Declining net oil exports--a temporary decline or a long term trend?
Posted by Sam Foucher on September 27, 2007 - 10:00am
This is a post coauthored by myself and by Friend of TOD Jeffrey J. Brown (westexas), an independent petroleum geologist in the Dallas, Texas area.
To answer the question
in the title
of this paper, we believe, for reasons outlined below, that the current
decline in world net oil exports is probably the start of a long term
trend, as a result of declining production and/or increasing
consumption in key exporting countries.
EIA data show a small
decline in world net oil exports from 2005 to
2006, led by a 3.3% per year decline rate in net exports from the top
three net oil exporters--Saudi Arabia, Russia and Norway. Furthermore,
recent data suggest that the net export decline is continuing, and
probably accelerating.
The Export Land Model and Two Case Histories
In previous articles
posted on The Oil Drum we outlined a simplistic
export model for a hypothetical country with Ultimate Recoverable
Reserves (URR) of about 38 billion barrels (Gb), labeled the Export
Land Model
(ELM). The model showed the effect on net exports of a country that hit
peak production and started declining at 5% per year. The exporting
country consumes 50% of its production, and that consumption is
increasing by 2.5% per year. The 5% decline rate is loosely based on
the post-peak Texas decline rate of about 4% per year. The ELM is shown
graphically below, Figure One.
Figure 1
While this is a simplistic model, it has some important lessons for us.
First, assuming ultimate
recoverable reserves of 38 Gb, and assuming
that Export Land peaked when it was about 55% depleted, Export Land
would have about 17 Gb of remaining recoverable reserves, after
peaking. The model shows that only about 1.7 Gb, or 10%, of remaining
post-peak recoverable reserves would be exported.
Second, the overall
exponential net export decline rate, about 29% per
year over the eight year net export decline period, is much more rapid
than the production decline rate of 5% per year, because net exports in
a given year are the net difference between two exponential functions:
exponentially declining production and (generally) exponentially
increasing consumption.
Third, the net export
decline rate in a given year accelerates with
time, from an initial year over year change in net exports of -12.5% to
a final year over year change in net exports of -47.6% (last year of
net exports).
So, how
does the simplistic ELM compare to real world case histories? Actually,
two recent case histories, Indonesia and the UK, showed sharper net
export declines than the ELM. Figure Two, shows the year-over-year
changes in net exports, from the start of the most recent production
declines to the (apparent) final year of net exports (EIA, Total
Liquids).
Figure 2
Note the differences between the overall production decline rates and net export decline rates for the three regions:
| Region | Production Decline | Net Exports Decline Rate |
|---|---|---|
| ELM | - 5%/year | - 28.8%/year |
| Indonesia | - 3.9%/year | - 28.9%/year |
| UK | - 7.8%/year | -55.7%/year |
It's also interesting
that the UK and Indonesian net export declines
were so similar, given the radical differences between the two regions.
The UK is characterized by high per capita income, high energy taxes
and a minimal increase in consumption (+0.2%/year over the net export
decline period). In contrast, Indonesia is characterized by low per
capita income, energy consumption subsidies and a fairly rapid increase
in consumption (+4.1%/year over the net export decline period).
Note that once
production in a given exporting country starts
declining, the net export decline rate is a function of: (1)
consumption as a percentage of production at peak production; (2) The
production decline rate and (3) The rate of change in domestic
consumption.
The UK and
Indonesia net export declines were similar to the ELM because of their
relatively high consumption as a percentage of production at the most
recent peak, in the 50% to 60% range. However, regions with lower
percentages of consumption, relative to production, will almost
certainly also show accelerating net export decline rates, once
production starts declining.
The Top Five Net Oil Exporters
The current top five net
oil exporters--Saudi Arabia, Russia, Norway,
Iran and the UAE--account for about half of world net oil exports. From
2000 to 2005, they showed a combined 3.7% per year increase in
consumption.
From 2005
to 2006, their combined consumption showed an accelerating rate of
increase, to +5.3% per year. From 2005 to 2006, the top five showed a
net export decline rate of -3.3% per year. Based on year to date data,
it is a near certainty that this net export decline rate will
accelerate from 2006 to 2007.
We are presently working
on generating a range of projected future
production curves for the top five, using the logistic method, and
consumption curves, using a Monte Carlo analysis based on observed
growth rates. This will result in a range of nine points at which
production = consumption for each country, in terms of time and
production rate, with eight points centered on the middle cases for
both production and consumption. We will then plot predicted total net
exports for the top five, showing the worst case, middle case and best
case in terms of the time at which production = consumption. We also
plan to show, for the sake of argument, a plot showing indefinite flat
production, versus increasing consumption.
In aggregate, the net
export decline rates will not be as severe as the
UK and Indonesian case histories discussed above; however, the models
will show that the net export decline rate accelerates with time. While
some smaller exporters are increasing their production and their net
exports, once the large net exporters start showing an accelerating
rate of decline net exports, it is very doubtful that smaller exporters
can offset the decline from the larger exporters.
While overall world oil
production is important, oil importers are
focused on two things: their domestic production and world net oil
export capacity. In our opinion, we should base our plans on the very
real possibility of a rapid decline in world net oil exports.
“We can't solve problems by using the same kind of thinking we used when we created them.”
—Albert Einstein
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If I haven't mentioned it lately, in my opinion Khebab is a certified genius, and he is doing some tremendous work on the net export paper for ASPO-USA.
My usual acknowledgment: We are building on prior work by Simmons & Deffeyes, et al.
I have made some oblique references to some conversations I have had with some "concerned government scientists." One of them told me that you could have heard a pin drop when a group of them thought through the implications of the ELM. In any case, I thought that a couple of recent e-mails were particularly well written, and with his permission, I am posting them below:
Interesting.
I've often wondered whether the USGS scientists bought the party line.
FYI--no comment on whether my guys are at USGS, but that does not detract from his point and your point.
USGS proudly brought to you by ExxonMobil, DaimlerChrysler Corp. the El Paso Energy Foundation, German Coal Mining Association, Edison Electric Institute, Cyprus Minerals Co., Western Fuels Association and Intermountain Rural Electric Association
Just because it is sponsored by the oil industry, doesn't mean that internally is can't know about PO - if PO is rely happening soon, then it would be in the oil industries best interest to find out about, and model the outcomes from, PO. (what they share to other people is another kettle of fish)
I guess my point is that who sponsors a group doesn't mean that certain views can't be held, just that they can't be freely expressed to people outside that group.
I would think that is even worse: to be able to know how bad things are and not be able to tell people.
One of my good college buddies majored in geology, then embarked on a career with the USGS, some 30 years ago. We've kept in touch through the years, getting together now & then. He's published almost 100 papers in his field of expertise. A few years ago, as I was discovering the concept of peak oil & its possible ramifications, I emailed him at work to get his take on the subject(he has always been free to use his work email address to correspond). His curt reply was that some of his colleagues believed in p.o., others were not concerned. I have not heard from him since.
The "I have not heard from him since." was kind of cryptic. How long ago was this? And have you written back since?
Tim
tim, sorry, should have been more clear. we were in the habit of corresponding at least a few times a year up until that exchange. no, i have not written back since, as the tone of his email seemed clear to me ("not interested in discussing this issue further"). several months to a year would not have been unusual to pass, but 3 years is. in the past he has been more than interested & willing to discuss his geology projects and views with me. this just came across to me in two ways: "oh no, my buddy has been caught up in this crackpot idea of peak oil" and/or "this is something i don't want to be caught dead expressing an opinion on"
Then just call him up and see if you can buy him lunch. Couldn't hurt.
It's good to know people are reading this stuff and are concerned. However, if things are as potentially dire as they appear to be, isn't the 'correct' course of action to ditch the 'maintain anonymity for professional reasons' attitude and go public? I mean in times like these, dangerous times, doesn't one have to show a bit of courage and act responsibly and be brave? By 'responsibly' I mean responsible to ones own ethical standards and more importantly responsible to all the people who haven't a clue, who are sleepwalking and being led around by the nose towards the butcher's knife? Worrying about saving ones probably non-existant pension will probably be the least of one worries if the ELM model is as accurate as it seems to be. How long does one wait until starts to speak out? It's a challange and a dilema and up to the individual himself to make that call I suppose. I'm fortunate that I don't have a boss, never had time for them, and I don't need a pension plan, and I've never really had a position of responsibility to worry about losing.
Unfortunately, most that are in a position to "ring the alarm" and act "responsibly" have taken lessons from our current president and VP. They are thinking, "why should I take the fall here if no one else is going to..."
Are you guys kidding? Have you ever worked for a corporation? Ever worked inside a government office? (I'm guessing yes to at least one or more.)
I'll explain it though, to refresh your memory. It's pretty basic. See, how it works is you do your job, you make whoever is above you look good--all the way up, and keep your mouth shut. That's why these corporations (and even government departments) have what are known to some as a "Public Relations" contingent. If it can't be put on TV and spun, it does not exist. If you abide, you get a promotion.
If you don't abide by these descriptors, you're fucking canned. In a nutshell that's how it works. There are clear ideological boundaries. Kiazan Moneypenny (the strangest goddamn name ever) isn't going to publicly disclose that the State Dept. and Blackwater are full of shit. You'd have to be a mad man. Ditto the Pentagon. Behind closed doors while filthy drunk, fine. Anonymous sources spilling a tidbit here or there, okay. Trying to finagle your way out of a sinking ship via "whistleblowing", great. But free, open speech within corporations and the government? Hahahahah...
I mean, that's why we have contracts (and sockpuppets).
CERA, USGS and EIA are not going to implore us to take mitigation steps. They will merely observe the past with a twinkle in their eye, and optimistic view of the future. Anything else is political suicide. Toe the party-line. Which is:
Nothing to see here...
It has nothing specifically to do with the current administration. Things were this way under Cigar Clinton, Bushy One, Reaganmeister, PB&J Carter, Lucky Ford, Tricky Dick, ad infinitum all the way back to the Standard Oil racket (although, T.R. tried to save face, and was able to accomplish much more, relatively, than the sockpuppets in power over recent history.) The more things change, the more they stay the same. Cliché rules the day.
Next quarter looks good.
Haaa....sad, but true...I've worked in both government and private corporations. My current company just went through some workshops where they identified types of people in the workplace as Loyalists, Passive Terrorists, or Active Terrorists.
They were using these labels to tell if you were part of the Solution or part of the Problem. Loyalists work together to come to positive results. Terrorists work to sink other people to make themselves look better. All the while listening to this workshop, I kept thinking, "My God...why the hell are we using these labels?"
So what you say is true, if you are a "Yes Man/Woman" and act positively all the time, you will go far in corporations. If you rock the boat and criticize people or ideas, you will eventually be forced out.
Well, now your invocation makes sense. Looks like your company really did take a line from this Admin's speech writers. You're either with us or against us. Which actually makes sense, corporate-wise.
This scenario sounds like something out of The Office.
Passive Terrorists? What, is that like a lazy terrorist who just colors his or her coloring books all day long while letting the phone ring? Meanwhile the Active Terrorists are cutting RJ-45 cables, hax0ring into company databases, uploading them to the Pirate Bay, and exposing the pron on the CEO's computer?
Ya...I was thinking The Office as well...life imitating art?
Passive Terrorists...saying crap behind people's backs instead of provoking outright fistfights over the coffee machine.
"It has nothing specifically to do with the current administration."
My Dad worked for the government for many years Starting when HST was POTUS and ending when Bush one was in office. He told me that that the government lies 2/3rd of the time. He said that the government lies when it is to their advantage, that is when the truth would be a problem, and when it does not natter, The govt lies when there is no advantage or disadvantage for or against, in order to keep their activities obtuse and to keep the populace confused. The government only tells the truth when it is to its distinct advantage.
That is what the govt and the oil industry are doing regarding energy
Hi Jeffrey,
Thanks, esp. for being in contact w. concerned scientists, and for sharing the comments.
re: "Then everyone wins."
Do the people you're in contact with ever talk about mitigation paths or other actions (of any sort)?
re: "...believe it is important to maintain anonymity for professional reasons."
Do they have any opinions about what actions others should take? Or what actions should be taken by scientists who perhaps are in a better position WRT anonymity?
Regarding our post-peak future, the Matt Savinar and Alan Drake are pretty much polar opposites. Matt is scouting out places to live upwind from probable fallout zones, while Alan is pushing electrification of transportation (EOT), while trying to make a go of it in New Orleans.
One of the scientists I talked to is deeply concerned that Matt may be more correct that Alan.
Nevertheless, I suspect, but do not for sure, that they would strongly support EOT.
WT: IMHO, both Matt and Alan are correct. Alan is right on target for the future of Germany, Japan, Sweden, France, etc. Matt is closer for large parts of the USA- I think parts of the USA will do OK. IMO, in many ways the USA circa 2037 will look like Mexico circa 2007 (many areas in Mexico are still great places to live).
Hi Jeffrey,
Thanks for responding. I'm curious, if you do get a chance to talk and/or share again...Do they ever talk about a coordinated plan, for eg. immediate conservation, Alan's plan, and some policies that favor retrofits (ag policy that recognizes "peak" and promotes conversion to organic, build-out of wind/solar, etc. - just examples)- i.e., something that actually addresses things in a comprehensive way? It seems like we need all of this (and more) ASAP.
Also, do they see any role for "concerned scientists" and/or the public in terms of policies or any other kind of action?
Probably not under the current administration, would be my guess.
Westexas, I am just curious about one thing. Why does khebab (Samuel Foucher) post under his real name at energybulletin.net but not here at TOD?
For the final paper, we are using a range of three different projected consumption rates, but in the short term Saudi Arabia is definitely showing accelerating rates of increase in consumption. A recent report indicated that Saudi Arabia is going to have to shift 500,000 bpd of liquids production to domestic consumption in power plants and desalination plants, because of a shortfall in natural gas production. This why the Saudis are contemplating importing coal.
Because of this report, my guesstimate for the 2007 increase in Saudi consumption was 10%. Rembrandt recently put the increase in consumption for the first half of 2007 versus first half of 2006 at 9%. Of course, for the long term projections, we are not using anything like this, but in the short term, it definitely appears that consumption is exploding.
Net export Saudi decline rates (total liquids, EIA), actual for 2006 and estimated for 2007 based on year to date production and +9% increase in consumption (Rembrandt's estimate for first half):
2006: -5.5%/year
2007: -11.0%/year
Fantastic work. One factor that I think makes these export decline rates both believable and conservative is the tendency for energy intensive industries to relocate where the energy is both available and subsidized. As an example, look at the relocation of the natural gas intensive industries out of the US. Thus, countries which have hydrocarbons are going to keep more of them for themselves.
To emphasise a point made before:
Extreme subsidisation of local fuel prices in some countries with large net oil exports decouples local consumption from changes in world oil prices, accentuating the rate of reduction of exports, as per the ELM model. Recent prices (mainly from GTZ - international fuel prices 2007) of particular interest are: (US$ prices per US gallon November 2006)
Saudi Arabia: $0.61
Venezuela: $0.12
Iran $0.34
Libya: $0.49
To make a less remarked point:
Once such countries become significant oil importers, the economic pressure to move to world prices eventually becomes irresistible - resulting in a much larger percentage increase seen in the local market than the rest of the world, and then, on balance of probability, resulting in an 'exaggerated' downward pressure on oil consumption over the subsequent period. Thus Indonesia's seven fold increase in the local price of gasoline over the last few years will eventually 'distort' local fuel consumption trends. There can also be a political cost - Myanmar(Burma) resisted adjusting local prices until a remarkable 13 years after becoming a net importer, but the seven fold increase in the local price in one year is having 'interesting' consequences.
This is my first comment on the Oil Drum, after a year or so of reading - many thanks to all for a great project - what a fantastic way of using the web to develop important ideas and analyses.
In support of your premise, Indonesia has shown a recent decline in consumption in 2006--after they became a net importer (they also showed a small decline from 1997 to 1998). The overall Indonesian case history may be the most troubling for various export models. Their consumption continued to increase as their net exports were falling. Makes you wonder what will happen in richer exporting countries.
westexas,
it seems to me that the essence of the ELM model is to highlight that post peak, the overall decline in world oil supply will not be shared ‘evenly’, and that in particular countries that continue to be net exporters are likely to chose not to enforce, by one means or another, a declining oil supply within their own country.
An interesting ELM model to do, might be: segment the post-peak world for about ten years into two groups, the continuing net exporters and the rest of us - make some plausible assumptions about demand growth within the continuing net exporters - assume that this demand growth is met: and then see what overall rate of decline this forces on the rest of the world.
One issue may muddy the water a little... to some extent, oil producing countries may be developing energy intensive industries whose products are then exported. The net global effect of this is much less than when the end consumption is moved from one country to another.
If a plastic factory moves from New Jersey to Saudi Arabia, certainly some New Jersey workers will lose their jobs. Maybe the turnpike through Elizabeth will lose a little of that special tang! But if the plastic produced is then shipped to New Jersey... seems the impact won't be so big.
I think that in actuality, looking e.g. at standards of living in oil exporting and importing countries, there is a lot of opportunity for end consumption to move to exporting countries. But still, to get the detailed numbers right, somehow it would be good to take into account movement of intermediate product manufacturing.
Very interesting work, admirable. I just hope someone pulls it to pieces and debunks it in double-quick time, because, if these projected decline rates for the major oil producers are near to being accurate; then we are in difficulties! How on earth we are supposed to mitigate and compensate for such a steep decline is going to be a profound challange to our civilization and its ability to adapt, change, and develope alternatives to oil. It's potential rate and speed of the decline that concerns me. If these countries are not only going to be using more themselves, but producing less oil, then we're in a real jam. Exports will, seemingly, be hit by declining production and increased domestic consumption, leaving us with exactly what? If one starts to think about the potential consequences of these numbers, one can't help feeling uneasy.
First, I would like to say that I really appreciate all the work the authors do, and I think you guys are doing a great job. Keep it up.
Now, these numbers seem very odd to me. I can't see how the numbers are useful. They all seem depended on the percentage that you export. If two countries produce the exact same amount of oil and have the same decline rate 5%, but one country exports 50% of there production and one exports 25% of there production, they will be taking the same amount of oil off the market. There percentages will look drastically different and it will look like the second country is doing much worse then the first. But both countries are removing the same amount of oil from the market.
Why is it interesting that one country has a faster decline percentage when they are removing the same amount of oil from the market?
digbee,
if they have the same amount and the same decline rate, but one exports 50% and the other exports 25% and keeps 75% for their internal consumption, the "market" as a global total is not impacted. Importing countries will see an decrease available to them greater than the production decline rate. At a global scale you are correct, but for those countries dependent upon imports, the amount available to import is the only amount that matters. An that amount decreases faster than the actual product decrease. That is the main point of the ELM that westexas is making.
thanks again to the authors for the continued excellent work
ej
Let's stick with the simple ELM and use year over year changes in production of -5%/year, with no increase in consumption. Export Land is producing 2 mbpd and consuming one mbpd, and then production starts declining at -5%/year.
The initial decline in production, about 100,000 bpd, would be equal to the export decline (in volume). However, the initial decline rate in exports would be -10.5%/year (the 0.5 comes from the exponential function).
In any case, we can use the simple Rule of 72--production would drop by 50% in 14 years, at which point exports would be zero. (With a +2.5%/year increase in consumption, exports go to zero in nine years.)
So, a -5%/year production decline rate, with zero increase in consumption, would result in a -16%/year decline in exports over the first 10 years of the production/export decline.
I think the problem is that we all live in importing countries...
I am willing to hazard a guess that these civilization-shattering implications have been well considered by those implementing a policy of war in the Middle East. From Dick Cheney's speech to the London Institute of Petroleum, 1999 (quoted from this paper by Kjell Aleklett):
It's a classic quote for sure, but nowhere does it imply ELM modelling.
That is of course not a proof it hasn't been done, but it hasn't been openly discussed.
The reference "but also to meet new demand" is to an aggregate whole world rising demand.
ELM is about asymmetry of that demand rise.
Consumption rises faster in exporting countries, hence importing countries are even worse off, even if they don't grow their own demand at the same time (and they do).
And of course consumption does not NEED to rise faster in exporting countries for the effect to remain significant - albeit less severe. It only needs to remain static in absolute terms or, at best (for the importers) decline at a slower rate than domestic production for a decreasing proportion of a decreasing production to be available for export
Sabretache
Dear Steve001,
The current administation is arguably the most oil literate group of people leading the United States ever. They may not know much about invading countries and fighting guerilla wars, (though even that is debatable, we are, after all, just beginning in Iraq,) but oil they do know and understand. Saddam and his regime was in the way of our investing in Iraq, so we got him out of the way. Iran is in the way of us controlling Iraq, so we'll get them out of the way. That is unless things go wrong. It's the going wrong part that concerns me at the moment. Getting Iraq and Iran 'right' is going to be a very unpleasant job. We may not like what we see in the mirror if we follow that path. Maybe we should choose another path.
On the other hand, maybe the United States is already the victim of a bloodless and very successful coup only most people were unaware that it had ever happened?
Sounds weird, I know. But the Constitution and the Bill of Rights are shredded. The Congress is very weak and passive. The Supreme Court is rigged. Habeus Corpus has been thrown out the window as a guiding principle after centuries of use. The President is the State. The Commander in Chief, in time of war, is de facto, above all laws. The use of torture has been systematized and is widespread. There's a paralell and private army of at least fifty thousand roaming Iraq loyal to who exactly. The candidates that actually won the Presidential election end up loosing. Nearly all the candidates are threatening to attack Iran, and nothing (code for nukes) is off the table! One could go on, but why bother? Maybe the United States is just one terrorist attack away from something like martial law and the internment of dissident, unpatriotic elements, that are undemining the war effort and the moral of our troops. Still, I may just be dreaming.
JimK - your reply spawned some corresponding thoughts ..
Utopian behaviors are observed in too much of western food handling and politics for the same
In the future the Norwegian population – or European for that matter - can not expect to send their freshly caught fish-catch to China and return, for gutting and square-packing. The sole idea of this actually taking place today is utopia in the making … and extremely energy intensive. NO wonder we have an issue on climate – the future will not allow for this behavior AND should be stopped at once (!) See if you can figure why Saudi Arabia is a top exporter of wheat - inconsistent from being a dry desert country. Norway takes its grand share of wheat from Saudi, provisionally that is.
Since food is such a basic need we all know the importance of securing it – and we all know that agricultural harvest comes in seasonal waves AND that crop-yield has to be stored away between the wave-crests. Now, this is the domain of UN-FAO and they are deeply concerned about the yield/spoilage factor – which is far too difficult to handle. But after all it is just nature doing its thing, isn't it? As humans have put themselves on top of it all, “we have shown we can rule the nature” – OR can we (?) – I reckon nature is kicking fairly hard back at times – and I guess we haven't seen her at her most furious – yet that is.
I was looking at google earth maps a while back and I saw many large circles almost looking like some large scale farming arrangements in Saudi Arabia.
I am wondering if some of these have something to do with wheat production ?
DocScience
oil producing countries may be developing energy intensive industries whose products
That is already happening due to natural gas depletion on our continent.
Note that the one upside of NG is that demand seems flat over here.
Of course of more immediate interest to the USA is the export land effect of Mexico.
A classic case of this is the recent US$11.6 billion purchase of General Electrics plastics unit by the petrochemicals manufacturer Saudi Basic Industries Corp. I.E. the engineering plastics business will in future be known as Sabic Innovative Plastics. One of the reasons given by GE for its divestiture of the plastics unit is the high cost of petrol stock.
http://politics.reddit.com/info/2u3xd/comments
if you are so inclined...thanks for helping us spread this work around the web.
Take a look at
http://research.cibcwm.com/economic_public/download/occrept62.pdf
confirmation (as if any were needed!) of this excellent work (link taken from ODAC web site).
P.S. my first post here!
Renewable Ali, Edinburgh, Scotland, UK
Welcome to TOD Ali.
It is interesting to see that Jeff Rubin has been reading TOD lately, he doesn't even change the graphs' titles.
Anyway it's nice to understand how influencial TOD is becoming.
I did a cursory perusal of this article. I have a problem with their use of the oil/GDP figure. I believe this figure is useless. Say that oil is 3% of GDP, this figure implies that if no oil was used them 97% of GDP would remain. This is false, of course. So what does the oil/GDP ratio mean? Nothing. What matters is the GDP as a function of oil consumption.
Now, I have given this some thought, and I think a more appropriate figure is
(Exports - NonOilImports)/(Oil Imports)
Why? Because this gives a number telling how capable a country is of paying for its imported oil. Imported oil is paid for by net exports. The more exports you generate, the more capable you are of paying for the oil you import.
I believe the US is unique among the major oil importers, int that it has a negative ratio.
I would really appreciate feedback on the above because finding an appropriate metric has bothered me for quite a while.
I suggested the following "What If."
What if we had to exchange a product of value for a barrel of oil in the harbor, rather than using dollars as a medium of exchange?
While it's true that the oil producers can use the dollars to buy "stuff" in the US, the question is, would they be better off buying "stuff" in stronger economies, e.g. China.
BTW, the current gasoline/crude crack spread is pretty interesting, although the diesel spread is still pretty strong.
Another "What If."
What if you were running a refinery in Africa. At current prices you would have problems buying enough oil to keep your refinery running at max capacity--because your customers could not afford to buy all of the product, at the price that you would have to charge. It would seem to me that your refinery utilization rate would drift downward, as you were outbid for crude oil supplies by higher bidders.
Calculate the figure in any currency you like. You are right, hey would get more stuff from China, because China imports less oil but exports more stuff, which is what my proposed metric measures.
Another point is that China undervalues it's currency against the dollar. That is, they make oil more expensive for themselves by devaluing the yuan. So if lower buying power starts to negatively affect their ability to import the oil they need to grow the economy, then that would be an incentive to strengthen their currency against the dollar. They don't do this now because they perceive that exporting to America is more important to growth than the domestic price of oil. It is a balancing act.
As the price of oil goes up, the pressure to revalue the yuan will go up, and increase their buying power relative to America.
As for your Africa comment, It makes little sense to me. The price of crude is set globally. If you are able to refine the crude at a lower cost because of cheap African labor, then you could sell the product at lower price and still make a profit. In essence, you would be able to outbid the competition for crude and still make a profit at the same price as the competition, because your labor costs were lower.
Maybe, I'm misinterpreting you.
I think you are misintepreting. First, labor is a small part of refinery costs. Capital costs are far greater, and where capital is at greater risk of destruction or confiscation (pick any African dictatorship and compare it to the US) the costs of capital will be far higher.
So, the African refinery has to have competitive capital costs, stable operations, and the ability to import crude and export gasoline, safely and securely, for a period of time at least equal to its long term debt. And then you have the import/export costs, currency issues, etc.
Africa will slip backwards, as all of the oil on its north coast goes to Europe, on its east coast to America, and on its west coast to China. Little will be left for the 700 million people in between.
The key point is whether your customers are able to afford to buy the refined product, since the price of crude is the primary cost for the refinery.
If you can't sell all of the product at a profit, you would curtail the refinery runs, in order to meet the demand from customers who can pay the price--which is what I suspect may be beginning to happen in the US.
Edit: I put this in the wrong area. Sorry.
In our opinion, we should base our plans on the very real possibility of a rapid decline in world net oil exports.
Who's we? What plans?
The current top five net oil exporters--Saudi Arabia, Russia, Norway, Iran and the UAE--account for about half of world net oil exports.
Plans (let's just say someone's) for reducing consumption in at least one of these are well afoot. Of course these plans might also affect production as well as destabilizing two others on this list.
But this would not adversely affect the interests of the someone -- who is certainly well aware that oil in the ground is an extremely good investment IF one can but control the ground underneath which it sits.
One way or another, hoarding is the other big factor that will lead to a steepening of the down slide.
Regarding plans, I recommend Alan Drake's plans for Electrification Of Transportation (EOT). Alan has pointed out that the average American today uses as much oil as 400 Swiss citizens used at the end of the Second World War.
IMO, we are headed for a situation where we are going to be forced to start adjusting to rapidly declining oil supplies. Unfortunately, IMO we are going to have to write off large portions of our suburban post-war "investment." The current housing situation is just a squall line in front of the approaching storm.
No real disagreement. The "writing off" has already begun in several parts of the country. The "writing off" will be of people, not just property, neighborhoods, and areas. Every single one of us will ultimately be affected.
But no realistic plan, Drake's or any other, can be implemented without regime change.
Dave by golly
It's going to take more than a regime change, to get alan's plan implemented. It's going to take a complete culture change and people starving to death in the gettos to get the American people to wake up.
old hermit
"you can cure ignorance, but you can't educate stupitidy" The old hermit
I am chomping at the bit for this report, if its anything like Khebabs other analysis its going to be an eye popping eye opener for the ELM model. The graphs alone will be worth the money ;o)
I leave you with this piece from a construction magazine:
The 'Burj Dubai', completing soon, is to be the tallest building in the World -hey, doesn't the completion of the tallest building usually co-incide with a recession or crash of some sort??
Regard, Nick.
P.S. I think you must mean 5 points centred on the middle cases not 8 no?
......tallest building in the World -hey, doesn't the completion of the tallest building usually co-incide with a recession or crash of some sort??
Well The Iranians did say they have given up their claims to Dubai, but then again, might as well give them something to target outside of Khuzestan. There are other things to be factored into the Peak Oil scenario that are often overlooked by Oil geologists.
Dubai is actually the main port for imports of Iran. True, it is part of the United Arab Emirates, but in trade terms that is one of its main functions.
Stuff arrives in Dubai in containers and large ships and is broken down and sent almost piecemeal to Iran in much small smaller vessels. For many reasons, this suits the Iranians - especially the ones in the employ of the customs services. Dubai is indispensable to Iran.
In a similar fashion, Dubai is rapidly becoming indispensable to the US Navy. Rather comic, I think.
Jeffrey - in the first chart I present 5 hypothetical export lands. One point you make is that the ratio of domestic consumption to overall production is important. My feeling is this is probably the most important variable in analysing export decline.
This chart illustrates the sensitivity to decline for the 5 Export Lands. Country 5 is experiencing exponential decline of exports. Country 4 is turning exponential after 5 years. The exports from countries 1 to 3 are less sensitive to falling production (rising consumption)
This chart for Indonesia illustrates your ideal export land. High population, economic growth, industrialisation leading to ever growing consumption that eventually ate all exports (I wonder when Indonesia will leave OPEC?)
The chart for Russia shows consumption quite stable, rising production lerading to rising Russian exports. Russian exports are vulnerable to rising consumption - but I'd argue they are much more vulnerable to falling production (when that happens)
UAE is a typical Gulf export land. Rising consumption has not yet made significant impact upon exports - again like Russia, it is production that will determine the future of exports.
In summary, I'd rank the variables that are important for exports as follows:
1. Ratio of domestic consumption to production
2. Production
3. Consumption
Since most of the big exporting countries resemble more the UAE and Russia than they do the UK or Indonesia.
No argument, we are all saying that the projected combined net export declines for the top five will not be as bad as the -29%/year and -55%/year net export decline rates that we saw in Indonesia and UK.
However, I somehow don't think that the prospect of doing "better than" 29% to 55% decline rates is very comforting.
For example, a -7%/year net export decline rate cuts net exports in half in 10 years.
BTW, for anyone that wants to do some simple "What if" scenarios, the initial conditions (rounded off) for the top five net exporters are as follows, in 2006 (EIA Total Liquids):
Production: 30 mbpd
Consumption: 7 mbpd
Net Exports: 23 mbpd
You can use the Rule of 72 (rounded off to 70), i.e., a -5%/year decline rate cuts production by 50% in 14 years (or a +5%/year increase in production doubles production in 14 years). Same thing for consumption, a +5%/year rate of increase in consumption doubles consumption in 14 years.
So, if we use -5% and +5% (production/consumption), net exports would be pretty much at zero in 14 years (down to one mbpd, a net export decline rate of -22%/year).
Or, if we use -2.5% and +2.5%, we would be down to one mbpd in net exports in 28 years, a net export decline rate of -11%/year.
Note that in both cases, the year to year net export decline would accelerate with time, producing the overall exponential net export decline rate shown.
Long time lurker and first time poster here. Which of the suppliers of oil to the US would be the first to stop exports? I recently read an article that Mexico's reserves will be gone in ten years; so even without consumption increases, could they be the first to stop supplying us?
I'm contributing to the consumption increases here; I recently traded my nine year old Civic for a new four cylinder Accord. So I'm probably using at least 10% more fuel than I used to. At least I don't drive a Hummer and live in a McMansion.
The assumption is that oil exports (once they escape from Export Land) are fungible, going to the highest bidder. That may or may not be an accurate assumption going forward, and it may not be completely accurate now. An additional complicating factor is the declining value of the dollar.
We may, and probably will, see more bilateral agreements, where oil exporters "choose" their buyers, in order to maximize their perceived economic benefit.
An interesting development would be an implicit (which may be happening now) or explicit threat of force by Bush/Cheney in order to keep the oil flowing to the US.
Now that exports are declining, is there any offlimits region of the US that could be opened to drilling by Bush/Cheney? Could offshore oil fields replace some of the imported oil?
I think that the first question to ask is whether those new fields could offset the decline in US production. And the answer is "No."
First, we have to offset the ongoing decline in US oil production (we have rebounded recently because of the recovery from the hurricane damage).
We are going to see an across the board emergency crash effort to bring on any and all additional energy supplies. While oil companies can make money finding smaller fields, what we cannot do is offset the long term decline in the large, old oil fields.
The better solution is to pretend that we are like the Swiss in the Second World War, cutoff from oil supplies. They had to get by on stored oil.
In fact, a better way to present the ELP plan is to assume that you could not buy gasoline at any price--or that you could only buy 10% of what you used to buy. How would you rearrange your life?
I would support opening up new areas of the US for exploration. A stop should be placed on putting new areas of US territory into production though.
The way we currently waste fossil fuels is a crime of a magnitude on a generational scale.
Dear Westexas,
Bush and Cheney know about bind we're in. We need lots more oil to flow from the last, great, 'untapped' reserves in the Middle East. Increasing the flow of exports from the region requires extensive investment in infrastructure and knowhow. We need them to open up to us, especially now that China and India are rising from their centuries long slumber. So we sent an enormous army to occupy and perhaps more importantly control the regions oil and gas reserves. The 'prize' as Cheney has called it, is almost within our grasp after years of careful planning. Now only one country stands in the way - Iran and that's why they are next in line for regime change. Whether this policy is actually feasable, sane, or massively counterproductive and wasteful, leading to the exact opposite of what we desire, is too big a subject to get into right now. Live well and prosper.
Check out the B-52 story at the bottom of the Drumbeat thread. Given the following comment, it seems to me that lots of things are possible.
http://www.time.com/time/magazine/article/0,9171,1181629,00.html
Why Iraq Was a Mistake
Sunday, Apr. 09, 2006 By LIEUT. GENERAL GREG NEWBOLD (RET.)
WT...you print this out quite often these days. I sense some urgency in the message you are trying to deliver not too subtly.
I applaud your efforts.
When will the "Flag Officers" stand up?
Check out the B-52 story. They may have already defied Bush.
It's also important to note that which people familiar with the oath are aware of: the oath is to defend the Constitution against all enemies, foreign and domestic.
I want to know why the DOE is adding oil to the SPR ( http://tonto.eia.doe.gov/dnav/pet/pet_stoc_wstk_dcu_nus_w.htm ) while the price of oil is around $80/barrel.
Several months ago they turned down "bids" for restocking oil when the pricewas near $60/barrel because the price was to high!!
Any thoughts???
They made this deal back in May. I'm not sure exactly how it works, but I think it's that "royalty in kind" thing.
So 7/30 = 23%. That means the top 5 exporters lie somewhere between my country 1 and country 2.
Thanks Euan, you pretty much answered my question about the ELM model: How does it related to the real world?
Your second chart seems to indicate that the short term (6 year) implications of the ELM is not that great for the biggest producers, though it certainly would be longer term. Iran is the only one of the biggest exporter that I would guess might be similar to Country 2 or Country 3. I might have thought Russia as well, but your data indicates Russia is more like Country 4 at the moment. Mexico too perhaps?
I see a quick and dirty was to extrapolate this data for a longer period of time is to say Country 3 in year 7 would take on the same curve as Country 4 had in year 2, and so on. After 6 years, each country is roughly where the next higher numbered country was at the beginning of the graph. So for each additional 5 year period, move up to the next higher line and add 5 to the year to get the result.
In rough numbers:
Country 5 stops exporting in 2.5 years
Country 4 stops exporting in 7 years
Country 3 stops exporting in 12 years
Country 2 stops exporting in 17 years???
Country 1 stops exporting in 22 years???
Country 1 and 2 are difficult to tell on the graph because their lines are so close together, so I'm not so sure about the extrapolation for them.
Remember as countries 5,4,3,2... stop exporting, they START taking imports away from someone else.
That is important also I think.
Right. Picture a balance beam with exporters on one side and importers on the other. UK is apparently dancing the fulcrum right now. As countries slide from the E- to the I-side they add progressively more and more 'weight' that the E's have to support.
Reminds me of Statics 101.
Great work West Texas and Khebab.
Only argument made against ELM is that world's top oil exporters are so much dependent on revenues they get from oil exports that they can't (unlike UK and Indonesia) allow internal consumption to rise so much that exports fell more than a certain level.
The question is what is that level.
I think as long as oil prices keep rising (means world economy is able to absorb high prices without falling into a recession) the top oil exporters keep becoming richer that result in increase in their internal consumption. That is for two reasons. One is that as they become wealthier they become bigger consumers. Second is that their governments don't mind increase in internal consumption as increase in revenues from higher oil prices compensate that.
This can't continue forever because at some level oil prices would reach a point where world economy go in recession and so oil demand get reduced and due to this demand destruction prices reduces too or get stable. At that point top oil exporters wouldn't allow internal consumption to increase (by reducing subsidies or imposing rationing).
I don't know what that point is where this happen. To get a more realistic model of world oil exports in near future some estimation of that point need to be made. Then I think ELM would be more widely accepted and less vulnerable to objections.
Yes, I have the same question. Why wouldn't oil exporting countries throttle back their own consumption in the face of lower revenues due to less oil to export. As oil scarcity increases, why won't exporting nations realize what needs to be done to maximize their revenue from oil and get their people to conserve either voluntarily, or by law. After all, at that point, the importing nations will be forced to conserve as well.
Even in the first phase of ELM, where revenue increases while exports drop due to higher prices, exporting governments will realize that internal consumption growth is dragging down the potential revenue of the available oil.
-Don
As noted up the thread, Indonesia--a fairly poor country--showed an overall steady increase in consumption, even as their net exports were falling. Which makes one wonder about what will happen in richer exporting countries.
Iran rations gas.
That's entirely because of a lack of refinery capacity since they've been unable to import sufficient refining equipment. This is due to sanctions and other aspects.
(hypothetically) It's a bit like the pacific northwest having crap loads of trees but no lumber because noone will sell them any saws to use for lumber mills.
The most recent data, for 2005 to 2006, showed a 4.8% rate of increase in liquids consumption for Iran. We will see if the rationing had any effect on 2007 consumption.
One of the solutions for the major exporters is to upgrade their product-infrastructure, so that they are exporting less and less raw crude, and capturing the extra value-added by the export of petrol, to help offset the decline in export-revenues from their own consumption. To wit: review the extraordinary menu of such large projects that KSA has slated for construction over the next 5 years, from new refinery capacity to chemicals and plastics.
KSA gets it. Iran and Nigeria do not--but, they need to, and they need to get going in this area pronto.
Eventually they're all going to realize it's crazy to export so much raw crude. The export mix will need to be increasingly weighted towards product.
Gregor
PS: Today, my Peak Oil soundtrack can be found here:
http://www.youtube.com/watch?v=9BzDjRPvmRI
"At that point top oil exporters wouldn't allow internal consumption to increase (by reducing subsidies or imposing rationing)."
They may try to control internal consumption but they may not be able to. People often get quite nasty when a perk of citizenship is revoked. With internal turmoil, exports will fall because of internal turmoil rather than internal consumption.
I predict within a few years export withholding will be observed in commodities besides oil. This includes phosphates, natural gas, uranium and maybe even certain kinds of graduates needed at home. Take Australia's uranium for example, said to be 40% of world reserves. A domestic program could take half of that so the 40% effectively becomes 20%.
If your own country doesn't have enough of a commodity don't assume you will be able to import it.
Down, down, down....updated. Roughly -5% since mid-2005
Peak exported oil?
source: http://netoilexports.blogspot.com/
Yes, likely peak exported oil according to the chart and according to the convincing argument by Westexas and Khebab.
Thanks for pointing us to an up-to-date blog that is focused solely on this important topic!
Yes probably peak ... for an importing country this is THE chart to watch ... total world production can go to 100bbd but if net exports are still dropping all importing countries can expect to pay much more for the less they get!
Also, simmilar graphs of supply apply to all internationally traded fungible goods ... gas, coal, uranium, indium, phosphorus, fixed nitrogen .... etc .... etc!
Xeroid.
yeah, thats the chART, with a small c and h pointing at the reductions of hydro/carbons .
Now for some curve fitting:
From the data on the original graph, plotted from Jan. 2002, with a second order polynomial trend line going out to the end of 2009. The R-squared value shows that the curve fit is scary good. Projecting the trend shows a loss of 10 MB/day in exports from now until the end of 2009. That's a drop of 26% over 2.5 years, with a decline of 14% in 2009, and of course steepening after that.
I don't even need to eat these chicken entrails to feel sick - just reading them is enough.
Added comment: If this curve were to hold, net exports would go to 0 in 2012. That can't be right. Can it?
No. I think it will go pear-shaped before then. For example, if the US has no oil to drive to Wal-Mart, China won't need so much oil for their factories.
That curve may hold for "business as usual," but it won't be business as usual.
Oh, I agree completely. My question was more a rhetorical shake of the head. If that BAU curve holds for even three more years we will start to see major geopolitical changes as net exports approach the 50% mark.
As we discussed back in January, 2006, the potentially big decline is in Russian production. It's interesting that the Russians are beginning to strongly emphasize energy conservation.
http://mnweekly.ru/local/20070927/55279368.html
27/09/2007 | Moscow News,№38 2007
Russia's Geology in Dire Straits
http://mnweekly.ru/business/20070927/55279349.html
27/09/2007 | Moscow News,№38 2007
Russia Beginning To Feel the Heat
The whole ELM concept as it is laid out by WT and Kheab, is unbelieavble. Just now we have no problems and the gasoline prices are low.
But on the other end, i can´t dismiss the ELM concept, though it seems unreal because of the implications that should follow it.
Well i don´t know what to say, other than to look out below if this really is real. Scary indeed.
You may not have seen an American movie, "The Sixth Sense," about a boy who "Sees dead people." He said that many ghosts don't know they are dead, and they only see "what they want to see."
Our old way of life, especially our car dependent suburban way of life in the US, is dead--but most of us don't know it yet, and we only see what we want to see.
I happen to be in South Florida and maybe this is just a local thing but I think that the reality may be slowly beginning to sink in.
I happen to have stopped at a used car lot recently and was struck by the fact that there seemed to be an inordinately large number of relatively late model Cadilac Escalades, Lincoln Navigators, Humvees and such being offered at steeply reduced prices. Coincidence? Maybe.
Could be a lot of repossessions, in tandem with the McMansion foreclosures.
"Cheap is the new chic."
I think that conspicuous consumption will increasingly become both unwise and socially unacceptable.
Ah, the plot, it thickens:
http://www.sciam.com/article.cfm?articleId=1FC8E87E-E7F2-99DF-3253ADDFDB...
"But physicist David Mills, chief scientific officer and founder of Palo Alto, Calif.–based solar-thermal company Ausra, has bigger ideas: concentrating the sun's power to provide all of the electricity needs of the U.S., including a switch to electric cars feeding off the grid. "Within 18 months, with storage, we will not only reduce [the] cost of [solar-thermal] electricity but also satisfy the requirements for a modern society," Mills claims. "Supplying [electricity] 24 hours a day and effectively replacing the function of coal or gas."
And now Bill Clinton gets in on the action:
http://blog.sciam.com/index.php?title=promises_promises_the_solar_editio...
Not holding my breath or anything but it sure beats being depressed about peak oil.
We have many ways to generate electricity. That is not the problem. Our problem remains that we need either better battery technology or a much better way to store hydrogen. In other words, we need a replacement for liquid hydrocarbons for powering cars.
My guess is that for cars we'll get suitable batteries long before a hydrogen storage technology.
As I see it we are in a race between Peak Oil and battery technologies suitable for cars. I'm not sure how that race is going to turn out.
Westexas,
Earlier you used the word 'exponential' in relation to what seemed an almost nightmare scenario of exponentially decling figures for oil exports.
The ELM data is unpleasant enough on its own, but now your using terms like exponential decline rates! Exponential is a very powerful concept. For years we've used the words exponential growth and all that implies for the future, are we now going to have to get used to exponential decline? Such a concept, which is inherent in the ELM model, is almost scary, though perhaps the word 'scary' grossly underestimates the importance of ELM.
Here's something I'd like you to explain to me, as I may have misunderstood. Doesn't ELM mean that the downside of the curve has the potential to be substantially steeper than the upside? That is not a gentle, what comforting word that is, downward slope; or a mirror image of the upside, but something far less benign, with all that implies? A negative feedback system of accelerating decline rates?
Reading some of the comments here one almost senses a wave of shock or panic hitting people. I do hope you're wrong, otherwise things are going to get very interesting.
Virtually everything I have written since January, 2006, including my ELP recommendations, has flowed from my basic premise that net exports would decline faster than overall world crude oil production declined. As I have noted, events seem to be following the Peak Oil/Peak Export "script."
As I have looked more closely at the model, recent case histories and recent production/export data, I have grown more and more concerned.
IMO, we are headed for an epic collision between the expectation of an infinite rate of increase in exported oil and the reality of declining oil exports. IMO, this decline will accelerate with time.
My ELP 2.0 recommendation is that you should plan your life based on the assumption that you can only buy 10% of your current gasoline consumption.
Actually for a declining quantity, exponential is less scary than linear decline. Exponential decline slows down as the quantity gets smaller. Linear decline reaches zero in a finite time. When hypothesizing about an ad-hoc model one generally uses exponential because a negative value is often meaningless and a model that produces meaningless values is a really hard thing to sell.
but something far less benign, with all that implies? A negative feedback system of accelerating decline rates?
Yes, And the damage isn't done when you reach Zero Exports.
The Newly created Importing Country now starts competing for the remaining oil.
The Remaining Oil Runs out faster as it runs out!
"Our old way of life, especially our car dependent suburban way of life in the US is dead"
I have been PO aware since three years, and done preps in the line of your ELP. I live in Sweden, that is totally reliant on imported oil. US has domestic oil production. We have not. Therefore a country like Sweden likely would be harder hit by the ELM than US. If americans draw down their oilconsumption to the european level, then there would not be so much problems in US in the short term.
But for us living in countrys without oilproduction, the outcome will be catastrofic if you(which i believe) are right.
You can always merge with Norway to form a "United States of Scandinavia" :-)
Yes that could be a solution, but i am not so hopeful of that. Norway propably can´t sell oil only to Sweden, EU will propably dictate something else.
Anyway Sweden had a union with Norway until 1905, when the norwegians decided to leeve our union and our swedish king Oscar II. The norwegians are friendly to us swedes as people, but they are VERY nationalistic, so a reemerge of the union is not likely.
Swede,
I've long argued that the US won't be as hard hit by Peak Oil precisely because we waste so much oil now. We can cut our consumption of gasoline in half just by switching to Priuses and compact diesels. What can Europeans in cold climates do?
My advice: Build nuclear power plants and start working feverishly on battery research. The electric society is the answer.
FuturePundit
I agree, the only solution for privat cars is electrical cars.
Then comes the question if it is possible to manufacture and load as many electrical cars as we now use gasoline and diesel for?
Swede,
The answer depends on the cost and weight of the batteries. Supposedly A123Systems has the solution. They are an MIT spin-off funded by big name venture capitalists. GM has selected them for the Volt batteries. Will their lithium iron nanophosphate batteries make the grade in cost, weight, safety, and durability? An awful lot rides on the answer to that question.
I am sure it would be very good for Sweden to become a net energy exporter of CO2 free energy exported as electricity and high tech refined energy intensive products like making aluminium, cast it, precision machine it, plate it and export the parts to countries who has plenty of labour but are short on energy. And in some sectors we can continue to make complete energy intensive products like cars or jet fighters. If we each year do a little more of what we already know how to do we can become a new kind of oilfield for the world market.
But this do require more electricity. Savings are being done, combined heat and power plants are being built, nuclear plants uprated, wind power is being built and there are serious efforts to build hydro powerplants. But we also should build a few new nuclear powerplants since fulfilling every dream of savings and new production our greens have wont be enough to let us do what we could do. Since we can do significantly more we have a moral obligation to get it done.
There are also serious efforts to both build more biogas production and import Norwegian gas. One large scale pipeline and at least one LNG terminal is fairly close to start building. This is very good news and I hope it in the end will result in complete utlilization of our economical biogas feedstocks and a low capacity very long term methane
gas pipeline network along the major roads built to still be usefull in the end of this century when the natural gas might be gone but biogas continues to be produced.
There are so manny good things that could be done that combines environmental and economical benefits and it exites me that a fair number of good ideas are being implemented and it is reasonable to do more. Professionally I am trying to figure out removable limitations for these trends. If I find them I have a significant chance of making a good idea or two into party politics and then government policy if the next election goes well.
Now when I have worked a few months inside a fringe of our governmental system in Sweden I know it listens to expertese and new research. That were a bliss for my soul to find hidden below crap journalistics and opportunistic drivel to appeal to marginal voters. Perhaps it is the same in the US? Perhaps a mountin of crap hides a smart and humanistic long term thinking core in the political system?
Are crude/gasoline traders reading TOD today? Surely, TS Lorenzo is not a threat to any facilities.
What else caused the jump today? I give credit to WT and Khebab!!
I came across more than one article that said "analysts" were surprised at the jump in oil prices last night and today. Supposedly, they have no explanation.
It seems a tropical depression is heading towards Mexico...
Yeah, but it's not supposed to be a threat to production.
Bloomberg
http://www.bloomberg.com/apps/news?pid=20601087&sid=aWeeRvCp0e1U&refer=home
Stockpiles, Cushing
Oil gained the past two days, even after a report showing U.S. crude oil stockpiles unexpectedly rose for the first time in five weeks. Inventories increased as imports jumped and refining rates slowed to a six-month low.
Inventories at Cushing, where WTI is stored, dropped 209,000 barrels to 18.13 million last week, the Energy Department reported Sept. 26. It was the 16th decline in 18 weeks, and left Cushing supplies at the lowest since the week ended Dec. 2, 2005.
``The funds decided the big drop at Cushing outweighed the gains elsewhere,'' Addison Armstrong, director of market research at TFS Energy LLC in Stamford, Connecticut, said yesterday.
And Cantarell has not been repaired since Dean.
The Bay of Campeche has been in or under threat since TD10
hit Florida/MS/LA.
Arkansaw of Samuel L Clemens
Regarding "credit," that should make us real popular in the neighborhood.
I think that we are seeing a bidding war for declining crude oil exports, combined with some institutional money flowing in.
However, the primary reason for the run up, IMO, is that Yergin, in late June, predicted that oil prices next year would be back down to $60. Gotta give credit where credit is due.
While I don't have any idea if the Wall Street types frequent TOD, Goldman's Jeffrey Currie did include an ELM looking chart in his most recent commodity piece. He/they are calling this a cyclical bull inside of a secular bull market in oil, and looking for a "super-spike" in prices. I was mildly disappointed that the super-spike was only just over $100, and not the $600-$800 I think we'll get when it really goes parabolic. Of course, at 3 or 4:1 for the Euro, that isn't so bad for the east side of the Atlantic.
Over the past two years I have seen an increase in the references in street research to global resource scarcity, substantially increasing commodity prices in dollar terms and a general bearishness on the prospects for the States Utd until such time as the demand for food trumps the demand for petroleum. Perhaps I am just more aware of it now than I have beenl; it is not in every research piece, but I would call it pervasive. Interestingly, some of the added peak awareness is coming from the dramatic expansion of the hedge fund industry.
Goldman has been crying super-spike since a few years ago.
Ya know, just in case...
Media Advisory - America's top oil suppliers to slash exports by 2012: CIBC World Markets
WTF???? Amazing timing with the release of WT and Khebab's research. Man, you guys are hitting the BIG TIME.
This is being reported at CNNMoney folks.
Leanan, let's put the whole damn thing in here...it's big:
I look forward to a full analysis of the ELM problem in the report of the ASPO-USA conference. To me, it looks like an issue as enormous in relation to peak oil as James Hansen's recent paper on "Trace Gases and Climate Change" is to climate change. In other words, we have 10 years maximum in order to undertake huge changes in our daily lifestyle and use of energy if a disaster is to be avoided - and plans for the changes need to be devised and set in motion NOW. There is almost no sign of that happening. At the moment, no major politician or political party in a major industrialised country, even if they have knowledge of the problem, is prepared to say so, let alone do anything about it. As JM Greer commented in his most recent Archdruid Report, most see peak oil as a PR problem rather than as a crisis needing bold action. Maybe the speech above will be the start of a change in this?
If not, I'm afraid I see the next few years as ones of worsening oil price spikes, recessions and financial seizures. We may be seeing the first one at the moment, though as westexas commented it is only a minor squall before the hurricane.
Has anybody information on these questions please.
Which country is not getting as much oil as they want?
Supply has dropped, demand has increased but I haven't heard anyone bitching that they aren't getting enough.
Which countries will be the first to not get the oil they need or want?
How will it be determined who gets what and how much when the time comes?
Every country is getting all they want at 83/b. If and when oil goes to 200, every country will continue getting all they want at that price.
...there's one group that won't be 'getting what they want' and that's the whole financial 'money is debt'/ exponential expansion group...
I.e. Society as we know it.
The system is in a form of growth capacity overshoot -having been injected by fiat asset steroids supported by free energy these past 40+ years- and the return to a 'normal' level of sustainable global growth is going to be messy if it can be achieved at all.
Nick.
Worldwide demand can't exceed worldwide supply, the market price changes to balance the two.
As the price goes up the least able to pay the increase drop out of the market ... or take what they want by force.
At the moment it is mostly the poorer oil importing nations that are substantially decreasing their consumption. The poor people don't like being forced to cut back any more than you would ... watch the news for where the populations are rioting ... there are plenty of them at the moment ... somebody on TOD has been keeping a list, sorry I can't find the link.
Xeroid.
Here's an article I wrote about the energy shortages that have been happening across the third world (which was based on the list posted to TOD):
Peak Oil Hits the Third World
And for a first-world example, Saudi Arabia has been undersupplying its contract volumes with Japan for about six months now: Saudi keeps term supply cuts for Asia steady in September
For the most part, it looks like the poorer nations (or those with less clout) are simply getting priced or squeezed out of the market.
--C
Energy consultant, writer, blogger www.getreallist.com
Then you aren't paying attention.
It's the poor countries that are suffering. The price of gasoline is often subsidized in those, and their governments can no longer afford the subsidies. The protests in Myanmar started because the government doubled fuel prices. At $80 a barrel, roughly a quarter of their national budget is going to oil.
Fuel shortages have rippled through many countries in Africa for the past two or three years. There's a shortage of one fuel, everyone switches to another one, then that one runs short. Factories and mines have been forced to shut down, and many are trying to build their own power plants...but they're having trouble finding fuel for them.
Bangladesh has had civil unrest over shortages. Farmers have been unable to farm, because they don't have fuel to run their irrigation pumps or fertilizer for their crops. They marched in the streets and even overran a government building.
There's a shortage of heavy oil in Asia. They use heavy oil to run power plants there. Prices are breaking records. This may be partly due to more heavy oil being refined into gasoline.
That's just a small sampling of the "demand destruction" going on around the world.
Leanan: Interestingly, these countries are still labelled as part of the "developing" world. Now that oil supply has started declining, they aren't developing, they are regressing. It does appear that declining oil supply is starting to drop the stragglers off the "global economy" boat.
Yes, but...
Perhaps he has changed his tune. The following shows that in early 06 he saw a net add to crude output of over 1Mb/d/y. Still waiting for all those barrels...
Hello,
New in TOD.
I’ve a doubt about this matter:
All of those actual exporting countries need to continue exporting oil as their economies are based on oil extraction and export industry.
How could their internal consumpsion (i.e. their economy) be growing at a so high rate without the income of oil export ? (or with a decreasing income)
Could it be a reason for the actual oil price increase?
Sorry for my bad English.
In the early stages (Russia for example), the higher prices make up for lower volume and they make more money for less oil.
In the later stages, Indonesia as an example, they do try to conserve. In Indonesia's last year as an oil exporter, they went without electricity rather than burn oil as they waited for a coal fired plant to be finished. But the next year they were still not an oil exporter.
Hope this helps and welcome.
Alan
Something I haven't really seen mentioned is the pressure on oil exporters to diversify their economies away from dependence on oil exports. To my mind this would make more sense than a country forcing demand destruction (economic collapse) within in order to maintain exports.
Look at Dubai ..
That's your diversification model ..
Triff ..
But doesn't the impact of declines depend on the level of consumption versus export now? Your model has current consumption at 50% of production; if the initial consumption rate is changed to 25% of total production while maintaining the same rates of increase and decrease, net exports extend to 18 years and account for 4.7 billion barrels of the remaining reserves versus 9 years and 1.7 billion barrels. What are the current consumption rates for the largest exporters?
Copy of one of my posts up the thread:
It would be interesting to see a list of the top exporters and, for each, to show the percentage of production that goes to domestic consumption, and also the rate of change of that percentage. Is there data available somewhere summarized like this for the top dozen or so exporters?
http://www.eia.doe.gov/emeu/cabs/topworldtables1_2.htm
click on source for detail
Thanks. Here's a chart with those numbers, sorted in order of largest increase in percentage domestic consumption between 2005 and 2006:
The spreadsheet linked from the top post here has that info for the top 16 exporters. He shows monthly data going back to 2001.
I downloaded that spreadsheet, and added a cell for each country to derive the percent internal consumption. The range was broad, from 3% to 73%. But for the two neighborly suppliers to the US junkie – 73% for Canada and 62% for Mexico. Scary times ahead, it would seem.
The current level of consumption compared to exports is important but more importantly the yearly rate of increase. In particular, the IEA (OMR, July 2007) is very bullish for Saudi Arabia (+4.2% /year), Iran and Russia (+2.4%/year) which are in the top 5 net exporters. Growth in domestic consumption is fueled by booming economies (partly because of record high oil revenues) and heavily subsidized gasoline prices.
Good work for all that contribute here. Needless to say, most of us are quite concerned about the future of our world. I was thinking the effect of PO on top of world economy -- what is it all mean for GDP? I was talking to a friend and discussing about our retirement future, etc... It seemed to me a lot of thing are going down the tube fast. Once this peak-energy (PE) is reached, I guess we are looking for a fast decline in GDP and all (401K, social security, etc..) that tied to our expected GDP growth. Is it just me or a lot of us here are quite pessimistic about our current state of affair and lack of future visions?
Somehow, my friend is a bit more naive -- pretty much saying we will come up with something to keep all this growth engine moving. I am on the other hand think all this growth need to stop NOW -- espcially what is going on in the US. We can't have a Presidend going around the world encouraging more consumption -- buying junk/waste to keep the economy humming. Are we buying time or what here?
Hmmm....
"We have to kill consumption before consumption kills us."