Of China, Strategic Petroleum Reserves, and "them again"

Dear Me! There has been a considerable stir in the TOD house, since CERA have just come out with a report restating their position that there is no Peak Oil Problem. For a mere $1,000 you may discover (perhaps) what is new since the last time they said this. Now we have commented about problems with the CERA position on a number of occasions (try one, two, three , four and five for a start). But since it is better to do a little checking first, it may take a little time to go through and see exactly what is different this time around, if anything.

In the meantime, the election is over, and a small, cynical, part of my mind wonders how long it will be before we start adding more oil to the Strategic Petroleum Reserve. Last year's Energy Policy Act authorized increasing the size of the reserve to 1 billion barrels. The current reserve is made up of 273.5 million bbls of sweet and 415 million bbls of sour, for a total of 688.5 million, as of November 3rd. However, over the past few months there has been very little activity. The reserve had been filled to its initial target of 700 million barrels by August 2005, but then, following Katrina there was a period where it proved its intended value:

On August 27, 2005, Hurricane Katrina entered the Gulf of Mexico and began a path of destruction that caused massive damage to production platforms, terminals, pipelines, and refineries in states along the U.S. Gulf Coast. Because of the severe disruption to petroleum supplies, Secretary Bodman immediately approved six requests for emergency loans of crude oil from the SPR and President Bush directed that a drawdown and sale of crude oil be conducted. Ultimately, 9.8 million barrels were loaned and 11 million barrels were sold. Because the loaned oil is repaid with similar quality oil, plus a negotiated volume of premium barrels, 10.3 million barrels were scheduled to be repaid. By late Spring 2006, repayment of 8.6 million barrels had been completed. However, delivery of the remaining 1.7 million barrels was deferred at the President's direction as part of his Four Part Plan to Confront High Gasoline Prices. The final 1.7 million barrels will be delivered during Spring 2007.
One can thus anticipate, that purchase coming in the spring. However, in the President's message in April, the deferral of purchases was meant only to be temporary.
The President has directed the Department of Energy to defer filling the Reserve this summer. Our Strategic Reserve is sufficiently large to guard against any major supply disruption over the next few months. Deferring deposits until the fall will leave a little more oil on the market - and when supplies are tight, every little bit counts.

The example of Katrina provides a justification for the SPR's, and this has, perhaps, not been lost on the Chinese, who have suffered a more-than-normally-vicious typhoon season this past year, including Saomai and Prapiroon. They had initially planned to start filling their SPR about this time last year, but hesitated because of concerns that the price was high and that buying for the reserve would drive prices up further.

They have obviously now changed their minds, and have been buying for over a month, but the size of the reserve anticipated may now be considered too small. The current size is sufficient for about 7 days, though this is projected to increase to 10 days.

China's first batch of the four strategic petroleum reserve bases are designed to be in Zhenhai (Ningbo of Zhejiang Province), Huangdao (Qingdao of Shandong Province), Daishan (Zhoushou of Zhejiang Province) and Dalian (Dalian of Liaoning Province). The other three reserve bases are expected to be completed by 2008. By then, they will form a total petroleum strategic reserve capacity for consumption of more than ten days.
A second set of sites is now in process of being identified.

Now that the current sites are being filled, there remains the issue of price,

The Ministry of Commerce issued the statistics on increase of major import commodities of China in the first half. Of them, import volume of crude oil increased 15.6% year on year, and the value surged 53.9%; while import volume of oil products went up 16.1%, and the value up 71.8%. According to the latest statistics from the General Administration of Customs, the average price of import of crude oil was 452.9 US dollars/ton in the first half, up 33% year on year, and the average price of imported oil products was 423.3 US dollars/ton, up 48%.

As the second biggest oil consumer in the country, China's dependence on import of oil products is 40%. Prices of oil, as a basic energy, have influenced the prices of the whole industrial sector, and will finally affect the GDP growth.

But the fact that China is now pressing ahead suggests that they might be recognizing that, as the supply volumes shorten, there might not be a time when the price is cheaper than now. Their current source is apparently Russian oil, with some 3 million bbl already stored, about 10% of that available. It is expected that they will have another 4.4 million bbl in storage by mid-December. There will be additional space available in the beginning of the year.
A second batch of tanks at China's second reserve site in Zhejiang province should be ready by the end of the year, a newspaper reported on Monday.

More tanks are also planned for Qingdao in Shandong province and Dalian in Liaoning province as part of a first phase of a reserve plan, due for completion in 2008, that will have a total capacity of 16.2 million cubic metres (102 million barrels) -- or about a month of imports at current rates.

Oil traders fear China will have to increase imports by as much as 100,000 barrels per day (bpd) in order to fill the reserves. That would be a relatively small volume in global terms but represent a 3.4 percent rise from current imports.

The actual rates at which the SPR is filled is giving rise to some concern. There is also some worry that the Chinese will use their reserve in a more commercial manner. But this is where my opening question regains a bit of relevance, since if the US starts to fill it's SPR at 100,000 bd, and the Chinese start filling theirs at 100,000 bd, and this is added to current incremental growth in demand, and the change in purchasing practices of those nations now in depletion, then the drivers to higher gas prices may already be falling into place.

It is also worth noting that the Chinese are getting their additional oil from Russia, and that they are paying for it from their dollar reserves. This leads on into questions about Russian exports, but that would get us into another lengthy story, that is better left to another day.

In similar fashion the CERA inability to distinguish between what they call reserves, which includes

Those who believe a peak is imminent tend to consider only proven remaining reserves of conventional oil, which they currently estimate at about 1.2 trillion barrels. In the view of many petroleum geologists, this is a pessimistic estimate because it excludes the enormous contribution likely from probable and possible resources, those yet to be found, and plays down the importance of unconventional reserves in the Canadian oil sands, the Orinoco tar belt, oil shale and GTL projects. CERA believes the global inventory is some 4.8 trillion barrels, of which about 1.08 trillion barrels have been produced, leaving 3.72 trillion conventional and unconventional barrels, an order of magnitude that will allow productive capacity to continue to expand well into this century
and their reliance on un-named new technologies, also requires a much lengthier rebuttal - although it will largely be a repeat, as their press release and report appears to be, of ground that has been plowed before. Well, I am sure that we will return to this again, before long.
Thank you for posting again.
That's all.

Thanks Heading Out for this great post.  To westtexas, please continue to be a contributor of the TOD.  You are one of the contributors I have come to respect most.

On the CERA report, I think that there is no doubt that peak oil is now firmly on the agenda.  This in of itself is a great accomplishment.  The TOD and others have all played a part.  It is my fond hope that TOD continues to do so.

It is thanks to the TOD, ASPO and others that care about this issue that I took the time to author a teaching case on this subject for an MBA class (it is as far as I know the first to explicitly do so). Still, it is for me just a beginning in trying to play my part and there is still a long road ahead but it is worth traveling.

Despite Hothgar and others like that, I will continue coming to TOD

I'm flattered, but give it a rest please.  If I were a troll, I would have been banned/removed a long time ago.  My opinions differ from yours, yes, but the fundamentals are the same.
Your data has been publicly refuted. You have made claims against Westexas for data which even you cannot supply. You have ignored historical discussions that occurred at TOD for over a year before your arrival that already debunked the small field myth with which you tried to attack Westexas, and you incessantly use ad hominem attacks, demonstrating your irrationality.

I do wish there were an ignore button on TOD. You would be the first to whom I would apply that button.

Oh, hint - if you want to understand how useless the small fields are, go wade through Matthew Simmons' presentations. The data is in there. I'm not going to assist you further or repeat everything here because you do not deserve it.

I never said small fields were useless.  I said I wanted to see where he got his information from because I suspect there were a lot of fields that production was expected to fall just short of westexas 'criteria' for inclusion in his list.  That and I believed he was intentionally ignoring project slips from the past couple of years and being outright selective in his process.  Perhaps he was worried about being assassinated if he listed them.

But I can see how you MIGHT confuse the two :P

'sigh' replace 'useless' with 'worthwhile'.
Hotgor..You are most welcome to provide the charts as has khebab and others...I'm still waiting from the last time I asked...
I am not usually this abrupt and too the point, but you sir, are a moron.  I do not understand how you can possibly read this post asking to see where WT got his data from, and somehow conjure up a response that asks me to show my graphs...
Hothgar has quit posting insults and ad hominem arguements since the discussion last Saturday, which I found to have a very positive effect on TOD. I personally think we should lighten up about him. He's obviously trying ! (yes, the double meaning is intended)
I second that - if you want the tone to improve then you should forget past flame wars.

He isn't behaving like a troll in this thread so its best to let bygones be bygones...

I agree.  He is young and has much to learn.

Never forgiving or giving a second chance gives no room for improvement.

OTOH, this is a tough site and unless someone appeals for a "learners permit" as they struggle with the complex issues here, they should be judged by the same standard.

And I miss WesTexas.

Best Hopes,


Certainly, the SPR purchases were delayed until after the election, but the recent dramatic sell-off in crude oil prices reflects additional supply coming onto the market. ExxonMobil is reporting a big surge in its Asian (read: Mid-East) production over the past quarter with total worldwide production up 7%.

The conspiracy theorist in me wants to think that the Saudis were pumping unsustainably to keep their Bush friends in control of Congress, but perhaps this increased supply is just the result of the increased drilling worldwide in response to 2004-2005 prices in conjunction with a few megaprojects (Caspian, etc.) coming online.

Is this a final surge to the late 2006-early 2007 peak?

Have I been not paying attention here at TOD or has there been a lack of discussion about this decline in price and what it might mean for a blip in supply (i.e. ultimate peak right now?)

The trailing data looks like a plateau, but this price decline suggests that the fat lady is still singing ...

... and the tune? Gotterdaemerung baby!


I don't think you can take the Exxon result as an example of an overall world production surge. Their 3rd Qtr production of 2646 is only 3 % of total world production, and the increase was only 195 kbpd (about 0.2% increase relative to world production) higher than last year's hurricane-reduced number, and 140 k more than 2 yrs ago. Overall the world remains pretty flat.
To expand a bit on the above, Total was down 5.5%, Chevron was flat, and BP was flat qtr to qtr (due to hurricanes in 2005), but down about 1 1/2% the first 9 mos 2006 vs 1st 9 mos 2005.
According to latest EIA numbers August 06 was a new record total, surpassing December last year.  
December 2005 was 84787 kbpd (still down due to hurricanes), August 2006 was 85096 kbpd. A 0.4% increase of 409 kbpd. I'd hardly call that a surge over an 8 month period. I'm also sure it's well within measurement error, and the 8 month average for this year is still less than for last year.

Not trying to make any big point here other than there has been no surge in production, possibly no actual increase at all. We'll have to wait for revisions, and even then any increase or decrease will be almost negligible.

Make that 309 - oops.
Very informative about the SPR, as well as China's plans for their SPR. I hadn't realized our SPR had been almost refilled from Katrina. It will put a lot of pressure on prices if we try to put a billion barrels in there, but right now is probably the time to do it.
Actually, neither did I - this after checking SPR info a couple of times over the last few months.

Though a few million barrels may not seem like much, and the oil is 'loaned' so to speak - that is barrels out are replaced by barrels in, it is not a cash transaction - what I find interesting is that the refilling was either pretty much finished (without the extra compensation) before Bush stopped it, or what he was stopping was something else.

It strikes me more over time how murky many subjects are becoming - for example, if the Saudis had tankers of crude just brimming over with nowhere to go, and Congress had already authorized the filling of the SPR, then why not simply place a phone call to help the Saudis out? (And what happened to those tankers, anyways, now that the Saudis are cutting production?)

So many pieces just don't fit on the puzzle table we are using, somehow.

This is not a conspiracy framework, fun as they can be, but something much more fundamental. As an example - how important is oil in direct GDP - that is, if you actually reduce America's oil use by 500,000 bpd through pure efficiency gains, how does that affect how people view the economy using various numbers? Obviously, crude is generally imported, which detracts from GDP, but the sale of gasoline is considered part of GDP.

Somehow, using perspectives of what was considered rational in the past doesn't work very well anymore. And I think a 30 year old is going to be astounded by how little of their current framework will apply in the next ten years - either inflation or deflation, they have no real experience of either, much less an awareness of what that means. Or of extreme price swings within fairly short periods of time.

As a side note - German gasoline prices fell over the last few months, spiked a touch around the election, and are now seemingly stable at under $4 dollars a gallon - roughly 1.20 euro a liter, from lows of around 1.15 euro a liter in the last few weeks. There is a worldwide market in gasoline, and the American prices were not an island.

seemingly stable at under $4 dollars a gallon - roughly 1.20 euro a liter

Really? I make it $5.81 per US gallon. As calculated here. UK is slightly more expensive at $6.14.

You are absolutely right - it is 1.28 dollars to the euro, not the other way around. Actually, I had wondered why that number had felt wrong, but only concentrated on the rouding of 1.28 compared to 32 ounces to 33.8 ounces, and decided that it still seemed reasonable enough to round that way.

I also spent some more time at the SPR DOE site - there is still no information about returned oil, that I could find, and that the numbers seem a bit fuzzy - the 11 million barrel drawdon seems to be from the SPR itself, but the 'loan' is in a separate category.

This seems to be more of that unique brand of American accounting - what is borrowed actually adds to future wealth, so that means debts are actually assets.

To get back to my basic definition of how to measure peak oil, it is only what comes out of the pipeline that matters, nothing else. And in this case, the SPR is down more than 11 million barrels plus whatever was returned. This means that refilling it to it previous amount requires more coming out of the pipeline than the number which seems most commonly bandied about by the DOE itself.

You are left to speculate whether the oil won't actually be 'repaid,' thus spreading some pocket change around without anyone noticing it in the shuffle. Or maybe there will be a mysterious leak discovered in six years, which accounts for that now forgotten missing amount. But this enters in to the realm of graft and corruption, which is only a historical footnote in American history, right? Teapot Dome is so much more fun than Enron, at least in the history I learned - the link at http://en.wikipedia.org/wiki/Teapot_Dome_scandal is pretty good. And yes, this is how government works, including this concise summary - 'In return for leasing these oil fields to the respective oil magnates, Fall received gifts from the oilmen totaling about $404,000. It was this money changing hands that was illegal--not the leasing. Fall attempted to keep his actions secret, but the sudden improvement in his standard of living prompted speculation.' Nothing about the SPR oil 'loans' is illegal at all, only obvious personal enrichment is illegal. Getting a job at company X or a consultant contract 6 years after leaving government service is perfectly normal, after all. And anyone even hinting at corruption will just be dismissed as someone who has no experience with such honorable, dedicated public servants - except for the occasional Air Force tanker contract -

'Boeing Co.'s (BA) former chief financial officer pleaded guilty Monday to illegally hiring a top Air Force procurement officer who has admitted she gave the company preferential treatment on a $23 billion tanker contract.

Michael Sears (search), 57, pleaded guilty to a single count of aiding and abetting illegal employment negotiations.

Sears faces up to five years in prison when he is sentenced on Jan. 21, but his lawyer, James Streicker, said that under federal sentencing guidelines Sears most likely faces, at worst, a prison term of zero to six months.

Sears admitted that he offered Darleen Druyun (search), 56, of Vienna, Va., who was one of the Air Force's top contract officers, to a six-figure executive position at Boeing while she was reviewing whether Boeing should get a $23 billion contract to provide new refueling tankers to the Air Force.

Druyun, who was sentenced in October to nine months in prison, admitted that she provided an inflated price to Boeing on the contract as "a parting gift" and that she had helped Boeing obtain inflated deals on previous contracts, while at the same time she intervened to get her daughter a job at the company and later to keep her from being fired by Boeing for poor performance.'

Please notice that the link is from Fox, for those who feel that conservatives or criminals are unfairly depicted in the media. I may further add, look at the penalties these people are facing for trying to defraud American citizens of literally hundreds of millions if not billions of dollars. If only they had been caught with a joint or some crystal meth, the penalties would have been higher, but that is another tangent entirely.

That's a very useful tool, thanks.

the last time I paid <£2 a gallon was back in the early nineties here in the UK (the current US price if <$3).

I would postulate that while the US has 'spent' it's oil wealth on bigger and better (with emphasis on the bigger!) the UK and Europe as a whole have -via taxes- spent it on the so called 'European Social Model' -i.e. distribution of tax wealth to create a fairer kinder society, etc. In addition there have been numerous 'asset price bubbles' since the early 90s as all this wealth sloshes around the system, the latest being the global property bubble.

-I would also think that both models are about to come to an end. Perhaps Europe is a little better prepared for this as the high fuel tax regime has made us much more aware of the costs of energy than the US -but it ain't gonna be pretty...

Regards, Nick.

The SPR is filled by oil from US production, either from oil in lieu of oil royalties, or from repayments from SPR loans.
Yes, it is - it seems like royalty in kind (RIK) is the preferred method at this point. Also interesting is how often the SPR has been tapped, according to DOE, for balancing out minor problems in the last few years - though more frequent recently, it has been so used in the past, however - for example, shipping channel problems.

Perhaps it makes sense that an administration full of oil and MBA types would see the advantages of not only the strategic, but also the tactical, so to speak?

I really don't understand this refilled comment.  I have looked at the reserves and they are stated as 688.5 down from 700.  My math says they are still down 11.5 million barrels.  What am I missing?
11.5 million barrels off of 700 means it is 98.4% full. That is nearly refilled. Also, that 11.5 million barrels is just over half a days consumption for the U.S. The SPR is for all practical purposes full.
Well, in a surprise to me, according to a site provided by another post today it's 727!


The DOE actually has an office of Fossil Energy!

I believe you are reading the capacity rather than the contents.  I revisited the DOE site and got the following updated info, from that which I posted earlier.


"I believe you are reading the capacity rather than the contents. "

Yes, capacity is what I want to clarify.

Robert R. said:

"11.5 million barrels off of 700 means it is 98.4% full. That is nearly refilled. "

So, this suggests that capacity is 700, while the Dept of Fossil Energy(!)  is saying it's 727.

Any idea which it is?

727 million barrels is the actual size of the holes in the ground (one of 4 SPR crude deposits is along Airline Highway between New Orleans & Baton Rouge).

700 million barrels was the authorized limit before the recent Energy bill (now 1 billion barrels).

With the new authorization, once refilling starts it should go to 727 million barrels and then wait as a 5th SPR is set up and/or the existing ones enlarged.

IMHO, the small heating oil SPR should be enlarged and we should have at least 10 million barrels of product (heating oil, VLS diesel, gasoline) in the SPR. located in several critical areas with pipelines (say Phoenix, Dallas, Atlanta, Chicago, New Jersey).

Best Hopes,



So, since 2005 we could have been filling up to 727.  Hmh.

Folks, consider this a reminder to positively rate these articles (using the icons under the tags in the story title) at reddit, digg, and del.icio.us.  Also, don't forget to submit them to your favorite link farms, such as metafilter, stumbleupon, slashdot, fark, boingboing, furl, or any of the others.  These posts are a lot of work, and the authors appreciate your helping them get more readers for their work however you can.
The CERA article also make it to SlashDot.   Wait until they get a few hundred responses and then read the +5 Insightfuls. I'm expecting to see the same response from those geeks as the last time Peak Oil was discussed: technology will save us all and "Peak Oil Theorists" are "Chicken Littles."
The CERA report states that only about 1/4 of the world's oil reserves (oil, tar sands, oil shale and GTL) have been exploited.  The problem is not what is physically in the earth, but what can be exploited at prices that can sustain an economy.  As oil prices rise due to falling conventional/light crude production, the cost of developing the alternatives - tar sands, shale and very deep water/great depth oil also rises.

From information Shell has released on its tar sands projects, development costs have nearly doubled and the cost of production gone up by the same percentage, largely due to inflation in the energy/industrial sector.  This same scenario will also be true of oil shale and deep water, barring some great technological breakthrough.

Problem comes when very high prices for conventional oil cause severe damage to the economy, thus cutting off capital for energy projects (especially when interst rates & inflation go sky high due to excessive debt of US) and cutting off tax revenues for government energy projects.  For example, any tax credits for energy projects that spur conservation and devolopment are of no use to companies that are losing money or going bancrupt in a failing economy.    

The price of the CERA report rekindles the age old question; are rich people smart or just lucky?
Depend on their natal membership position in the lucky sperm club. Hugh Roy Cullen, the wildcatter whofounded Quintana Oil and found two of the ten biggest fields in Texas (Thompsons and Tom O'Connor) said;"I'd rather be lucky than smart any day".
I just read righthere saying that since the democrats have gained control of the house and senate, oil will get more expensive since the NIMBYism will gain lots of support especially from Fla.
Actually, for the last ten years it's been Republicans in the Presidency, the Senate, the House, the Supreme Court, the Boards of the oil companies, and controlling Florida, too.
I doubt that the oil fields we desperately hope are off Florida are going to be tapped.
You mean all the exclusive, wealthy, conservative Limbaugh types who have bought up the coastal areas for their gated developments?
China is almost without question going to use their SPR for "market adjusting" purposes. They recently "leased" a part of the Zhenhai SPR depot to Sinopec and stated as such. There is a common belief there that the US manipulates the oil market to harm China, despite the lack of appropriate mechanisms within their own country to transmit supply and demand signals to their 2 major oil companies, aso that such measures are appropriate. In the last few days, IEA held a conference in Beijing, in which China's participation in the international petroleum sharing agreements of the IEA were discussed, but China remains suspicious of closer ties to the organization (which, technically, can't accept China as a member since it is not an OECD member.)

China's peak oil awareness has grown quite a bit since I first held discussions with various leaders on the subject in the last two years. Even the National Energy Leading Group, China's top energy policy body under the State Council, has been publishing articles on the subject on their website. In September this year, one of the articles stated: "世界产油量的高峰期极有可 3021;在2010年以前来临." ("World peak oil production is very likely to occur before 2010".)

The US doesn't understand how critical oil is to the Chinese economy and the lengths to which they will go to secure it. We equate oil with car usage (and rightly so), but China's transport use of oil accounts for nearly 25 percentage points less than it does in the US...the rest drives key agricultural and industrial processes for which there is no quick or easy substitute, and for which "cutting back discretionary driving" is no solution.

sparaxis, welcome to The Oil Drum ! I've thought for a while that we need an East Asian perspective on many of our debates. Please continue to comment!
"key agricultural and industrial processes for which there is no quick or easy substitute"

could you provide more detail?

Sixty percent of China's irrigation water is pumped by diesel fuel, which is preferentially supplied to farmers. THough many rural counties have been electrified, the grid in many places simply wouldn't support the irrigation load if it were electrified (plus, there's 700 million people in rural areas, so electricity is primarily for residential and commercial supply). And this is not to mention diesel-powered tractors and other rural vehicle use.

China has a huge petrochemical industry, one of the largest in the world. Nearly 50% of industrial oil use is feedstock to petrochemicals. The US heavily relies on natural gas for the petrochemical industry, but China has very little natural gas. In the past, they used coal as a major petrochemical feedstock, and still do for  fertilizer production, but as the industry has modernized and grown, it has shifted to oil. Originally they used gasoil for ethylene cracking, but now it in turn has been virtually all substituted for by naphtha, which is more efficient, allowing the gasoil to be freed up for diesel production.

Such infrastructure choices basically locks China into a certain oil consumption pattern in the short to medium term; it would take a decade or more to make a significant shift in either agricultural or industrial use.


China is ramping up solar panel production. That means irrigation can take place without diesel, unless it's cloudy during the day. Cloudy days reduce transpiration in plants which reduces water consumption by the plants. Plants use the most water during bright, sunny, windy, days in the summer.
Great info, Sparaxis, thanks!
I concur.  The country is very peak aware.  Biofuels are front and center while wind power has been quietly dropped from the program.
Think tanks and "independent" consultants  produce public reports only to validate and publicize previously agreed-upon results. Do not be fooled by $1.000 price tags - they are simply red herrings to awe and confuse the credulous. They are also very effective for advertising and keeping their name in the papers/TV.

The real research reports (they do those, too) are highly secret, cost much, much more ($$ high six-figures plus) and are only available to those that privately order them. And those reports are MUCH more careful, balanced, nuanced and realistic than public ones.

Finally...if there was so much oil still to be discovered (as some "independent" consultants claim),  at $80/bbl - heck, even at $50 - Exxon BP Shell & Co would be drilling holes in every square inch instead of doing massive stock buybacks with their free cash flows.

Talk is cheap. Money talks, so follow that...

Hellasious -

Amen to that!

Many years ago I  worked for one of these pretigious 'think tanks' (I'm sure you'd recognized the name) and got a first-hand look at how the corporate consulting game is often played. In many instances a major corporate client is not looking for facts or infomation (they usually their  own resources for that) but rather VALIDATION of a preconcieved position or adgenda.

It lends so much more credibility if a respected 'independent' authority like CERA comes out and says the oil supply situation is just peachy than if say Exxon/Mobil comes out and says the oil supply situation is just peachy. In this regard CERA is functioning more like a PR firm for Big Oil than as a true consultant.

To get a clue as to what is driving CERA one need go no further than to examine their own list of major clients (one of which has been the Kingdom of Saudi Arabia).

CERA is simply a shill for Big Oil.
Does someone know how CERA meets its payroll?
It would be interesting to know who really pays $1000 for their reports and whether their sales of reports actually pays for their operations.  
Each supertanker takes months to do a round-trip between, say, the Persian Gulf and Europe or Japan. Furthermore, their number is limited and their capacities are well-known.
In view of this, it always amazes me that no one is using the Internet to keep track of them in an "open" way. I mean it does not take a great technical feat to do so and it would put a lot of these "consultancies" out of business.
I can think of ways of plotting their trips around the world on GoggleMaps - here is a site of mine that may give you food for thought IslandMap.co.uk
Check out this link to see what can be done at present
In view of this, it always amazes me that no one is using the Internet to keep track of them in an "open" way. I mean it does not take a great technical feat to do so

Unlike 'trainspotting' and 'planespotting' I don't know of 'tankerspotters'.   (planespotters is how some of hte CIA flights got fingered)

Find the tankerspotters, then you have the data.

eric blair -

If I recall correctly, either Simmons or Deffeyes in one of their recent books made very brief mention of a small company based in either the Netherlands or one of the German coastal cities that does pretty much just that.

They claim to have agents in most of the major ports that record the comings and goings of tankers as well as record how deeply they are loaded. From this they arrive at oil movements. As I recall, Simmons or Deffeyes was a bit skeptical about both their capabiliy and credibility.

Regardless, tanker spotting would seem like an obvious and easy way to check up on what is going where and by whom. Not perfect by any means,  but a good check against published information. It's well to remember that if it weren't for amateur plane spotters, these CIA rendition flights would probably still be a secret.

Petrologistics, a one man Swiss firm, has tanker watchers in major exporting ports who estimate the oil being shipped.
sorry, it was an article on Energy Bulletin
Khaos3 -

Maybe that's where I read it, but I somehow recall either Simmons or Deffeyes make mention of Petrologistics as largely a one-man operation.  From the Energy Bulletin Article it appears that Lloyds of London is also involved in tracking the movements of tankers.

According to Mr. Gerber, one of his agents in the Middle East disappeared.  Looks like real cloak and dagger stuff!

At any rate, there should be much more transparency regarding something as vital as global oil movements.


I think you are correct because I remember a comment questioning the accuracy of their tallys. I have both their books and tried looking it up for you. Deffeyes or Simmons may have just left it out of the index.

Could you use Googlemaps of the ocean and some computer time to find the plumes that ships leave and the shipping lanes to keep a tally on where the tankers are? I presume that the major governments do just that, but it's so cheap that a private individual could do it. Or just look at the harbors. How often does Googlemap update?
Come to think of it, it's only Panama, Suez, Malacca, and the Cape of Good Hope that you have to worry about. I don't think you move a lot of tankers around the Horn. It's in range of a few individuals with binoculars.
You don't need somebody in China, etc, because you know the tankers are either laid up, moving someplace you can observe, or moving someplace you can't observe by process of elimination.
A few dozen people, perhaps?
Google maps does not update nearly quickly or consistently enough to give you that data. Also, there is probably not enough detail in the imagery.

I would be amazed if they did so because that would be prohibitively expensive.

True about Goggle Maps. It was offered by me as an illustration of how ships could be tagged according to when and where they were last reported. I am sure the US Navy, and a few others beside, does this sort of thing (otherwise why have a navy?). However, there is no technical reason why a dispersed groups of Tanker Spotters could not do so on an informal but structured basis.

IMHO, it beats train and plane spotting any day.

From where I am, Ryde on the Isle of Wight, anyone can see pretty well all the significant traffic going through the Solent from the window.

I recall reading it in Twilight in the Desert. Simmons brought it up to support his argument that the data transparency in the oil industry leaves a lot to be desired.
CERA's biggest mistake is that they think we are Wave Makers... they misread history and seem to think someone has things under "control" -  but Homo Saps is a Wave Rider when it comes to "geopolitics, economics and technology."


The Great Wave
Price Revolutions and the Rhythm of History

"Fischer examines price records in many nations, and finds our great waves of rising prices in the thirteenth, sixteenth, eighteenth, and twentieth centuries.

All were marked by price swings of increasing volatility, falling real wages, a growing gap between rich and poor, and an increase in violent crime, family disintegration, and cultural despair.

* Each long wave reached its climax in a period of political revolution, demographic contraction, and economic collapse.

* Every crisis was followed by sharp deflation, and then by a long era of price equilibrium, rising real wages, falling returns to capital, growing equality, and accelerating population-growth. Aggregate demand increased, and another wave began.

* Fischer concludes that we are living in the late stages of the twentieth century price revolution.

* He does not predict what will happen next. Rather, he ends with an analysis of where we might go from here, and what our choices are now. "

I'm relatively new to the board - have been observing for several months and would like to add to discussion. I've noticed there isn't a 'suggestion box' where we can suggest analyses to conduct or topical special interests. I have one such thought:

I suspect there would be little debate on the hypothesis that high energy prices curtail growth and cause inflation. I put together a comparison of US personal savings rate versus US gasoline prices which shows a strong reltaionship there:

personal savings: http://bea.gov/briefrm/saving.htm
gasoline prices: http://tonto.eia.doe.gov/dnav/pet/pet_pri_gnd_dcus_nus_w.htm (staright average of monthly figures)

Is there any interest to further analyis of the economic consequences of peak oil?

I would be interested.  You can e-mail Prof. Goose with suggestions.  Maybe he'll ask you to do a "guest post."
I would have to agree, energy prices to one extent ro another increase the costs of goods which by definition is inflation.

Wages remain relatively stagnant, and therefore one has less purchasing power for a given wage.

Couple this with the need to "keep up with the Joneses" and I would believe a coorlation exists.

Though it's interesting to notice such a dramatic drop in savings rate at 2.00/gal (Q1 2005), is this a "critical point" or is this the rising energy costs finding their way into consumer goods?

One can thus anticipate, that purchase coming in the spring. However, in the President's message in April, the deferral of purchases was meant only to be temporary.

I've been following the US SPR data as best as I can for a while now, and I find the situation a bit odd.  Like the author, I would have expected all SPR repayments (from loans) and refills (from SPR stock sales) to have been made after the election, however there has been some recent activity with SPR stock increases reported starting the week of October 12th.

Here's the history of SPR changes from the weekly inventory reports, somewhat arbitrarily starting the data series in mid March of this year as we were midway through the Katrina repayments with comments below the data.

Week           Change in SPR stocks in 000s
3/22/06        400
3/29/06        500
4/5/06          600
4/12/06        200
4/19/06        400
4/26/06        200
5/3/06          500
5/10/06        500
5/17/06        500

....NO Changes....

7/12/06       -800

....NO Changes....

10/12/06       100
10/18/06       0
10/25/06       300
11/3/06         300
11/10/06       100

The weekly inventory report from 5/17 shows the last repayments, before Bush pulled the plug in an effort to bring down oil prices.  The SPR stocks had been growing at a rate of over 400K/week - a rate that if maintained would have put the SPR back to its high water mark of just over 700M barrels around the first week of December (2006).

Then, after the plug was pulled on repayments, there was an oil spill in the Calcasieu Ship Channel in Louisiana on June 23rd, blocking ship traffic into and out of some refineries.  As a result, 750K barrels were loaned out to CP & Citgo.  That appears as the 800K drawdown on the July 12th inventory report.

Now, when that SPR draw was made, the DOE put out a press release (http://www.doe.gov/news/3789.htm) which finished with the following quote: "Terms of the loans keep with President Bush's directive to defer SPR loan repayments until after the end of summer."

However, unlike the still missing Katrina repayments as well as the sale of 11M barrels post Katrina, the loans from the Calcasieu shipping lane closure now appear to have been repaid over the last 5 weeks.

The weekly inventory data just shows the change in SPR stocks, but digging a bit more and going to the SPR website (http://www2.spr.doe.gov/DIR/SilverStream/Pages/pgDailyInventoryReportViewDOE_new.html), it is clear that the 800K of recent activity is from the June 23rd river closure.  There is a comment that reads:

"Calcasieu Exchange - Calcasieu river closure. Return of exchange oil + premium scheduled for Oct. 2006."

Why Bush/Rove/Bodman didn't postpone this until after the elections is a mystery to me (obviously it was not a material swing in the market, but why treat this one differently?).

Now, there is another interesting footnote which reads "1.7 mmb originally scheduled Katrina Exchange Oil being deferred until 2nd quarter CY 2007".

I'll just cut to the chase and say that it is not possible (at least for me) to figure out if the meaning of this comment is that there is still 1.7M in repayments needed to be made, or instead 1.0M (as the month in which this footnote applies did show a 700K repayment and the language is ambiguous), or 1.4M as the rolling forward of the data would imply (and in my opinion is the most likely accurate figure).

All that said, we are today some 11.9M barrels below the highwater mark acheived pre-Katrina.  Of that, if we assume that 1.4M of that balance is from pending Katrina repayments, it looks like the government will need to buy (as opposed to take delivery of repayment for lent crude) 10.5M barrels to get back to where we were before Katrina, and has thus only repurchased 500K of the sold barrels in the last 14 months.

Ignoring the bill to expand SPR capacity to 1B barrels (for which new sites need to be brought online before any purchases can be made), topping off the current SPR capacity of 727M would require the government to go out and get another 38.4M barrels.

Are you sure the capacity is 727?  I always thought it was 700?
It's never been above an intra-week high of 700.7M (closing a week at a record 700.5M), but at least according to the DOE: "Today, the SPR has the capacity to hold 727 million barrels"

See: http://www.fossil.energy.gov/programs/reserves/spr/index.html

CERA's Greatest Hits

A brief rundown of CERA reports (all behind firewall of course, so we can only guess at the contents...)

10/14/2003: UK Offshore: Not yet the endgame

Websters Dictionary under "Oil Endgame": Any province that declines at a 10% or greater for 3 consecutive years. See United Kingdom, 2004-2006 (12%, 12%, 11% YTD).

11/19/2003: UK Offshore--A Whole New Ball Game?

Money quote: "The demise of UK oil production is more often forecast than delivered."

12/1/2003: Norway--Very Steady as She Goes

"Very steady" means declines of 3%, 9%, and 8.5% (YTD) for the 3 years following report. "Steady" evidently means declines in excess of 10%. "Undulating plateau" means declines of only 4-6% per year.

9/20/2005: 'Come and Get It': OPEC's New (Short-term) Policy

OPEC's oil production in September 2005: 31.586 million bbl/d. Number of months since September 2005 OPEC's oil production has exceeded that level: 0. Heck of a job, Brownie!

More to come...

Love it. Next time they say "we have been out of oil five times already" we should call them on it and have them specify/document the claim. Then, if only we had these reports (plus their claims earlier this decade that large new finds and increased drilling would provide the US with an increasing supply of natl gas at a lower price for most of the rest of the decade) we could very specifically document just how wrong they persist in being - not in predictions decades out like Hubbert attempted, which are hard if not impossible to make, but even just one year out.

I'm sure Simmons & Co have all the reports, I wish he'd pull them out and start playing hardball if he really wants to make his point.

It seems to me that the Cornucopians are impervious to any refutation of their statements. I don't know why they're covered in Teflon, but its darn sure true.
   Yergin did write an excellent, perceptive history of the oil patch. But his record as a prognosticator is more than a little flawed-what's the current price of oil? Two Yergins? as WestTexas's joke goes.
   CERA redefines the definition of oil in order to keep a Cornucopian view, as i pointed out above, and they call depletion a "plateau"
I'm much less concerned about whether Yergin recognizes his problems than I am the popular press learns about his failings. He is constantly paraded as the BIG expert, all others come second. His consistent, considerable errors need to be pointed out clearly in debates and in the news so that the public and hopefully news people have a chance to form their own, more accurate opinion.
Reality and clarity are unimportant. Voters decide with their "hearts" rather than with their rational brains. --See Sci American Dec. 2006, page 34, focusing on the work of Stony Brook professor Charles Taber.
Are you actually ready to abandon reality, accuracy and clarity?

I understand your point, but we are not talking about voting. I am taliking about about influencing public awareness. Some people respond to clarity, enough to make it worthwhile to pursue over time.

I'm also tired and making lots of typos.
ah, sb...I do love thee.  Taber's work is wonderful, I am a big fan.  Unfortunately, he makes a good case.
I find it enlightening that Dr Taber uses the scientific method to conclude that most people are not swayed by the scientific method!  Very Zen like, in a roundabout way.
Taber looks very good, also good is Dr. Kelton Rhoads who compares influence (political) to using "established proganda tactics" that manipulate "bugs" in the human brain.  Such as: omissions, contextualization, ingroup/outgroup manipulations, cynicism, traps, manipulating cause & effect, modeling the convert communicator, pacing and distraction, associations, numeric deceptions, and shutting down the opposition -- to name a few
Perhaps Yergin's unwarranted credibility has to do with the fact that his primary audience for such reports (who actually buys this thing?) are almost all journalists. I'm rather sure that most, if not all these journalists would love to have a resume and or book such as Yergin's on their resume. When the audience's highest possible form of praise (Pulitzer) has apready been lavished on the performer, the audience may understandably suspend some of their normal skepticism. Personally, I'd argue that among run of the mill journalists the normal level of skepticism is already severely limited.

Apologies to any journalists who may be onboard here - but am I wrong?
There is an excellant book published in 1980, called "Overshoot" by William Catton.  The book points out the futility and harm of building our food supplies on non-renewable resources.  The argument is that fossile fuels provide more than 9 ghost acres for each real acre.  The implication is of course that as oil declines, food production will decline until populations are again living on real acres.  There was an interesting article recently that said that in the last 7 years the world grain supply has been drawn down 6 times.  This implies that we are living on the edge of what oil/natural gas can provide in terms of ghost acreage.  If Bartlett is correct, then we have basically 10 years after peak oil till the oil supply is depleted.  If peak oil was indeed 2005, then this means that populations will dwindle to something less than 1 billion by 2015.  It seems a crime to continue to try to build populations on the back of fossile fuels if the result is that more people are likely to die when depletion becomes a fact.  So even if CERA is correct, the only rational course of action is to start a Manhatten style project to return populations to a sustainable level with renewable fuels.
"So even if CERA is correct, the only rational course of action is to start a Manhatten style project to return populations to a sustainable level with renewable fuels."

Other than daily sunlight(photosynthesis) ,  what are the renewable fuels ?

As a farmer , I am saying ...eating plants that grow without importation is the only thing that is sustainable ...after that entropy lowers the EROEI  

Hydroelectric, wind, solar photovoltaic, solar thermal, geothermal, tidal are all renewable sources of energy.

Best Hopes,


But they all require fossil fuels to function ?

What is the EROEI of each ??  Taking entropy into consideration.


hydro - 50 to 1,000 to 1
wind - up to 60:1
Solar PV - ~20:1


Link to the source please .

hydro - 50 to 1,000 to 1
wind - up to 60:1
Solar PV - ~20:1

For each unit of energy input one gets back 20-1000 units ?

How can you get more energy than you put in ?

What about the laws of thermodynamics ?

Where did the energy come from ?

Thermodynamics applies to a closed system. All of the above energies come from the sun...PV directly, Wind is the sun heating the earth unevenly and the air moves around turbines capture a bit. Hydro same thing oceans are heated evaporate and rain...on their way down the mountain the potential energy is turned into electrical via turbines.  No energy is created only captured.  

What the post means is if it takes X amount of btu's to manufacture the PV cell you can get 20 times that back in the conceivable life of the product.

For Vestas Wind Turbines

http://www.vestas.com/vestas/global/en/Sustainability/environmental_impact_of_wind+turbines/Energy_b alances.htm



They claim EROI of 2 to 10.  Others here (reputable posters) have claimed 20.

Hydro was from old source.  The Karahnjukar project in Iceland will produce constant 540 MW for 400 years.  It is using 30 MW for 4-5 years plus diesel, some concrete, air service, etc.  Still, I think it will have an EROEI > 1,000.

Hope this helps,


Karahnjukar takes water from one river valley and runs it through a 40 km tunnel to another river valley.  599 meter (2000') drop, about 110 m3/sec.

Wind turbines collect energy from wind, solar PV from sunlighht directly into electricity.


I thought that jygmann's point was that plant acreage was 'ghosted' due to importation(meaning we import oil to create fertilizers,etc) and therefore only what occurs naturally, nitrogen released by lightening,snow,etc, should be considered.

I fail to see how the other forms of energy creation can easily be used to create fertilizer in sufficient quantities to effect a change in the huge usage of chemical fertilizers that would cease with a falloff in oil.

Meaning, without oil our ag efforts to feed more than is sustainable is a crisis that is marching steadily towards us and we have no alternatives except 'sustainable ag' and that means then a huge dieoff of the population.

Did I miss something?  

Dams ,PV panels, Windmills, food production , etc all require Investment of fossil fuel energy (importation).

The importation of fuels,machinery ,labor, and maintenence is from fossil fuels (ancient sunlight).

Without fossil fuels , we run on daily sunlight (photosynthesis).

CERA's Greatest Hit, part 2

Let's turn the clock back a bit to see how well the crystal ball works.

From 2004 : Forecast/actuals YTD 2006 for a few countries (mbbl/d): Brazil (2080/1703). Angola (1590/1408). Canada (3210/2437). Russia (9900/9176). Iran (4650/4000). Kuwait (3100/2547). Nigeria (3000/2420).

Anyone see a pattern here? Every country for which an individual forecast was broken out was overforecast compared to actuals. There's some goofiness here about how NGPL's/condensates exactly are accounted (imagine that...), but the consistency of the overestimate isn't pretty. Here's a comparison of the CERA forecast/EIA world actuals in mbbl/d(2002 and 2003 are actual; difference in 2002 and 2003 is presumably NGLs, although CERA claims their figures are not exact, esp. 2003); number after the "+" indicates CERA/IHS overdoing it: 2002 (68343/66967 +1367). 2003 (71775/69235 +2540). 2004 (75839/72224 +3615). 2005 (79147/73554 +5593). 2006 YTD (82117/73421 +8696).

Even if there is a bit of inconsistency with NGL's here, the trend is apparent: CERA/IHS way overforecasting supply. No worries, though - their latest projections are bound to be much better!

Great stuff.  This deserves to be archived somewhere for handy reference.  
do they document what their assumptions in making those predictions were, and what are their assumptions in making this latest set of predictions?
What is their estimate for 2007? If they follow their trend in overestimation, it will be ca. 20% too much.
Slashdot has an interesting string describing the CERA report: http://hardware.slashdot.org/hardware/06/11/15/1723227.shtml
just wait until tomorrow.  
There was a CERA article in the paper today.  "pulitzer prize winning Daniel Yergen".... Pretty much a trash the hubbert curve, Simmons, etc.  
This was the same paper that had the CEO of shell on the cover of the business section warning the end of easy oil is over and conserve.
The contrasts are getting a little more severe.
CERA vrs. 'The Hirsch Report'
CERA vrs. the CEO of shell oil.

We have weak reporters in this country.  They get the same pay if they print what is handed to them or get out there and make some enemies.

CERA who pays your wages and for what??
CERA why is your report behind a $1,000.00 paywall.
CERA You are trying to convince "the public" but hide your data. Why?
CERA What about your past projections?
CERA Why? Why? Why?

"We have weak reporters in this country."

Yeah, they aren't getting out the news.

OTOH, I wouldn't blame them too much.  They can only do what their publishers/editors allow them to do, and real research takes time and money.