World Oil Production Forecast - Update November 2009
Posted by ace on November 23, 2009 - 10:45am
World oil production peaked in July 2008 at 74.74 million barrels/day (mbd) and now has fallen to about 72 mbd. It is expected that oil production will decline at about 2.2 mbd per year as shown below in the chart. The forecasts from the IEA WEO 2008 and 2009 are shown for comparison. The IEA 2009 forecast has dropped significantly lower than the 2008 forecast. The IEA 2009 forecast also shows a slight decline from 2009 to 2012 implying that the IEA possibly agrees that world oil peaked in July 2008.
The US Energy Information Administration (EIA) and the International Energy Agency (IEA) should make official statements about declining world oil production now to urgently increase the focus on oil conservation and alternative renewable energy sources.
World Oil Production
World crude oil, condensate and oil sands production peaked in 2005 at an annual average of 73.72 million barrels per day (mbd) according to recent EIA production data. 2008 production was slightly less than 2005 creating a peak plateau from 2005 to 2008 as shown in the chart below. Production is expected to decline further as non OPEC annual oil production peaked in 2004 and is forecast to decline at a faster rate in 2010 and beyond due mainly to big declines from Russia, Norway, the UK and Mexico. Saudi Arabia's crude oil production peaked in 2005. By 2011, OPEC will not have the ability to offset cumulative non OPEC declines and world oil production is forecast to stay below its 2005 peak.
My forecast to 2012 is based on an aggregation of individual forecasts from over 80 countries including over 300 major oil projects. My estimate of 1.95 trillion barrels (TB) of total Ultimate Recoverable Reserves (URR) of oil is used to generate the forecast beyond 2012 as shown by the red line below. If Colin Campbell's estimate of 2.20 TB is used, which is 250 billion barrels (Gb) greater than my estimate due mainly to more optimistic assumptions about OPEC reserves, the peak production date remains at 2005. This shows that an additional 250 Gb of recoverable oil reserves does not change the peak oil date and instead increased production rates occur later as indicated by the green line below. Additional reserves and the related production from prospective areas such as the arctic, Iraq, and Brazil's Santos basin are highly unlikely to produce another peak but should decrease the production decline rate after 2012.
The IEA WEO 2009 forecast is also shown on the chart below and an abrupt change in production occurs after 2015. The reason for this change is due to the IEA using one forecasting methodology up to 2015 and a different methodology after 2015. The IEA explains their two different methodologies on pages 39 and 40 from the IEA World Energy Model (WEM). The IEA's forecast to 2015 is based on over 570 sanctioned and planned projects, each with capacity greater than 5 thousand barrels per day. The IEA needs to explain this sudden change in production after 2015.
The IEA's forecast from 2015 to 2030 is not based on projects but based on the assumption that there are enough remaining oil resources coupled with enough investment to cause oil production to suddenly increase after 2015 to meet the IEA's oil demand forecast. The IEA projects that much of the sudden production increase after 2015 comes from OPEC countries most of which are referred to as closed countries by the IEA. The IEA WEM page 40 states the following in reference to OPEC closed countries: "Long-term exploration and production investments of closed countries are projected based on expert judgement supported by the analysis of the consistency of official targets with the potential from past discoveries, estimated yet-to-be-discovered reserves and enhanced oil recovery projects." The IEA also continues to accept, without any questions, the oil resource estimates by the US Geological Survey oil assessment in 2000 (USGS 2000) as shown in Fig 10 on page 26 of the IEA WEM.
OPEC is consistent with the IEA in its use of forecasting methodology for long term projection to 2030. OPEC also forecasts oil demand first and also relies on USGS 2000 resource estimates to project an oil supply increase which meets demand. The paragraph below is from page 24 of the OPEC World Oil Outlook 2007 and is OPEC's attempt to assure the world that there are sufficient resources to meet future demand.
A central tenet of the OPEC long-term supply perspective assessment is that resources are sufficient to meet future demand. The resource base, as defined by estimates from the US Geological Survey (USGS) of ultimately recoverable reserves (URR), does not constitute a constraint to supplying the rising levels of oil demanded in the reference case. Indeed, the methodologies developed and applied to derive the regional crude supply figures revolve around the assessment of remaining resources (resources minus cumulative production), so supply projections are, by definition, plausible from the resource perspective. Moreover, it is worth noting that these URR estimates have practically doubled since the early 1980s, from just 1,700 billion barrels to over 3,300 billion barrels, and it is probable that this upward revision process will continue. It should be noted that cumulative production during this period was less than one-third of this increase. In addition, these figures do not take into account the large resources of nonconventional oil.
Both the IEA and OPEC first forecast long term oil demand to 2030. Next, both agencies assume that there are sufficient oil resources to meet demand as substantiated by the USGS 2000 oil assessment. Oil extraction has become technologically more challenging and more expensive as much of the easy oil has already been produced. There is a strong likelihood that oil resources and investment will both be insufficient to increase production above the 2005 peak. However, both IEA and OPEC will probably say that falling investment caused falling oil production.
Non OPEC Oil Production
Non OPEC crude oil, condensate and oil sands production peaked in December 2003 at 42.62 mbd according to recent EIA production data. Production is expected to decline further at a rate of 1.6 mbd per year from now to December 2012. This decline is due mainly to big declines from Russia, the North Sea and Mexico.
The IEA WEO 2009 forecast is shown on the chart and projects a decreasing production rate which is roughly equal to an extrapolation of the downward trend from December 2003 to now, as shown by the dashed red line. This implies that the IEA has admitted that non OPEC oil production peaked in December 2003.
World Oil and Natural Gas Liquids Production
World crude oil, condensate, oil sands and natural gas liquids production peaked in July 2008 at 82.80 mbd according to recent EIA production data. Production is expected to decline further at a rate of 2.4 mbd per year from December 2010 to December 2012.
The IEA WEO 2009 forecast is shown on the chart and projects an increase due mainly to optimistic assumptions about OPEC production rates. The IEA also assumes annual increases of 0.44 mbd from new natural gas liquids capacity additions and 0.13 mbd annual increments from Canada oil sands. In a stark contrast, Colin Campbell assumes only 0.07 mbd annual increases from natural gas liquids.
World Liquids Production, Demand and Price
The definition of oil used by the International Energy Agency (IEA) also includes natural gas liquids (NGL), bio-fuels, processing gains and other liquids derived from natural gas and coal. OPEC NGLs were supposed to cause a significant net increase in world NGLs in 2009 but this has not happened yet as NGL production is struggling to exceed 8 mbd. According to the EIA NGL data, 2007 production was 7.96 mbd, 2008 was 7.91 mbd and 2009 year to date remains just below 8 mbd at 7.99 mbd. Although bio-fuels production has been growing exponentially, world liquids production has probably passed peak in July 2008 at 87.9 mbd as shown below. In 2008, US ethanol production was 0.6 mbd, Brazilian ethanol production was 0.4 mbd, and bio-fuels production outside the US and Brazil was 0.5 mbd.
The IEA WEO 2009 supply projection is approximately equal to the forecast demand in the chart below. The IEA's forecasting model first calculates the future demand and assumes that oil resources are not a constraint. Second, the capital investment is assumed to be large enough to ensure that these oil resources can be converted into production fast enough to meet demand. Consequently, the IEA supply forecast is roughly equal to the demand forecast.
The average oil price should stay above $US 75/barrel for the remainder of the year as average demand is forecast to be only slightly greater than supply to December 2009. If world demand unexpectedly weakens then prices might fall below $US 75. Furthermore, OPEC is unlikely to cut supply at its December meeting which reduces the upward pressure on oil prices. Some recent evidence of increased demand is shown by US crude oil stocks dropping from a recent peak of 26.2 days at the end of April down to 24.1 days in mid November. However, oil prices could exceed $100 in early 2010 as world liquids production may fall below forecast demand.
High volatility of future oil prices is also expected due partly to delays in project investment causing future annual oil capacity additions to decline sharply to 2012. This declining trend in capacity additions is shown in the chart below which is derived from this oil megaproject database. About 3.7 mbd of annual capacity additions are needed just to offset declines from existing fields. Annual capacity additions from 2010 are forecast to be less than 3.7 mbd implying that world production of crude, condensate, oil sands, NGL, GTL and CTL will continue declining. The chart below shows capacity additions from new projects and not production additions. Allowing for maintenance, unplanned outages and other incidents, future production additions may be about 15% less than capacity additions. This means that the production additions for 2010 to 2012 could be less than 3 mbd, well short of the required 3.7 mbd to offset declines from existing fields.
Many large capacity additions started in 2009 including over 1 mbd from Saudi Arabia, over 0.4 mbd from Brazil, over 0.5 mbd from Russia and almost 0.3 mbd from USA. Key producer Saudi Arabia has no more capacity additions until Manifa's 0.9 mbd scheduled to start in 2013, at the earliest. Capacity additions from Brazil, Russia and USA decline from 2009 to 2010. World capacity additions drop further in 2011 and decrease again in 2012. Consequently, an oil supply crunch is likely to occur in 2012 as shown below. The capacity additions do not include bio-fuel additions but these additions are unlikely to ease the 2012 oil crunch.
Additional Information Sources
World Oil Production Forecast - Update May 2009
World Oil Production Peaked in 2008, March 17, 2009
Saudi Arabia's Crude Oil Production Peaked in 2005, March 3, 2009
Non OPEC-12 Oil Production Peaked in 2004, February 23, 2009
USA Gulf of Mexico Oil Production Forecast Update, February 9, 2009
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Thanks, Ace. I always am interested in the data and appreciate the work you put in to producing this post. It looks like the die is cast for the next three years for declining production based on current data. Even if 100 discoveries of large oil fields occurred within the next three years, we would still have an oil crunch in 2012. Either 2005 or 2008 is the likely peak for the foreseeable future. There could be another peak down the road, but the further away from those dates we get without a production increase, the less likely it is that the peak will be surpassed. My language is deliberately stochastic as definitive statements are foolish at this point.
The IEA's chief economist has already made a warning in Aug 2009 when he said that "the world will likely see an "oil crunch" within the next five years that will send prices soaring, starting as early as 2010."
http://www.scdigest.com/assets/On_Target/09-08-05-2.php?cid=2625
Would it be possible to go back through the previous outlooks and plot how the predictions have changed over time?
Knowing that, on average the 3 year IEA outlook has been 20% optimistic may be of use in evaluating the usefulness of the current predictions.
Also, is this post just an IEA outlook, or would it be nice to see the mean forecast from a few other sources (ie, as in http://www.theoildrum.com/node/2620 ) so that this isn't just IEA's outlook, but somewhere you can get an idea of what other people have predicted also.
A table showing IEA changes in their WEOs is here:
http://www.crudeoilpeak.com/?p=564
1 Most think SA has substantial add'l cpacity, plus a little more from other gulf countries. Do you agree? SA has stated that 75 is high enough, seems to be raising output a little already. Suggest you comment on what you think excess capacity exists, if any, and the potential for it to be produced to meet any near term shortfall, say in 2010/11.
2 Stocks are higher than five year avg, US consumption seems nearly certain to decline over the near term as unemployment continues to rise. Do you believe that china expansion will continue or do you think they, and the commodities they have been stockpiling, are in a bubble? And, if in a bubble, do you think that chinese fuel consumption will decline over the near term?
3 Do you think the world is emerging from the recession, will continue flat from here, or will decline from here?
I agree supply is fixed over the next two years unless SA can and will produce more. Do you think the above economic issues can substantially affect demand and price in 2010/11?
If the existing field decline rate is around 4.5%, we need 3.3 MMBD each year to break even. Fig 6 indicates we actually added spare capacity in 2008 and 2009, giving us a little bit of buffer for 2012. If there is little increase in demand, no unforeseen above ground problems and no unusual speculative pressure we might get through 2012 at lower prices than the July 2008 price spike.
No unusual speculative pressure is highly unlikely. The monthly oil chart is in a firm uptrend:
http://futures.tradingcharts.com/chart/CO/M
Please note that the normal fall decline in prices that occurred from 2001 to 2006 and again big time in 2008 has been replaced replaced by an uptrend as in 2007.
And gold is again making new highs this morning having broken out of a basing pattern:
http://futures.tradingcharts.com/chart/GD/M
The last 2 breakouts in the gold chart were good for a $300 price increase for gold. This implies a $1300 price before we start basing again.
And if we look at the dollar, it appears to be losing support at 75 on the dollar index chart:
http://futures.tradingcharts.com/chart/US/W
It's acting like it wants to breakdown and test support at 72 again.
The picture I see is unusual speculative pressure on oil prices in the near future. Markets usually go to extremes in both directions and with oil fundamentals being very bullish, the bullishness of the charts is confirmed.
Any oil price that stays long enough above 80$ will trigger a new recession. If the january 2009 price spike is going to happen, good bye recovery.
This seems a little premature to say. What are you basing that $80 limit on? I think we will emerge from every recession a little more resistant to the high price as people adjust. The problem, of course, is that the production decline will continue to be steeper and steeper for a while, though eventually, it should start to level out (the long tail). What I hope is that most people will wise up to the trend before too long and make permanent lifestyle adjustments (give up personal transport) that will permanently reduce their liquid fuel needs.
Anecdotally: I know when gas was $4.00 a gallon, it cut into my discretionary spending. At $2.50, I simply limit my driving. I don't plan to have a car by 2012. Probably, I won't be able to afford one, or at least, it won't be worth it.
80$ or more a barrel was more or less the inflation corrected oil price before the last 5 recessions set in. Of course that is not an exact figure but it was described here in some recent comments quite convincingly.
Your lifestyle adaption is really recommendable by any means but if everybody did so it would trigger a recession even without high oil prices: Everything in the global economy is based on growth. In spite of that deferred demand or at least reduced consumption wil be a must, soon IMO.
Check out Dave Murphy's post showing that an inflation-adjusted price of $80 to $85 a barrel seems to lead to recession. Others have come to the same conclusion.
There is no recovery. It's all statistical baloney from the Charisma boy-In-Chief and his stooges (just like Bush before him).
Here's an example, the Bureau of Economic Analysis claims that consumer spending rose by 1.2% for the third quarter. Yet actual retail sales tax receipts at the state and local level reported for the third quarter are down 8.2%. One of these numbers is a LIE. The BEA relies on its "models" for what they think the economy is doing. The state and local sales tax receipts are the actual data about what the economy is doing.
But which number gets reported by the Ministry of Truth, aka the Mainstream Media? Why the 1.2% increase, of course. They are LYING to you. It's a confidence game, aka a CON game.
Meanwhile real unemployment appears to be north of 22% and rising. The peak of the Great Depression was 24%.
Sometime in the next 6-8 months the stock market is going to get smoked, hard. Recovery? I don't see any green shoots, just lots of green shit, ready to hit the proverbial fan.
Would you mind sharing the source for the -8.2% number? Thanks.
Google "state tax receipts". Tons of info comes up. A large drop appears to be true.
Thanks. Similar data apparently lurks in the U.S. Census Bureau site. The numbers there are UGLY.
The -8.2 number quoted above may be from today's WSJ however.
WSJ was citing this report:
http://www.rockinst.org/newsroom/news_releases/2009/11-23-sharp_declines...
Very difficult to spin those results. They are very bad.
States are drowning in red ink because of the decline of real estate and sales tax revenues. It's on Bloomberg, Wall Street Journal, even a national association of State Budget Officers has commented about how horrible this is.
But here's one example of such data already collected for you.
You can get it yourself but you have to go state by state to collect it all.
The rise in the market (particularly the S&P) directly correlates, over 90%, to the moves in the dollar since March 2009. That has almost never been true in the past 2 decades but it is now. That rise is nowhere near as large as people make it out to be due to the fall of the dollar in the meanwhile.
In fact, if you have a trading account that can plot FOREX info against market info, plot the dollar index since March against the S&P since March. Those two puppies look like inverted twins of one another. The dollar goes down and the market surges. The dollar goes up (which has been rare since March) and the market pulls back.
Even the BLS report admits, in Table A-12, line item U-6 of the monthly employment report that real unemployment, not the juggled public U-3 numbers is at least 17.5%. And given some of the shenanigans that Bush Jr. and Clinton pulled with unemployment numbers, there is good reason to believe it is much higher, such as a recent university report suggesting over 22%.
There is no recovery. It's all crap and lies. And the rest of the world continues to edge away from the dollar (and the Euro and yen) at a slow but steady pace.
By the way, Russia added another 500,000 ounces of gold to their central bank holdings. At 1000 troy ounces per 31.1 KG that's 15550 kg of gold they added last month (to the 19 million ounces they currently hold). That's a bit over 17 tons of gold they added last month alone. India bought 200 tons. Sri Lanka bought gold. China is buying gold. Why? Because the dollar is being deliberately trashed to save the very SOBs that caused the crisis - Wall Street financial institutions.
But consumers aren't buying the recovery BS, because they are maxed out on their credit cards or busy trying to pay them off so they don't get hammered again by the likes of Citibank, which recently raised credit card rates on 2 million customers from single digits to 29.9%.
Unemployed people and employed people taking pay cuts (Google that and see what FedEx and dozens of other major corporations have done in that regard, even Microsoft) do not consume as much as they did before because they can't. This is a nascent depression and more Bernanke and Geithner lies are going to make a full blow real depression. And then, once we're down and on the floor, peak oil will seal the deal by preventing any real restructuring.
P.S. China has 7.7% GDP? REALLY? Google Ordos. Google the highway in Hunan province that has been built, ripped up and rebuilt just to inflate the GDP number. China is playing the world for the fools that most of them are.
Ordos made it onto BBC News last week. Aparently even though the city is empty many of the apartments have been bought up by speculators hoping to cash in once the recovery begins. That sounds like China could be heading towards its own housing bubble.
there is a third possible lie. maybe the retailers responsible for collecting and paying sales taxes are doing the lying. maybe they are using sales tax reciepts to manage cash flow or lack therof. maybe they are under-reporting and pocketing sales tax reciepts. it happens.
According to the IEA, Saudi Arabia can produce an additional 3.4 million b/d within 90 days. Let's look at recent history.
Recent annual US oil prices versus recent annual average Saudi net oil exports (EIA):
Oil price & net exports:
2002: $26 & 7.1 mbpd
2003: $31 & 8.3
2004: $42 & 8.6*
2005: $57 & 9.1
2006: $66 & 8.6**
2007: $72 & 8.0
2008: $100 & 8.5
*Saudi Arabia reiterated their support for the $22-$28 OPEC price band in April, 2004, and they made good on their promise to attempt to bring prices down, as they increased net oil exports in 2004 & 2005. An article from April, 2004:
http://www.independent.co.uk/news/business/news/opec-studying-plan-to-bo...
Excerpt:
But then we have the 2006, 2007 & 2008 data points.
**In early 2006, the Saudi oil minister complained of an inability of find buyers for all of their oil, "Even their light, sweet oil," as annual oil prices traded in excess of twice the upper limit of $28 that the Saudis had pledged to support only two years earlier. Of course, I guess the Saudis could have offered to sell another one mbpd for $28 per barrel, if they had the oil to sell. In any case, as I have previously described, based on the logistic models this was coincidentally at about the same stage of depletion at which Texas started having trouble finding buyers for all its oil, "Even its light, sweet oil," in 1973.
Now some of us, following Matt Simmons' lead, hold the heretical point of view that Saudi Arabia's oil fields are not immune from the laws of physics. And maybe, just maybe, when the bulk of your production comes from a group of oil fields that are several decades old, your production might be peaking.
We have a very large disconnect here.
On the one hand, we have the KSA claiming, or some analysts suggesting, that the KSA has a reserve capacity of 3mbd that can brought on line in 90 days.
On the other hand, we have the KSA not bringing any portion of that capacity on line in the multi-year run up to 145 dollar oil, when they could have been making 4-7 times their usual profit.
The only reasonable explanations I can see are:
1. The KSA is husbanding oil for the future.
2. The KSA doesn't have any spare capacity.
I add the additional detail that KSA production fell dramatically by 1.5mbd right after oil prices dropped of the 145 high in summer 08. This is important because it suggests that they were running at full throttle and they let up as soon as they could after the price spike. Quite obviously, dropping production 1.5mbd during a price spike to 145 would have been a catastrophe and would have forever shaken everybody's faith in their ability to pump what they say they can.
I don't see a third option.
If it's 1, then the KSA has accomplished, for the first time in the history of civilization, what no other government has done - the saving of resources for future generations despite the ability to reap huge profits now.
So I think it's 2.
Given the secrecy with which the KSA holds all of its field data and the massive turmoil that will result when its own population figures out that the gravy train is slowing down . . . . I'm quite shocked that most people here think it's 1.
And, IMO, the 3% decline rate suggested by the graph heading this post is wildly optimistic and depends, almost entirely, on #1 being correct.
I agree that Saudi had no spare capacity as of July 2008. Since then however they have cut production by about 1.4 million barrels per day and they have brought Khurais on line. khurais currently has about 300,000 bp/d production capacity, with peak production expected to be 1.2 mbp/d. I doubt it will ever reach that level but that is another story.
Anyway, Saudi Arabia currently has about 1.7 mb/d of spare capacity minus any depletion of older fields since July of 2008.
Ron P.
Thanks for that link. Actually it states 300 kb/d from 4 GOSPs, two in Khurais and "one in each of the other fields," by which I assume they mean South Ghawar. So Khurais's output is even more threadbare, if I'm interpreting this correctly - more like the last official number quoted by Simmons in TITD of ca. 150 kb/d.
In the wake of the IEA whistleblower story it isn't too outre to suggest that the production figures stated for KSA could be overblown to some extent, either. From Feb-Aug 2007 their stated liquids production according to the EIA was 10126.17 kb/d. No more, no less. Perhaps some flunky forgot to hit GO on a random number generator. Maybe the same flunky who handles their proven reserves took over the oil production department. .171 is to the right of the decimal point all the way back to Jan '05, through Oct '08. Just noticed this - is it some algorithm making itself manifest?
Henry Groppe has stated that official production figures all over the world are quite often out of kilter with reality, and that import volumes reported by consuming nations are much more reliable. It would be remiss to point out that he's also bullish on Saudi production, however.
No, they do not mean South Ghawar, they mean the other two fields in the Khurais project, Abu Jifan and Mazalij.
The production figures do not come from the IEA, they are a composite of several other sources including Platts, Petroconsultants, MEES and likely several others. When OPEC states their production in their Monthly Oil Market Report, they specify that they are from "external sources". OPEC members do not report their production numbers.
The numbers reported by the EIA as well as the IEA are basically guesses based on production reports from other sources.
Ron P.
""""I agree that Saudi had no spare capacity as of July 2008.""""
Interesting!
"""""Since then however they have cut production by about 1.4 million barrels per day"""""
Yes!
""""" and they have brought Khurais on line. khurais currently has about 300,000 bp/d production capacity, with peak production expected to be 1.2 mbp/d."""""
How do we know this?
If the answer to my question includes the phrase, "because the Saudis are telling us that," then I don't believe them. I think they're liars, and I don't trust their numbers at all.
Many people suppose that the KSA has a lot to gain by a spike in oil and acknowledgement that the world has peaked.
Rubbish.
KSA has the most to lose. Because, when the world first takes in that big, deep breath and thinks, "you mean we're running out of oil," the the KSA is going to be like the weakling kid holding a bag of jelly beans in a class room full of hungry bullies.
"""""I doubt it will ever reach that level but that is another story."""""
I'd love to hear the story some time.
"""""Anyway, Saudi Arabia currently has about 1.7 mb/d of spare capacity minus any depletion of older fields since July of 2008."""""
Well, I'm happy that we're in agreement that they probably don't have another 3 plus to offer.
I think we'll know soon enough.
AndrewB,
I think we will know soon enough if Saudi Arabia has genuine surplus capacity as it will probably be needed to meet demand in the next year as shown in my Fig 5 above.
HOWEVER, there is chance that voluntary demand destruction could result from next month's Copenhagen climate talks.
OPEC chief el-Badri said two days ago that "oil producing countries should be compensated for lost revenues if climate talks in Copenhagen next month agree to cut the use of oil".
http://www.presstv.ir/detail.aspx?id=111881§ionid=3510213
The IEA also wants a climate change deal at Copenhagen to limit concentration of greenhouse gases. Carbon taxes on oil consumption would bring down demand in 2030 from 105.2 mbd to 89 mbd, according to the IEA.
http://pakobserver.net/200911/23/news/business05.asp
The introduction of carbon taxes at Copenhagen would be a convenient way to drop oil demand since oil supply is declining. Guess who would get the carbon taxes - the producing countries or the consuming countries? I think that a climate change deal with new carbon taxes will be made at Copenhagen.
Hi Ace,
Do you think OECD countries would be prepared to accept those taxes knowing what it would do to their economies? Everyone still seems to be chanting the growth mantra at the moment. They had the chance to do this at Kyoto and what did we get from that? Not much at all. If we take a look at the Keeling curve then we still havnt put a dent in carbon dioxide emissions.
A carbon tax on oil could go a long way in covering falling oil production through demand destruction if they get it right.
It looks some kind of carbon tax is inevitable, even if it's a small one to start.
Carbon tax a good way forward
http://www.upstreamonline.com/live/article199807.ece
"Shell has called for government intervention in carbon markets.
Chief executive Peter Voser told the Guardian paper action needed to be taken to make expensive green projects like carbon capture and storage (CCS) economically viable."
OPEC chief el-Badri said two days ago that "oil producing countries should be compensated for lost revenues if climate talks in Copenhagen next month agree to cut the use of oil".
I wonder how the USA could get in on that.
KSA increased production in June/July last year to offset the high price. At the time there was a lot of speculation that KSA just shipped out of reserves.
However there is a possibility that KSA did have excess capacity last summer.
Great analysis Andrew.
It will be interesting to see how the transition to heavy oil production affects their creative accounting and the spin we will get.
About stocks, people hoard resources when they think (speculate, if you like) that the price will increase, and reduce stocks when they think that the price will reduce.
Hight stocks mean that most people with the resources to hold oil think it will get more expensive, as 2008 low stocks meant that they tough oil would get cheaper. Of course, they may be wrong, as they where for the bigest part of 2008 and all of 2007.
I doubt very much that the KSA intends to produce any more. They have explicitly said they want to leave what they can in the ground for future generations. Why needlessly exchange an irreplaceable asset for increasingly worthless slips of green paper?
This is the fundamental flaw in much of the analysis and forecasting that is going on right now. In the past, it was a pretty safe assumption that if the reserves were there, then they would be extracted at the fastest rate possible. Now that those who are actually paying attention have good reason to think (whether actually acknowledged in public or not) that we are past peak, the rules of the game have changed, and the old assumptions no longer apply. The name of the game now is to hold back your reserves as long as possible, because they will be worth a lot more in the future than they are now. The catch is not to hold back so much or wait so long that civilization collapses and there is no one left to buy the oil - or it is no longer possible to even get it out of the ground. It is going to be a tricky game to play, and another unsafe assumption is that all the players will make the right moves. They won't.
I disagree completely.
The KSA was more than happy to pump like maniacs when prices bumped up into here-to-fore outrageous levels - like more than 30 bucks. The KSA would pump and pump and pump and pump, thereby driving prices back down, you know, "to stabilize price and ensure that their customers didn't move to alternative sources."
So flash forward 20 or 30 years when they can now reap huge profits and they do what?
Now they choose to save?
Ridiculous.
It's the same controlling family. It's the same controlling interest.
The royal family has never and will never give a wit about future generations. They want to hold power and make money.
I think they are hiding their own peak because they know it will lead to revolution.
Time will shortly tell.
When gas is 10 bucks a gallon in the U.S. and Joe 6-pack is in the streets demanding action, we'll see how committed the KSA is to "future generations" when the U.S. gives them the "pump on our terms or receive democracy" option that Iraq got.
When peak oil is understood as a process, rather than an event, then the available data tolerates alternate explanations. In this perspective 'peak extraction capacity', a metric which the enablers of the reigning elites are trying to impose at the centre of the discussion, assumes at most minor significance.
It follows that it is not ridiculous that the Saudi's would husband their remaining resource now.
A present capacity of 'reaping huge profits is far from the only relevant information relevant to policy making.
There is the small matter of the capacity to recirculate petro-dollars 'profitably'. Is fiat money in the bank as valuable as oil in the ground? Where should the KSA invest its profits? In US equity?
There is the latest information regarding the physical characteristics of the remaining resource at home and abroad, as well as real world experience with the latest extraction technologies vs faith-based expectations of unfolding advances in this domain.
Regarding your foreign policy speculation, the US didn't have the capability to increase the rate of oil extraction from Iraq. The US is even weaker with respect to the KSA regarding the flow of oil, despite all the spending by the empire's security apparatus on weapons of mass destruction. Could the kingdom resist the empire? Well the kingdom could fall, and the empire could enjoy another shock'n awe show, but on the ground the flow of oil would most probably decline. I don't expect the pro's in the department of war would choose to gamble against this probability.
"""""When peak oil is understood as a process, rather than an event, then the available data tolerates alternate explanations.""""
This makes no sense to me. Peak oil is a moment in time. Consequences of peak oil may be an era.
"""""In this perspective 'peak extraction capacity', a metric which the enablers of the reigning elites are trying to impose at the centre of the discussion, assumes at most minor significance."""""
Once again, this makes no sense to me. Perhaps I'm not the audience you're targeting.
"""""It follows that it is not ridiculous that the Saudi's would husband their remaining resource now."""""
Obviously, if I found all the premises to be lacking in sense, the conclusion does not make sense to me.
"""""A present capacity of 'reaping huge profits is far from the only relevant information relevant to policy making."""""
I quite agree with you here. There's also maintaining power, which was next to "reaping huge profits" in my post, thereby making clear that "reaping huge profits" had company. Beyond that, there's only the idealistic concept that they are taking care of future generations, which I find, from a behavioral perspective to be virtually impossible.
"""""There is the small matter of the capacity to recirculate petro-dollars 'profitably'. Is fiat money in the bank as valuable as oil in the ground? Where should the KSA invest its profits? In US equity?"""""
It is a small matter. Buy gold. Buy mines. Buy beanie babies.
They knew 30 years ago that they'd be running out.
They knew 30 years ago that oil would someday spike.
None of their information has changed, so why would their behavior change?
Sure, oil in the ground is about a great of a resource as a country could have right now. But what's the point if you end up giving up your control/sovereignty at some point specifically because you have it.
This is a red herring. It is antithetical to human nature to save. It is extraordinarily antithetical to governments of any kind to save. Governments don't save - they spend.
"""""There is the latest information regarding the physical characteristics of the remaining resource at home and abroad, as well as real world experience with the latest extraction technologies vs faith-based expectations of unfolding advances in this domain.""""""
Once again, I find this makes no sense. I suppose I am not your target audience.
"""""Regarding your foreign policy speculation, the US didn't have the capability to increase the rate of oil extraction from Iraq."""""
Once again, I'm not sure what you're trying to say. The U.S. controls Iraq. The U.S. has access to the oil there if and when it wants it. It's not about rate of extraction - it's about controlling the oil. Drinking more yourself, preventing your enemy from drinking - whichever.
"""""The US is even weaker with respect to the KSA regarding the flow of oil, despite all the spending by the empire's security apparatus on weapons of mass destruction. Could the kingdom resist the empire? Well the kingdom could fall, and the empire could enjoy another shock'n awe show, but on the ground the flow of oil would most probably decline. I don't expect the pro's in the department of war would choose to gamble against this probability."""""
Gamble?
If option 1 is to watch your oil supply dwindle 50% in a matter of 10-15 years (my prediction), and option 2 is to find a reason to go in and bogart most of the remaining oil, then it's not a gamble at all.
At least not if what you want is more energy for you and less for others.
i know this from experience.
AndrewB
Well said Sir , in respect to Saudi Arabia except it appears that the House of Saud long ago cut thier deal with thier friendly but potentially unstable and known to be violent good buddy Uncle Sam.
The oil will flow so long as the house of Saud stands-if it's there to flow.
The only way this will change is if the US loses it's military chokehold on the Middle East and the Saudis find themselves in the position of having to find a new big brother to protect them from thie nieghbors-not to mention the rest of the world .
Of course this analysis is just my opinion but it is one held by quite a few others.
As long as the foxes guard the henhouse AND count the chickens, whats the point in counting tomorrows eggs today? The foxes always eat first.
jkissing,
The assumptions about SA are critical to any production forecast including mine.
One method to calculate SA surplus capacity is to apply extraction rates to SA remaining crude oil reserves. For more accuracy, the extraction rates should be applied to remaining recoverable reserves in fields currently in production. For example, the reserves in Manifa would be excluded as it is not producing.
The chart below shows SA oil initially in place (OIIP) split between producing and static fields in 2005 and is discussed further in http://www.theoildrum.com/node/5154
Manifa is shown as producing in the chart below but I will assume that is currently not producing so that SA OIIP for currently producing fields is assumed to be 450 Gb. If a recovery factor of 45% is applied to 450 Gb then SA total recoverable reserves (ie produced plus remaining) is about 200 Gb. Note that the average recovery factor for world fields is about 33%.
My updated chart below assumes a URR of 185 Gb. I also assume that in July 2008 SA had no surplus capacity as they took advantage of high oil prices. Note that in July 2008 the extraction rate was just over 5% which is appropriate for large fields. The average extraction rate from Jan 2005 to Dec 2007 was 4.4%. The extraction rate for 2009 has been above 4.4% and has increased to about 4.7% this month. If it's assumed that SA only has 65.5 Gb remaining recoverable reserves as at end of this month then potential average annual production capacity for the following year would be about 8.55 mbd applying an extraction rate of 5% and assuming that 3.1 Gb is produced over the following year.
The EIA August 2009 production was 8.48 mbd. The difference between 8.55 mbd and 8.48 mbd is about 0.1 mbd which is an estimate of the lower bound of SA crude surplus capacity on an annual average basis.
Next, an upper bound can be calculated. Instead of assuming a URR of 185 Gb, a higher URR of 200 Gb could be assumed for those fields currently in production as discussed in reference to the first chart above. The 15 Gb difference between 200 Gb and 185 Gb is probably about equal to the URR of Khurais and Khursaniyah which recently started production. It's now assumed that SA has 80.5 Gb recoverabe reserves remaining in fields in production. Thus, average annual production capacity for the following year would be about 10.50 mbd applying an extraction rate of 5% and assuming that 3.8 Gb is produced over the following year.
The EIA August 2009 production was 8.48 mbd. The difference between 10.50 mbd and 8.48 mbd is about 2.0 mbd which is an estimate of the upper bound of SA crude surplus capacity on an annual average basis.
Based on the above, SA surplus annual average capacity for the following year is between 0.1 mbd and 2.0 mbd. For comparison the EIA is estimating SA surplus capacity at 2.6 mbd in 2009Q3 http://www.eia.doe.gov/emeu/steo/pub/3ctab.pdf
The IEA is estimating SA surplus capacity at 3.45 mbd in Sep 2009.
http://omrpublic.iea.org/omrarchive/09oct09sup.pdf
However, both EIA and IEA accept official statements on reserves and surplus capacities from SA without any independent verification. In addition, both the EIA and IEA qualify their surplus capacity by stating it can only be sustained for 90 days.
I certainly believe in PO and have personally done what I can to spread the word. However, I am suspicious of predictions of a new trend that is both quite different from past trends and that begin immediately. I agree that SA will decline, but whether this decline begins in 2010 or 2020 is both significant and IMO difficult to predict. Many such past predictions have been wrong.
Another current difficulty in forecasting supply and demand is that we are in an unprecedented economic situation that is reducing demand vs. what it would otherwise have been in most regions around the world. We know OPEC has cut production to shore up prices, and this effort has been largely successful, aided IMO by commodity speculators that have less reason (in the face of very high storage) than mid-2008 (when storage was very low.) The difference between low storage then and high now is reduced demand over and above OPEC cuts. IMO unemployment will go higher and demand lower for at least another year, meaning that OPEC should be contemplating cuts and not, as rumored, higher production. Perhaps, as some say, it is more about crushing Iran on account of SA nuclear fears... quite credible, SA is thought to have brought down the Soviet Union in the same way. In this case production might rise in spite of the weak economy and high storage.
I assume, but do not know, that the uncertainty regarding future demand and price is affecting current investments. OPEC (excluding SA) is rumored to be avoiding new investments. there is certainly a case to be made that a lack of current investments will reduce future production, which would bring forward PO and usefully extend the tail. At any rate IMO OPEC has the ability to restore world production if demand returns through 2011, but that lack of new projects in 2012 might will cause a shortage. Many think such a shortage will result in sharply higher prices, the alternative view is that prices simply rise until recession returns. The lag implies volatility and investment opportunity.
THere is enormous potential for the US to reduce consumption, say by a third, or 7MB/d, over time from the peak... such a transition is clearly underway and therefore easier to project IMO than SA decline. Higher demand by developing countries will not necessarily lead to higher price even if production declines if and when the US hits a price limit, say 80-100/b. Forget about Hummers, they're already gone.
IMO there is too much uncertainty regarding SA to predict its production, and too many variables to predict price. However, I appreciate the effort. I enjoy reading both your studies and others posted here on TOD.
"IMO there is too much uncertainty regarding SA to predict its production"
I agree that there is uncertaintly but there is reasonable likelihood that SA crude production will stay below 9 mbd on an annual average basis.
My chart below shows that Saudi Arabia's crude production will decline from its recent 2005 peak. There is a possibility that SA statements saying it has 260 Gb of remaining oil is true but I doubt it. Assuming that produced plus remaining oil is 260 Gb it is still unlikely that annual production could surpass the 2005 peak.
I've got to say Ace, I think that decline rate looks wrong. It maybe what the megaprojects data says, but such a steep fall away without some event seems unlikely to me. Rather I'd expect a progressive increase in decline rate, with a number of reversals, culminating in some induced event (say Iran not exporting for a year) that resulted in switched mental models and true entry into 'decline age mentality' and hoarding.
Say half your overall decline rate at worst, over the next two years.
The Lower 48 and North Sea case histories are interesting. Their initial decline rates, over the first three years after their respective production peaks, were fairly low, but they showed much higher decline rates over the following six years.
Based on the logistic models, conventional world crude oil production in 2005 was at about the same stage of depletion at which the Lower 48 and the North Sea peaked. I suspect that the decline in demand is masking an accelerating rate of decline in world crude production,
But as always, I think that the real story is net oil exports. Sam's best case is that the (2005) top five Cumulative Net Oil Exports (CNOE) depletion rate is about 9%/year from 2005-2013. These five exporters account for about half of total world net oil exports. A conservative estimate for the bottom half would be a 5%/year depletion rate. If we average the two, we would get an estimate of about 7%/year for the post-2005 global CNOE depletion rate, which suggests that we will consume about half of post-2005 global CNOE in the 2005-2015 time period.
Regarding the bottom half of net exporters, consider three examples--Canada, Mexico & Venezuela. Their combined net exports dropped from 5.0 mbpd in 2004 to 4.0 mbpd in 2008, with all three showing year over year net export declines in 2008.
Note that the ELM and actual case histories show that the CNOE depletion rate is much higher than the annual net export decline rate, e.g., the observed three year net export decline rate for the combined output from Indonesia, UK and the Egypt was only about 3%/year, but their combined post-peak CNOE were being depleted at a rate of about 25%/year over the initial three year production decline.
westexas,
The difference, I'd postulate, between peaking in an individual area and peaking in global production is the global wakeup call and price increases that result. If the North Sea peaks, its against a backdrop of somewhere else on the rise. Doesn't help the UK balance of trade, but doesn't have major global impacts.
When it becomes obvious the global oil production has peak, its a whole different matter. Emergency expansion programmes come to the fore, money is no object - and hoarding begins.
As I've said before, I see exportland (ELM) as a particular example of a general system level effect. As production becomes limited the declines are felt unequally with a variety of related mechanisms progressively separating the 'haves' from the 'have nots'. Others examples are price spikes, rationing, military or economic strong arm tactics, etc. Its important to see these as a whole because the interaction defines the real world shape of impacts that are felt.
The net result is that some regions see precipitous decline rates and collapse, whilst others gentle rises. The average however will stretch out the gentle declining plateau until some major defining event that changes mindsets and expectations.
As a 'for instance' of how I think this changes the decline slope, think of Mexico. As things stand its heading towards zero exports 2011-2014. In a hoarding, post peak, world the US is likely to see imports only from Canada and Mexico (and maybe some Nigeria, maybe). That's a sizeable lurch downwards in US oil availability - and I don't see the US accepting Mexico continuing with its domestic usage as before. Thus I think action will be taken that slices through Mexico's domestic usage (rationing), to continue to feed oil northwards - postponing what exportland would suggest.
Some net oil exporters have shown, to some degree, a decline in consumption, but we have looked at 23 former and current net oil exporters that have shown production declines. So far, we have not found a single example of an oil exporting country cutting their consumption enough to keep their net export decline rate above their production decline rate.
Yep, but 'so far' we are still in the BAU oil increase mode. As I keep banging on, the oil decline mode is a whole different game with different rules and behaviours.
I'm not saying the US would give Mexico the choice of whether to cut domestic usage - rather the reverse.
Possibly, but the world is not nearly as simple as you are implying-why do you think China is being treated with kid gloves by every proposed CO2 reduction scheme? It is because the fossil fuels need to continue to flow to China to drive the world economy forward over the coming decades-your model of USA action would have been accurate 30 years ago but not any longer.
Somewhat related-Denninger featured a SNL skit that hits the mark http://market-ticker.denninger.net/
Try Don’t Buy Stuff You Can Not Afford :: ASPO-USA: Association for the Study of Peak Oil and Gas, too, if you're in need of economic related chuckles.
garyp - I get what you are saying but do you really think that
a) The US government will actually threaten Mexico to stop consuming and send the oil north and
b) The Mexicans, whose economy will be just as shot to bits, will accept the imperial dic-tats from the US?
Me, can't see it. If the US dictated who much oil the Mexicans could consume and the Mexican government went along with it there would be bloody revolution. Short of actually invasion by the US I can't see how the amount of exports to the US will not decline..
It wouldn't done like that in any event-Mexican domestic prices would be raised under some pretence-raised enough so that internal consumption declined-not predicting it, but that is how it is done.
The approved mechanism would be something like the Mexican government being told to invite US peacekeepers in to forestall the drug gangs. The US then insists on rationing of Mexican oil usage (through caps and price increases) to match the rationing that would be happening in the US at that point. The US would focus on control of the oil infrastructure and the border area, taking military action to wipe out any large groupings of drug lords as targets present themselves.
The end game has the US in control of Mexico's production, and probably some swift pipeline laid to redirect output northwards.
Think Iraq, but without the US being even less nice, as a model.
I was just down in Guerrero, and the revolution is alive and well. Mexico has a long history of resistance, and is reasonably politically literate, unlike the US.
A US invasion of Mexico, or even more neo colonial economic action, will not work out well for all involved.
Hightrekker,
Any additional commentary on Mexican political conditions as seen from the ground would be very welcome.
Additionally do you have opinions that you are willing to share in regard to our huge Hispanic population (and thier political mood ) in the Southwest?
Hello hightrekker,
I second oldfarmermac's invite. I'm interested, also, in what you mean by "revolution," and your perspective on the police, army, drug cartels, and the impact of decline in oil. Or, anything else you might like to share from your travels.
Gary -- I agree with your view for the potential for some intervention effort by the US. But it won't be easy to design IMO. The big factor I haven't seen mentioned yet is China. I haven't seen any reports of China buying into Mexican production...still against the Mex. constitution. But they have other techniques. Consider the multi-billion "loan" they recently made to Petrobras. No details but I wouldn't be surprised if access to Brazil oil was part of the deal. Consider Venezuela...another significant supplier of oil to the US. China has made many trades with Vz locking up their crude...especially the heavy stuff the Gulf Coast refineries had always assumed would be there's when the sweet sources dried up.
Difficult to see military action being an option...at least not in the short term. Getting heavy-handed on the political side won't be too productive either IMO. Most folks don't realize that nations just can't throw away contracts they've signed like they did in the old days. Lots of press about this country or that changing the rules on oil trades. What doesn't make the headlines is the price many countries end up paying for those sins. The world courts have a huge stick to use on offending countries today: the international banking system. I've seen the bankers use this clout with severe results. Results that are often kept from the public.
You'll note I didn't say Venezuela or Brazil were exporting to the US?
I'm not considering this type of scenario was in the too short term, its post tipping point with the new drivers and behaviours. Those drivers/behaviours would likely be borne from much of the financial system getting trashed - which lets face it, is on the cards in the depression of a decline world. That would make a mess of many of those contracts. That kind of world also utilises the threat of military force, and of mutual defence pacts for oil.
The main point was to illustrate how the interaction of different decline drivers would derail predicted inequalities like exportland - which are created with an eye to today's drivers and behaviours. How the great game plays out is much more complicated and unstable than that.
Plus, of course, this is a scenario - not a prediction.
This idea of forcing Mexico to continue exports to the US is some kind of neo-conservative wet dream. First of all, you would run into the inescapable problems that you ran into in Iraq - oil burns and pipelines don't work if they have big holes in them. All it takes is a few nutbars with matches and high explosives to cut the national oil exports to zero. Guns are useful, too, and the Mexicans can buy all the automatic weapons designed to fire armor-piercing ammunition they need from US gun shops.
Second, and more importantly, Mexican oil production is in a freefall because of the collapse of production at Cantarell. They haven't had any success getting production out of their other fields, so it's not going to be long before the country is a net oil importer. They can probably get the oil they need from Canada or Venezuela, but that will be oil diverted from US consumers.
Canadian production is very reliable, and the obvious market is the US, but remember, it goes to the highest bidder. After the mouthing-off done by the politicians in California, some Canadian companies are investing in million-barrel crude carriers. Just in case there are difficulties selling to the US, you know.
China is already heavily invested in the Canadian oil industry. At the moment the oil is going to the US regardless, but the Chinese are not fools and are deeply into long-term planning, unlike some countries I could name.
How do you not allow Mexico to consume oil? Invade?
The choice is:
- accept declining oil import from Mexico
- accept a dysfunctional Mexiko, revolution, war (?)
The latter will result in piracy, blown-up pipelines and facilities, possible insurgence activity within the US borders. Nasty.
How many times has the US intervened in Latin American politics for the interests of our corporations? Dozens? Scores?
If we take over countries by coups and juntas for bananas, why wouldn't we for oil? We tried this recently in Venezuela, but it didn't quite work how we planned.
You don't have to militarily invade a country to control its policies. Read 'Confessions of an Economic Hitman' and 'Shock Doctrine' for some idea of how it's done.
In regard to any group forcing a country to reduce its consumption, I think that a more likely scenario is that the rest of the world decides that it is everyone's long term interest to see the US economy crash sooner rather than later.
You will note that I suggested Canada and Mexico were the only ones still sending oil in the direction of the US in this scenario? And that there was a sharp curtailing of other sources?
I wonder if China, basically alone, can make that happen?
It's generally postulated that as things are now it would be economic suicide for China to have the US economy outright fail, but interests have a way of changing.
Would it beneficial to Russia for our economy to fail?
We are an importer - a consumer - while some economies in the world need us to consume there may come a day in the not too distant future when it is in others best interest for us to stop consuming so much of the world's natural resources even if that means so they can consume more of those very same resources.
Pete
Pete -- I've been promoting the concept of MADOR: Mutually Assured Distribution Of Resources. A play on the old Mutual Assured Destruction theme of the cold war. Last I heard the EU was importing as much China product as the US. But our edged may be the amount of US debt paper China is holding. Depending upon who's numbers you believe China is pulling in as much as $500 million/day from all the various US debt. OTOH, it seems the US policy of printing gobs of $'s and driving the value of that debt down via inflation won't sit too well with China. But that may be just one more good reason for China to nurse us along.
IMO the main reason for China to nurse us along is that we buy more Chinese junk than any other country. At least that is my understanding. Last I looked there was a connection between joblessness and ability to purchase. And, looking at our "Recovery", already billed, in advance, to be 'jobless,' should put some hesitation in China's ambitions. They might just end up with the ability to produce megatons of goods with no one to sell to.
If you gave a party and no one showed up, would it still be a party?
What you are missing is that you have not been paying for the Chinese goods. You personally paid for your item, and China lent the money for your bloated government spending. Without China, not only do you not have the cheap goods, you don't have the government programs either.
The Chinese recently and uncharacteristicly have been rather blunt when it comes to US Imperial and economic policies, which are intertwined as most here understand. The Chinese interest is for the USA to remain solvent so China's many dollars retain most of their value. So if the USA wants to continue to be economically bailed out by China, then it will have to end its Imperalist adventures, which pose the greatest problem solvency-wise. And China with many billions invested in South America cannot be happy with the US Empire's military expansion in Colombia.
The Cold War was large-scale political theatre that killed millions. It's been replaced by a new type of geopolitical theatre that's already killed hundreds of thousands, with millions more seemingly guaranteed unless nations end their competition for energy and start to share what remains. Such cooperation is anethema to Me-First nationalists like Cheney, Biden, Bush, and Obama and those pulling their strings.
The Planet's people face two choices: They can cooperate and work together to solve the shared planetary problems, or they can choose to try and be the "Last Man Standing" by competing and refusing to help solve the planetary problems.
Before long the only leverage the US will have is it's nukes. Scary, huh?
Rockman, MADOR sounds a bit like The Oil Depletion Protocol, aka the Rimini Protocol.
aangle...I had not seen that site before...thanks. Unfortunately my MADOR vision isn't based upon a moral and fair adjustment. I see it more a situation where the US and China use their financial, political and, perhaps at times, military abilities to usurp energy from the weaker nations. We've had such dynamics established many decades ago by individual countries. I just see a logical progression where the US and China would see the advantage of cooperating in such efforts. Of course, this could work well as long as there is enough energy for us to share. When the volume isn't sufficient then it may become very dicey for the US.
I think the US is close to the limits of its ability to use strong arm tactics both politically and materially and that we won't be pulling off any more invasions and occupations unless or until the s is really in the fan and things are so bad domestically that nobody gives a damn about international relations anymore.
It is true that in the past oil monarchs often sold as fast as possible but the reasons they did so were and are more complex than simple immediate greed.There were actual surplus supplies.Higher sales at times meant increased security and political dominance.Sales proceeds could be invested and earnings on investments were expected to exceed price increases of oil in the ground.
Nowadays oil need not be saved in the ground "for future generations"-it will probably go up faster than any available investments in the short or medium term.
Oil exporters are walking a political tightrope every day in a world that becomes more dangerous by the day.If I were an enlightened Saudi I would probably be grateful for Uncle Sam's velveted fist but also maybe glad the Chinese are rising-sometimes it's better for a little country to exist between two larger and more powerful countries that are enemies or potential enemies.Alliances are tricky things.
Certainly the House of Saud would have been involved in lots of bloody fights over the last half century without us around to keep the playground bullies away.I doubt they would still be in power otherwise.
My guess is that the US economy will continue to slide, dragging down a lot of other countries with it, thereby keeping the brakes on consumption to a far greater extent than is assumed by most forecasters.
Of course this will only postpone the time that prices start climbing steadily for maybe a year or two.
We are cursed ,as some Chines sage once said, "to live in interesting times."
If I had any money and was willing to risk it in the stock market I would be buying up renewables stocks on dips.
There will be another huge buying spree and investment spree in this field once the investment and brokerage industry and the msm come to grips with the true state oil the overall energy situation.
I don't expect renewables to solve our problems as a society but they will surely solve the financial problems of lots of individual investors-if the entire house of cards stands for another decade.
This is exactly what I've been doing this year (I'm 50% ahead at the moment, but that's easy in a rising market... I would have made at least as much by investing in banks or plastic widgets).
My strategic thinking is that even if the rest of the economy tanks, renewable energy companies are likely to flourish. Reality is that they are likely to be killed by financing problems, as they require a high level of capital investment.
But what the heck. I have a philosophical objection to stocking my money in something inert like gold... I want it to do some good. Or die trying.
Do you think ELM is applicable in a country like Nigeria?
Rgds
WeekendPeak
It certainly would be if the local kleptocracy employed more of their oil cash flow on economic development. Instead, they leave the oil-producing regions wallowing in squalour and pollution, which quite naturally leads to armed rebellion and curtailment of production...
What about their partners in crime, the big oil companies? One would think that their interest would be to favour economic development in order to stabilize production... On the other hand, economic development entails greater (subsidised) domestic oil consumption, less (profitable) exports.
No need for conspiracy theories to see the convergence of interests. Economic development in Nigeria is not in the interest of oil-importing countries.
This is true of all underdeveloped resource-exporting countries, in a world economy increasingly dominated by scarcity.
What we can say is that the Nigerian net export decline rate is in excess of the production decline rate, as of 2008 (EIA).
I totally agree with you on this, except that I wonder why you don't think that total world oil won't to some extent be masked similarly by other power sources? I realize there is a difference between oil and electricity, but still, energy is energy in a lot of ways too. Won't world peak push demand to alternate sources?
On the trade issue, this could (and will) be a problem in some areas of course, but on the aggregate? Let's not forget that the world economy is not just oil. Can China really be cut off completely when they have access to the vast majority of world reserves of rare earth ores? Can the world get by without the US crop yield? (and how important will its coal and shale gas reserves be in the future?) What about India and its thorium reserves and Australia and its uranium reserves? Can the Middle East horde oil and still expect the world to export crops to it? (not to mention, not invade it). Is there nothing Russia needs from the rest of the world?
Ace, I think you’re near term projection for non OPEC production is a little low. I expect November 09 non OPEC production to be about 41.5 mb/d or perhaps a little higher. This is because the US and Russia have recently increased their production levels.
The US has brought several new Gulf of Mexico projects on line late last year and early this year and they are just now spinning up to near full production. I expect US production to reach a post Katrina peak in late 2009 and begin a slow decline next year as far fewer GOM projects are scheduled for 2010 and later.
Russia reached a new post Soviet Union peak in August and is holding that level through November. November may even be a little higher than August. That however is all about to change but not until next year.
Russia 2010 oil output to fall -Bernstein analysts
Of course all those eight new fields have not all ramped up to full production. Most are close however except the largest of them all, Vancor. Vancor, by the end of the year, will be producing at about 50% of full production or about 225,000 mb/d. Production from that level is expected to rise to about half a million barrels per day by 2014. I expect that the slow rise to full production is because they must drill more wells in this arctic field.
Taking all this into consideration I expect non OPEC production to start to drop, early next year, at less than your predicted 1.6 mb/d. That is almost 4 percent and I just don't think it will drop that fast by next year. I think it will drop at about half that rate until the decline accelerates by about 2012.
Ron P.
That's actually 225,000 barrels per day, not 225,000 mbpd
An additional 225,000 MBPD would definitely help with this little problem of peak oil. 225,000 BPD - not so much.
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I have been a long time TOD member. And I will say (with tongue in cheek) that the great thing with having so many experts on this site is that there are so many different forcasts. If you don't like one, just wait a little.
So I really like this above one from Ace. This is more negative than his previous ones, and more negative than most here, and I agree with it (based on subjective feelings only)
But could I humbly ask Khebab (because he has done this before)or someone else, to consolidate all the major (new) forcasts, and somehow summarize the main points of difference between them, pro and con, and post that. How and why they arrive at their conclusions
Then we can have an informed debate
and also include WT's ELM, as it applies. so for example in Ace's forcast of a decline of 2.2mbd/year, I think this will come directly out of the hide of the total export capacity. so given total exports are approx 40 mbd, then the decline rate in available oil for the OECD and other importers is 5.5%
What do you think the chance of Khebab doing that as a posting?
I tend to agree with Ace's forecase, though my feeling is that it might be a tad optimistic. OTOH, I just saw the DOW is up about 140 today, and I just cannot figure out what Universe they are living in. Certainly not this one.
OTOH, I just saw the DOW is up about 140 today, and I just cannot figure out what Universe they are living in.
Come now. You didn't expect mountains of great news this week?
The holiday festivities start Friday. Maybe we'll find Bin Laden...
Wall Street is driving up their end-of-year bonuses. That's what universe they live in.
DOW up about 1%, dollar down about 1%. Go research the correlation from March to right now between the dollar and the stock market indices. Most of this "rise" is really the fall of the dollar.
And he'll be dressed as Santa...
Hmmm, it's more negative so you really like it. Sounds like something you should tell your psychiatrist.
With regards to previous forecasts, the 2007 forecast shows prouduction for Nov 2009 around 70 mbd. Add in deliberate OPEC production cuts and he was off by 3-4 mbd. So there is obviously some error in his modeling.
http://i129.photobucket.com/albums/p237/1ace11/CC200703.jpg
Also, this comment makes no sense:
If demand were greater than supply, there would be shortages.
The bottom line is that there is no reason production levels can't be maintained, even if there were no new discoveries. And there are always new discoveries. The only reason production has declined since 2008 (wow, 1 whole year), is because of the worldwide recession and lower demand.
Do you still not get it? The only reason production levels can be maintained at or near levels of demand is because demand is diminished by the recession, and IMO soon to be depression, caused by demand exceeding supply. Supply of a finite resource depends, not on demand, but on physical reality. E.g., you can't pump a gallon out of a one quart jar!
And that, sir, is what peak oil is about. We are down to less than a gallon and whenever demand exceeds capacity to pump, prices peak. We will see more and more of that as we slide down Hubbert's peak.
And, while I did not make the statement that I liked the post referred to, I should point out that I could 'like' the informative value, but not that I like the message. You are attacking the messenger because you dislike what was said. You should try to listen more, understand what was said, and if you disagree do so for good reason. But please adhere to some modicum of logic in so doing. Straw men, ad hominem arguments and equivocation on terms are easy to do, and sometimes difficult to detect. On TOD, though, someone will usually call you.
If you disagree with a premise, please state why, and be ready to let us all know the source of your great wisdom. I am always interested in facts, and stand ready for correction when in error.
Thanks.
This is true but, we're not talking about a one quart jar. We're talking about 1.9 trillion barrels (in the article posted). I've read other estimates has high as 10 trillion barrels. Even with the 1.9 trillion number, there's no reason you can't pump 74 mbd for the next 40 years with existing reserves (no new discoveries needed). Of course there have always been new discoveries, so even the 40 year projection is too short.
Are you a troll? Do you even understand the basics of this subject?
Seriously dude, go take a peak oil primer course...
Do you understand how many times and how many people have predicted the end of oil production over the past 100 years? Does it not matter to anyone that they've always been proved wrong?
Yes I know the magic 4 words - "it's different this time"
That's what they always say.
Go pay a visit to Mr. Bayes.
If you don't make the visit, he will catch up to you. He always does.
I don't know which fairy tale you're living in, but in the one I'm thinking of, the little boy actually DID get eaten by the wolf, in the end.
Let us say you have a billion $ in a trust fund but you can only withdraw $1000 per month. Technically you are a billionaire but you cannot live like one.
What matters is not the size of the reserves but the maximum possible rate of extraction. For various reasons, sometimes oil production is not scalable (e.g. tar sands) or even possible (e.g. shale oil sands).
Let's say you have an oil field with 100 rigs that depletes 2%/yr. All you would have to do to maintain the same production level is add 2 rigs every year. For tar sand and shale operations, you just add to the size of your operation. More people and resources = more oil produced. There are experts who say oil production can not only be maintained, but increased. It all boils down to who you believe.
We will know in a few short months if the above forecast is correct or not.
It is not quite that simple. That theory might work in the tar sands if you have sufficient capital, equipment, labor, etc., and you do not mind digging up huge tracts of western Canada. However, that will not work in a field like Ghawar or many of the old giant oil fields that underpin total world production. The oil in these fields is finite and it has been and is being depleted. Once the oil column shrinks to a certain thickness just adding drilling rigs won’t be enough. In fact, it is likely that they have in effect been doing exactly this over the last five years or so with all of their horizontal drilling that has been documented from time to time on this website. I have worked fields like that in my career and I guarantee you that eventually decline will happen. Just look at Cantarell.
So, you drill step-out wells you hit the edge of the producing formation, at which point you stop buying new rigs and sell the ones you have for scrap value. This is where the familiar bell-shaped curve that most oil fields follow comes from.
For oil shale operations, first and foremost, you have to have one. At this point in time you don't have one. It will take 20 years to build a new operation from scratch. Feel free to start building one at any time you want.
For tar sands (more accurately bituminous sands), Canada has fewer people than California and the vast majority of them live along the border with the US lower 48 states, far, far from the oil sands which are at the latitude of southern Alaska. And more money is useful up to a point, at which point it causes more problems than it is worth. We're already at that point, so look forward to environmental regulations putting a cap on oil sands production in future.
And if you're paying in US dollars, well, don't count on being able to do that indefinitely. You might have to pay in euros or yuan.
conservationist -- if you're talking about a conventional oil field then each has a finite geographical limit. Once you've drilled all the viable locations there are no more wells to be drilled. You could always twin each existing well and thus greatly increase flow rates. But you would recover very little additional oil in many cases. And drilling a new well cost $'s. You might increase your recovery rate but you won't recover your additional investment. Thus why would you drill those wells. All reservoirs have a drainage pattern. If one well will effective drain 100 acres you could certainly drill 10 more wells on that 100 acre until and recover the oil much faster. But you would lose your shirt in doing so.
Oil sands -- you could have a point. In such a cases I suspect you wouldn't necessarily increase the size of the processing unit but build multiple units. But I'll venture that oil sands are similar to all other hydrocarbon accumulations in that there are sweet spot and less productive areas. Generally you would expect any operations, especially one with a high initial capex, to focus on the sweeter areas first and save the poorer prospects for later.
As far as as shale oil is concerned, no one is producing it because the technology to produce it doesn't exist.
As far as producing oil from tar sands is concerned, first you have to heat them by burning natural gas. Then it takes a lot of fresh water and causes massive environmental damage. After all this the oil is useless unless you mix it with light sweet crude. Clearly, the operation to produce oil from tar sands is not scalable.
As far as conventional oil fields are concerned you can increase production up to a point by drilling more wells (especially horizontal wells) and by maintaining high reservoir pressure by pumping water or Nitrogen but eventually production falls regardless of what you do.
Not true. Oil has been produced from shale since the 1800s. Many countries have produced oil from shale and China still continues till today. There's an estimated 3 trillion barrels of oil available from oil shale. There were plans to produce it in the US after the energy crisis of the 70s, but they were abondoned after the oil price drop in the early 80s. Oil shale activity is increasing in the US currently, and leases are now being issued.
Read my recent post. The issue isn't one of not having enough resource in the ground. It is that the resources that are left no mostly no longer cheap to extract and quick to extract--something that our society is built around. We start having all kinds of economic problems when the start dealing with expensive oil--people don't have enough money left over for other things, and we have a recession (like now). The dividing line of too expensive oil seems to be about $80 or $85 per barrel.
Peak oil has a lot of financial issues associated with it, which is why it isn't acting the way people might expect.
Gail:
Well put. Conservationist seems to believe that the oil left will all be extracted. Of course, to get to 10 Trillion barrels he would have to go to, say, Triton. There may well be pleanty of oil there, from what I have read. It is just a bit expensive and difficult to recover it. Just like the finds in the depths of the ocean.
It would appear that the neck of the quart bottle I spoke of is a bit narrower, so the oil comes out more slowely. Peak oil is generally considered to be the point in time when we have extracted 1/2 of all the oil there is. Of course, we know that some more will be discovered, just as with the US, additional oil finds still happen. But that does not mean we did not pass our peak in 1970 or 1972. The world peak was probably entered in 2005, and production has continued at about that rate - actually slowly declining, but they speak of total liquids so those peaked in 2008. The recesion brought on by the inability to pump it out fast enough to meet demand has now caused a reduction in useage. That allows supply to match up with demand for a short while. So long as our economy goes South, demand will be met. As soon as the economy begins to surge, oil prices will rise until they choke off the economy, again. That is the catabolic decline described by Greer in The Long Descent. Economy goes down, oil price drops, economy recovers, price goes up, economy goes down again, farther. Each step it drops some more. Later it reaches the poing where it is not just Chinese toys that are priced out of reach, and demand remains above supply. So long as there are hungry people, the price goes up. When people cannot afford food any more, they begin to die off. Then, as before, the economy recovers when demand drops below supply. Ad nauseum, until we reach the bottom. At some point coal is used in place of oil. Then wood? Then what?
I hope Conservationist has an answer to that. He has an belief, unfounded IMO, that we can continue with BAU for 40 years. He does not say what happens the - and keep in mind that my scenario takes a few hundred years to play out... his is a mere 40.
Or maybe Jesus will return and change one barrel of oil into ten, to feed the energy hungry multitude. AMEN.
Shalom!
Gail,
People are confusing resources with reserves.
The 2003 USGS estimates there is 952 billion barrels of recoverable light oil left(the world uses 24 billion barrels per year)--forget about undiscovered and there is 434 billion recoverable barrels of heavy oil and 651 billion recoverable barrels of bitumen. The world production of unconventional oil(US, Venezuela, Canada, Mexico, Indonesia) is about 3 billion barrels per year. If unconventional oil doesn't pick up the world will be out of oil for all practical purposes in 40 years (if you assume an exponential production decline--leaving more in the ground--you're still down 75% of a constant production projection).
http://walrus.wr.usgs.gov/infobank/programs/html/factsheets/pdfs/2003_00...
Heavy and unconventional oil represents a possible safety net for the world.
I propose that by 2030 20 million barrels per day of heavy oil/unconventional be produced at cost with funds(20 cent per gallon gas tax) provided by the richest countries ($2 trillion dollars over 20 years)as there will be little if any conventional oil left after 2050.
At least this plan beats the anarchy of markets.
Maj,
If you're looking for a managed solution, yours is a very poor one. The unconventional stuff is fiendishly expensive, and would require a huge and (in your hypothesis) altruistic investment by the "rich" countries (if there are any left at that point).
Renewable energies can certainly be ramped up for an equivalent investment. Even if you ignore the danger from climate change (I presume you do), in this scenario you at least have something to show for it, long term. An Apollo program to develop unconventional oil is, by definition, still a sunset industry. (and the sun never sets on solar!)
AC,
The investment is $100 billion per year over twenty years for a +50 return on investment; let's assune it takes 1000 cfh of gas per barrel of oil, then 1 trillion barrels of oil would take 1000 Tcf of natural gas and that looks feasible, after all the US shale gas alone is estimated by some at 1200 Tcf.
As far as pure money goes $2 trillion dollars for 1 trillion barrels of oil is $2 per barrel for infrastructure($100000 per daily barrel capital).
Ramping up from about 8 mbpd of heavy oil/bitumen to 22 mbpd over 20 years(a 7% growth rate)is a lot easier than from going from 1% of US energy for wind and solar to even 5%; at $1 per watt(ridiculous??!), $2T would produce
2 TW of electricity or ~5000 TWh/yr of electricity or 16.7 quads of energy.
8 billion barrels of oil per year(for the next 50 years) represents 45 quads of energy.
Actually I don't ignore the danger of climate change but 8 Gb is only about a quarter of the oil we use now and is a safety net for developing countries and I believe that oil in the future will be eventually used for plastics rather than energy.
The sun sets on solar energy every night!
The cheap oil is gone, everyone agrees on that. However, I think if you could lower the price of oil, that in itself wouldn't fix the US economy. The problem for the west is jobs being outsourced to developing countries. To some extent the world economy is a zero net sum. More expensive oil won't destroy the world economy, but it will cause the world economy to adapt. IMO
Good. This statement has effectively nullified every opinion that conservationist has posted previously. Cut and paste this piece next time he says something.
This is what I disagree with. The Great Illusion I call it -- that we can some how continue on the present path by finding alternative sources. There is absolutely no choice but radical retrenchment, moving toward a way-of-life that is less and less dependent on underground resources and is more and more integrated into the surface ecology, that which we destroying by our manic efforts to prolong the death throes of industrialism.
I don't say that none of the alternative sources have no role, but simply that there is no hope of them allowing us to continue with BAU. Therefore to talk about them with no mention of the need to retrench is, well, let's say unrealistic.
I agree 100%
prime example;
"The Spanish would have obtained the same results if they would not have built one wind turbine, but had chosen to limit the rise of energy consumption to 85 TWh instead of the recorded 112 TWh"
http://www.lowtechmagazine.com/2009/11/renewable-energy-is-not-enough.ht...
What we really need to do is focus on alternatives to ease our trip down.
We did it and life is good. No grid. No utility easements. No Power bill. The power company guy drove up the other day looking for our meter. I gave him a boloney sandwich and we watched CNN on the big screen while I explained how fu*ked up his view of how the world works was. He thanked me for the sandwich and drove away.
The U.S. has the option to nationalize how oil is used internally. Well, Congress and the President do. I've not seen any recent discussion on what the government's priorities will be, or should be, when a lack of oil begins to tear apart the infrastructure of the U.S.
Letting the free market dictate how oil is used and priced is inconceivable once our food production and its distribution is threatened. At some point, the U.S., and other countries, will have to rely on their government to create a comprehensive oil policy based on the rate of decline in available oil.
One would expect this to be done years in advance. Any info out there on what the U.S., or any other country, has for a plan?
Poking around for years in the odd corners of bokstores and libraries leads me to believe that somewhere there are filing cabinets with such plans in them -but they are probably way out of date.
It is said that the military has contingency plans for everything-including invading England and Canada.
But just because some low level bueracrat was once tasked with drawing something up means nothing-I am firmly convinced that no REAL plans exist and that if they did they would be modified beyond recognition during thier implementation.
I have a suspicion that the US government is taking peak oil in serious since the lower 48 peaked in the 70ties. But in times of the cold war, still under the shadow of the Vietnam war and later on of the iranian revolution there was no consensus to show less muscles. When Carter was gone the idea of conservation was gone with him. In fact pumping a lot of cheap oil in the late 80ties was jointly responsible for the demise of the Soviet Union. And of course, Reagan's America had to be big and invincible. In the 90ties with oil at 20$ there was no way to change that paradigm. Big oiled muscles everywhere. Then that force was used to invade Irak. There was always something more important to do than to conserve. And alternative and renewable energies always start with conservation. Not that I approve that point of view the US government might have had over the last three decades, but I at least can understand it with let's say a kind of strategic if not to say sarcastic empathy.
Westexasfanclub,
I think your comment makes a great deal of sense and tend to agree in broad terms with your analysis of recent history.
Certainly there have always been a few people with deep insght and long term vision in the govt-and they have acted on these insights so far as I can see in many cases.
Certainly Reagen planned on driving the old USSR to the wall.
Certainly congress went along with Iraq /Afghanistan because of the oil.
It's too bad Carter's plans weren't implemented but that's water long since under the bridge.
For the govt. to admit to the problem would open the door to the extent of the problem. They don't want to risk stampeding the sheep.
Pres. Obama's State of the Union Address:
I have been your President for a year now. While the Nation has been focused on healthcare and the wars in Afganistan and Iraq, while you have been distracted by a relatively "mild" recesion, I and my team of energy analysts have been determining the extent of a looming problem that, to this point has only been voiced by a lunatic fringe known as "The Peak Energy Alarmist Front". It is our determination that this subculture of scientists, engineers, economists, geologists, educators, and others has in fact been completely accurate in their prediction that global oil production has peaked and that available supplies of energy will no longer be able to support the system of economic growth that our modern technological society has been dependent upon for over a century. Our economy, our currency, our military, our transportation and agricultural systems, the clothes you wear, the homes that you live in, indeed our entire way of life are utterly, completely reliant upon an ever increasing supply of carbon based energy, mostly in the form of petroleum based products. The time to act in an effective way to mitigate the consequences peak carbon energy has passed. The age of oil is ending and we have not prepared. At this moment, as your President, I am declaring Martial Law. All prices are to be frozen, all bank and investment accounts frozen. Stock markets and commodity exchanges are closed to trading until further notice. There will be no hoarding or looting....................."
Gee, Mr. President, maybe we should just try and keep the country's head above water until we go over the falls.
Actually, the last time the US invaded Canada (1812), Canada invaded the US right back. English solders and Canadian militia backed up by hordes of screaming Indians captured Detroit. They had intelligence that the American general was deathly afraid of being scalped by Indians, so they lined up all the Indians they could find, the Indians did a lot of yelling and screaming, and he surrendered without firing a shot.
Later, he was sentenced to death for cowardice by Congress, but the President pardoned him. You may not have heard about this because it's not widely discussed in American high school history classes. There's a lot of similar stuff that doesn't get discussed in American history classes.
The only good thing about that war is that both sides declared victory and agreed not to do it again, making it one of the more productive wars in history. The people who do know the history hold annual reenactments of the battles because it is more fun to reenact them than to have done them in the first place.
Frankly America is welcome to come and invade 'England' (by which I guess, in typically insulting form to the Welsh, Scotts and Irish, one means 'Britain' :). You won't find much to your liking though, just a washed out little bankrupt nation floating in oodles of debt, run by incompetent muppets who couldn't organise a piss up in a brewery and populated, for the most part, by fat lard-arsed chavs whose one ambition in life is not to win X-factor but merely 'do ok' at the kareoke down the booza on Friday night.
Come to think of it, before you deploy the 101st Airbourne to take Windsor Castle let me assure you it ain't worth the hastle.
;)
Thanks, Rocky, Hacland.I knew of the results of the war but not those details and I got a good laugh out of both replies.
Sorry about the misuse of England and Britian-being of Scots Irish ancestry myself that is in excusable but then I'm just an ignorant backwoods Yank that uses some Elizabethan era language even today.
You guys might have seen a movie once about a little country that started a war wth the US in order to lose and get war reparations from us.II rc, its called The Mouse That Roared.
All this stuff would be incredibly funny if only it weren't in danger of becoming real.
Sounds like my kind of place. Same little country that gave Hitler his fist good ass woopin'? I guess times really have changed, huh?
There are no plans. And if there were it wouldn't make any difference.
Our body politic is purely reactive. The crisis explodes and then the political reaction happens. Invariably this means doing the politically expedient thing; the wrong thing, the thing that usually makes everything worse. That's the way it is.
It's completely amusing to me the priority people here on the "Drum" place upon public policy and the steps to be taken to influence public policy. God bless you all, but no one here is going to influence public policy. To do that you need to wield either big votes or big money; preferably both. And even if you were to eventually get the money and the votes you would only succeed in making minor modifications at the margins.
Peak Oil is going to crush the world as we know it. It's a total paradigm shift. It's going to reorganize the world the way WWI reorganized europe; IN SPITE of governments.
Forget about the huge inertia bound institutions; government, industry.
The wise will figure out a way to keep their own little boats afloat as the waves of crisis break.
That's all.
Jabberwock --you're such a darn pessimist. And, even more unfortunate, such a darn realist also. I agree with you. At one time there seemed to be an occasional plan regarding some major issue put forth. Often not a very good plan...but a plan none the less. We do have a major debate going on presently regarding health care. Given the worst case scenarios of PO that debate seems like so much wasted energy and time IMHO.
But, I agree. While not so good at planning we can react with great force and effort after a crisis hits. One might have great faith in our political system to design such a reaction with sound and moral provisions. I am not one who has such faith. I would expect the first reaction will be to hunt down the guilty and punish them. When that effort fails to improve the situation we'll probably have little time left to address the true problems. And one might well take the position that there are no good solutions to the problems but just better bad choices.
OTOH, Alanfrombigeasy has been asked to help determine how large amounts of mass transit moneys are to be spent, so some on the forum do seem to have some say in the shape of the future calamities. And who knows who is luring around here these days?
On yet another hand, the quote that pops up at the top right on occasion, something about how we have two modes--panic and complacency--is certainly as true as ever (the quote is from James Schlesinger, the first secretary of the US Dept of Energy.)
Direct access we as bloggers will never have, except in the rare case that proves the rule.
But there is a generation of future politicians , lawyers, and bankers in school now and some of them are reading this site.
And we should not forget that progress can be made and has been made many times in the past by people initially thought to be powerless,witness Gahndi and ML King once they gained thier followers.
Furthermore it is within reason to think that some people in power who don't yet "get it" will get it later on.
I have radically conservative acquaintances who are open to the idea that perhaps a European style medical system is becoming necessary simply as a way to maintain public order and as a stop gap to prevent an entirely socialist govt from coming to power.
Once a person becomes convinced of a fact he can change his mind about a lot of things-and peak oil will soon be recognized as a fact.I can think of several people who will change thier mind about mandated fuel efficiency standards for cars at that time, and in fact have said so in public ( but these people are not public figures.)
Speaking as a person who lives in intimate contact with a fundamentalist religious community I believe that religion as a force in American politics has peaked, which is good news on the environmental and energy fronts.
(I just listened in on a hot conversation between three or four kids who are true believers a few days ago as they discussed a dinosaur movie ,species extinction, Noah's Ark, and a school trip to a science museum.The ones with a modest amount of brains will leave the literal interpretation of the bible to the preacher and Sunday school teacher-they have drawn thier own conclusions already.Television is not all bad!It exposes them to a lot of new ideas .)
Of course they will probably remain in the church until they reach adulthood but the writing is on the wall.
I think thre is a consensus slowly building among thinking people that we are in a crisis and that bau will not get us out of it.Leaders will emerge that can get this idea across to the common man or woman on the street but of course there may not be a sufficient window of opportunity for a course reversal- a lot of smart people think it is already too late .
OFM,
I also think that things MAY not turn out as dire as some predict. I'm sure there will be some turmoil, perhaps even some chaos but as you say, the upcoming generation is, perhaps, paying more attention to the problems of the world than a lot of us older folks give them credit for. I see more articles regarding evangelicals getting on the save the environment bandwagon. Having been raised in a semi-fundamentalist home it just makes sense that the God-fearing folks would want to preserve the lord's handiwork. Like the bumper stiker asks: What would Jesus drive?
Answer: He'd be hitchiking as to own a car as a true christian is to be a hypocrite. Run that one by your local fundamentalists. I can't can't cite chapter and verse on that but it was in regards to a rich man getting into heaven on a camel, holding a needle (more or less):)
All this projection and fore casting really does start to make my head hurt and reminds me of a quote. It was in an article (might have been on this or another PO site) expounding on the two major schools of ecomomic theory and it was attributed to the economist John Kenneth Galbraith:
"The only function of economic forecasting is making astrology look respectable"
I use that as my "happy thought" whenever I read some projection or forecast I'd rather not have seen.
I've taken some of my modest inheritance and invested in some speculative alt-energy stocks and companies (the old man would probably whack me upside the head if he were alive) and so spend more time on energy and environment web sites than I do PO sites. My "forecast" is that it's way to early to write off conservation and alternative energy as providing significant mitigation as BAU spins apart (Embrace the new Paradigm!). There are a number of interesting areas of research that the current administration has only just begun to invest in and the stimulus $ has not all yet been allocated. The changes will come in a number of small ways that we may not notice for a while. It takes a lot of time to turn a supertanker moving at warp speed.
For example, last Thursday I drove to Stephentown NY to attend the groundbreaking of a 20MW flywheel energy storage facility(Beacon Power Corp), the first of its type in this country. Across the valley Is Jiminy Peak ski area that about 3 years ago put up a wind turbine to get 1/2 of their energy needs.
Now, across the road on the opposite ridge are 5 more wimd turbines and there were at least 5 or 6 more lying in a field just outside of town waiting to be erected. Not huge, but pretty impressive for that rural area of eastern NY state. If that effort is increased and kept up for 10 years it really might amount to something.
It occurred to me the other day that a lot of the far out Doomers may simply be Luddites.
Moose,
It ain't over till the fat lady sings.My personal opinion is that we come thru the bottleneck alive but humbled here in the states and in the richer countries.
But I don't have much hope for poor countries that are overpopulated and dependent on trade for both food and energy.
Those that have get. You're right that those currently surviving on the edge are probably goig to get sucked over the abyss. It would be nice if more Americans realized that and lend a more helping hand to the less fortunate countries. But, some of them may surprise us as they're mostly getting along without FF now. A little solar, wind and biofuels might go a long way there.
As for humility, it's a quality sorely lacking in this country (along w/common sense) IMHO. A mandatory humbling could be a good thing.
Must be some Calvinists in my family tree.
Moose,
Yes, projections and forecasting make my head hurt also. But a good headache is better than bad guessing. I tend to alternate between a firm belief that the human species is hopeless and therefore incapable of solving our current problems, and there is some hope for us as a species but the numbers show the challenges are too large and too expensive to be fixed in time.
Unfortunately, every time I look at the numbers generated by people whose expertise I trust my conclusion is we won't be able to pull out of the nosedive we are in. I'm in no way smart enough to understand how the numbers are generated and the science behind them, but I am smart enough to look at them critically and with an open mind.
I too am impressed with the couple of dozen windmills to the Northwest of me in New York. Makes me feel good to see them. Then I remember the problem of scale and know from data provided by others that wind power can't scale up fast enough to contribute enough to stop the problems coming when oil supplies decline. It's only when we put real numbers into discussions do we get an idea of scale. The numbers may be off a bit but if they say an alternative source of energy will only replace 3% of oil and we need it to replace 30%, then a small error in the numbers makes no difference in the problem of scale.
That's what I like most about TOD. Regardless of how far away we get from the data sometimes during in the comments section, we are always brought back to it either in new articles, in a new comment, or links to other articles.
Oily and gassy comments and predictions from the prominent Pulitzer prize winning columnist George Will. Possibly worth some discussion or a formal rebuttal.
http://townhall.com/columnists/GeorgeWill/2009/11/22/oils_expanding_fron...
To quote Mystery Science Theater: "Can we get a table closer to the plot?"
I myself was not able to discern a cogent argument in Will's piece, it's just a bunch of feel-good talking points any or all of which may be valid, but fail to reflect a passing understanding of the subject. This article isn't right, it's not even wrong.
I wish Will had done a better job here -- in his time line he neglected a few events, such as the US peak nearly 4 decades ago, and the current state of 56 of the top 65 producing countries having passed peak, but those facts run contrary to his narrative.
I'm deeply saddened and disappointed that Will appears to be giving his conservative readership an incomplete and biased view of a topic that I conciser to be one of the top three threats to civilization, along with anthropogenic global warming and population overshoot, yet I am not surprised, after all his position on AGW is well known. His position on population growth is not known to me, but were I a betting man I'd put a sawbuck on the trifecta.
Unfortunately, to have a well known and oft-respected conservative columnist step into the Peak Oil discussion on the side of the cornucopians will not make it easier to face the looming reality.
This sort of stuff has been going on since the 1970's. Will it ever stop?
http://www.spiked-online.com/index.php/site/article/7723/
Absolute true! If we go not further and further and finally leave our biological origins (becoming smart machines) we will fail because the sun uses 564 million metric tons hydrogen every second creating 560 million metric tons of nitrogen, and 4 million tons energy... A finite resource! In 100-200 million years "nature" is finished either way because this planet will heat up badly without the man-made burning of fossil-fuels (because the sun will become larger/ burning faster by time) and loses his watter to space!
Science and ongoing technological-development is all which works in large scales against ever growing entropy! The "beautiful nature is harmed by mankind" - shit drives me insane. She sure is nice as is Megan Fox, but that would not chance their destiny in any way!
We must go further or we are finished either way. It doesen't matters if it happens in 1 or 1 million years. All nonsense in the greateness of things!
George Swill - I don't know how anyone can stomach him.
They are geared towards firing up the fear centers of the brain.
The subtext message is that a group of green-faced zombies are heading your way with the intent of caging you up and eating you for their supper.
Infinite and everlasting resources (oil, coal, lost continents, etc.) are your God-given right. These zombies believe in a finite planet. And they are going to force their unGodly way of life on you. They call themselves "Environmentalists". But don't be fooled. They are green faced zombies.
Funny. There is even a green zombie cake for the having.
Beware. Beware. They are taking over the government. They are the government. Eat them before they eat you.
I've got to agree with westexas. The real story is developing in world exports. Net imports into the U.S. are falling off a cliff:
http://tonto.eia.doe.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MTTNTUS2...
I suspect that the great river of world oil exports is slowly being diverted into China, using our trade deficit dollars. We are being outbid outside of the current markets. We are also exporting more oil than ever.
Our trade deficit recently increased because the Fed is printing money, this cash is then used by the Chinese to buy more oil driving the price up and further strangulating our economy. They know their dollars are going to be worthless eventually, so they are using it to buy tangible assets or oil which can be made into assets. This is a cycle which will lead to severe shortages of everything in the U.S.
On top of this, we are shutting down refineries in the U.S. because they are not profitable. This trend will obviously continue, as our economy continues to slow down. Again this will leave more net oil exports for China to consume with the money we are printing for them.
Hi ExAir,
I agree that world oil exports are slowly being diverted into China, but it seems to me that their heavy buying is propping up oil demand and the price. Why wouldn't they let prices come down?
Could it be that in addition to some mystical Chinese consumer demand, they are hoarding? Their recent cut-off of their storage data implies as much, but it would be better for them to slow up purchasing and let prices ease up.
I think they know all about P.O.
"China's implied oil demand in October was more than 10 percent higher than at the same time last year, customs data showed on Monday."
from http://www.reuters.com/article/globalMarketsNews/idUSTRE56T3EA20091123
What is everybodys take on, what seems to me, a strong case of hoarding?
I read somewhere (sorry no link) that the US pays $500 million a day just in interest ONLY payments, and Chinas OIL tab is only around $400 million a day.
So their energy is paid for plus change to go out to dinner now and then.
Why do they care what the price of oil is?
The Chinese are not hoarding oil. They are consuming more and more oil because their domestic economy is growing rapidly. The Chinese economy is now big enough that it can grow on internal demand alone. China doesn't really need the US market any more.
The Chinese can afford to import much more oil than they used to because they can pay for it with inexpensive manufactured goods, which oil exporting countries are keen to buy.
US oil imports are falling because of demand destruction. Americans can no longer afford to buy as much gasoline and other oil products as they used to. US exports are not competitive with Chinese exports because they are much more expensive, so the US has no way to pay for oil imports other than borrowing the money from the Chinese.
Americans were living in a fool's paradise for the last couple of decades, one in which cheap oil would go on forever, and everyone could afford a big house in the suburbs and a big SUV to commute to work. Welcome to the real world.
I'm not sure you can attribute the drop in imports entirely to a drop in demand from the recession. If you look at the annual graph:
http://tonto.eia.doe.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=mttntus2...
it is clear that imports started to drop in 2005-2006, before the recession even started. Furthermore in the prior two recessions, imports barely changed. This drop is definitely different.
I think this conclusively shows that the oil price spike in 2008 was not caused by "speculators"
And if it were demand destruction causing imports to drop, why would OPEC imports increase:
http://tonto.eia.doe.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MTTNT_NU...
and non-opec imports drop precipitously:
http://tonto.eia.doe.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MTTNTUSV...
even with oil prices north of $140 dollars, non-opec imports continued to drop.
If demand destruction was the issue, wouldn't they both drop in tandem?
We are currently seeing a smaller rise in oil price; however, were still continuing to see a drop of imports into the U.S. Something clearly abnormal is happening to our supply of oil imports, either we are being outbid on the world market or the world supply is dropping by a larger amount than countries are reporting.
Unless I read this incorrectly, the post mentioned a "big" drop in Russian production. Did I miss something? I believe they are the ones that have kept world oil production afloat for the last three years. Westexas, is there evidence of falling exports from Russia? Just curious. In retrospect they may have been harder to predict than OPEC.
In 2008, EIA data show that Russian total liquids production fell at 1%/year, and net exports fell at 2.4%/year. Their 2009 annual production will probably be right around the 2007 & 2008 levels. The change in net exports will be a function of consumption. Given the age of their underlying production base, I do think that they are due for a sharper production decline.
The strength of Russian production in 2009 has surprised me.
My forecasts assume that Russian crude production will begin to decline soon at about 4%/year as many of their fields are old and new project additions decline.
In 2009, Russian oil production started from many big projects including Vankor, Uvat, Yuri Korchagin and Yuzhno-Khylchuyuskoye.
http://en.wikipedia.org/wiki/Oil_megaprojects_(2009)
In 2010, Russia has less crude capacity additions.
http://en.wikipedia.org/wiki/Oil_megaprojects_(2010)
Holy smoke! Not another peak? Namely, Peak IEA WEO.
There is something that I quite don't understand, the area under the production curve post-peak should be similar to the area pre-peak. From the graph of fig 2 it's obviously not, so I guess that your declining rate are excessive, usually it declines slower than it has grown because of improvement of recovery rate over time and also new discoveries. I don't see why the decline would becomes so sharp in 2010 when it was not so far.
There's no law that says so AFAIK. Hubbert's curve is typically shown as a symmetrical bell curve, but that's an assumption.
Lot's of people on TOD think we have been pulling the oil out in such a way that the curve is skewed to the right - Cantarell is the poster child for this. EOR type techniques cause production rates to stay high longer so the peak occurs later but the cost of this is a faster decline post peak.
I guess TODers like Darwinian would say the decline post peak is going to become a plummet, with the kind of outcome that plummets usually result in - very bad injury or worse.
Indeed. Because of this tricky thing known as time causality, it is impossible to have a perfectly symmetric curve. And then due to the actual process and outcomes that occur, you can get just about any shape that you want.
The truncated-symmetric shape of the logistic sigmoid is caused by a dispersed exponential acceleration of discovery search balanced by an exponential damping in available subvolumes. This may play out for certain conditions but is not guaranteed.
I don't suppose there is a way of saying this that I could actually understand?
You mean what is symmetry?
I am not sure that the Cantarell field pattern is a good model for the world production. I expect the plateau to be longer and then to fall slower than that. I think this presentation is a very pessimistic forecast of the oil production worldwide. To day, 80% of oil producing countries have past their peak and still the wold oil production is not falling from a cliff like this. If you look the US production, it peaked in 1971 and after 40 years it has declined by 40%. So I don't see why the production worldwide should fall faster than that post-peak.
The USA was able to get lots of cheap oil from outside the USA for decades before and after the USA peaked. This takes quite a lot of the demand off the USA domestic production.
Post world peak, there's nowhere else to go.
I want to believe as much as anybody that we won't see Westexas's predictions come true, but even without knowing any maths, my guess is the ELM model is right. Future world production may not look exactly like Cantarell, but probably more like it than not.
The only way out that I can see is a crash program of nuclear and a crash program of using the power from nuclear to make artificial liquid fuels, but this won't happen under any kind of market-based system that I can imagine. I don't want to be as pessimistic as Darwinian but I'm afraid he's right.
The present model assume 1 : the most pessimistic case on the reserves, a world depletion rates like an offshore field (most of the world is not offshore, is it ?), and no progress in recovery rate, no new discoveries. That's a bit too much.
To me the crash plan would be more using more natural gas for transportation and more coal to liquid, plus more efficient use of the precious oil, Huge investment upfront but...
You know in the 70s the oil production dropped a cliff by almost 20% and the world kept going, at a slower pace, yes but. In US oil is used so inefficiently that you could save 50% of it. Most of our displacements are just purposeless and unnecessary so we can save a lot, quite a lot
Anyway I bought a recumbent low racer Baron one an half year ago and use it for most of my displacement, I lost 10 pounds, saved tons of gas, I use it even for long distance displacement, this bike is so efficient, doing 10 miles on it is really nothing.
The only thing you said that corresponds to possibly accepted wisdom is this:
which is what I thought the Hirsch report said. I don't like the Hirsch report, despite the fact that Robert Hirsch is without doubt about 10 orders of magnitude smarter than me, because I don't see him advocating for a truly sustainable way forward - which can only be nuclear, since all other approaches depend on fossil fuels, including so-called renewable (wind, solar etc as proposed by Jacobson and Delucchi) plans. The Hirsch report, I think, advocates an emergency approach, which provides liquid fuels by converting coal or gas to liquids, but this is just what James Hansen would say will ensure the most damage to the biosphere.
I don't see how industrial civilization is really helped along by the use of recumbents. And for what little it's worth, I'm a cyclist - I own several touring bikes.
My recumbent is not an usual one it is a low-racer, and yes it is more efficient than a normal bike like 10 to 15% faster at given power and more than 20% faster if there is head wind. If you never had a chance to draft behind a lowracer you don't know what you are talking about, not the slightest idea my friend. And even if I cruise at 25MPH I am not looking at the road like you would do in the same case.
I was thinking more like James Howard Kunstler - where do you get the asphalt and rubber tires after the oil runs out?
Put it another way, basically, recumbents are a product of industrial civilization not the other way around.
Good point dou. Cantarell Fld is unique not only in its size but the reservoir drive mechanism is not so common. It's a pressure depletion drive unlike the water drive at Ghawar Fld. A rapid decline rate near the end of field life is very common in these reservoirs and virtually impossible to predict unless you have all the detailed data. PEMEX had such data. They might not have warned the world but they knew what was coming and what the fure looks like for the balance of field life. And i wouldn't hold my breath waiting for that press release.
Cantarell is not a pressure depletion drive reservoir. It was/is under im-miscible gas injection. It is bassically gas-oil gravity drainage. It probably started as a pressure depletion drive with gas cap expansion. Then Pemex went and started injecting gas into the field to greatly expand the gas cap and push the oil column back down into the part of the field that had been invaded by the limited aquifer. The effect of this is to expose a much greater volume of matrix rock to gas-oil gravity drainage. The simple analogy is pulling a sponge out of a bucket. When you first pull the sponge out you get a big flush of water that quickly drops off to a trickle. As long as Pemex could keep expanding the gas cap they were exposing new rock to gas (continually pulling more sponge out) and they got a good flush in prodtion. Unfortunatly the field is finite and they eventually had to stop expanding the gas cap and now this huge sponge area they have exposed to gas is just slowly draining oil.
Gas-oil gravity drainage is actually a very effective recovery technique. You do not have to worry about areal or vertical sweep efficency as you do in a waterflood or miscible displacement flood. Gravity works everywhere. In naturally fractured reservoir most waterfloods basically end up being water-oil gravity drainage projects after a matter of time. Gas-oil gravity drainage is much more effective because the density difference between oil and gas is many, many times greater than the density difference between oil and water.
One comment I have is if you look at the NON-OPEC oil production that have peaked in 2004 you can see that the slip is very gentle no cliff like effect, well at least for now. And I don't see why it should be different for the world production. We won't have a peak but a plateau and then a gentle slip, because recovery will keep improving, oil discoveries will somewhat help (helped by 4D technology.
Following are reproductions of my oil depletion model from fall of 2007. I have a complete discovery model behind the production model so it looks more optimistic than Ace's decline. The critical premise that I add to the discussion is that I account for the possibility of gray swan discoveries as a fat-tail probability model. I suggest that we need to do this so as not to make the same forecasting mistakes as in the past. Otherwise we will continue to short-sheet future discoveries due to our reliance on sharp normal statistics (just as the financial quants on Wall St always royally screw up their own projections).
Application of Dispersive Discovery -- http://www.theoildrum.com/node/3287
2800 GB URR, based on a dispersive discovery model fit to backdated data
This is the part blown up to match Ace's diagram.
Notice how close that the newer 2009 IEA forecast (the dotted black line) fits to my model. It is not beyond the realm of possibility that IEA looked at the dispersive discovery model and have updated their methodology to use a state-of-the-art stochastic model of oil depletion. I kind of doubt that they would admit to it though. Maybe the IEA whistle blower can tell us the back story.
Happy Thanksgiving Day!
I didn't look far enough and notice that IEA starts to ramp up again after 2015. You are correct Ace, they are using completely different methodologies here.
Ace
Good, and thank for the update, your model looks very reasonable to me, and more likely scenario. And it changes everything, with the ACE scenario, there is no possibility for the economy to adapt, the fall is too sharp. With you model, it is not easy to handle but quite doable, king of like in the 70s.
I am not sure that it is a good idea to show a over scary picture to try to make people react, because then it doesn't sounds plausible and people will reject it and do nothing.
One more question, how much the heavy oil of Venezuela account in your model ? 5MBD in 2030? like the Tar sands ?
On the technology breakthrough side , i think that 4D imaging and in-situ combustion will fat the tail significantly, my best guest.
Technology breakthrough happen regularly, they are not guarantee or predictable but they happen. They happen because we look for them. Horizontal drilling and hydraulic fracturing is revolutionizing the gaz industry, it was not even thinkable 2 years ago.
This is only for crude, based on a homogeneous accounting of crude discoveries over the past 150 years. Any new types of crude get subsumed in the extrapolated discovery curve.
This is a fairly good approximation in comparison to minerals where you have grades of ore that run the gamut.
This graphic data would be more useful if you used a 6 to 12-month moving average.
Re: http://www.theoildrum.com/node/5979/563844
(WebHubbleTelescope's comment)
Would the last diagram adapted from Ace's diagram up top (Fig 1 - World Oil Production to 2012 http://www.theoildrum.com/files/ccst20091119.png ) have shown up better as a .png?
I will get a better version of that chart.
Since posting that, I am beginning to think that IEA is schizophrenic. As Ace said, they project a stable or slightly falling crude output until 2015, after which it shows a slope discontinuity and starts going up.
How that can happen is anyone's guess.
I tend to think that IEA may be playing a game. They show a near term plateau to keep their immediate critics happy, but show the longer range growth to keep everyone else optimistic. That's all I can say since there is absolutely no way that anyone can project a discontinuity like that in an extrapolation. No model based on probability considerations can show a future discontinuity, even a Black Swan can't because you can't predict when that will happen.. It can only show a continuous transition, unless they are plotting what they wish to see in comparison to what the models tell us. I suspect that they were told to avoid the latter.
"there is absolutely no way that anyone can project a discontinuity like that in an extrapolation."
I agree. The IEA WEO 2009 Table 1.4 shows the following discontinuities for crude oil production from some OPEC countries:
Algeria 2008, 1.4 mbd; down in 2015 to 1.2 mbd; and up to 1.6 mbd in 2030.
Iran 2008, 3.9 mbd; down in 2015 to 3.3 mbd; and up to 4.0 mbd in 2030.
Iraq 2008, 2.4 mbd; up in 2015 to 3.0 mbd; and big move up to 6.7 mbd in 2030.
Kuwait 2008, 2.6 mbd; down in 2015 to 2.3 mbd; and up to 3.1 mbd in 2030.
Libya 2008, 1.7 mbd; 2015 also 1.7 mbd; and up to 2.3 mbd in 2030.
Saudi Arabia 2008, 9.2 mbd; up in 2015 to 10.9 mbd; and up again to 12.0 mbd in 2030.
UAE 2008, 2.6 mbd; down in 2015 to 2.5 mbd; and up to 3.0 mbd in 2030.
Jaw drops to floor. No way can all those pieces show such a significant correlation as they (the IEA) project it. Those are all spatially independent areas and should not synchronize unless they have a crystal ball.
This is worse data fudging by IEA than anything in ClimateGate.
Alert the media!
Better version