Tracking the EIA Short Term Forecasts
Posted by Sam Foucher on December 31, 2006 - 12:11pm
This is a guest post by Gilles.
Hi all. Thanks to Khebab, I have the opportunity to repost a study that I made about Short Term Energy Outlook (STEO) EIA's predictions. I posted it originally as a comment to Khebab's last post , but it was buried under more than 100 comments and he thought it was a good idea to repost it in a guest post.
Animation of the EIA Short Term Oultooks from January 2005 to October 2006. Fine lines: past forecasts; Line with circle markers: forecast for the month displayed. Click to enlarge.
Please let me introduce myself in a few words. I'm a French professor in astrophysics, and I discovered the problem of PO less than 2 years ago (before that, I was rather confident that nuclear energy and hydrogen engines would solve the problem of the depletion of fossil fuels. I changed my mind a lot since this time of course, but it is worth reminding that this opinion is still mostly shared among the scientific community !) I participate regularly to the French forum oleocene , and I follow of course very closely the very interesting discussions on TOD and other similar sites. My work here is minor: I just made a compilation of recent EIA predictions. I'm not of course an expert in energy sources, but I was curious to test how the official agencies could manage the possible apparition of a plateau, in comparison with their cornucopian, ever growing production forecasts.
I drew the following graph in May 2006, by superimposing all monthly published outlooks since the beginning of 2005 (I took off some months for sake of clarity). The spectacular feature for me is that the prediction curve dropped abruptly in August 2005, i.e. just before Katrina hits. After the unusual 2005 hurricane season, the following months have accentuated the decline of the curves, but the EIA regularly predicted that the production would rise again after a few months.However, this hope has been largely disappointed, since the inflexion point has been continuously slipping, giving the impression of an everlasting postponement. The real curve is following a more or less flat line, exhibiting the famous plateau that Stuart commented a lot of times.
Figure 1: Compilation of EIA monthly STEO predictions from January 2005 to May 2006. For each month, the solid line refers to past quarters and the dotted line to predictions for the present and future quarters.
The same kind of figure was drawn this month, showing a similar pattern: after a few stable predictions in summer, the curves started to be revised downwards again.
Figure 2: Same as Figure 1, but from July 2005 to December 2006 (beware, colors have changed).
Basically, EIA has been telling us: "don't worry, the production will start again rising within 3 months...." for more than one year now ! The cumulated gap since the beginning of 2005 is now reaching around 3Mbd. They did not offer of course a clear explanation why THIS has happened !!!
For the fun, an Oleocene moderator (Sylvain) constructed an animated gif to show the EIA "snake" crawling on the ground in real time that you can watch on top of that post.
One last comment: in the last STO issue, the EIA predicts a gap between the world demand and supply of 0.3 Mbd in 2006 (84.7 vs 85.0) and 0.4 Mbd in 2007 (86.1 vs 86.5). While these figures are not yet really catastrophic (there was an extra production of 0.5 Mbd in 2005), they are nevertheless puzzling, since they indicate that the suuply drop cannot be attributed to a demand destruction. (The cumulated crude oil stock decrease would nevertheless reach 200 Mbl, two thirds of the total US stocks). In any case, I think we are founded to ask EIA naively : could you please explain us, with simple words, why do you predict that the 2007 production will not exceed 86.1 Mbd, whereas the demand is planned to reach 86.5, and that only 15 months ago, the world was supposed to be able to produce 88 Mbd in this last quarter of 2006?
Gilles
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What a surprise to find here a post of the famous (on Oleocene.org french site at least) GillesH38 ! It would be so nice to have a french site of the quality of TOD.
The blindness of EIA is incredible, good job man.
You think EIA is bad? Check out IEA one of these days.
10 years later and IEA, EIA & Lynch are on the money.
Yup, smekhovo, your forecast role models are the only fantasy around here:
Well, it looks like there's an upside to oil production and it looks like there's a downside. IEA to Lynch say there's only an upside and Campbell et al. said it's time for the downside - obviously a few years too early. Looks like the upside has been lasting a lot longer than Campbell thought, right Freddy?. IEA et al just keep saying that the upside is supposed to work like the Everready battery.
Too bad we're not in advertising here...
Removing the personalities, this seems to me to be the central problem in a peak oil prediction. Calling any peak, in any domain, is harder than naming the general trend. The example that springs to mind now is the housing bubble. I know people who have been calling a top for 20 years, but were wrong for 19 of those years.
It is always the best bet to say that next year will be a lot like this one. That is the statistically correct prediction. It will be right for say 19 years, until it is wrong.
Calling the 20th year, or peak oil, is tricky business. I think we have to hold ourselves in check by saying that we have indications rather than any sorts of proofs.
Good points.
The main mistakes with the past peak predictions are the same ones being made repeatedly on this board. Some have been calling for a peak for nearly two decades now - eventually they will be correct.
Well, I told my brother back in '04 that he should sell his appt. in Washington DC because the market was overheating. He didn't take the bait. Even now, why sell?
At the same time I argued that China would continue many years into the future with 10% growth because there is a dynamic behind it that can't (at least not with any normal measures) be shut off. For these reasons it only makes sense to continue to do as the EI what have yous do and assume that the past will continue into the future. That is also the meaning of time elapsed growth shift seen in Gilles' figure 1. There is no real "thought" behind it. The trend just remains your friend, right? Until it switches, of course.
I'm wondering if the production models (if any) used by Lynch and the EIA\IEA are only able to predict an exponential growth which has basically only one parameter (the growth rate). The growth rate has always been around 1.5-2.0% per year for the last 20 years. Using a model with only one parameter is obviously a lot less risky that using a logistic curve for instance which has 3 parameters.
You say "less risky" but does either method produce a probability with its forecast? Or does probability remain a secondary, fuzzy, human, meta-judgement?
That's a tricky question. Based on recent production history, a 2% growth rate is very likely. However, an exponential growth cannot go forever in a physical world so the exponential model is very unlikely on a large time scale.
I agree. In fact, sustained exponential growth is not sustainable in most systems on even a medium or short time scale. Overshoot and collapse is an all too common response in everything from prices to populations.
I worried that someone would take the idea that 2% can't continue "forever" and flip it to a psuedo-proof of collapse.
The fact is, it isn't a proof of that or anything else. There might be plateaus, there might be soft landings, there might be a "long tail" ... who knows?
This is a really good point.
The simplest model which HAS worked for all commodities in the past in an exponential model.
If Q = total fraction of resource recovered then exponentional growth is given by
dQ/dt = AQ and hence Q = exp(At) where A is some constant, a single parameter fit as khebab says.
Well the interesting thing is if you form the ratio dQ/dt/Q and plot it as function of time you should get
dQ/dt / Q = A - a constant as a function of time.
This is the well-known, (to TOD readers), Hubbert Linearization plot and rather than being a simple constant, shows a decrease as a function of time for all mature reqions, including the whole world.
A better approximation is to use
dQ/dt = AQ*(1-Q)
Which gives a Bell-shaped curve for dQ/dT and is the basis of many predictions for near term peaks in world Oil production, including my own.
However this is also an approximation and the real-world will almost certainly show some deviations from this. As I said before, if I had to bet on future world Oil production I'd go with Khebab's loglet analysis, although even that is not currently sensitive to new technologies that would come into play with Oil prices sustained above $60 Barrel.
In any case, Oil consumption accounts for approximately 40% of world CO2 emmissions, gas accounts for 20% and coal accounts for aboout the remaining 40%. Even if we have ways to increase Oil production in the future we should not it.
We should use our Fossil fuel resources to transition to new ways of providing the wealth and energy we want and need.
TOD:Canada is happy to host posts and discussions in French. If you're interested in submitting a guest post in French, contact me at Stoneleigh2006(at)msn(dot)com.
stoneleigh
not to sound crass or ignorant or both
but is there a meaningful % of people in canada that speak french and dont speak english?
I guess a more relevant question would be - what % would find an article written in french much more absorbable and informative written in french than english? (I acutally had 7 years of french but if Gilles had written this post in french, id have had a mighty struggle - except for the nifty .gif of course)
There is a significant percentage of the Quebec population that can't speak any english at all, although they are unlikely to be frequenters of TOD.
That said, my partner is a fluently bilingual francophone and a senior official of the Canadian government. Even still, she finds it difficult to read highly technical information in english and has particular difficulty with numerical information where the discussion is in english. So, if she were to read TOD, she would appreciate articles in french.
Finally, Quebecers are more likely to use search engines in french. So they might become peak oil aware through french sites from Europe, but would be unlikely to immediately discover any of the good work TOD is doing.
So, the odd french article on TOD:Canada is a good thing. Most of the Quebecers who discover TOD through a french article will probably be able to follow along quite well in english after discovering the site.
Except for along the Quebec border, there are virtually no towns or cities in Canada that break the 5% french speaking threshold needed for in-french services. But, there are hundreds of communities with significant european, asian or east indian populations that approach the 60% levels. Unfortunately, they are likely as unwelcome to post at TOD-Canada in their native tongue as they would be generally in Quebec.
I believe immigrants to Quebec are still banned from attending English schools ore erecting English signs outside and within their business premises.
Rant over...
Freddy: You are forgetting that the Quebecois are "special".
There's some people speaking french in europe too...
Thank you Gilles for this very interesting post - especially the animated graph at the top.
Another naive question to ask the EIA is when their current members plan on retiring and letting competent and sane people take over.
Even they are likely to suffer from the valence effect. We all do to some extent (except me..;)
"We all do to some extent "
If I suffer from the valance effect we are really in deep feces ;)
I look forward to your controversial neuro-chemistry post. The concept of "Freewill" is highly over-rated IMHO.
How funny! I love your article!
I think I posted half jokingly about the religion of the god TINOPO (There Is NO Peak Oil) yesterday, explaining that the religious denialists will grab on to every little fluctuation upwards and declare it as the beginning of a new exponential production growth cycle. Looks like you have identified TINOPO's high priests... it's EIA!
I also think you should revisit your thoughts about nuclear energy, once more. Energy from fusion will play an enormous role in the generation capacity of many countries, foremost the US. The fusion generator has already been set in motion and is performing perfectly within its design parameters with a power output far beyond our current and nearterm energy demand and it will be burning its copious amounts of fuel for at least another couple billion years without overheating. The only thing missing from the reactor are the radiation to electricity converters. Thank goodness they are on sale now. This is what they look like:
http://en.wikipedia.org/wiki/Solar_panel
:-)
When you finish tabulating the Infinite Possibilities you should consider also calculating the finite probabilities of each (take your time...).
And then maybe "revisit your thoughts about nuclear energy."
I'll have to agree with sendoilplease, in that there's no way we're going to "consume" our way out of an overconsumption problem. Even if a wholehearted effort were in place to create the manufacturing capacity, the amount of excess energy required to make a significant number of PV's would break the bank. Whether we call it a "surge" or an "escalation," that kind of silicon volume gobbles water and electricity, and produces lots of uniquely noxious waste. Then there's the inverters, controllers, &/or batteries.... And how about the even greater mass of aluminum or whatever the support structures will be made from? Or shall we lash together bamboo?
Armchair calculations based on the number of photons striking Saudi would be laughable in their irrelevant ineptness, were it not for their pernicious effect on all the people who are looking for an easy out. No more balm for your brain, boy: It's time to get serious about preserving as much of civilization as possible while society implodes. The question we may face in one or two generations is, "How do we guard the libraries to keep people from burning them for fuel?"
Solar panels repay the energy invested in about two years (various studies report one to many years). Progress is being made on making the support structures cheaper. Also, new silicon plants are being built to provide silicon just for PV cells. This has less stringent requirements than silicon used for electronics. In addition to PV there is also electricity made by concentrating sunlight on boilers (molten salt reservoirs store heat to provide energy at night and on cloudy days). There are also solar water heaters and similar devices used for heating.
It is a worthwhile question to ask whether we have the capacity to build enough PV capacity before oil goes into serious decline. I don't share your pessimism that it is a worthless endeavor.
Perhaps I misunderstood. I agree that we will not support "business as usual" simply by substituting PV for oil. I do think that solar energy in various forms is worth pursuing.
I just wish people would quit talking so much about PV and start talking more about all the other ways to use solar energy right now. Doesn't it seem absurd to see people in the USA using natural gas or some other fossil fuel to heat domestic water during the roasting hot summers we are getting around here, when all you have to do is drape a loop of plastic pipe around on your roof and feed it into your usual hot water system?
And then there is that argument that we have lots of roof area for PV. Sure, but area is not the problem. PV costs a lot. What about just Organic Rankine Cycle machines (low temperature steam engines). What! you say, moving parts- ohmygod!! Right, but if moving parts were all that bad, what about my watch, my fridge, my local coal fired steam power plant, my tractor, me, and so on and so on. Ever so many things have moving parts and still do good for us.
ORC machines are very well known to people who know about them, and can do a pretty good job- and at costs that I'll bet would compete well with PV if somebody really tried a modern design. But my real gripe is what I have said already too many times- gotta look at ALL the possibilities, not just one (PV) or a few.
And never to forget- the real problem is too many people, esp too many greedy, wasteful, lazy, fat and stupid ones.
Let's talk about all of it!
Hang dry clothes, solar water heating, swamp cooling instead of standard AC in dry climes. etc - as well as PV!!
What about just Organic Rankine Cycle machines (low temperature steam engines).
Show me where they can be bought? Show me where one can get a 400+ degree solar system that is as reasonable as the 1kw thermal system that output sub 200 deg. F.. I *MIGHT* be able to buy a stirling dish one day. But a dish can't mount to the side of a building. Or to a roofline.
Labor for PV cots alot. The MC connetor crimper is expensive. The electronics to do a grid intertie is expensive. Even if the PV panel drops, the labor and intergration electonics will still cost alot.
Thanks.
Always learning here.
Didn't know they called them ORC's.
It's the dawning of the age of aquarius.
Let the sun shine.
Just a quick question...
If the PV Cells repay their energy cost in just a couple of years, what do you do with the electricity? There is an energy cost to create light bulbs and air conditioners and electric cars. For a Post carbon future shouldn't you consider all the energy costs? Wouldn't you need sufficient energy surplus to repay the energy cost for the PV cells and all the other stuff you would plan to use in order to maintain a long term sustainability?
just a quick answer:
yes.
It bugs me that people confuse energy payback time studies with ERoEI. You could, I'm sure, easily find oilwells whose drilling cost was returned in a matter of days and whose total lifetime return yielded 10000:1 over the drilling cost. Makes the 20:1 or so quoted for PV look pretty silly when considered on a scale of what we need to feed our energy appetites.
As for PV energy return, I tend to agree with Don Lancaster who says, "I do not see conventional silicon pv ever reaching fully burdened energy breakeven."
Before they get to the libraries, they'll burn the forests. We must ensure that on the downslope away from energy abundance, that there will be enough education, societal cohesion, or just plain old law and order, to protect the forests from being felled for firewood, and to allow for sustainable silviculture.
Without an educated populace, or failing that, a heavily armed "Forest Ranger" type of national guard, we can watch our trees, our topsoil, our agriculture and our future, all wash out to sea, leaving behind nothing but desert.
Earth = Easter Island in space. Let's not screw it up this time.
Happy New Year!
george - as you know, vermont was clear cut 100 years ago - there were hardly any forests except on the tops of mountains and in private groves - this was BEFORE we were dependent on oil and gas .
Yes indeed - 100 years ago, Vermont was 90% deforested, today the reverse is true.
In fact this entire region had once seen most of its trees harvested and floated down the rivers to the major population centers. Burlington became rich because of the logging industry. But times have changed of course, and many of the fine homes on the Hill, built with lumber money, are now occupied by fraternities associated with the University of Vermont.
My understanding is that with the building of the railroads, those who had been struggling in the cold, rocky soil here in the Green Mountains abandoned their farms and moved to flatter, if not greener, pastures in the midwest, farming the rich soil left behind by the glaciers. It is a remarkable testament to the resilience of nature that the Green Mountains of Vermont, White Mountains of New Hampshire and Adirondack forests of upstate New York bounced back (with a good deal of help from heroic figures such as Teddy Roosevelt, who created the Adirondack Park).
However, the trees we see today were only able to grow back because the growth in the use of fossil fuels made them less attractive as an energy source. The issue approaching us now of course, is that with fossil fuels soon to be no longer easily or cheaply available, people's eyes will once again turn to these forests.
Without an alternative means to heat one's home or power one's locomotive, the forests may fall once again. Only this time there may be no high-energy-density replacement to give them the time and breathing room to re-establish.
I love walking these woods with my dog, I'm up there nearly every day. Yesterday it was sunny, the mountain behind our house was covered with snow, the moon was rising above the ridge into a deep blue sky, and it was silent and absolutely beautiful. And yet I'm always conscious of the fact that, if firewood once again becomes a precious commodity, as it once was in Medieval Europe, it will be very difficult to hold back a tide of humanity armed with chainsaws, looking for warmth or a quick buck.
Sometimes a graph is worth 1000 words. This one illustrates the transition from wood to coal to oil and gas.
I don't recall arguing in any of my posts that PV powered SUVs with 150kW engines will be the future. PV, wind and other renewables will simply become the new baseline for a future in which we will use as much energy as we NEED, not as much as we like to WASTE.
"Whether we call it a "surge" or an "escalation," that kind of silicon volume gobbles water and electricity, and produces lots of uniquely noxious waste."
How so? In order to make a thin film cell, all you need is a few um of silicon thickness. Let's take a look at that: 1m^2 of a 5um Si thin film have a mass of 2330kg/m^3*1m^2*5*10^-6m=0.01165kg = 11.65g. Such a panel can produce roughly 15W of average power for a lifetime of 25 years, which is 0.015kW*24h/day*365day/year*25years=3285kWh. That is roughly one quarter of an average US citizen's annual electricity consumption. In other words, it takes some 100m^2 of Si thin film to produce ALL of one person's electricity. In other words, it takes approx. 1.2kg of silicon... less than three pounds of coating every 25 years. If you burn that amount of silicon with air, it will give a comparable amount of heat of burning a similar amount of coal... see chemistry 101.
You might want to revisit your misconceptions about silicon use in properly designed cells. The current generation of bulk cells are, of course, worse by a factor of 100 in their material use. Since they are not made in large quantities, yet, the resulting environmental effects are negligible. As production volumes go up, material use in cell menufacturing continues to go down as a simple result of price pressure. Many manufaturers are either completely getting out of the bulk cell market or have serious R&D programs in (non-si) thin film cells going on. And let's not forget that concentrators are even more efficient by a factor of 400... they don't need any significant amount of semiconductor matrial.
"Armchair calculations based on the number of photons striking Saudi would be laughable in their irrelevant ineptness, were it not for their pernicious effect on all the people who are looking for an easy out."
I am not talking about people who are looking for an EASY way out. I am talking about replacing our current energy infrastructure with something that works. Solar works, wether you like it or not. That you are desperate for an EASY way out that won't cost any money is not my problem. It is also not part of my argument, either. The replacement of every single kW of our primary energy consumption with renewables will cost a significant amount of money. It is an investment we have made in the past and it is an investment we will make again. No big deal, in life you get what you pay for. And unless you are looking for a reason to get yourself all worked up over nothing you might want to consider this simple truth.
Of course it will be far easier and cheaper to save the first 50% of our energy consumption that to replace the other 50%. In my books that is a plus, not a minus, but then, I keep proper records about what I need and what I waste...
Call me when society will have imploded. :-)
I often find that oil production figures are often inaccurate and hard to pin down. It often helps to look at comparative storage figures. The advantage is that storage figures are harder to fake and the consequences of faking them in company reporting tends to be more severe. I've included the aggregate storage figures from the EIA for last week. (Sorry about the presentation it is a bit rough.) The actual amount of storage has actually gone up slightly year over year. A similar analysis to the one done on production figures would be kind of interesting to see.
Happy Holidays
http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/weekly_pe...
Petroleum Stocks % Chg fr
(Million Barrels) 12/22/06 12/15/06 12/22/05 Prev Week Yr Ago
Total Stocks (Excl SPR) (7) 1,022.1 1,029.5 1,023.0 -0.7 -0.1
Crude Oil in SPR (11) 688.6 688.6 684.9 0.0 0.5
Total Stocks (Incl SPR) (7) 1,710.7 1,718.1 1,707.9 -0.4 0.2
Regarding Gilles' animated graph, I've posted this question before but have not gotten an answer.
Anybody have any ideas on why the projections become more optimistic before they become more pessimitic?
IOW, why did they vote for cornucopia before they voted for decline?
Changes in OPEC spare capacity are the reason EIA supply forecasts become over optimistic and then over pessimistic?
Of course I have no idea of why EIA does increase or decrease their predictions. I was surprised by doing this compilation to see major revisions of crude production numbers even one year after they happened !
I just notice that the curves were more or less overlapping and only slight revisions occured during the first semester of 2005 (some of them were indeed upwards revisions), and after July 2005, they started to be almost systematically revised downwards (that's when the plateau began to be clearly visible). For me something happened around this date (just before Katrina, and the hurricanes can not explain why the production has not recovered since this date to previous forecast values) : may be the unability of KSA to raise its production in response to other shortages (Nigeria, Iraq ) ?
step back, I have been thinking about this issue, in its broadest context, in much depth over the past few weeks and have decided to write a (controversial) post on it. (it started after going on my umpteenpth date in a row who's primary concern was what my astrological sign was)
I believe we have evolved mechanisms favoring optimism over pessimism, fantasy over reality, faith over science, etc. as well as easily responding to authority. Children in our ancestral environment who obeyed their parents unequivocally had an adaptive advantage to reach adulthood because they would avoid all sorts of pitfalls that natural child curiousity would gravitate towards. Ease of belief in authority figures is an adult byproduct of this concept.
Our ancestors that were optimistic in general felt better about the world and themselves and therefore moved up the mating ladder/ had more access to resources / had more incremental mating success. There is an increasing body of empirical writing on both of these concepts, and while Im sure I will win few friends, my new years tod todo list includes some introductory posts on the neural mechanism of evolution in relation to the Peak Oil demand side equation, and eventually a post "Peak Oil: Science vs Faith?" outlining the possible underlying explanations that given equal airplay, people choose a)the more appealing but less real message and b)the more authoritative but less accurate message. I think at least part of the answers to these prevalent behaviours lie in evolutionary psycholgy/biology.
very interesting idea
assuming the female is the one who chooses her mate(s), would she not be drawn (emotionally speaking) to the ones that are more optimistic? and thus females would tend to bias evolution towards producing overly-optimistic children as opposed to those who tend to be pessimistic?
then of course, after a few decades of overly exuberant optimism, mother nature steps in every once in a while to bitch slap the human race back into its rightful place in the scheme of things ... think of the black plague and the dark ages as an example
IOW, as counter intuitive as it might seem, it could be that our persistant "prusuit of happiness" leads to our own demise because we develop too much happiness
I would have to disagree on this a little, and say that it would probably be more accurate to say that we can't "develop too much happiness," but merely touch on it, and then continue the pursuit once again. Where lies the trouble is that we're always in pursuit.
Agreed, our (western) pathological obsession with progress that appears to be the fuel of the fire of civilisation.
We do things, make technologies and behave in certain ways because in part because it makes us more likely to mate and spread our genes and - perhaps more importantly for a species optimised as ours is for survival in many different environments - because doing these things is easier. Put another way, we try minimising our personal biological energy expenditure because it is an important survival strategy.
Happiness is a function of many different things, but I find it odd that idea hard work is often much worse than doing it (though this is a personal observation). Happiness is being care free with regard to operating exactly as your genetic and cultural directors tell you. The pursuit of happiness therefore inevitably leads to the pursuit of food, comfort, sex and (relative) laziness - though in our culture it also includes owning shiny stuff and being powerful/rich.
It turns out happiness has a simple formula:
Acquiring more stuff makes us more happy (due to those genetic factors you describe). But our desires to gain ever more stuff reduce our happiness, because we can't achieve them.
The equation has been verified by several studies. Eg. Danes are happier than their neighbours because they have lower expectations, but similar levels of attainment. Nigerians, despite having hardly any stuff, are one of the happiest peoples, presumably because they don't feel compelled to acquire more.
So the route to happiness is to be a super-high achiever, or have lower expectations. As Charles Dickens puts it:
"Annual income 20 shillings - Annual expenses 19.5 Shillings - Bliss"
"Annual income 19.5 shillings - Annual expenses 20 Shillings - Misery"
Absolutely Bob. Based on what you said I would argue Nigerians have a saner culture than ours because they aren't under the same pressures to progress/archive/compete.
These days, for the good of our own sanity and the health of the planet, I think we all need to choose the latter where possible. In the future that choice will increasingly be made for us.
While I am aware of my own sign, I can't tell you the sign of my wife, kids or any other family member or friend. I have heard their sign many times because people ask them and I am present, but it never sticks in my head because I find the topic completely baffling and without meaning.
I would be very interested in your topic, since it would help me comprehend what is going on around me. And I do care about that.
of course -you have a phd in biology!
Makes about as much sense as most of the "magic" people seem to believe in (sorry, been reading The God Delusion of late).
Hmm. I hope you're able to avoid the Dawkins-level caricatures ('all religious people are idiots').
If it's a popular topic, perhaps I might be allowed a rejoinder on it - "Old Testament insights and their relevance to Peak Oil":
"Disaster will come upon you, and you will not know how to conjure it away.
A calamity will fall upon you that you cannot ward off with a ransom;
a catastrophe that you cannot foresee will suddenly come upon you."
(Isaiah 47)
Having often been compared to Noah ("The Flood is Coming!") I appreciate your reference.
I would not call religious people idiots as a general, blanket statement. I don't understand what they are talking about though. For some reason, I am unusual.
I look upon religion as some kind of natural phenomenon related to the human brain and evolution. If so many people believe strongly in things that have no apparent material basis, it doesn't do me any good to wring my hands and say "but you are wrong!" I'd rather figure out where these beliefs come from (in the materialistic sense of neurological processes).
My view is that as soon as humans became aware of their own mortality, there was a pressing need to find a satisfactory belief system which made sense of that.
I think most humans become "aware" of that inconvenient truth around age 3-5 years old.
Sure, but I meant humans as a species.
It is an inevitable feature of evolution that sentient beings have a drive for survival, for continuance.
So when the neocortical part of the 5 year old's brain figures out that death is a part of the universal truth, another part figures out how to maintain "continuance". Is it not amazing that essentailly all human religions have a being that goes on forever, an eternal "one"?
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Excellent post!
I think the key part about religions is that they redefine death as not really being "death". The soul lives on, or has always lived. Therefore death is not to be feared. At the very least, death fits somehow into a bigger picture. Making sense of life in a wider sense usually involves a super entity, which by definition are generally eternal, but I think this is incidental.
You talk about evolution creating a drive in sentient beings for survival, but that is not really true. Evolution creates a drive to reproduce, and then die. Death is a necessary part of evolution, without it there would be no adaptation, and no evolution. It's DNA that continues, not the individual. If sentient beings mirror the desire of DNA to continue, then they would reproduce and live to support their offspring until reproductive age or die doing something heroic for their immediate kin. Which is pretty much what happens.
This pattern which is determined by evolution, is supported by the cultural institutions of religion. Supporting your family and dying heroically are traditonal religious ideas. As you say, if religion wasn't closely aligned to the needs of evolution then the practioners would die out.
Because the general ideological trend - and it is ideological - is geared to business as usual, some kind of mythical status quo.
Of course, to be seen as serious, analyses and projections must be ground out (the many people who do them are paid and feed their children with the money they get...) so at some point change has to be acknowledged; there must be ups and downs, worries, questions, a lot of figures bandied about, projections, etc.
So the up-n-down nature is pretty imponderable, it probably reflects ambient news and serious discussions around the coffee machine or water cooler. In that situation, to maintain the myth of growth or rise, there have to be ‘dips’ - and the dips will automatically be cancelled out or washed away by subsequent ‘rises’ and the 'dips' probably occur when the they brings things down to a more realistic level, ie. before a previous 'rise'.
Hmm. Curves have to move!
(on edit:: that was a response to step back at 3.10)
The emphasis on economic growth is not all ideological; some of it is practical. Especially note this: The ONLY way anybody knows how to keep the unemployment rate down is to keep the rate of growth in real per capita GDP growth up.
One of the biggest challenges we face in a zero growth society is to figure out how to allocate income. With major portions of the labor force having no jobs (through no fault of their own) we're going to have to figure out how to tax those with higher incomes to support those with much lower ones. In the U.S., ideas for income redistribution like this are not now politically viable.
I do not have the answers. Maybe we need a huge ECC, Energy Conservation Corps based on the CCC model of the Great Depression. That might be a small step in the right direction, but it will not solve the problems of unemployment in a steady-state economy. BTW, "sharing the work" does not seem to work--see France for a current example of how shorter work hours lead to more unemployment.
The answers are murky to me, but the hard question is clear. What do we do in a society with a stable or declining GDP to distribute income fairly and efficiently?
Theoretically it is possible to have increasing GDP with declining use of fossil fuels--but there are good reasons to believe that these theories will remain in the realm of fantasy.
Economists do not like mass unemployment. Under current arrangements, the more growth, the less unemployment--and vice versa.
if the size of the pie is 500 but used to be 1000 and we have 700 people, everyone now has less, so growth is difficult if not impossible. unless of course, somehow we suddenly have only 300 people - then we can still have growth with a pie size of 500.
more devious, powerful and ambitious minds than my own will do that calculus at some point, if infrastructure to harness 'growth' energy from solar flows is not built in time.
I doubt if rationality and powerful minds will have much to do with how things play out over the next thirty years or so. Politics is about who gets what and when. The only other way we have to distribute income or wealth is the market. Though I am not a doomer, I predict both market and government failures on a huge scale to deal with increasingly scarce and expensive oil and natural gas.
The closest analog to the times we face is, I think, the Great Depression. Now the depression of the nineteen thirties was due to a deficiency of demand, while the coming hard times will be based on supply constraints. Thus I expect inflation rather than deflation to accompany massive unemployment triggered by declinging GDP. Were I a betting man, I'd bet on rationing and price controls too.
Fearless forecast: There is no relatively painless way out of our Peak-Oil predicament.
How could the market fail? I don't remember it having goals, in the first place. Isn't the market simply the "place" where people who have goods meet the people who need goods to work out the appropriate price? That mechanism is not responsible for the people with needs asking for more than the people who have can give. So logically it seems kind of pointless to say that the market will fail. Of course it can not solve the PO problem... the market can not create new power plants or oil wells from scratch. Only engineering can create new types of power plants and conservation can reduce the need for new oil wells.
And just the same is true about politics: it does not create anything by itself either, for sure not energy of any form. What politics could do (and could have done for a long time) is to create an R&D friendly playing field that would give us a head-start and thus a cost advantage in mitigating the consequences of PO. At that task politics has surely failed, so far. If it will continue to fail at that, the market will take care of it by moving money from those who need energy to new suppliers of energy at a much higher cost level.
I think we need to stop treating this as a zero-sum game. Wealth is not proportional to how much energy we get by burning ancient hydrocarbons with the planets precious atmosphere. It is not even proportional to how much energy we have available in total. It is a lot more proportional to how much of it we use wisely.
it would seem that "what we do with a stable or declining gdp " here in the u s of a is disguise inflation as gdp
No, that is not correct.
Real (inflation adjusted) GDP is still growing in the U.S.
How do I know this assertion to be correct? Because the unemployment rate is low and stable. If in fact real GDP were declining, then employment would also decline, thereby causing an increase in the unemeployment rate. No increase in unemployment => No decline in real GDP.
That would normally be true, but these days I wouldn't know normal if I tripped over it. With a negative savins rate people are spending more than they make, and this means employment is being kept artificially high... for now.
ok, i see what you mean but how do we account for the expanding federal debt, at $ 600 billion that is nearly 5 % of gdp
Given that energy plus built capital have tended to replaced labor, is it possible for a decline in energy to create a greater demand for labor, and hence, plenty of employment?
Of course this could take a long time to work out.
Are you familiar with Flemmings writings on "The Lean Economy" and if so, what do you think of them?
I'm not familiar with Fleming's work.
In the VERY long run higher energy prices could cause the demand for labor to increase--if all other things stayed the same. But the problem is that "other things" such as the cost of food will not stay the same.
To make humans productive, they need both tools and energy. Humans pushing on a shovel or wheeling a wheelbarrow are not very productive and hence would tend to earn extremely low wages. Falling wages tend to cause depressions.
Over the next thirty years I expect the rising cost of energy to have nothing but negative effects on employment and real wages. Over the next hundred years my crystal ball gets cloudy--by then fusion energy could be a reality.
I think we're in for the worst of all possible economic worlds over the next thirty years:
1. declining employment and rising unemployment
2. inflation, then worsening inflation
3. falling real (inflation-adjusted) wages
4. falling real profits
5. falling net investment despite increased investment in energy sectors
6. rapidly rising interest rates to reflect rapidly increasing inflation
7. government price controls that will make a very bad situation worse
8. great increases in economic and social inequality
9. worsening social tensions from increasing economic hardships and increasing inequalities
10. You pick: It will probably get worse.
However, I am not a doomer. Hard times do not equal doom.
Thanks Don.
Here are some references on David Fleming and Lean Economy.
http://energybulletin.net/4514.html
http://www.feasta.org/documents/review2/fleming.htm
This is the same author of Tradable Energy Quotas, connected to FEASTA. Do you follow FEASTA much? I would like to have an economist with your sort of perspective take a look at their work.
Thanks for the links.
The big problem I see with Fleming's program is that much of it seems to be wishful thinking.
For example: "All civilizations crash."
Hm, Britain and the Scandanavian countries (including Iceland) have been civilized for a thousand years without crashing.
Also, I don't think local currencies and local economies will work. Governmental power is ultimately based on violence or the threat of violence, i.e. police and military force. I don't think small economies can stand up to large ones. For example, the Romans were defeated by the barbarians because of low Roman birthrates, not because they lost battles to them. Indeed, the Roman legions employed barbarians as mercenaries for hundreds of years before the "fall" of Rome. Then feudalism became the most effective way of organizing power for nearly a thousand years in Western Europe--again with the unit of government (the feudal estate) based on what was militarily effective. The nation state, to a large extent, was built with gunpowder (and sailing ships).
I do not know what the future is going to look like. But I have some ideas on what it is NOT going to look like--not going to be a bunch of communitarian villages. Not going to be business as usual. Not going to be any kind of utopia at all, but by the same token it probably won't be one of the doomer scenarios either.
Of course, I've been wrong before;-)
OPEC spare capacity has increased in the past year from under 1mbpd to now close to 2mbpd. Isn't this why daily conventional production appears to have stalled since 2005 (and not because of any inability to raise production)? The EIA cannot forecast OPEC cut decisions. OPEC (especially Saudis) could increase production tomorrow which would invalidate the 2005 peak seen in the analysis above and bring us back onto the EIA supply growth path...?
We have seen this same phenomenon at work in Texas, where the Texas Railroad Commission has chosen to increase Texas spare capacity to about 2.5 mbpd. While the state is currently producing less than one mbpd, I am reliably informed by the Texas State Geologist that Texas can--and will when circumstances warrant--significantly increase its production, which would of course invalidate the 1972 peak in Texas production, and the 1970 peak in Lower 48 production.
OPEC have had spare capacity of varying amounts since 1973 (as the TRC did before 1972). By calling a peak in 2005, one is basically making a call that OPEC, for the first time, is cutting because it has to for physical reasons and not because it wants to support price. If OPEC were creating spare capacity in a rising price environment then it would indicate that they are struggling for physical reasons. However, OPEC cutting following a 25% fall in prices ($80 to $60 in 2 months) to me looks as if it is genuinely seeking to take oil off the market to stop prices collapsing any further.....not because of a physical constraint..
Of course, there is the remote, distant and barely plausible possibility that world production and Saudi production are falling because of depletion.
I recall that someone pointed out that the world in 2006 was at the same stage of depletion that the Lower 48 started declining and the Saudi Arabia in 2006 was at the same stage of depletion that Texas started declining (based on the Hubbert Linearization method).
I agree that the "collapse" in oil prices down to 500% more than the 1999 low price is highly suspicious.
Westexas, Your cynicism is showing. Happy New Year.
Who is this person you speak of - he/she sounds like a genius! ;)
Your ironic truth-telling puts an enjoyable smirk on my face everytime!
Why are there so few who can see the big picture - I find this is true on so many topics - the facts and logic may be quite robust, but it seems 9 out of 10 talking monkeys still think with their guts and not their brains.
"the "collapse" in oil prices down to 500% more than the 1999"
The high price makes alternatives like ethanol more economically feasable...
I also asked for and recieved a "Mr. Fusion" for Christmas. So eat your heart out WT, I can drive my hybrid auto to NY on banana peels.
.-)
Talking about prices of anything in nominal terms is not useful except over very short periods of time (which is what I tried to do). Everything is relative: housing markets and steel prices have also increased by 500% since 1999...but if they now fell by 25% over 2 months many would call it a "collapse".......
I guess that my main point is that a lot of the analysis on this site discounts or ignores how the above ground world oil market (OPEC decisions, inventory levels, F&D cost changes, demand shocks, supply disruptions, weather, economic growth, etc.) affects production rates. Sometimes (especially for an engineer) it helps to stand back from the charts and figures one analyses and first look for an above ground explanation(s) before pinning medals on a guy for picking "the day".
Just look at Nigerian production rates over the past 2 years...it has been all over the place because of the ongoing strife there....and those figures feed through to short term volatility which has nothing to do with peak oil.
Everyone knows that a conventional peak in oil production is going to happen and, for sure, there are many indicators that the time is near. But many false positives will occur in the meantime and it does the analysis of peak oil a disservice to discount what is happening in the above ground oil market, rather than blaming every production gyration on a physical/geological limit being reached.
"Everything is relative: housing markets and steel prices have also increased by 500% since 1999...but if they now fell by 25% over 2 months many would call it a "collapse"......."
Might not be related to oil/steel or maybe it is but my wages have not gone up 500% since 1999.
"But many false positives will occur in the meantime and it does the analysis of peak oil a disservice to discount what is happening in the above ground oil market, rather than blaming every production gyration on a physical/geological limit being reached."
A shift of 500% and a term of 5 years doesn't seem like a knee jerk reaction IMHO. The Dow Jones isn't 50,000(@500%).
I agree whole heartedly with you that above ground factors are to be considered - not ignored. Look a SA increase in drilling rigs - this speaks loudly as to what is going on - or it should.
I think the idea of placing a tight date on PO isn't what we should be doing. IMHO the "perponderance of evidence" says that we are in "the zone" and had better get our industries of thier myopic ass's.
Talking about prices of anything in nominal terms is not useful except over very short periods of time (which is what I tried to do). Everything is relative: housing markets and steel prices have also increased by 500% since 1999...but if they now fell by 25% over 2 months many would call it a "collapse".......
I guess that my main point is that a lot of the analysis on this site discounts or ignores how the above ground world oil market (OPEC decisions, inventory levels, F&D cost changes, demand shocks, supply disruptions, weather, economic growth, etc.) affects production rates. Sometimes (especially for an engineer) it helps to stand back from the charts and figures one analyses and first look for an above ground explanation(s) before pinning medals on a guy for picking "the day".
Just look at Nigerian production rates over the past 2 years...it has been all over the place because of the ongoing strife there....and those figures feed through to short term volatility which has nothing to do with peak oil.
Everyone knows that a conventional peak in oil production is going to happen and, for sure, there are many indicators that the time is near. But many false positives will occur in the meantime and it does the analysis of peak oil a disservice to discount what is happening in the above ground oil market, rather than blaming every production gyration on a physical/geological limit being reached.
.
Drake, the spot price of crude never reached $80. The interday high was $78 and change. But most important there was, and never has been any verification of OPEC spare capacity. From 1991 until November of 2006, OPEC was producing flat out except for 1999, 2001 and 2002. Only Saudi supposidely had any spare capacity during that period. And the only way we know of that spare capacity is the word of Saudi officials. And their word is worth about as much as a bucket of warm spit. There has never been any varification of any spare capacity from Saudi, they simply would not allow it.
Ron Patterson
Westexas, I agree that there is the possiblity that Saudis are stuggling to physically maintain production rates and that they are using the creation of spare capacity line as a cover.
There is also a valid reason for them to cut back now which clouds any declaration of a peak for 2005. F&D costs (due to higher steel, rig rates, etc.) and Saudi government spending (welfare etc.) has increased such that they now need oil to be over $45-50 to break even. Hence, any rapid drop toward that number is a major cause of concern for them.
Proof will come whether spare capacity is a myth or not when oil prices rally back up to $80 or more. If the Saudis cannot increase production then your case has been proven and a peak in 2005 due to physical constraints is more likely than not.
With nearly 600k in GTL's coming on stream, an expansion of nearly 1mbd in refinery capacity for their shut in heavy crude, and their current light oil projects people have discussed thoroughly on this board - it will be a long time before SA liquids production plummets.
At the moment though, we will have to wait a while to see if WestTexas is correct since OPEC is currently supporting a $60 barrel crude. I for one, don't think he is correct.
Just thought I'd drop another random data point here. ... We just got back from a road trip up from Austin to Jackson, MS.
There were drilling rigs going along highway 79 through east Texas and one was spotted off of I20 in western Mississippi. It looks like there's a frantic effort underway to drain every last patch of grease around here. Also noticed quite a few non-running pumpjacks in the established fields. My guess was that they are wells with low enough production that the pumps only run part time.
Back in Ohio ("where my family was gone"), we haven't had a well that ran full time since 1979. An hour a day would make more sense. Besides, the only wells you see from the roads have jacks that are standing very still.. Couldn't get a rig for spitt'n anyway. Even at $70 oil, the costs are just too high, exspeshially when the rigs cost so much. sigh.
Gilles (pronounced correctly in my mind),
great graphic -thank you. It would also be interesting to do a similar graphic on all EIA oil price forecasts since 1999 superimposed over actual prices.
Out of curiousity (and wanting to do it myself), how did you post a series of graphics as one hyperlink? Did youtake screenshots of those somehow then morph them into a gif file? thanks in advance
Nate, that's an animated GIF file, which is widely supported on browsers and image viewers. If you Google "animated gif maker" or something like that, you will most likely find a number of free software programs you can use to create animations from a series of static images. It's a great visual and it would be interesting to add to it as new Short Term Energy Outlooks are published.
Okay, this is important. That EIA has missed many a forecast doesn't mean they are complete idiots or that we are at peak oil production. It could be that both are true, but Gilles' graphic does not prove it.
If you notice, the rate of EIA's projected increase is a bit over 2%. In a world of no peaking, this is a reasonable value for the increase in demand, and thus, the needed increase in production. Demand would rise from more people (primarily), and increased economic activity per capita (secondarily). To attempt to forecast something different, you have to have forward information beyond expected population growth including future knowledge of disruptions (Hurricane prediction isn't that good) and/or economic activity.
As mentioned in one of the comments, storage numbers have risen. Also in a recent post, Stuart Staniford has shown rather convincingly that there has been a decrease in the expected growth in the gasoline usage, due probably to a response to increased price. Could it be that there is a shortfall in demand? Could you predict it 6-12 months in advance? 2 months in advance? If so, you should become a speculator in oil and make a fortune.
What the EIA prediction tells you is that (1) they are not oracles, and (2) they don't as yet subscribe to the idea that peak oil is upon us. That doesn't make them idiots, but yes, they could be wrong.
In an attempt to answer your question, supply and demand in 2007 do not have to match exactly. Storage is a buffer, and as you must project supply, you must also project demand.
My question for you Gilles (and all other critics of EIA): Can you give us projections of both supply and demand out 1 year that would differ dramatically from what EIA has done? Please post them, and let's see how you do 6 and 12 months from now. It isn't as easy as you might think, and after a few times trying, you may just throw your hands up in the air and revert to a methodology not unlike the EIA methodology.
What about prices? a lot of people are saying that demand is going down because of high prices since 2003 but it seems that the EIA iteself does not believe in that hypothesis otherwise they would have reduce their growth rate below 2%.
There is a compilation of supply forecasts here that is reviewed on a monthly basis.
Hi Khebab:
I'll try to reply to your questions. However, I don't want to become a spokesman for EIA. They do what they do, and once you understand what they do, I think it is fair to leave it at that and not complain about how bad they are. You label their approach appropriately in your forecasts as "Business As Usual" (I enjoy your posts, btw).
First, because I'm new to the board, let me just say that you can understand most of what I say by my underlying approach, and that is summed up by the statement "the future is uncertain." This is based on 10 years of futures trading and trying to make (short-term) predictions and realizing how hard it really is.
In the Dec '06 STEO, EIA has both the demand and supply destruction that occurred in 2005 and 2006 (http://www.eia.doe.gov/emeu/steo/pub/gifs/Slide6.gif). This is all, of course, after the fact. They missed predicting Katrina (can you blame them?) and troubles in Nigeria.
All departures from long-term growth are generally considered by them to be temporary, and they revert back to a base growth in 2007. They also point out that new production is coming on-line to compensate for OPEC reductions, and expect prices to fall (some) as the market restores itself from the drastic interruptions in 2005. This is not an unreasonable projection in a world-view of plentiful oil.
The really interesting point will be if/when they project a long-term production reduction. They did that in natural gas a few years back for domestic production and have now admitted that long-term growth for natural gas use must come from overseas. Somehow the implications of that has not sunken in with many people.
Khebab,
I suggest that most of these forecasts are over optimistic. Skrewbowski and others don't adjust their figures to what is really happening on the fields.
He has CHINGUETTI at 75,000 barrels per day - now 30 thousand after starting at 37 thousand and reserves downgraded by 57%
ENFIELD was supposed to be 100,000 but now 45 thousand and one of the five producing wells watered out straight away in July.
MUTINEER/EXETER was supposed to be 100,000 now 40 thousand from the start.
JERUK in Indonesia was upposed to be 50 thousand per day - nothing and may be abandoned
KASHAGAN in the Caspian was supposed to be on line at 450,000 per day, delayed until well past 2010 and start date uncertain as reported by ENI and TOTAL
SO, what about most of the others, how reliable would they be?
I had the opportunity last week to talk with a petroleum engineer who supervises offshore well completions in Tunisia and has friends working in Russia, Nigeria and many other places. He said on some of the longer pipelines in Russia you would be lucky to have 20% of the oil arrive at the terminal because it is being stolen along the way. In Nigeria they get stuck into the pipelines with hacksaws to steal the oil. When the hacksaw finally breaks through the pipe is quite hot and you get fires and explosions like probably happened there a few days ago.
Through Russia and the Stans if a rig breaks down they leave it for want of spare parts and it may sit there rusting for a year. Even simply things like pipe flanges and nuts and bolts not matching up cause significant problems.
Well productivity in Saudi Arabia has fallen from 12,500 barrels per day in 1974 to 5770 per well in 2002. God knows what it would be now. When one considers the original oil column in Ghawar in the northern most productive section was around 1300' and is now down below 150' in many parts, why would anyone think you would get increased production from Ghawar and Saudi Arabia?
With water injection of over 9.5 million barrels per days, the pumps required to push half a million barrels of water through the system at 2,000 p.s.i. need a 20,000 hp motor to power these pumps. Talk of $1.50 cost per barrel oil there is rubbish. The above engineer in talking to one of the Saudi Aramco top engineers was told that barium sulphate is now a huge problem as well as the water problems. This causes severe clogging of well bores and pipes.
Talk of increased production in teh Middle East is a fantasy.
Nearly a year ago the former (late 1990's) head of ARAMCO's exploration and development, Mr. Husseini, was interviewed about increased KSA production. When asked if production could be increased to 12 MBPD he said it could be done but would cost many billions of $$ and take several years. When asked if production could be increased to 15 MBPD (as the EIA predicted) he said "unlikely" at any cost. He did not say how long the 12 MBPD could be sustained once it was achieved.
Husseini's conservatism shows how limited the capacity of ARAMCO is compared to EIA and IEA forecasts of greatly
increased production.
I can't find the link to the interview but it was on energybulletin.net.
Two words: Thunder. Horse.
i wish i could understand your criptic post but i cant what is going on with thunderhorse? google links dont seem to give anything current
That's the point.
Well, Thunder Horse was supposed to go online 2004, and then 2005, and then 2006, then 2007 and now the official word is 2008.
Regarding Skrebowskis megaprojects, TH is an excellent example that schedules seldomly are kept.
ok, thank you
The real issue is what people do with these predictions. I've posted before how hopeless the Australian ABARE predictions are and they follow the same 'snake' as the EIA, positive prediction, a reduction with further positive growth 3months out. In real life this can cause great problems, as here in Western Australia where a Aust+US consortium agreed in 2001 to a 20-year contract to sell North West shlef gas to a US$1 bill fertiliser plant, but now have told them they are running out- next month!
oops
"The Aus$700 million Burrup Fertilisers project on the Burrup Peninsula is facing a potential gas supply crisis, after Perth-based Tap Oil privately warned the Indian-backed venture it was running out of gas and may not be able to meet its supply obligations as early as next month."
http://www.thewest.com.au/default.aspx?MenuID=32&ContentID=17312
Peak gas maybe worse than peak oil given its suddeness?
A similar graphic for EIA predictions of North American natural gas production would be interesting too.
i wonder how far back EIA forecasts go for US DOMESTIC production of oil? I know the current forecast calls for an increase each year up until 2016 then a decline, even though we've been in decline since 1971, with the exception of a few small yearly upticks.
That would also make an interesting GIF graphic.
Khebab, Gilles, Westexas et al...
First, I second JB's request above for EIA's past predictions for NA NG.
Simmons (I think) predicted that NA NG problems would be much more serious than PO in the near term, at least for those living in NA. So...
Second, how about a hubbert study on NA NG? Plenty of good data at EIA, we hit peak on 2001, the issue is clearly important and on topic.
Personally, I think it is all about rigs, at least in the near term. SA (and others) poached rigs from our gulf to work in theirs, raising world oil production above what it would have otherwise been but reducing NA NG capability (all gom rigs are looking for NG) so gom rigs are down from 117 avg in 2001 to 81 in 06. Meanwhile, land rigs stabilized last summer in the mid 1300's, maybe because there are no more rigs that can be pulled out of cold storage and now we must wait for new builds.
Production is of course declining from old wells, but initial production from new ones also continues to drop sharply, explaining why US rigs are up 80% while production is down 4%+ since 2001. In 2006 land rigs were up an amazing 16%, and gom rigs staged a modest comeback, up 8%; it would be shocking if this infrastructure addition did not boost production, and it did through July, but subsequently fell 7% through sep (remember that land rigs stabilized in summer but also gom rigs resumed their exodus), so I expect overall 06 to be up at most 1% over 05.
IMO land rigs will be up 5% 07/06 while gom rigs will continue declining 1%/month. If this scenario comes to pass I expect land rig production down 5% and gom production down 12% (land rig produciton is clearly non-linear, rigs up and production down, but gom rig production, drilling in a newer region, is still in proportion to the number of rigs).
I see a slow squeeze, with production declining 1bcf/week progressive (2bcf week 2, 3bcf week 3, etc) through 07 and beyond. This will eventually bring about high prices, and high prices will no doubt eventually bring back some of the fickle gom rigs... which is one of the main points; we cannot maintain NA NG production with low prices. And, we will soon see that we cannot long maintain production at any price. We are wil-e-coyote; having already run off the cliff, we are just beginning to look down.
yet we just made new yearly lows on natural gas prices due to warm weather...
ThenNatural gas market truly is a prime example of the market focusing on just-in-time needs and ignoring longer term structural problems. As long as we have NG this month, we'll find an answer to these future shortages no problem!!!
Can the Powers-That-Be afford to admit that a) They're no longer masters of the petroleum supply; b) The capitalist model of eternal economic expansion is a myth; and c) The developed world is at the mercy of the Putins of the world? Rhetorical question.
IMO, we're likely to see more "above-ground" excuses for production declines, to disguise the geologic peak as long as possible. These don't have to be violent in nature, but, well, it works. Think of the Northwoods document, of the recommended use of agent-provocateurs, and of the apparently illogical machinations of various zealot/figurehead "leaders."
Saddam has just been executed on the holiest day of the Muslim year: the feast of Eid.
-- gilles thank you for the post, nice, thanks to all for all the other posts and everyone have a happy new year, cheers --
Nice post Giles.
Just one question - is there any branch of statistics which allows us to use trend/error data in past projections to improve the accuracy of current projections?
Surely there MUST be some "crystallised" data in those earlier projections which might be of use currently?