EIA: From Forecast of Oil Supply Abundance to Decade of Stagnation

This is a guest post from Steven Kopits. Steven heads the New York office of Douglas-Westwood, energy business consultants.

The EIA, the statistics arm of the US Department of Energy, recently released its International Energy Outlook (IEO) for 2010. This is an important document for forecasters, as it represents the EIA's integrated view of the global energy markets in the years to come and contains a long term forecast on the range of energy sources and CO2. Like it or hate it, the IEO is a touchstone for the energy industry and is treated as the authoritative government forecast in the press and in capital raising documents like prospectuses. It influences policy-makers, the media, public opinion and investors. What it says matters.

And what does it say?

That peak oil is all but on us. And that's new.

As recently as 2007, the EIA saw a rosy future of oil supplies increasing with demand. It predicted oil consumption would rise by 15 million barrels per day (mbpd) to 2020, an ample amount to cover most eventualities. By 2030, the oil supply would reach nearly 118 mbpd, or 23 mbpd more than in 2006. But over time, this optimism has faded, with each succeeding year's forecast lower than the year before. For 2030, the oil supply forecast has declined by 14 mbpd in only the last three years. This drop is as much as the combined output of Saudi Arabia and China.


EIA Forecasts of World Petroleum Liquids Production to 2030
Source: EIA IEO - 2007-2010

But that's not the interesting part. The more salient development is the reduction in the forecast to 2020. Forecasts beyond ten years are highly uncertain and more subject to massaging and 'interpretation'. Shorter term forecasts are more definite, and the forecasters are more accountable. As a consequence, the outlook for the short to medium term warrants greater attention. In the case of the EIA, the forecast changes most dramatically here.

For the remainder of the decade, even though China would be expected to hit its stride for increased oil demand, the EIA sees no year in which liquids production will increase by even 1%. Petroleum liquids supply increases by an average of 0.6% per year from 2011 to 2020. In other words, the EIA is expecting the oil supply to be essentially flat for the rest of the decade. The supply will creep up from 86 mbpd today to approximately 92 mbpd to 2020, but that is not much growth, and indeed, is about the same as current global liquids production capacity. Moreover, it represents a reduction of nearly 4 mbpd from last year's forecast for 2020. On paper, the output of China has disappeared over the course of the last year.

In its forecast, the EIA, normally the cheerleader for production growth, has become amongst the most pessimistic forecasters around. For example, its forecasts to 2020 are 2-3 mbpd lower than that of traditionally dour Total, the French oil major. And they are below our own forecasts at Douglas-Westwood through 2020. As we are normally considered to be in the peak oil camp, the EIA's forecast is nothing short of remarkable, and grim.

Is it right? In the last decade or so, the EIA's forecast has inevitably proved too rosy by a margin. While SEC-approved prospectuses still routinely cite the EIA, those who deal with oil forecasts on a daily basis have come to discount the EIA as simply unreliable and inappropriate as a basis for investments or decision-making. But the EIA appears to have drawn a line in the sand with its new IEO and placed its fortunes firmly with the peak oil crowd. At least to 2020.

We'll see how it plays out. But for now, the EIA appears to be making a statement. Perhaps we should sit up and pay attention.

Don't see much change in the slope, it is simply being initialized at about 85MM each subsequent year.

Agree, I don't see a peak, only a continuation of "ok, this time, it really will begin steadily climbing again, you'll see!"...

Maybe the EIA is factoring in the production from the bacteria that that Venter biotech guy is going to create that will deuce oil.

current gap between actual and 2006 production is 4 mmbf/day. 2020 gap between 2006 prediction and 2010 prediction would be about 12 mmbf/day. That does show some slope reduction.

but in 2016, the slope goes right back to where it was...we're just going to be technologically insufficient until then.

ah, technology, it really will save us... :|

But look at the slope on out past 2020 - there's little difference there, and is classic cornucopian forecasting. If we look at the 2000 projections, there would be 120 barrels/day by 2020, far above the 2006 projection. Hence, how many times are we willing to be fooled??


Look at the rest of the slides following the one above - it's a great lesson in spin...

Yeah I see what you mean. I can't see the graph past 2020 unless I save to another document. But as the post said, the first few years are the closest to reality.

The first couple of years appear to look shaky to give us a sense of confidence that they are taking production concerns into account, no doubt, but then it lapses back into fantasyland. For example, the EIA 2000 World Outlook projected we would be producing 124 million barrels per day (34 billion barrels per year) in 2010;


The first few years of the 2000 outlook were undoubtedly "closest to reality", so one main point we've learned is that the EIA forecast can't be trusted past the first couple of years, and even then is a shot in the dark.

"...how many times are we willing to be fooled??"

A strange quirk of human nature called magical thinking:

I learned many years ago that being repeatedly right in one's predictions did not enhance one's credibility if the predictions where not popular or were perceived as 'negative' to begin with.
Similarly, being repeatedly wrong in one's predictions did not damage one's predictive reputation providing that one's series of predictions were popular and positive to begin with.

What seems to count is 'having a positive attitude' rather than being right or wrong.

Any fortuneteller worth their salt would reassure Miss Desperate that Mr Right will soon walk into her life. If Mr Right does turn up, the fortune-teller shares in the kudos if not, the fortune-teller is not blamed. Contrariwise, if the fortuneteller predicted that Miss Desperate would never find her man, her would earn nothing but antipathy- if she was right but additionally and with equal lashings of scorn if she was wrong. Rule Number #1: Never make a negative romantic forecast!

In parts of Asia for example, there were (before ultrasounds) old women who are renowned for predicting the sex of an unborn child.If the parents hoped for a boy, she would predict that it would be a boy. If they ( rarely) hoped for a girl, she would predict a girl. That way she could never go wrong. If the baby turns out to be the predicted sex, her reputation is enhanced, if not then the parents will say, "Well, at least she tried and her heart was in the right place" and the reputation remains untarnished.
In a sense, through magical thinking, to predict something is to make it happen.
This is a bit like the idea of the best-selling book 'The Secret'- wish for something and it will happen. ('Praying' falls into this category.)
Conversely, the be skeptical is to emit bad vibes which can only lead to bad things happening and thus the tribe will hold you accountable when bad things do happen. If you see that houses are being built on a hillside and the trees are being chopped down and you foolishly then predict a mudslide, when the mudslide then occurs, groupthink will hold you responsible for it.
(Like Herman Hesse's shamanistic rainmaker)
Every successful bureaucrat understands this instinctively. Always be optimistic, never upset the tribe with negative thoughts, never rock the boat, never be a whistleblower... which brings us back to, and explains, the lack of public/official concern regarding the series of repeatedly inaccurate EIA predictions.

While I think there is some benefit of positive thinking, generally I agree. The idea of delusion and denial has a long and infamous history.A link to some early writings -
The originals are there to download.

The important thing is to shoot the messenger of bad tidings and avoid reality at all costs!

The two big realities, we live in a finite world, our ecological footprint is far too big in respect of our population - how its heard by the populous - I hate humanity, bring on die-off!!

You don't get many party invites when your a neo-malthusian saying that maybe it would be a good idea to restrain humanities avarice =:-<

thanks sunnata,

I particularly liked these quotes from your link:

* "Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."

* "Of all the offspring of Time, Error is the most ancient, and is so old and familiar an acquaintance, that Truth, when discovered, comes upon most of us like an intruder, and meets the intruder's welcome."


We need to hear more from you guys!

The "Extraordnary Delusions" book is one of my favorites and should be required reading for everybody allowed to vote.

Books such as this one are part of the reasons I keep describing myself as a conservative-meaning not so much in the usual political sense but more in the sense of looking at all things with a skeptical eye and seeing what the eventual consequences might be if these things come to pass.

I can't remember who said it first but tanother relevant bit of wisdom runs goes approximateely:

The primary cause of problems is solutions.

Now in respect to prayer:as the usual thing in the churches I know best, the various branches of Christianity, people pray for blessings , but more so for strength, fortitude, understanding,and brotherly love relations among people both inside and out of the church.

It is generally understood among the more enlightened church goers that prayer changes people, and then the people change things, although the belief in God is still a necessary part of the game.

In the words of more than a few serious Baptists, God helps those who help themselves;and he helps the helpless, through the mechanism of the self sufficient and or better off members of his church.

Even at the level of the dumbest of the dumb, prayer is helpful;it serves to release tensions ans contributes to peace of mind in the same way as meditation.

If religion is the opium of the masses, God is a perfect example of the power of placebo drugs and medicine.

With apologies to Steven Kopits, but I think I see the beginnings of a trend here...

Forecasts trend

thank you for the graphic illustration of what the other side of the much discussed and inevitable tipping point looks like.

Nice. Years ago I made this graph:

Uploaded with ImageShack.us

It shows the gradual decline of EIA optimism, like Steven's graph, but dating back to 2000. Laying their cards on the table is actually part of the EIA's mission statement, as they dutifully depict in their annual Annual Energy Outlook Retrospective Review: Evaluation of Projections in Past Editions (1982-2008) just how far off the mark they were. The Noughts stand out for bad aim here. Forecasts for 2008 from the mid 90s were more accurate than those from the mid 00s. Wonder why? "Rarely is the questioned asked: Is our children learning?"

Of course, as Mike Lynch pointed out in subsequent op eds, forecasts are only good for either 5 or 2-3 years. I think changing the number within the space of two weeks was a demonstration of wit on his behalf...

The EIA low growth forecasts show declining production, too.

Can you update to include the intervening recent years?

Or provide a data table, so I can?


I would extend the "actual" plateau out to 2012, but I agree the EIA's projections will probably converge toward steady production, never including decline.

No need for apologies. I thought it was hilarious--and very possibly prescient. I think it is interesting to contemplate when the EIA will reduce the slope of its trend line. Probably 2-3 years, I would think.

Still, no matter how you slice it, the EIA's forecast to 2020 is very pessimistic. It would be helpful if the EIA were more active in arguing its case. Their own forecast suggests a very challenging decade coming up, and it would be useful if they participated in the discussions of alternatives, rather than just hoping the Chinese won't want any more oil.


What I think you are trying to say is "the EIA's forecast to 2020 is very pessimistic when compared to their previous projections". Many, if not most here, would consider it overly optimistic, especially the full forecast.

It seems to me that "peak oil" represents the time period when econometric models such as those put together by the EIA stop being predictive, in the way they were intended to work.

This happens because when the "easy oil" is mostly gone, it suddenly takes much more capital to maintain production--and even more to increase production. Prices need to be high over a long period for this to happen (and given limitations on how much customers have to spend, it is not entirely clear that this can really happen in practice).

Because of these issues, the model can be expect to be very poor at prediction, and can be expected to forecast far more oil production than is actually the case. The repeated over-prediction is exactly what one would expect in the presence of peak oil.

Gail's explaination of the reasons the common bau models future oil production predictions are way to optimistic seems to be on the money to me, and as intelligible as any, especially to a person knowledgeable about business but not nature in general and geology in particular..

The cornucopians probably ARE more or less correct in saying that there is plenty of oil in the ground to meet our needs for a long time;and the pessimists are all too often guilty of failing to distinguish oil that is in the ground and oil that affordably be gotten OUT of the ground in terms of the public debate.

Among ourselves we understand this distinction, but casual conversations with numerous people who are not intensely interested in this subject leads me to believe that the general public simply DOES NOT understand the issue of the declining quality/quantity of the resourse base at all, whether the resource in question is coal, natural gas, phopphates, copper, or any other industrial commodity.

It behooves us to emphasize her arguments when talking to our friends and acquaintances who are new to the subject.

We must remember that while the general level of trust in govt and large institutions such as banks, insurance companies, ans so forth is declining, it is still huge , especially in comparision to the amount of trust we peakers enjoy at the current time.

Our minds are so constructed that we are automatically ignore cries of " wolf" anytime we hear it a few times and the wolf fails to show;and there are so many different people screaming wolf these days that the cries are necessarily ignored en masse;even though I am mostly retired and a readaholic I can't even keep up with all the supposed disasters to come that are sure to do me in, let alone take the time to examine each one individually.

To make a convert we need to hang our arguments on something clearly comprehensible to the interested person, something that does not strongly contradict whatever he THINKS he already knows.

Most people who are old enough to have children already know about rising prices, and have at least some understanding of the reasons for thier rising;this is probably the best route to a sympathetic hearing.

Hi Mac,

Well said! But, I can't help but wonder if

this is probably the best route to a sympathetic hearing

if we have the luxury of gentle persuasion? The big question is how long before we have tangible evidence of peak oil - gas station shortages (with attendant long lines of cars waiting for gas); electrical brownouts; spoiled food deliveries due to transportation delays; and, of course, much higher prices for all forms of energy products.

The Vietnam war did not wind down until there were ugly confrontations between students and police. I wonder what kind of confrontation could jump start the peak oil debate? The DOE has stated that it will take 20 years to prepare for a reasonable adaptation prior to the recognized point of peak oil. I see zero recognition at this point beyond us "oil drummers". Do we really have 20 plus years before the peak? It seems from most of what I've read that the peak will occur in the next 3 to 10 years around the 90 mbpd mark.

There does not appear to be any general recognition of this possibility and zero preparation. Do we really have time for gentle persuasion if we hope to keep the movie "The Road" in the realm of pure fiction?

Gail's argument, over and over again, in one form or another, is that we won't have gas lines, because the economy will ratchet down so that gas prices stay the same, the amount available drops, and the number of drivers who have enough income to buy gas drops in the same proportion. At least that's how I read it.

I used to think gas lines would drive Peak Oil home, the way they did in the 70s when US Peak Oil hit. I'm inclined to believe now that demand destruction will hit before the lines form.

I don't see a confrontation over fuel, I see a smaller and smaller segment of the population working to support the whole economy as the layoffs continue. You'll either be doing OK with BAU, maybe taxed a little higher, or you'll be scrambling hand-to-mouth.

And eventually pitchforks and torches, but that's a topic for another day.

I think this is actually how society will deal with climate change. A very healthy percentage of the population will be paid to live a nearly carbon-free existence, but it won't be hand-to-mouth.

Hi Dave,

No, we don't have the time needed;but whatever progress at any level can be made is better than none.

Given the realities of practical politics,my personal opinion is that we have a slim but nevertheless real chance of coming to our collective senses if LADY LUCK smiles on us, and brings us just the right combination of what I refer to as Pearl Harbor events.

Of course such events aren't going to do us any good AT ALL taken individually;but if they arrive more or less one right after another and hit us hard enough to really hurt but not so hard that we lose the ability to meaningfully change our ways,it IS POSSIBLE that the public might GRADUALLY realize the situation is critical and get behind the kind of change necessary to avoid a REAL CRASH or WWIII.

If this scenario works out,we will still have to give up virtually all of our energy guzzling ways in respect to oil, and our bloated living standards will have to come down a long long way.

But the decline could be MANAGED, rather than running wild at random;if it runs wild there is a very real chance that the civil authorities will lose control of not only this country but most other countries as well, and something along the lines of Mad Max will result.

Of course such events aren't going to do us any good AT ALL taken individually;but if they arrive more or less one right after another and hit us hard enough to really hurt but not so hard that we lose the ability to meaningfully change our ways,it IS POSSIBLE that the public might GRADUALLY realize the situation is critical and get behind the kind of change necessary to avoid a REAL CRASH or WWIII.

Yes. However...

There are a heck of a lot of variables here that will affect exactly what kind of response society (and politics) takes to ongoing crises. I am sure that there are any number of authoritarian types who are planning how to take advantage of any future crisis so as to instigate their particular form of "planning for the future". The big issue may well be whether the public "gets in behind" the kind of changes required or whether it is "coerced" to make the kind of changes desired by those who come to be in charge.

With the low levels of trust in the government - not only in the US but in many democracies around the world - this will require extraordinary leadership to pull through in an orderly and democratic way.

With apologies to Steven Kopits, but I think I see the beginnings of a trend here...

Nice one!

to FMagyar: great extrapolation graph of the EIA report! very effective. If its OK with you, I am going to share with readers over at my blog (http://visionsofanothertime.wordpress.com).

Sure, no problem, as long as you attribute it to the EIA and not me ;^)

I just find these EIA projections baffling both in how they generalise and yet publish specific detail trends in the curves...
For instance, what happens in 2012 to cause the inflection? or how come the 2007 forecast has a kink in 2025... what modeling predicts that 15 years into the future?

The inflection in the EIA's latest projection does seem out of character.. ie ignore the tail disappearing to infinity look at the near term.. so perhaps is worth noting.

change of culture or mindset?

yeah perhaps

I believe the main flaw in the mindset is that they've never really bought into resource limits, only demand limits.

The steady increase in supply they predict is simply the correlate of economic activity. It is tending away from optimism as they see energy costs eat into economic recovery, but they are still really talking about money rather than oil, regardless of the language they use.

Resource limits are missing, and what Mididoctor is saying about seeing discontinuities in future years are both important.

The people who put this chart out are possibly mathematically challenged. If it is based on any kind of probability functions, then no way can it show any sharp discontinuities. A true stochastic process will smoothen out all sharp edges.

So that leaves us with the likelihood that it is based on individual reserves coming on line in future years. If that is the case it is a simple bean-counting exercise and they have no idea of what a resource constraint is.

A real stochastic model is on the level of dispersive discovery. This assumes resource constraints as a parameter set and can be backfit via regression to the best estimate of discoveries that have occurred up to the present time. The production output would take the discovery model and apply something like the oil shock model to project yearly estimates. The only way you can get discontinuities in the combined model is to apply perturbations to the shock portion, but there is no way to predict when those will occur in the future.

Even Hubbert Linearization, which is quite weak, has the concept of resource constraints. I think these EIA people are worse than mathematically challenged, they might be bureaucrats.

Those kinks worried me too. No serious mathematical modelling could produce such significant wobbles so far out into the future.

Which got me to wondering, could they be hand-drawn? I couldn't believe that, so then I thought, maybe they are clunky feedback reverberations in a model that is just too primitive for what it is trying to do...

Right now I'm leaning towards hand-drawn again.

You are on the right track as to it not being a mathematical model. At best it is an accounting model, where discrete production points are anticipated to come on line in the future.

They would be crazy to model it as a feedback loop, which would be like trying to predict the economy as a deterministic system.

EIA still is blinded by a BAU scenario. Growth is the only option.
Nothing about the effect of ELM on oil-importing countries. Nothing about other 'above ground factors' that could have impacts on oilproduction and oil demand.
Most energy consultants are too lazy, deluded and/or stupid to think for themselves. Better sit up and pay attention to TOD and ASPO.

If you want to keep your job, you must go along, and therefore get along, in a bueracracy.

If you want to get fired,or at the least shuffled off to North Dakota to inventory old file cabinets full of never published records, you can get your wish by saying what you think.

But people who can think and WANT to think are generally screened out during the hiring process anyway.

Contradicting the guys who wrote or signed off on the overly optimistic reports from five years ago can be tricky-they are running the show now, or soon will be, as the guys who signed off on the ten year old projections retire.

Otoh, the agency doesn't want to look like a clown school a few years down the road either.My personal wag is that they are reducing the forecasts as fast as they can w/o looking like clowns for being so overoptimistic a few years back.

This sort of decision would be made by upper management over drinks at somebody's house, no notes, no emails, no nothing, except a little quiet talk among the people involved.Not more than five or six people would have to be involved.

If you want to keep your job, you must go along, and therefore get along, in a bueracracy.

Sounds like work in the oilfield to me. If you like to keep the pay check coming in and and you have a family to support.

I've found it necessary to make some fundamental changes in the curriculum for the "Educational Evolution" seminar I created targeted at HNWIs (High-Net-Worth-Individuals) to help them understand Peak Oil and the Global Crisis

I discovered through trial and error that even very "wealthy" and very "well educated" persons routinely failed to understand many basic terms necessary to conceptualize Peak Oil and it's relationship to the "Global Crisis"

My solution was to implement a series of "intellectual exercises" wherein participants are tasked with generating their own definitions of certain terms that will be used in the "lecture" portion of the educational evolution.

One of the most important terms my students are asked to define is "corruption"

I was stunned to discover how often people could not spit up any kind of useful definition of this term.

It was interesting to find out that for most people corruption was similar to porno, "I know it when I see it."

I have received a lot of feedback from participants who were grateful to have this term brought to their attention and they have reported that is has helped them in their political discussions with family and friends.

Our current definition of corruption is: a public trust betrayed for private gain

real life examples:

airlines who "pencil-whip" maintenance logs while the SkyPolice looks the other way

ModernMediaMachine propaganda influenced by biased alignment between Government, Corporations and Media organizations (as explained by Noam Chomsky)

oil industry entities like DOE, MMS, EPA, OilCos, ect.,etc that failed to enforce regulations and contributed to GulfSpill

The media spends a lot of its time spreading the message that corruption is a feature of 3rd world and non-democratic countries. Supposedly there is no significant corruption in the USA, Canada and the rest of the "good guy" club. So it is not surprising that people think that this is reality. I say follow the money. Here in Toronto the budget has increased by 50% (three billion Canadian per year) in the last six years without any proportional increase in population and in the face of very low inflation. Meanwhile, infrastructure is rotting. Somebody is raking in the dough and it ain't the single mothers on welfare. The main difference between western corruption and that of some underdeveloped country is that it is well hidden (sophisticated and ignored by the media) and not idiotically petty (like cops shaking drivers down for money).

EIA still is blinded by a BAU scenario. Growth is the only option.

That's the way I see it too. What we are talking about here is The government authority on oil, and so there is an inherent conflict of interest between their wanting to be accurate yet at the same time needing to 'project' some increases, knowing full well the economy is based on growth. As such, a .6 per annum increase comes across to me as the minimum they can suggest it goes up each year. It's just one tenth above 1/2 of 1 percent.

Afterall, what good is a government body if it doesn't do the bidding of the country for which it serves? (sarcasm)

I do get a kick out of the continuing reduction in projections each year. The EIA couldn't handle the idea of admitting anything anywhere near peak oil all at once after those grandiose projections, so as Steely Dan would say, they are rising up to their apology (in their own way and in good time).

what percentage of the "forecast" includes "deepwater" (as in, "in way over our heads", what a tragically apt descriptive) production?

is the assumption that events in the Gulf won't have an impact on exploration and production at 5k, 10k or god forbid 20k?

and as for the reassuring words about Saudi Arabia's supply/capacity/reserves— what has changed there that we can now take their numbers on capacity and reserves with more than a grain of sand?

this is so much collective whistling past the grave yard!

Steven Kopits wrote:
That peak oil is all but on us.

One can not make an assessment of peak oil by examining projections of global liquid fuels production. Liquid fuels include:

crude oil
natural gas condensates
natural gas liquids (propane, natural gasoline, other things?)

The inclusion of ethanol and biodiesel double counts the crude oil used to make them. Since ethanol has a lower enthalpy of combustion than gasoline, a vehicle will not travel the same distance as with an equal volume of gasoline. This improper comparison helps the curve for liquid fuels to rise. Since global natural gas production has not peaked and is not expected to peak until after 2040, the natural gas portion of the mix certainly could increase while crude oil production declines.

The EIA's progressive lowering of its projections could represent an increasingly pessimistic outlook for the global economy or increased use of electric vehicles thereby reducing the growing demand for liquid fuels. Indeed the EIA states:

In the IEO2010 Reference case—which reflects a scenario assuming that current laws and policies remain unchanged throughout the projection period....

which includes Obama's plan to put PHEV's on American roads. Is the EIA projecting that the conversion to electric vehicles will fail, be insignificant or have a small impact on the curve?

In the Reference case, as the economic situation improves, most nations return to the economic growth paths that were anticipated before the recession began.

They are not projecting peak oil. They are assuming that production will rise to meet projected demand based on a rosy economic scenario. BAU....

Although liquid fuels remain the largest source of energy, the liquids share of world marketed energy consumption falls from 35 percent in 2007 to 30 percent in 2035, as projected high world oil prices lead many energy users to switch away from liquid fuels when feasible.

Here the project global liquid fuels production will decline a little. ELM projects by 2035 net crude oil exports will be zero. Big differences.

Deflation and depression followed by long-term economic decline will mask Peak Oil. As Leanan and others have stated, we'll only be able to recognize Peak Oil in the rear view mirror, and fifty years from now historians will probably still be arguing about when Peak Oil due to geological limitations took place.

Perhaps for ten more years the focus will be on economic decline and political responses to it, because real GDP can go down much faster than oil production capacity declines.

The American oil peak of 1970 happened 40 years ago, and still the man on the street has never heard of it, and probably wouldn't believe it anyway. If discussed anywhere but on this website, wingnuts will appear and say that there are no resource limits, except caused by environmentalists.

fifty years from now historians will probably still be arguing about when Peak Oil due to geological limitations took place.

I predict that instead, they will still be arguing the same things they are today: energy independence, drill baby drill, sustainable global industrialism, etc. The concept of "resource limits" will still be cuckoo.

How much oil do you think the U.S. will be importing in fifty years?

A lot less by volume, but as a percentage of consumption maybe the same?

Our discussion won't lead the man on the street to understand that domestic oil supply is permanently shrinking. Today, 40 years after Peak Oil America, when the man on the street sees a graph of Peak Oil, he sees no geologic trend. He sees only the evil actions of enviro-terrorists, greedy speculators, jihadi extremists, and oil multinationals.

I notice that in the Annual Energy Outlook 2010 "Comparisons with Other Projections" the the EIA is all on its own in forecasting gains in domestic US production. And who are these doomsaying pessimists they beg to differ with?

Sources: 2008 and AEO2010: AEO2010 National Energy Modeling System, run AEO2010R.D111809A. IHSGI: IHS Global Insight, Inc.,
2009 Energy Outlook (Lexington, MA, September 2009). EVA: Energy Ventures Analysis, Inc., FUELCAST: Long-Term Outlook (February
2010). DB: Deutsche Bank AG, e-mail from Adam Sieminski (November 3, 2009). P&G: Purvin and Gertz, Inc., 2009 Global Petroleum
Market Outlook, Vol. 2, Table III-2 (April 2009). IEA: International Energy Agency, World Energy Outlook 2009 (Paris, France, November
2009), Table 1.4.

"He sees only the evil actions of enviro-terrorists, greedy speculators, jihadi extremists, and oil multinationals."

And populist cant about "kicking ass" only reinforces this impression - once Tony Hayward's head is on a pike, we're done and everything will be A-OK.

Deflation and depression followed by long-term economic decline will mask Peak Oil. As Leanan and others have stated, we'll only be able to recognize Peak Oil in the rear view mirror, and fifty years from now historians will probably still be arguing about when Peak Oil due to geological limitations took place.

Deflaton and depression followed by long- term economic decline will mask Peak Oil. Check! Deflation in many markets beginning in 2004 has been masked by bubbles in real estate and finance asseta. Deflation currently is being masked by over $30 trillion in sovereign funds- recycling which is yet another asset price bubble.

As Leanan and others have stated, we'll only be able to recognize Peak Oil in the rear view mirror ... Check! Peak Oil is a flow, change in the rate of production against the rate of demand (not consumption, which always matches production). Measured by money in markets, Peak Oil took place in 1998. Leanan is right, nobody is recognizing Peak Oil even though it took place over ten years ago. This is why the economies of the entire developed and marginally developed world are cracking apart. The cost of inputs has made ordinary commerce/business activity unprofitable using an infrastructure that is too expensive to operate without extremely cheap fuels.

Here is the S&P 500 priced in crude:

This fine chart from Mr Excessive measures oil price with the S&P 500. You will notice the absolutely greatest availability and the lowest price of oil relative to that index was in 1998- 99.

The crackup that we in America are currently experiencing began in 2004 with the increase in 'inflation' that was noted by the Federal Reserve as an outcome of rising nominal fuel prices. (What the Fed decided was inflationary was rather allocation-ary, that is, deflation.)

Peak Oil is so ... yesterday!

fifty years from now historians will probably still be arguing about when Peak Oil due to geological limitations took place. The fact that Peak Oil is making the front pages of the New York Times means that the facts are starting to appear in the public discussion.

As for the EIA, not particularly relevant to anything.

Since global natural gas production has not peaked and is not expected to peak until after 2040

Source ?

From ASPO:

peak gas might be a reality within 20 years after the peak oil, or around 2030. Obvious there is big uncertainties in this number but it is time to start to think of a year for the gas peak. With the enormous expansion that we now can see in Europe it might be earlier.

If you are referring to:
Risk-opportunity analyses and production peak forecasting on world conventional oil and gas perspectives
First published in: Petroleum Science
Authors: J. Zhang et al

in which the abstract states:

... gas production will reach a peak around 2030.

then I direct your attention to the word "conventional" in the title which does not include natural gas associated with horizontally drilled NG wells in oil shale. As for conventional crude oil production, I think it has already peaked making me wonder about the veracity of this paper. Without reading the paper, I do not know what the authors are classifying as "conventional."

A New World Model Including Energy and Climate Change Data, Dolores García, April 3, 2009; modeled using an assumption of about 2030 for global peak natural gas in graph 4.2.1.

Natural Gas: how big is the problem?, Luis de Sousa, December 5, 2006; also projects a peak in global natural gas production in about 2030. Note his incorrect projection for North America:

Simply put, by 2010 Conventional Gas production can be half of what is today in North America, falling from 20 Tcf/a to 10 Tcf/a. Jean doesn't hesitate to say that shortages will soon occur in this part of the world.

The Energy Export Databrowser shows natural gas production (but not conventional) for North America to be about 27 Tcf/a in 2008:

ASPO and The Oil Drum tend to be overly pessimistic in their projections of peaks. The same applies to the extended plateau of crude oil production that the world has experienced for the past ~5 years. None of the authors of the main articles projected an extended plateau, but some of the commentators did. If you want to get it right, add a little more time to the projections published on TOD and ASPO. Thus my reference for global peak natural gas being ~2040 is me.

(BTW, the Stair Step Descent Model provides the best general description of what has happened so far)

If you want to get it right, add a little more time to the projections published on TOD and ASPO.

I think that if you add TOD/ASPO with EIA or IEA, and divide by 2, you might be close. Of course, looking back and explaining why things are the way they are is easy; looking forward and saying how they will be? Now, that's the real problem, isn't it?

I agree we have seen several steps down. The relevent question has to be, "How big is the next step going to be?"

I won't be alive for peak ng, in all likelihood (unless the far out doomers are correct, in which case, Caty bar the door!), but my kids and for certain my grandkids will be. If they survive that long.

Best hopes for small, itty bitty steps!


Thus my reference for global peak natural gas being ~2040 is me.

Rockman and some others have pointed out several times that unconventional gas in the ground cannot simply be translated in production numbers. The much higher costs need a sustainable high price of gas. When a high price or other factors cause a recession/depression the price drops and drilling becomes uneconomical. Besides, if the transition is done (partly) with gas the situation in a few decades becomes even worse.

In other words, expensive gas means low EROEI gas. And that is the same as expensive oil. Coal has been a low EROEI fossil fuel for the last 50+ years.

We may not have reached the peak of oil or gas supply in purely geologic terms, but we may have reached the point of peak net energy already. We can no longer afford to both spend more and more of society's resources expanding the energy supply, and expand the global economy at the same time. Either we spend less on supply, or we generate less demand. Either way we will consume less energy. Industrial civilisation has peaked. We cannot transition to a lower energy more efficient society faster enough, because the low hanging fruit has already been plucked. Large scale renewable energy flows require a large up-front investment before they break even in energy terms. We do not have the spare energy to expand these sources fast enough.

The decline will be patchy, and probably unstable. Areas with high energy dependancy, and poor economic performance will fair badly. (US comes to mind...) However, resource wars will likely break out and accelerate the decline.

Gas (NG) , and to a lesser extent coal are regional resources. Transport costs mean they are only economic close to their source, globally speaking. That is why the US imports or exports so little gas. So the US is likely to see relatively cheap gas even as it declines into a an economic third world country, because it will be a stranded asset, unless a massive effort is made to transition the economy from oil to more gas very rapidly.

Of course, with rapid investment from China, the decline could be softened considerably, as long as the US mindset can take the political consequences.

You forgot refinery gains. That must be what will save us!


In his book THE END OF THE FREE MARKET, Ian Bremmer says that "three quarters of global crude-oil reserves are owned by national oil companies" (page 56). He goes on:

The biggest mutinationals collectively produce just 10 percent of the world's oil and gas and old about 3 percent of its reserves.

Given that this is the case, wouldn't oil production in the future depend heavily on national economic, social and political motivations to produce reserves?

Estimates of future production appear to assume that prices will rise gently and that new production will be brought on line about as soon as it is economically feasible to do so given modestly higher costs to produce new reserves.

However, if -

  • prices are rising fairly steeply,
  • if the profits can only be invested at the current low rates of returns that are available to financial assets, and
  • if high-cost deposits can be exploited later with technology on a declining cost curve,

is there not an incentive for a nation to only maintain production at levels required to meet current needs for consumption and foreign exchange and to keep reserves for future exploitation?

"is there not an incentive for a nation to only maintain production at levels...."

Sounds very logical but we don't seeem to be very good at long term thinking, just look at Dubai or Check Out The Ridiculous Buildings Under Construction In The New Dubai -- Astana Kazakhstan, here's a link:


Your double counting is nonsense.

1 Btu of petroleum is burned for every 10 Btu of ethanol fuel produced.

The only real problem with ethanol is producing enough ethanol.
A billion tons of cellulosic biomass could produce the equivalent of ~1.9 billion barrels of oil = 3.2 billion barrels of ethanol.


At 10% ethanol E10, the difference in energy per gallon is negligible only 3%. Even at E50, the energy is only 88% of straight gasoline.
Could you reduce your annual miles driven by 12%?


The US uses 4.3 billion barrels of petroleum per year for transport
and 3.3 billion barrels of gasoline or 138 billion gallons of gasoline.

If all that gasoline were replaced by E50 it would take 97 billion gallons of ethanol (2.3 billion barrels of ethanol) mixed with 69 billion gallons of gasoline. To make 97 billion gallons of ethanol would take another 5.5 billion gallons of petroleum-derived diesel and gasoline.

So the total replacement of gasoline by E50 would reduce gasoline production from 138 billion gallons to 74.5 billion gallons(46% reduction). 74 billion gallons of gasoline can be produced from less than 5.6 mbpd(Alberta alone could produce 4.2 mbpd from tar by 2030).

As a serious question, do you do any kind of independent research to back up any of these numbers?

I understand that pulling numbers of the web classifies as some sort of research, but nowhere do I see any mention of how something like EROEI gets factored in.

1 Btu of petroleum is burned for every 10 Btu of ethanol fuel produced.

And how much boot-strapped ethanol was used? And how much natural gas? And how much coal? Perhaps an additional 8 Btu's total? I have seen an EROEI of 2 for ethanol.

So it may have been tricked into an oil-only case, but the ramifications are deeper.

If you look at the difference between what was predicted in 2005 for 2010 there is a shortfall of 7 MMbbl. That tells me that in 2015 the shortfall will be 15 MMbbl and in 2020 it will be off by 21 MMbbl. Therefore I see production at only 82 MMbbl in 2015 and 80 MMbbl in 2020. Not BAU but not doom either. Essentially flat output in the face of increasing demand.

Thomas, I don't agree that this is 'not doom.' Even given the U.S. Military report

"By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day," says the report, which has a foreword by a senior commander, General James N Mattis.

Not BAU but not doom either.

Your 15 mbpd shortfall represents 4% per year decline. Most, at least here, would consider this a rosey forecast. I wish things did not seem so clear. I would really like to agree with you.




All 80 Mbd's are not created equal.

Yogi Berra, greatest Yankee catcher of all time.

His sage advice to economists, politicians and investors everywhere: "The future ain't what it used to be. We made too many wrong mistakes. You've got to be very careful if you don't know where you're going, because you might not get there."


Good advice. I'll forgive him for being a NY Yankee.

Most think about peak oil in terms of long gas lines like in the early 70s during the oil embargo, and don't see much beyond that. But consider how our agriculture and military, not to mention a society based on long distance commuting, are dependent upon oil - and what increasing scarcity will mean. 95% of our agriculture is dependent upon oil for tillage, fertilizers, pesticides, etc. The threat of oil scarcity to national security is huge.

The solution isn't to pump more. Instead, we should be trying to protect what we have way into the future so we have oils for things we really need, like lubricants - and learn to live without. Instead, we've been driving around in Hummers and Expeditions and one still sees these newly on the road with paper plates in the windows.

There are peak oil deniers, just like there are global warming deniers, creationists, flat earthers, Tea parties and greasy politicians from Oklahoma. They operate on a belief that peak oil doesn't exist - despite overwhelming evidence to the contrary. Unfortunately they get listened to and frequently elected. And some are agreeing with BPs lowball flow estimates and saying the Gulf will recover quickly, that this is a little blip. And that we shouldn't interfere with the "free market" with a little increased oversight and regulation. And that it was probably the shrimpers' fault that they are out of work now, do we really need manatees or pelicans? ad nauseum. Why do we listen to these idiots?

Off Topic response: are you Casey Burns the flutemaker?

On Topic response: to focus on Ag I've read of things like electric combines. My initial response was laughter, since the issue of stringing cords around seems insurmountable; guess it has been given a shot though. Good luck slapping batteries on those things.

Dedicating an acre here and there to soybeans for biodiesel would be an obvious response. Something like would require planning ahead of time; I've always thought that it would be sensible to have plans on the board and dedicate a small bit of investment to municipalities in rural areas having production facilities on hand for such an eventuality. Or some manner of conservation plan; the fuel for running the actual Ag machinery isn't much of a contribution to domestic consumption, ideally conserving enough to provide for it wouldn't be much of a burden. But few communities have plans of this sort on the board, it still strikes most as a far fetched scenario.

Planning fuel conservation measures in advance of an established form of disaster would be a better avenue, perhaps - the massive earthquakes we will have to face someday here in the PNW, for instance.

Realistically, we can expect resource allocation to be the order of the day in a post peak world (eg rationing). Agriculture, chemicals, industry, goods transport, plastics, etc. will protected by 'first dibs' on available fuel. That's not a big issue since they don't take a large amount in relative terms. We can also expect government usages will assume themselves 'important', gobbling up a sizeable chunk. Together they will account for around half the current usage in the US; varying values in other countries.

The upshot is the available oil for private transport and non-reserved transport will dry up much faster - what I call 'rationland' (one of the general class of resource inequality factors). Rough numbers suggest a trend towards zero fuel for this class of transport within 10 years, possibly/probably faster.

The threat therefore becomes how fast we can adapt from a world of ubiquitous transport and commuting, to a world where motorised transport is unusual and expensive (eg going back 100 years). In particular, how fast we can get out of the idea of commuting large distances everyday. Bend or break is wrapped up in that question.

Both Gail and I have a context from which to view this having spoken with and challenged the movers and shakers at EIA on the rosy nature of their predictions (and their insistance on use the same cut and past approach to their predictions well beyond the point where it is evident that they were wrong).

It is somewhat disquieting to be told "if only you could see the data which we see" or to be told that there is at least 8 trillion barrels of oil out there to be recovered. "Maybe," I replied, "but f you 'need it' at fire hose rates and you can only be produced at swizzle stick rates, it might as well not be there at all." The EIA representative was taken back by the fact that I/we were not impressed by the shear size of the number he just threw out there. The pointmade was that it was not about shear volume, but about rates AND always has been.

Although this is supposed to be a nonpartisan presentation of the data a look over their history, particularly the online version of it, suggests that this is not always successful.

The other thing I noticed, stating last year was that they had stopped distinguishing between conventional oil and unconventional and other liquids. I have not looked at this year's vresion, but it probably is the same.

After all, "parts is parts!"

Delusion is a serious mental condition. Supposedly the Canadian tar sands will be yielding 5 million barrels per day of output by 2020. By then pigs will have evolved the ability to fly.

Bueracracies are like cancers;they always feed themselves and look after thier own short term interests first, and by doing so, they eventually kill the host society if they manage to grow big enough.

It is a rare thing to find someone working within one that doesn't put his personal welfare ahead of all other considerations;the very people capable of putting the public welfare first are not likely to get promoted to positions of responsibility, even if they keep thier mouths shut and stay for lack of better options.

Crime rates have fallen quite a bit in many places over the last few years,while the need for publicly funded health careand emergency support for the unemployed has risen dramatically.

I don't think there is a chief of police in the whole country who has stepped up and offered to sacrifice part of his budget allocation during the budgetary process to the local community hospital or clinic or food pantry.

I hope somebody can prove me wrong, as that would restore a bit of my lost faith in human nature.

Hi Starship and Gail.

re: "...having spoken with and challenged the movers and shakers at EIA..."

Just a note to say "thank you" for engaging in constructive conversation with people who, one assumes, are in a position to recognize the truth when they see it. And, thus, are in a position to speak it.

"Best hopes" for courage.

I saw this item when it came up in the Drumbeat. The linked article there, like this one, says that this puts the EIA firmly in the peak oil camp. How can that be true? The rate of increase is positive in the future. This curve is concave up. Positive second derivative. I do not see how this is consistent with the peak oil theory.

Theory? What theory? There is no theory (in the mathematical sense) for peak oil. All we have is heuristics, ala HL. Heuristics can put something concave up or concave down depending on what the data says.

The closest thing we have to theory is dispersive discovery, which can derive a Logistic under certain circumstances. Until we start referring to some foundational work, we are always stuck forever handwaving.

There is no theory (in the mathematical sense) for peak oil.

Correct, it is a study. That's why there is ASPO and TOD. Predicting Peak oil is a little more than 'intelligent guesswork' (heuristic).

Of course there's a theory of Peak Oil.

It's that oil is geologically finite and it will get much harder to find. It's been proven by the decreases in the size and number of oil discoveries and by the rising cost of producing oil. There's also the fact that high prices don't increase production but instead crash the economy.
The way peak oil can be disproven is a sudden explosion in the number and size of oil discoveries, a crashing price to produce oil and an economy capable of operating for decades at high oil prices.

So long suckas! I'm dropping off the transportation grid the day after tomorrow. I'm getting an electric bike tomorrow which will become my daily commuter. I may actually be able to get to work faster on my bike than I would in my car due to traffic gridlock.

I'm with you guys on Peak Oil, but I'm not with you on all the doom and gloom. We waste sooooooo much energy in the U.S. Most everyone is driving (solo) these big, honkin' fossil-fuel powered automobiles to work that are meant to carry 4+ people plus cargo. I rarely see anyone in the car pool lane. It's such a waste.

We should all be driving tiny bullet cars, smart cars, or LEVs to work. However, oil is relatively cheap, so no one has any incentive to downsize their mobiles.

After the Gulf disaster, I can no longer continue to sit idly by and do nothing. I'm hoping that commuting to work on an electric bike will help ease my guilty conscience somewhat.

Dear Steven,

Thanks for this post.

re: "...the IEO is a touchstone for the energy industry and is treated as the authoritative government forecast in the press and in capital raising documents like prospectuses. It influences policy-makers, the media, public opinion and investors."

I'd like to share what I see as a constructive step: To direct the National Academy of Sciences to do an immediate investigation into the global oil supply, including impacts (of decline) and policy options.

For details, please see www.oildepletion.wordpress.com.

The reason being, as you say:

re: "Perhaps we should sit up and pay attention."

A study by the NAS can do the following:

1) Provide and impartial and objective look at the global oil supply picture. The "impartial" part comes from the way the Academies organize studies - it's our best chance.

2) Provide a venue for input from ASPO, TOD, and others as to the data and how to interpret it.

3) Provide a statement of facts and their implications that States, municipalities, communities and families - and dare I say "corporations" - can refer to in planning for a new world of what appears to be less growth, if not collapse (or, however one wishes to say it). (eg., The intersection between a shrinking supply of "machine food" and the economy.)

4) Provide an objective way to look at and forumate the risk management options everyone will be faced with - "rationland", as GaryP said above. (And proposals for same.)

5) Provide both a clearing-house and a source of positive steps that can be taken to do a "top level" analysis of the feasibility of the possible change from a liquid-fuel infrastructure, to an electrical one, and how to approach this topic, given such factors as the LTF-grid dependence (heavy equipment to maintain roads, roads necessary to maintain the grid, etc.).

And so forth.

We don't have anything like this now.

In addition, the panel can provide on-going advice as the impacts of "peak oil" continue on...the "remorseless decline" (Campbell).

The current four-year NAS energy study omits the topic "global supply." Thus, the real issue is avoided. And the chance for positive response is lessened with each passing day.

I tend to plot reserve replacement projections/data. Seems like if that starts dropping from the 40 yrs or so that has been the norm, and the decline starts to look realy, then some of the big money starts to flow away from big oil. Has anyone plotted that lately? I used to use BP's analyses....

Definition of reserves:
Total Oil Discovered = Current Reserves + Total Oil Produced

So the notion of reserves is simply an artifact of reporting. Reserve peak has occurred sometime between the discovery peak of the early 1960's and the production peak of this decade.

Mathematically it will typically occur where the rate of production equalled the rate of discovery, which was several years ago.

dDiscovered/dt = dReserves/dt + dProduced/dt

while Reserve peak occurs where the time derivative is zero

dReserves/dt = 0 = dDiscovered/dt - dProduced/dt

i.e. where

dDiscovered/dt = dProduced/dt

Ain't math great?

Yes, the point you make seems pretty straight forward and I think correct, but for fun, lets integrate:
Discovered = Produced u(t - 45 yrs)

It's the lag of a generation or two between events that allows EIA to continue to project dProduced/dt > 0. Extrapolating the past is built in the DNA.

I think that after a few more episodes of hitting the production limit and recoiling, we will see a projection that has negative slope. It's only then will we know that BAU policy is over.

Note other posts and comments about the EIA presenting falsely rosy forecasts etc. Who was in charge there, Bush moles for awhile? How the hell did they figure we could come up with 115 Mbpd by 2028, wouldn't rounding up 100 be hard and expensive enough? Isn't it clear that for years they've been tools, propping up an economic Pollyanna for the sake of doing business? I guess somebody up there got a grip, maybe Obama put in some more honest thinkers (I don't know.) As for peak oil, it's not a specific plateau where suddenly the supply can't increase anymore at any price. Rather, it's a matter of diminishing returns at good cost and having to pay more and more for extra. That's bad enough.

(BTW in a clearly interdisciplinary forum, bringing up political considerations is fully on-topic for appropriate threads. We can't solve all this with tech fixes as everyone knows.)