severe constraints on the manufacture of rigs and drilling ships, platforms, pipelines and recovery equipment, and especially in the training of experienced personnel.

The same factors in E&P affected refining. Falling oil prices cut into the margins that refiners could charge. Refinery capacity grew slowly and steadily from 1992 to 1997, and had begun to accellerate in 1998 - but the price crash put that expansion on hold for several years. Refining capacity is now back in line with that '92-97 trend - even though demand has grown substantially faster. There were lots of posts here last year about "Peak Refining". Even though more refineries are being built or expanded, it's perfectly reasonable to assume that oil producers are looking to the market and deciding that accelerating production in the face of limited refining capacity increases is foolish - it would just drive down crude prices, letting refiners capture the market premiums that limited final product supply is creating.

So there's an alternate theory to explain high prices and low production: bottlenecks in equipment and refining that destroy the incentives for greater production.

Excellent work, as usual ... but what does it all mean?

The IEA demand prediction line is what the supply will have to be if the world economy is to continue to grow as normal ... they say ~1.6% a year ... which is probably not far off.

Interestingly, if you draw a line from 2002 supply rate with 1.6% growth they are bang on target now!

However, if you draw the line starting in 2005 they are already several million barrels a day too optimistic! This implies world growth has been declining for two years or so.

The area under the IEA demand line is how much oil, in total, will be required if the world economy is to continue to grow as we have been used to ... as growth is vital to our way of life the IEA is tasked by the OECD to ask 'is there that much oil left in the world?' ... answer, Yes! ... but importantly, can it be got out of the ground at the rate required and supplied at a profit? Not at the moment it seems, so far (for two years) 'peak oil' or 'peak-lite' as predicted by TOD is correct, not the IEA!

Because of the steep rise in prices over the last 9 years or so we know that supply is constrained at the moment ... in the rough general direction of all the other lines on the graph ... either for geologic reasons or above ground reasons (or most likely a bit of both!)

If it continues like this, diverging from the IEA prediction, the graphs show world economic growth can be expected to fall away rapidly.

Geologic peak production is 'best case' ... the amount of oil available for import predicted by WestTexas' ELM is also 'best case' ... let's hope that above ground (political?) contraints that adversely affect both aren't too severe.

Clearly, from the graphs, we can expect negative economic change but it is the rate of change that is important ... to fast and we have disaster ... recent financial and global climate chaos events don't bode well!

Xeroid.

In 2006 though, the price climbed right back up and yet there's been no indication of producers pumping more to take advantage of the higher price.

Actually, that's not true.

Cumulative production through the first half of 2007 was 70m barrels higher than the same period in 2006, even while a mild winter lowered the oil consumption of rich countries by 60m barrels - unsurprisingly, oil prices were (cumulatively) lower than in 2006, even before adjusting for inflation and a weaker US$. Up until recently, there was no incentive to pump more oil - OECD stocks were higher than in 2006, prices were lower, and putting more crude on the market would likely just depress prices and end up costing money.

That's changed recently, with the sharp spike in oil prices. If prices stay up, one would expect to see increased oil production. If that's possible, of course.

(Links for these numbers are here.)

I agree, a box plot/candlestick chart dating back at least 15 years would be very nice, but where to get the data for that?

One idea: going back historically to previous production AND forecast data and plotting those against actual revised production along with a confidence interval of each (not necessarily technically a confidence interval, but showing the margin of error against actual actualised production).

Then again, who has time for that, even if somebody had all the data? :)

However I do agree that it would be most interesting, possibly even very telling (the spread of margin of error as a function of time for various entities, like IEA/EIA).

Regarding precision, there is a large uncertainty (probably the second decimal is meaningless). Just look at the disparity between the IEA and the EIA from the last OilWatch:

or uncertainty in Saudi Arabia production which is almost 0.2 mbpd:

IMO, The precision must be around 0.5 mbpd for total liquids.

Also, there is a significant variation between countries about the exact volume contained in one barrel of oil.

The second table listed, World Production, helps explain why the markets aren't too concerned that we are down from the world production peaks. It has happened before, post 9/11, in the late 1990s, and the steepest decline in the early 1980s. They are probably just looking at it as something that happens now an again for a few years, and then production bounces back up.

Excellent work, as usual.

The two-year long plateau wasn't foreseen by any of the models. Is this because the HL method only applies to an aggregate of mature fields and thus isn't really applicable in a world in which lots of relatively small new fields (eg Angola) are coming into production all the time ?
I understand that the MegaProjects ansatz is meant to deal with this phenomenon, but then his numbers look systematically too optimistic, so there must be something wrong there as well.

All in all, things are beginning to look worse than all but the most pessimistic predictions of a few years ago. For this reason, whilst I reckon governments have been PO-aware for at least a decade, they may nevertheless have been caught out by the rapid deterioration since 2005.

Re: why not show when projections were made in the table for all punters, instead of just a few?
You're right, I can add a column.

Yes, I will. It just a question of formatting.

And so the new conclusion is? That at some point production of a finite resource is going to decrease? That many forecasters will be wrong? That if someone makes enough forecasts that one of them will be right or somewhat close? The interesting news would be something like a new technology for discovering oil, or improvements in processing and recovery, or changes in consumption habits, or changes in government policies, or successful nuclear fusion, or a 100x increase in the efficiency of solar panels or,... a myriad of things. But playing with the graphs doesn't do anything. In the scope of the problems that are being unleashed by decreasing energy supplies it really doesn't matter in the slightest whether the peak occured in 5/05, 6/06, 7/07 or 10/10 or even 12/12 or even 2025. The bleak future is starting. And the best we can do is play with graphs?

Good catch, I forgot to modify the table and add a reference for Ace. I will make a modification later.

Oups! the ASPO keeps moving around their old newsletters.

Nice analogy...add to that, everyone is hoping the party will continue, at least for a few more hours (let me get mine! then I'm out...).

It has been noted here before that this plateau or decline is unusual in that all previous declines and plateaus can be accounted for by economic activity.

Put bluntly, there has never been a period of broad economic growth while at the same time experiencing a decline or flattening of production.

The longest "flat spot" is in the 1990-1993 time frame around Gulf War I (and the impact on fuel prices) and the economic weakness recession that transpired.

The question will be a chicken and egg type of question: what causes economic conditions to stall this time? High energy costs or lack of growing energy supply? In either case it porbably won't make much difference simply because they'll both look the same to most people as are the outcomes.

US gdp growth has been quite robust since 2002, tho maybe next year not so good. The real story is asia, especially china, now the #2 oil consumer (partly because goods that used to be produced in the us are now produced there, meaning we are exporting our conusmption even as internal oil growth is around 1.5-2%). It is not US growth that is the story, it is china, imports up around 1%/month.

An even better way of looking at it is price. If plateau is on accountof lack of demand (why produce what consumers don't want) then price is stable or falling. In the current epoch price is surging. OPEC used to be happy with price at 22-28, we are 3x this level, indicative that demand continues to outpace supply. And, healthy us stocks are not a good indication - to maintain stocks at this happy level we must bid against consumers in other countries; current price is simply todays result in the marketplace.

Variations in the GDP and in the oil production/consumption are correlated:

Year-on-year variations of the GDP per capita (in blue) and the consumed oil barrels per capita (in red). The light dotted gray lines indicate recessions. src.

Do you have a reference?

Beach Boy, Canadaian Tar Sands are included in C+C. That is, the oil from the tar sands is just curde oil and counted as such. Therefore they are included in all catagories.

"All liquids" is C+C plus "Other Liquids." Tar sands oil is not "Other Liquids", it is crude oil. Other liquids is natural gas liquids, ethanol, biodiesel, palm oil, Orimulsion and anything else the IEA or EIA can think of to count. Tar sands oil is not "Other Liquids", it is crude oil.

Ron Patterson

as Ron said.

We use a lot more oil than you do...

Actually the barrel price in euros is not as bullish as in dollars, and part of the current high price can be attributed to the weakness of the dollar. That may be the result of a complex self regulation of oil demand : it's more efficient to reduce first american consumption thant european one. If they lived with a standard european life (which is not that bad ;) ), American could divide their demand by two. But unfortunately this is due in large part to their urbanisation and ground allocation, and it is not easy to change rapidly. European cities are much more concentrated and easily connected with electric trains than American ones.

BTW Khebab, excellent summary as usual ! I am astonished that in France at least, the media never mention that oil production has been stalled for two years. They speak a lot of hurricanes, Nigerian guerilleros , or Iranian nuclear facilities (although all these explanations are not working very well these days, so they simply don't give any ! ) , but never of this simple, obvious fact : oil production does not increase anymore despite a strong potential demand. Is it the same in US?

well in any case, it seems likely that the great dive is planned around 2012. mayas fans will surely be happy with that ;-).

Indeed. Even though we´re all too much dependent on oil, the US is way too depedent on it.

25 barrels/year*person for the US and
12-15 barrels/year*person for the European countries

speaks for it self.

After living in the US for a year and visiting a number of different times, I´ll never figured out why americans WANT such a car dependent country.

Walking, bicycling, trains, light-rail; it´s not only more energy efficient, it helps create better, more livible citys. And by walking and bicycling you lose weight in the meantime...

Btw, I know there are exceptions. Portland is a good example.

And CO2 taxes are going up in Sweden with 0.06 sek per kg CO2, close to one cent. Index compensation, eg inflation compensation, CO2 tax and sales tax add up to an increase of 0.2875 sek per l, about 4.4 cent per l or 16.6 cents per gallon if I got the funny unit right. Diesel taxation increases with 8.4 cents / l and fuel oil with $44.8 per m3. This is calculated with the dollar at 6.52 sek.

This is done to finance about an additional $153 million in various anti CO2 measures in the government budget for 2008. In addition to that all energy and environmental research budgets I have seen so far in the budget are inflation compensated. This is not much compared with private research and investments but it probably helps with making more private investments possible.

Higher fossil fuel taxes are a logical way to finance anti CO2 measures but it do hurt politically since half of the governing right wing parties had lowering the fuel taxes as an electoral promise in last years election.

Total government debt were amortized with $10276 million 2006 and the 2007 prognosis is $13343 million. The government debt were 43.1% of GDP in 2006 and the prognosis for 2007 is 35.6%. This has made it very hard to explain why the government dont spend much more money on environment, infrastructure, military, healthcare, and various groups dependant on government money. One of the major reasons for not spending billions on infrastructure has been the white hot building market, there is hardly any unemployment within building and very little in other "hard" industrial sectors.

The main focus have been and still is on lowering taxation on work, especially low paying work to get people back in the labour pool. This is also helped by lowering government benefits to unemployed etc and that is extremely unpopular with manny unemployed and our leftish media. More people working and less money used for uneployed have added to the budget surplus but more importantly we will enter the next economcial downturn with more people doing productive things and a fairly strong budget. The total taxation level is going down significantly, I dont remember the exact percentage but we are approaching the european medium in taxation.

We have even done some small simplifications of the government organization within the first year. The goal is significat savings in internal authority cost and simplification of the bueraucracy resulting in a 25% saving in the business cost for handling government and municipiality bueraucracy. There is hope this also will make it easier to start new businesses when 1/4 of the red tape is gone.

Overall it has been a great year since the election. The left wing opposition is shell-shocked, media is screaming blody murder, manny people hate change and the polls for the governing right wing parties are close to a disaster but I think we are on the road to restarting the old dynamics of the Swedish society. Getting people once again used to change and doing new things is extremely important. Hopefully the next three years will be prosperous and change accepted.

Phillies: It appears the Science authors missed the incredible sprawl of suburban wasteland. They obviously haven't heard of Kunstler.

Someone quoted numbers here on the heating/cooling degree days for a variety of major European and American cities a while back. I crunched those through a bit, and it turned out that the US was only higher by 10-20%, which is not enough to directly account for much difference.

In fact I used 14 forecasts because I included Staniford's Low, middle and high estimates.

Khebab/all....as usual, awesome work and comments.

re Rothman/Barrons 9.17.07
http://online.barrons.com/article/SB118981090977228146.html?mod=article-...
guy throws around alot of numbers and statements....(Liers number but numbers never lie :<).....specifically his comments on supply growth and Saudi production:

What about the demand from China and India and the notion that supplies have peaked?

The data doesn't show it. If you look at the International Energy Agency industry data and you do an apples-to-apples comparison of non-OPEC supplies, supplies from all of the countries outside of OPEC, you will see growth rates are running substantially higher than people believe to be the case. Growth in non-OPEC supply this year looks like it will be about 1.3 million barrels a day, and that number is about twice what people believed would be the case. And the Saudis clearly have the barrels available. They are bringing on new fields. Khursaniyah is coming on in the fourth quarter, Nuayyim next year and Shaybah next year and Khurais in 2009. These are fairly big additions.

Why is it when I read the US financial press, I feel like I'm reading the tabloids? Anyway, can someone steer me to the most recent work on TOD on SA new production? Ghawar depletion is pretty clear, even to the likes of Rothman. TIA

There is a seasonal pattern for "Other Liquids" probably because of Ethanol blended with gasoline, production is always maximum in Q3 and minimum in Q1:

We could go above 4 mbpd in July 2007.