Plateau background

Average daily oil production, by month, from various estimates. Click to enlarge. Believed to be all liquids. Graph is not zero-scaled. Source: IEA, and EIA. The IEA raw line is what they initially state each month. The IEA corrected line is calculated from the month-on-month production change quoted the following month.

The latest IEA Oil Market Report is out. In their inimitable style, they say:

World oil supply rose by 445 kb/d in May to 85.0 mb/d, fuelled by increases from OPEC, a lull in North Sea maintenance and recovering US GOM supply.
That sounds good, doesn't it? A healthy increase from April to May? What they don't tell you is in April they were claiming supply was 85.1mb/d, which they've now revised down to 84.55mb/d. You have to be keeping track to notice that. This gives the realization that April, which they had said was the highest supply month ever, is probably not that special (we'll know better when the US EIA weighs in on April supply at the end of this month).

Anyway, this means basically that the pattern of the last eighteen months of more-or-less flat supply is continuing. The moving average graphs now look like this:

Average daily oil production, by month, averaged from estimates by the EIA and IEA, together with 13 month centered moving average, and recursed moving average of the moving average. The last data point in the monthly data is from the IEA's preliminary estimate alone, and the moving average windows are reduced at the graph edges to only include the data that exists. The squares represent the last point on the correspondingly covered curve where the entire window has full data. Believed to be all liquids. Graph is not zero-scaled. Click to enlarge. Source: IEA, and EIA.

I promised I'd give a little more context to these plots in this post. I started plotting versions of these graphs on Thanksgiving Day 2005 (the day Ken Deffeyes had said, tongue-in-cheek, would be the peak of the smooth Hubbert curve of global production). I noticed there was a noticeable flattening of the curve. At that time, I was working from data provided by the Oil and Gas Journal, but I've since evolved my methodology and build these graphs out of data from both the US EIA (a branch of the Department of Energy), and the International Energy Agency (IEA), an OECD agency charged with worrying about security of energy supply. Both agencies produce monthly statistics.

The IEA reports first about 10-15 days after the end of the month. Then the following month, they produce a revised figure. The EIA doesn't report on a particular month until about two months later. Each time either of them come out with a new figure, I update my graphs. One graph (the headline in this story) shows all of the IEA initial reports, the following month corrected figures, and the EIA numbers. Presumably, the difference between the EIA and the IEA is some kind of estimate of the uncertainty in the data for global production.

The other graph I regularly produce shows a recursively applied moving average to smooth the data. The monthly signal that this is being applied to is the average of the EIA and IEA estimates. This is my best effort to see the overal trend in supply through the month-to-month and estimate-to-estimate noisiness. I have argued elsewhere that this plateau is probably evidence of peak oil being near-term (either now, or within the next few years, rather than decades off).

Several caveats are in order. First of all these data are for "all liquids". As well as crude oil, this includes natural gas liquids and condensate, ethanol, production from tar sands and Orinoco bitumen, coal-to-liquids production, and refinery gains (heavy oils cracked in the refinery increase in volume). A good discussion of the issues with this was recently led by thelastsasquatch.

It's also important to understand the region I'm plotting (Jan 2002-now) in the context of the overall history. A long history of oil production from 1930-2004 looks like this:

Average annual oil production from various estimates. Click to enlarge. Believed to be all liquids. EIA line includes refinery gains, others do not. Sources: ASPO, BP, and EIA.

The little yellow box shows the small piece of recent history we are plotting in the plateau graphs. The most prominent feature of these graphs are the oil shocks of 1973 and 1979-1980. In both cases, a regional disturbance in oil production (the Arab embargo in 1973, and then the Iranian revolution and closely following Iraq-Iran war in 1979-1980) produced a large abrupt contraction in supply for geopolitical reasons. That led to high prices, fuel switching and conservation measures, severe economic recessions, and a contraction of both demand for and supply of oil.

If we move into a more recent timeframe, the next graph shows oil production (green) and real oil prices (plum) since the beginning of 1989.

Oil production by month from 1995 on (with annual numbers from 1989-1995), together with a 13 month centered moving average. This is in green and uses the left scale. Believed to be all liquids. Graph is not zero-scaled. Also shown is world oil price, averaged across grades with export volume weighting (plum, right scale). Prices are weekly, except annual prior to 1997, and have a 52 week moving average shown also. Prices are inflation adjusted using the monthly CPI-U to be in April 2006 dollars. Click to enlarge. Source: EIA.

You can see that there have been flattenings or downturns before - three times in this interval. The first is in 1991 and is similar to the events of 1973 or 1979 (but much milder). The Persian Gulf War following the Iraqi invasion of Kuwait caused a moderate oil shock.

The "peaks" of 1998 and 2001 are different in character. In both cases, they were led by demand falling, not by supply constraints. This is clearly visible in the graph above because prices peak and then fall for a year or so prior to those production peaks. The first of these was caused by the cascading emerging market currency crises that became known as the Asian flu. The second was caused by the collapse of the US technology stock bubble. In both cases, recessions in parts of the world led to falling demand for oil, falling prices, and eventually falling production.

The events of 2004-2005 appear to be unprecedented in the history of oil production. The flattening of supply was not demand led - on the contrary demand for oil has remained strong as evidenced by the fact that prices have continued to rise to very high levels throughout the supply plateau.

Nor was it caused by any particular geopolitical (or weather) related outage. I have analyzed this at length, and the basic plateau shape is there even if one assumes various oil disturbances had not occurred (and they are mild compared to past oil shocks in any case).

So, at a minimum, we can say with confidence that there is some kind of unprecedented difficulty in raising global oil production/consumption. The graphs I build each month are meant to track the ongoing story of this period with a view to understanding it as it evolves.

For more information than I can summarize here, see these past stories:

Other relevant coverage:
That sounds good, doesn't it? A healthy increase from April to May? What they don't tell you is in April they were claiming supply was 85.1mb/d, which they've now revised down to 84.55mb/d. You have to be keeping track to notice that.

They seem to operate in exactly the same way as OPEC. It is amazing how many revisions OPEC do to the figures even 3 years afterwards to get the increases or at least minimise the decreases to the yearly and quarterly totals.

Yea, this reminds me of the Ministry of Plenty in the George Orwell novel "1984".  When the chocolate ration is decreased from 3 oz to 2 oz, it is announced to the public as an increase in the ration.  All production quotas are reported as exceeding their targets month after month even though Winston, the main character, knows the government's claims are bogus.  It is Winston's job to "rectify" the data before pulishing it for masses.  

You can read the entire eerie chapter 4 of 1984 for free here:

creepy analogy!
Ignorance Is Strength.
Inconvenient Truths are Gorry Falsehoods


Nice "were we stand" post.

IMHO we are getting here the peak in Conventional Oil (by Campbell's definition) not being tackled by other liquids.

The question is: is this just a temporary constraint? Can Deepwater or Fisher-Tropsch came and rescue us?

The answer will probably lie in the energy intensity of these alternate liquids, and the way they can be produced without cheap oil backing them.

The world economy was saved last year by the increasing World coal production. According to BP, World total energy production grew 2.4% in 2005, but oil only 1.0%. Coal production increased 5.0%, most of it in China (growth 10%, volume well over 30% of the total). Also Hydro grew significantly (4%). Natural gas grew only 2%. From all this we see that the Chinese coal production is the single most important factor keeping the World energy consumption and thus the World economy growing. This also explains, why the World economy did fairly well in 2005, despite of the plateauing oil.

If we consider the real energy supply, the impact of slowing oil supply growth in the latter part of 2005 will be seen only this year (because of the processing and logistics time lag). And yes, the are clear signs in the economy now.

Zero oil growth will not mean that the World energy supply growth will be zero, but it will mean a further slow down - about a half per cent. But this means also that if the oil production starts decreasing about 5% or more, the World Energy Peak is in.

World coal production growth is unlikely to increase from the present 5% level - the Chinese coal growth is already at the level of 10% and it is not going to get much better. The rest of the World cannot really increase its share enough. Coal is badly depleted in Europe and elsewhere, the volumes of Australia, Indonesia and South Africa are not large enough to make a difference. And the record of the US coal production growth is not such as to warrant a forecast of significantly higher growth than now.

Natural gas is crucial, but the supply growth has slowed down recently, so it is not likely to compensate the depleting oil as much as would be needed. And note, Bakhtiari is predicting Peak Gas in the near future. In any case, the present gas production data suggests that the growth is not going to be much higher than now.

What we will see in the near future is an economic slow down, where the action is mainly in the financial sphere (forex, debt, stocks, real estate). But we might get the World Energy Peak surprisingly soon, may be in a time frame of 5 - 10 years, and steep decline after that. It is not realistic to think that the Chinese coal production can keep the 10% pace for long. Add to that Peak Gas and Oil and All Liquids.

Note, that the the World Energy Peak may arrive quite soon even if the Peak Oil is delayed (the CERA/optimist view) or there will be just a longer oil plateau first, without decline or growth. In this situation natural gas will decide. In any case there is not much energy growth potential left in the World, so even a rather optimistic scenario will give a World Energy Plateau in a few years. The energy volumes involved are so huge that alternatives will not make any difference, CTL and GTL will not count here at all, because they depend on available coal and gas.

There you have the big picture.

"The energy volumes involved are so huge that alternatives will not make any difference, CTL and GTL will not count here at all, because they depend on available coal and gas."

Based on Simmons & Company data, total fossil fuel + nuclear energy consumption worldwide is about one billion barrels of oil equivalent every five days.  Worldwide, we burn through the energy equivalent of all Texas oil production to date about every 10 months.  

The WSJ had a couple of interesting articles yesterday, which I just glanced at.   If memory serves, one article stated that Chinese car sales are up by more than 50% year over year.  

The other article was about data processing centers, which the article stated can use as much electricity as a city of 30,000 to 40,000 people.  There was an article in the NYT about the new Google computer facility going up in the Pacific Northwest.   They located it there to be close to large amounts of cheap (hydro) electricity.  

In today's WSJ, there is an article contrasting the fate of the energy exporters to the energy importers, "In Oil's New Era, Power Shifts to Countries With Reserves."   There was an interesting quote by the Saudi Oil Minister, "Any industry that requires intensive energy will be welcome in Saudi Arabia.

At I have noted before, it seems to me that we are going to see a population shift, here in the US, and worldwide, to areas that have surplus energy to export.   As I have also pointed out, as depletion and rising domestic consumption both work against net export capacity, net exports are going to disappear at a rapid rate, while demand in energy importing areas like China continues to go up at a rapid rate.

Final quote from the article, by Henry Groppe, "We have entered the era of scarcity and price rationing (for oil)."

And another interesting quote from that article:
"It doesn't appear that the planet is running out of crude, as proponents of the "peak oil" theory have argued."
"It doesn't appear that the planet is running out of crude, as proponents of the "peak oil" theory have argued."

This is of course a mischaracterization of the Peak Oil argument--that one day we have oil, and the next day we don't.  In any case, the WSJ writer went on to state that "But some oil experts foresee the big Western companies running out of easy-to-tap oil, and most of them are already turning to harder to recover reserves."  

The overall theme of the article regarding Western oil companies is that they are turning toward GTL projects and to tar sands and very heavy oil and away from traditional exploration--not because they want to but because they don't have a choice.

There were three broad themes in the article:  (1)  life is good for energy exporters, not so good for energy importers; (2)  Western oil companies are turning more toward mining type operations for oil, rather than traditional drilling and (3)  they finished with a pretty good summary by Henry Groppe, that we have entered a new era "scarcity and price rationing."  

The only mild gripe I have with the article is the mischaracterization of the Peak Oil argument, but the rest of the article all but made the Peak Oil argument, but in different words.  The only real question is how fast unconventional oil production can be brought on line.  IMO, it won't be fast enough to offset the declines in conventional production.

Not only was it a "mischaracterization" -- the sentence was a non-sequitur -- given the comments made in the rest of the article.
The other article was about data processing centers, which the article stated can use as much electricity as a city of 30,000 to 40,000 people.  There was an article in the NYT about the new Google computer facility going up in the Pacific Northwest.   They located it there to be close to large amounts of cheap (hydro) electricity.

People don't pay enough attention (IMO) to the increasing role of electricity in the US economy.  As implied in the following graphic comparing economic growth in the US to electricity growth and total energy growth, electricity is playing an increasing role in our total energy budget.

Right, electricity is the clue. Cutler J. Cleveland has some reasearch on this ( where he shows the importance of the energy mix - especially electricity - fot the economic growth. And here we have the coal again. Coal is mostly used for generating electricity, and electricity is what modern industry needs. No wonder China is such an industrial giant.

According to BP, the US electricity generation in 2005 was 4229 TWh, and the Chinese 2475 TWh. But the Chinese generation grew 12.3% and the US only 1.7%. The growth of the Chinese electricity generation accounted for 42% of the increase of the World electrcity generation in 2005. It is important to note that in China most of the energy and electricity is used in manufacturing (up to 70%), unlike in the US where residential and commercial use dominate (the share of the industrial sector of the electricity consumption is about 30%). This means that the Chinese industry can use considerably more electricity (and energy) than the US manufacturing sector. Here we have a striking example of the importance of energy in economic development.

We should especially note the rate of growth here. China is definitely where the growth is in energy production. The average electricity generation growth between 2002 and 2005 has been nearly 15%. This means doubling the production in 5 years! If the 2005 growth could continue, the Chinese would produce more electricity than the US in 2010 and its industry use it 3 times more than the US industry - and nearly as much as the US and EU industrial sectors together. I think it is easy to understand the significance of this.

An another matter is, if these extrapolations are realistic. It is obvious that China will meet the physical limits to growth very soon. What will happen when the growth engine of the World energy and economy stops?

The Chinese energy (coal) production is, of course, crucial to the Climate Change. China is overwhelmingly the most important factor here. So the future of Chinese energy production is decisive to the climate forecasts. The forecasts of the increase of CO2 in the atmosphere are dependent on the fossile energy (mostly coal) supply forecasts. But most of those forecasts used here are based on EIA or IEA super-optimistic "official" long-time energy scenarios. Closer look suggests that the overall fossile energy production is nearing to a peak very fast, or at least to a situation where the growth slows considerably. I think these are basic facts for a global Climate Strategy.

Chinese coal production in April was up 19% year-on-year. The central government keeps trying to close mines, but it's like King Canute trying to stop the waves.
Incidentally, as I promised someone I would look up, Chinese coal consumption was 70% of primary energy in 2005, up from 67% in 2002.
Right, the Chinese coal is more significant to the World energy than the Saudi oil (1106 Mtoe vs. 540 Mtoe.). China is probably now the biggest fossile energy producer (not consumer) in the world just before the US (China coal+gas+oil in 2005: 1334 Mtoe, the US 1359 Mtoe, but considering the Chinese coal growth China is probably now the #1). Nuclear and hydro don't change this.

Here we see the secret of the Chinese economy. The energy production of China has risen 44% from 2002 to 2005, and this at absolute volumes comparable to the US! The Chinese total energy production growth has supplied almost half of the total World energy supply growth during that time (450 Mtoe of 1010 Mtoe growth). China has been literally the engine of the World energy and economy.

It is absolutely clear that low costs are not the main reason for production moving to China. The industrial growth there would have been impossible without this huge growth in domestic energy production. This is the biggest "energy surge" in the World history and the driving force of globalization.

And as Smekhovo noted, the rising share of domestic coal in the Chinese energy mix is the explanation for those missing symptoms of an oil crisis (no real supply problems, prices not really skyrocketing, economy not yet slowing) in face of slowing supply. The rising share of coal is an anomalous phenomenon - developing, modern economy would normally use relatively more of oil and gas, not less.

Thanks for posting this TI - I had not realized the magnitude of their growth or the proportion in coal.  This is one of the most sobering things I've read on TOD in some time.  I feel like I must not have been paying attention!

It would seem that if China will not be able to grow their energy sources, then their economic growth must slow too.  But at the same time, the competition for outside sources will then become very great.  The key event would then be peak Chinese coal, not peak world oil.

Yes, this is a new biggie for me too. I knew coal was going to play a big role on the down slope, but I had no idea how big a role it was already playing. I see all kinds of articles on Chinese air quality. Even aside from global warming, which has a longer fuse, the effect this is already having on people's health is enormous.

But the Chinese are totally locked into the path they are on. Without burning the coal, their economy melts down and there's another 1949. Unlike here, remembrance of revolution is fairly recent. So the last thing the government will (can) do is allow any great cooling. Nay, worse, they can't even afford to allow things to level off.

And yet, we may be on the verge of just such a cooling off of the world economy if the current slide in the markets doesn't reverse itself.

It's all way too interesting. I'd love to be bored for a few years.

I agree that peak energy is not going to be very far from peak oil. It might be possible to ramp gas and coal production for a few years, but the drop in oil production will accelerate and gas and coal will soon hit their own geological limits. I've lived next to strip mines enough to know that coal production is highly dependent on OIL. The trucks, trains, dozers, loaders, and many draglines run on diesel. When you are considering the removal and reclaimation of 100 ft of overburden for 4 ft of coal the margins are very dependent on the ratio of the coal price to the oil price. If the oil price spikes faster than coal I'd expect many of the operations could get shut down.
Yes, maybe when oil becomes real scarce. However look at food production - from the agribusiness, trucking expenses, to grocery store. Yet so far energy price increases have not shaken the consumer at the grocery store. For any business the effect would depend on the percentage of cost that an item relies on energy and if energy price increases be compensated with increased efficiency or productivity, etc.

One example is importing from China. Seems like it would exposed to oil price increases. Yet container shipping is very effecient. Large cargo ships loaded with a generic size container with RF Id tags utilizing automation - that can move alot products at low cost. So that's why you can afford to ship all those Dollar Store items.

The energy volumes involved are so huge that alternatives will not make any difference

There is a POSSIBILITY that you have underestimated the potential for wind.

Wind is the only renewable that has the potential for a significant worldwide impact.

IMHO, 30% annual, compounded growth is possible, with occasional spurts greater than that.  Designs will improve somewhat (not a mature, but a maturing industry) with 3% to 5% annual improvements in cost effectiveness (measured in a stable economy).  In a recession, booming sectors attract capital, labor and materials.

In a decade (optimistic case) this new wind power plus much smaller contributions from other renewables & new nukes could balance the declines in other energy sources.

Of course, legal and social obstacles must not be an impediment (see the Kennedys, English "conservationists", ec.) to allow this MASSIVE growth, ann they likely will be.

I'm not sure people have adequately digested the fact that a renewable energy source like wind, by definition never goes away.  It becomes a permanent feature of the earth.  All extractive, fossil mines and wells disappear eventually.  Their place is taken somewhere else maybe, and they leave a long or short term mess, but they are gone.  (Even dams silt up)  But I keep dreaming that I wake up in 100 years and there are giant wind turbines cranking everywhere, literally everywhere.  Lining the whole Himalaya crest, every mountain range, every shoreline, every roof, ringing every city.  And we are totally dependent on them.  Addicted.  And they never go away, ever.  They work!

Is there any guarantee, if wind is successful (or any renewable for that matter) we will not overdo it as we did the automobile, and simply turn the planet into an infinite powerplant ?  What if someone invents better electrical storage so turbines can handle baseload?   How can it fail to be overdone, if it actually works?  When have people ever stopped drawing on a resource that still yielded more?  I'm all for people being responsible for their energy consumption by having their energy plants in their own backyards, but knowing the greediness of my neighbors and their basic disdain for the common landscape as compared to the conveniences inside their monster houses, I am really not sure I would want a breakaway success of wind, or anything.      

Remember, solar radiation and wind ARE renewables, photovoltaic solar panels and windmills AREN'T.

This is what it takes today to build a Nordex N-90, a windmill  capable of producing 2,3MW:

150 tons of steel
10 tons of coper
30 tons of glass fiber
1.000 tons of concrete

If we were to substitute all the world electricity consumption  (not all energy!) with windmills we'll need 6.000.000 of those Nordex N-90, ALL OF THEM in type 6 fields, and we'll need:

90% of the world production of steel

113 times world production of glass fiber

3,4 time world production of concrete

Just to let you know how really renewable is a windmill. Having said that, I hope to see as many windmills as we can fit in our territory.

The lead times for any major energy project is not measured in months.  The "doom and gloomers" seem to forget that it the "energy crisis" really began last year with Katrenia.  Hell it even takes time for the wood pellet industry it gear up to the new reality.  Have faith we will survive just fine.
"The lead times for any major energy project is not measured in months."

In fact, according to the Hirsch Report the scale of this issue is such that only massive mitigation effort lasting 20 years or more will head off disaster.  With all due respect jamaica22, "faith" alone is probably not going to cut it.

As we sit here there are millions of people around the world working very hard figuring out how to make money suppling any and all forms of energy to the market and at the same time there are millions of people try to save money by using less energy.  My faith rests in the human spirit to better ones siuation in life.  
Okay.  Good luck with that.
I don't see much evidence that millions of people are trying to save energy. Please back this up with data. If true, this will be give me a little tiny bit of hope.
Some not quite anecdotal evidence is the surge in moped, scooter, and motorcycle sales. There was an article in the WSJ about this recently, if you are searching.
One could have quite a surge from the point of view of a tiny market, but still not make any significant penetration into the typical household.

Even if you are right,  can we keep on growing?   Oops.   Damn population problem. :P   Hawking is right,  we need to leave for space.  

Sorry for the scarcasm.   But the point seems to be missed too often.

We may be OK, but it takes more that faith.  Don't just stand there .... do something ;-)
The "doom and gloomers" seem to forget that it the "energy crisis" really began last year with Katrenia.

Well, no it began way before Katrina. Oil was over $60 a barrel well before Katrina and has been below $60 since Katrina. Oil prices hit $55 in 2004 and that was about the time people realized we had a problem on our hands.

To try to pin the entire world oil crisis on a single storm in the US is just not logical. Most cornucopians are far too myopic and too local, as well as overly simplistic in their thinking.  

"Hell it even takes time for the wood pellet industry it gear up to the new reality."

Ahhh wood! 5,600 BTU per pound- slightly more for those wood that contain resins.  IMO we will live on Planet Easter Island if we even consider wood as a replacement at "current levels of consumption" <---I think that westexas has noted enough that it is finally sinking in that this will have to change.

Saudi Aramco President and CEO Abdallah Jum'ah said Monday that SA will increase crude production to 12 mbpd by the end of 2009 while maintaing spare capacity of 1.5-2 mbpd. Details at OGJ website.
And they have been saying this for how many years now????
Like the boy that cried wolf.
Oh, come on now!  Don't crap in my mouth and tell me it's a fudge sundae.
No, really - and it's vegan too!
Well in that case it must be Soy Delicious!  Yum! ;)
Financial Times page 1 June 14
US is 'not ready' for Chavez oil ban thread
Funny. I was thinking you needed to reference where we could find this thread. Or maybe the U.S. is shutting down threads as part of their internet suveillance campaign.  
This is probably the article...Googled it

US is 'not ready' for Chavez oil ban threat

Another front page story in the Financial Times
Russia seeks tougher oil and gas curbs for foreign groups

A senior Russian minister on Tuesday proposed tightening restrictions on foreign oil companies and increasing the number of oil and gas fields which the government defines as strategic, in a sign of increasingly nationalistic policy towards energy resources.

The Energy Bulletin has a story about Al Gore, on the Larry King Show, stating that we are at or near Peak Oil.
For the lurking newbies, the Gore story is at:

Right after Gore made the Peak Oil statement, I would have paid good money to ask the following question (and get Gore's response on TV):

Mr Gore, what do you think the public will consider more important -- "Peak Oil" or "Global Warming".

The answer "both" is both political and correct ;-)
I think the public will drop Global Warming like a hot potato -- and Gore's association with GW will then marginalize him. My advice is for Gore (assuming prez ambitions) to associate himself strongly with clean energy, and forget about "solving GW" (it will, or course, be a side benefit).
So you're advocating that a highly-visible politician do what is politically advantageous, rather than what he thinks is right?

More of the same.

As I said "assuming prez ambitions" then yes -- because he would be accomplishing the right thing. What philospher said "if you will an end, then you must will a means"? Otherwise you are a "wisher".
I think GW has a great potential as a flag carrier for PO.

People talk about how the common folk can be manipulated for great causes (like foreign wars) ... well, here's one that fits the bill.  Not only is GW a sceintifically valid concern, it aligns with the nation's energy and economic needs for the next century.

We will be in a race for efficiency with other energy consuming nations, and this is a helpful motivator.

It's sad that the knee-jerk reaction from some on GW and PO is the same.  A certain element is so afraid of collective action that they will cringe from any factual problems that seem to require it.

So ... both ... they go together.  PO and GW both demand some element of collective action, or at least collective coordination, to reduce fossil fuel consumption.

Note that a carbon tax serves both purposes.
Only if spent correctly, which it probably won't be. Might be spent on more coal or oil wars. I do get your point though.
I think carbon credits and trading schemes put enron-style $$ in some people's eyes.  That's sad, but I think a carbon tax of some sort is the only way forward.  We've just got to push for one that is as "real" as possible.
One must alway consider how vulnerable to manipulation any give solution will be.  Cause if it can be, it will - especially now.
The only alternative I can see to broad carbon taxes would be mandates on industrial pratices, product design, and personal consumption.  Those certainly (by the shear volume of them required) leave even more opportunities for manipulation.
I dunno - for cars, emmissions limits work ok.  Tougher requirements for economy would help too.  I don't think either of these is especially prone to cheating/manipulation, unless perhaps the enforcement is farmed out to former auto industry execs.
Part of the reason I want to switch to a carbon tax is that CAFE has been gamed so successfully.

Calculating backward from our test Tahoe's window-sticker figures (which are lower than but derived from the unpublished CAFE numbers), we figure the E85 Tahoe's CAFE rating jumped from 20.1 mpg to 33.3 mpg, blowing through the 22.2 mpg mandate and raising GM's average.  What's that worth?  Well, spread over the roughly 4.5 million vehicles sold in 2005, the maximum 0.9 mpgh benefit allowed by the E85 loophole could have saved GM more than $200 million in fines.  That's not chump change, even for the auto giant.

That's the closing paragraph from a box called "Flex Fuel's Big Pay-off" on page 120 of "Car and Driver's" July 2006 issue.

I think a clean slate will have a better chance than mandates that carry such things forward.

(and of course if you are interested in GW you have to mandate not just cars, but refrigerators, light bulbs, heaters and air conditioning, ...)

There are US mandated minimum efficiency standards for refrigerators, air conditioners (SEER minimum increasing from 10 to 12 per memory, Clinton recommnded 13 and Bush pushed it back to 12 when he came to office), and gas and oil furnances, among other items.
I went searching once and I thought the only requirements were on commercial refrigerators, and that consumers just had the option of following "energy star" tags.  Ah well, if there is a residential requirement it is not strict, because not all appiances are energy star.

... it wouldn't be bad, if you ask me, to set "energy star" as a base mandate level for efficiency.

Last year, we needed a new fridge. I expected that all the Energy Star models would be a bit more expensive, but as I recall, they were also way too large for the two of us. Like polar bears, I guess refrigerators are most efficient when large.

So I got a smaller model with specs close to Energy Star, which was still much more efficient than what we had. It was larger than we needed, but the extra space came in handy when my stepson moved back home.

I wanted one that was shallower (front to back) than I ended up with.  I guess also, squarer (in footprint) is better for energy star.
Heh. What I really wanted was a lift-top unit. They're cheaper and they don't lose all that cold air every time you open the door. But that was too radical for the wife.
You saw the guy that hot-wired a chest freezer into a chest refrigerator?  Apparently you get a twofold benefit, from the reduced air loss and because freezers are better insulated than refrigerators.

ah, here it is:

can't vouch for the article's accuracy, but it's a neat idea.

I remember how hard Gore and Clinton pushed a carbon tax in 1993, and how the oil and energy and auto lobbyists had such a huge conniption fit and put that progressive idea to a halt.

But they tried ...

There was a study I read (no ref?) which said that the government was usually about 4 years or so behind popular opinion on social issues. I wonder if peak oil will hit the MSM and then...we will have to wait...for years...
Tom Friedman also remarked on the E85 loophole in his most recent column about the perfidy of General Motors. One of those occasional TF pieces that made a bit sense, actually.
As will my oft repeated plans to electrify our freight railroads, move most of the heavy truck freight to rail and build LOTS of Urban Rail.  Plus make it easier to bicycle.

Once more:

Keep repeating. A lot of things that have succeeded in the past which appear to have come "out of nowhere" were championed by a single person or by a few people who stayed committed.
The nice thing about a carbon tax is that it is simple and national.  If you have confidence in electric rail, you should see yourself as a beneficiary of such a carbon tax.

All the small constituencies, around rail, plug-in-hybrids, electric cars, hydrogen, biodiesel, ethanol, bicycles, relocalization, is that they indirectly or directly compete.

At the same time, if they really have the fundamentals, they would all gain from taxing carbon and/or the dirty fuels.

I mean, why answer "carbon tax" with "electric rail?"

I see a carbon tax as being positive for electric rail.  But they are both public policy initiatives that compl;iment each other.

I see "Carbon Tax" & "Gas Tax" as both being sticks in behavior change and Urban Rail as being a carrot.  

Electrified freight rail is just an economic response to external factors.  A carbon tac will help them in a difuse way.

Coal is used to make steel, a long life product.  A carbon tax will raise the price of wind turbines and steel rail, among myriad other items.

From a global economic perspective, this is good & proper, letting the market allocate resources & "bad" things.

However, the level of carbon taxes that the overall economy can tolerate will (probably) not be large enough to create the dramatic changes needed in the time allowed.

The rest of the world shows that high gas taxes do not inhibit economic growth, etc.

In a hypothetical several months ago, I proposed two taxes:

  1. A gas tax that rose by 1.5¢/month for 20 years, with inflation adjustements. In 2027, a tax of $3.60/gallon measured in 2006 $.

  2. A carbon tax based on the cheapest source of carbon in the US, Powder River Basin coal delivered to the railhead.

The carbon tax would be be 0.5% of the value of that coal per year for twenty years, eventually rising to 10% tax on that WY coal, and lesser % tax amounts elsewhere.

#1 is much higher and harder than #2.  This reflects the ease of change, the time delay of change and so forth.

Scottish Parliament took decision today to fund re-opening of Edinburgh to Borders rail link closed 40 years ago:

PO is still not widely accepted among decision makers in UK; when this changes expect many more such re-openings.

I would assume that China's coal consumption is the major contributor to GW and pollution (just a guess). It doesn't appear likely that anything is going to be done to limit this, so how can domestic policy in the USA make a difference?  
Apparently the U.S. is still responsible for 30% of the CO2 emitted worldwide.  We have the best opportunity for reducing it.
"Domestic" policy would have to go in the direction of cooperating with the Chinese on energy issues. Having them on "our side" relative to Chavez, Iran, etc. Promise to share/license energy efficiency stuff with them. I know that's not a lot, but it's nice to be on the same team rather than be competitors.
The answer is from Confucious about 2500 years ago " If you wish to correct the world you must first correct the state, and if you would correct the state, you must first correct the family, and If you would correct the family you must first correct correct yourself."
   With the US consuming 25% of the world energy supply of course its important.

''In this table we grouped the Chinese population by (average) altitude. We found that in China some 228 million people - comparable to the combined population of Germany, France, Italy, and Spain - live only a few meters above sea level (on average, less than 25 meters).''

GW = polar melting = marine transgressions = you get the picture.

I did a bunch of web surfing yesterday after hearing this:

The AP yesterday had a story on China asking civil servants to forego energy consumption for a day.  They claim that 7 million Chinese civil servants use as much energy annually as 780 million Chinese farmers.

First of all, that's something being done.  Second, in my surf I saw (can't remember where now) that environmental concerns were ranked high in polls of Chinese citizens.

I hope that there is enough sentiment in China (and the US!) to support coordinated reductions of 'the bad stuff.'

Anybody catch this piece from the "Iran Eyes Badges For Jews" Canada National Post:

The gods are laughing

I haven't really dived into it yet, but it has that "CO2 is plant food" astro-turf feel.

thats a old story that has already been debunked.
Yep, it was a false flag, pure propaganda.
Iranian Jews themselves have stated that it was not true.

From CNN:
From The Jerusalem Post:

Makes you wonder whether the "Canadian Nation Post" has an agenda to push, it it is just a front/mouthpiece organ, the equivalent of what Pravda was during the Cold War.
This is working better for me:

Gosh the Financial Times is full of stuff today (page 2)
Crude oil inventories rise to highest level for 20 years

..."There has been anecdotal evidence of storage reaching capacity for particular grades of oil in some areas, but that [storage data] is something we would like to know more about," said David Fyfe, an oil analyst at the IEA.

My long time theory, which Matt Simmons agrees with, is that building inventories of heavy, sour crude are obscuring flat to declining inventories of light, sweet crude oil, thus the recent extraordinary spreads between light, sweet and heavy, sour.
the next graph shows oil production (green) and real oil prices (plum) since the beginning of 1989.

i believe you mean "nominal" oil prices, which are adjusted for inflation.  "real" prices are not inflation adjusted.

i'm still confused about the "average of averages" line.  what are you averaging the 13 month MA with?  and what utility does this recursive averaging provide?

opps, i'm the one confused about inflation terms.  nominal isn't adjusted for inflation, real is adjusted.  please ignore that part of my comment.  
Popular Canadian (Conservative too!!!) takes on Big Oil and evokes the name of Chavez?  Dang!  Are we going to have to invade Canada to "liberate" the "people" from the forces of "evil"?  (I sure hope that no Canadian terrorists are planning on demolishing another building full of innocent Americans...)

sure hope that no Canadian terrorists ...

Heh, I can just seen them now in their plaid shirts and earflap hats...

singing "I'm a lumberjack and I'm ok..."
" I sleep all night and I work all day..." LOL
Wasn't there a line something about the lav-a-tree (lavatory)? LOL
You do know that most Canadian excuse themselves when someone steps on their toe's.  Then the stepper just excuse himself twice of more after that.

For a Canadian, a Terrorist is someone who mix waste in the recycle bin.

Even our army wouldn't be a real threat if we would ploy a Detroit attack, Detroit citizen alone would be able to defend more aggressivly.  

Maybe that's because we get free medicare for EVERYONE and Umemployments benefits that calm and sooth the people and everybody feel warm and fuzy.

By the way, The PO problem has yet to be shown in public debate in Quebec, even remotly or within the green community.  I guess that we will be the most surprised when it will occur.  

Ah yes, I can see it now, just like in either "Canadian Bacon" or "Wag The Dog" (both films that feature an excuse to invade Canada as a plot device).
So the plateau is showing we have either constrained supply or constrained demand

Obviously supply/demand must balance +/- additions and withdrawals from storage which must be a small effect over the period of the plateau.

Demand is constrained either by recession, price destruction or refinery capacity. We are not in a global recession yet (though we may be soon)- demand is still forecast to rise. There is some evidence of price destruction happening in Africa/Thailand etc so this is likely to be having a downward drag on demand. But refinery capacity is the reason given by the Saudis for recent drops in their oil production - perhaps this deserves more attention.

Supply is constrained either by producers being unable to pump more or unwilling. I doubt they are unwilling with oil prices hovering around $70. Seems unlikely, given Saudi promises to keep the oil market well supplied, that they would choose to defend oil prices at $70, $50 perhaps but not $70.

So if the plateau constraint was caused by price destruction of demand, the Saudis could pump more oil and lower the price to stimulate the demand i.e. fulfill their honoured role of swing producer.

It seems more likely that plateau is caused either by refinery bottlenecks constraining demand (as the Saudis say) or by the inability to pump more oil.

So is it possible the graph is showing us the current maximum world refining capacity ? Is it possible going forward we will be plotting peak refining capacity instead of peak oil...

The refinery capacity is connected to the oil supply. If there is a real refinery bottleneck, it is because there has not been a will to invest in so much new refineries - in the World. Only a quarter of the World refinery capacity is in the US, so the US environmental or other regulations are not the real problem here. The real problem is that the refinery life-cycle is 30 - 50 years. Even the most optimistic oil experts see an oil production decline in this time frame.

In Europe domestic oil rapidly declining already now, so oil supply for refineries must come from imports. It is not EU policy to encourage that. Oil producing countries have some interest in adding refinery and petrochemical capacity to add value to their petroleum exports, but those countries do know their production limits - and most oil producers are already past peak!

India and China are adding some refining capacity as their consumption is rising, but this is not much in the global scale. Refiners are mostly upgrading their capacity by upgrading - but who would assure them that there will be enough crude supply for full capacity operation during the next 10 - 50 years?

While we're on the topic of refineries...

Iran to build new refinery

The plan calls for the construction of two new refineries at Bandar Abbas, a 360,000-bpd gas condensate refinery and a new 180,000-bpd refinery for heavy crude ...

What?  No Light Sweet Crude refineries?


So the plateau may be showing maximum world refining capacity rather than peak oil production. Thats what the Saudis would have us believe.

My concern is we could see a plateau extend well into the future and all that tells us is that there has been insufficient investment in new refineries in the past 20-30 years.

Its not until there is a convincing drop off the plateau that we can be sure the Saudi refinery "excuse" isn't valid.

I wonder about the theory that oil stockpiles are high because it is all heavy oil that the refineries can't refine.  I don't know anything about the refining business so maybe someone can enlighten me, but why would anyone buy heavy oil in the first place if they know there are few refineries that can use it?  Why would they buy heavy oil if they knew it would just sit in storage?
I no longer have much faith in any of the offical numbers. Didn't Bush stop refilling the SPR? This is strange behavior if inventories are high.
As our May USA stock report showed this week, the SPR is down less than 1% from a year ago.  SPR hit a peak of 701-mb in Sept/2005, part of the mandated stockpiling ordered by Bush.  After the GOM hurricanes, refineries were allowed to tap SPR for 16-mb.  From that low of 685-mb in October 2005, SPR has ranged from 684-688-mb.
Of course the reason companies buy heavy oil is they think that they will make money from it.
   Here in the Houston area there are at least two refineries that can deal with "junk oil", or low quality crude. They are Exxons Baytown refinery and Citgo's refinery, owned by PDVSA. But any refinery can if they invest in Crackers. I'm no expert in downstream, but the refinery construction people are booming and I'm certain part of the boom is in refitting for heavy crude.
I last discussed the refinery capacity argument here. I don't buy it. That piece could stand to be updated now that 2005 numbers are available.
Moderators should note that the tail end of comments in that article Stuart references is loaded with spam garbage. Someone might want to nuke that last comment from taibing001.
"In both cases, a regional disturbance in oil production (the Arab embargo in 1973, and then the Iranian revolution and closely following Iraq-Iran war in 1979-1980) produced a large abrupt contraction in supply for geopolitical reasons."

The 1973 oil crisis was caused by the 1970 oil peak in the US, but triggered by the Jom-Kippur War, the immediate reason for the OPEC embargo. Without the US peak, the OPEC embargo would not have been so successful. Moreover, Matt Simmons found that Saudi Arabia had oil-geological reasons for "resting" their oil fileds.

I hesitate to suggest even more work for Mr Staniford, but is it easy to make a worldwide "net export" graph?
Stuart please clarify for me the following points and questions:

So the EIA and IEA are posting numbers for all liquids but most people interpret this as petroleum oil production because a decade ago that was the only liquid source?

So that 'all liquids graph' is the worldwide production of any liquid hydrocarbon, from any source, created by any means, with untracked EROEI?

Meaning that a barrel of Canadian tar sands oil is counted the same as West Texas intermediate even though the energy used to capture those two barrels is very different?  Ditto for ethanol, biodiesel, and liquified Natural Gas?  I read TLS's post, just clarifying here and trying to understand why non liquid petroleum products are lumped in with a 'petroleum liquids' report.

So how does a person track the net energy supply if more and more of the liquids are requiring ever more energy to capture/create a barrel?  

I could easily see us moving to a world where the total liquids stay about the same but we are using most of the coal, nuclear, solar and wind energy to make much of that liquid.  Not only would there be no net gain in energy, from the non petroleum energy sources, we might lose ground on total energy by making liquids rather than just using the electricity or heat from the other forms.

On an earlier thread here at TOD, it was mentioned that at "peak coal" for the UK in 1913, 18% of the coal produced was used to produce coal.

In the electrical industry, plants are ranked by how much power they can transmit off the plant site (pumping, crushing, transforming. lighting & other hotel loads are subtracted from the total).

AFAIK, this is the only example of "net energy" production, and it does not count energy losses off the plant sire.

"So how does a person track the net energy supply if more and more of the liquids are requiring ever more energy to capture/create a barrel?"

By price. As it becomes more energy intensive to get it out, it automatically becomes more expensive unless energy costs themselves are dropping (which we know to be not true).

Right this graph is gross liquid fuels. I don't think we have a way to compute net liquid fuels at present.
Thanks to all for responses.
BP 2005 Energy review now out.
BP says there was a 1% increase in all liquids production for 2005 over 2004. NB all increase (according to BP) comes from OPEC. Non-OPEC including FSU collectively declined by 0.25% last year.

Have you noticed that the gap between IEA raw and IEA corrected appears to be increasing starting June 2005? Does that mean that the data is becoming more unclear or is it a symptom of IEA being perpetual optimists (I think Simmons said something like that). If the data is becoming more unclear, why is that?
Nice work, Stuart.  Thanks for taking the time to create the oft-requested "medium" graph.

Looks like Deffeyes ain't wrong yet...

Price controls may be intended to protect consumers from high prices, but always have the effect of rationing product.  Coming off price controls is the instance where higher prices generate higher demand, as experienced in the US in the seventies when we came off Nixon's energy price controls.

China has recently allowed gasoline/diesel prices to rise towards world prices, encouraging refiners to sell into the home market instead of exporting product, eg to the US. As a result, crude imports in the first 5 months are up 17% yoy, or about .5mmb/d, and China product shortages are declining. The trend seems likely to continue, with Chinese consumers maybe allowed unlimited access to energy for the first time.

The US might see reduced gasoline imports.

From the full IEA report.
Non-OPEC supply for 2006 sees a modest 30 kb/d upward revision to 51.3 mb/d. Growth remains close to 1.2 mb/d, but is increasingly back-end loaded. Upward revisions to supply centre on the US, Canada, China and Sudan. These are countered in part by downward adjustments for Norway, Russia, Malaysia, Oman and Chad. OPEC "other liquids" supply is revised down by 85 kb/d in 2006 and 70 kb/d in 2005, as evidence has emerged of lower historical Venezuelan Orimulsion production. Despite this, OPEC non-crude growth in 2006 amounts to 260 kb/d, in addition to non-OPEC supply growth.
Upward revisions for the US, China?

Downward revisions for Russia, Malaysia!

Chad, Sudan?

And in case you were wondering, orimulsion is

Venezuela and China will also sign an agreement to continue Orimulsion production in Venezuela. Orimulsion is a product of extra-heavy crude oil, whose production process is patented by Venezuela and which can be used in some Chinese refineries for the production of fuel.
Nice to live in interesting times, isn't it? Back-end loaded! You bet. I can't wait for those future revisions.

Thanks for the good work, Stuart.

"Downward revisions for Russia"

IMO, "downward revisions" is going to turn into "production collapse."

The new "Great Game," is between the two primary net exporters, Saudi Arabia and Russia, versus the two primary net importers, US and China.

Consumption in all four countries is growing.  

It now appears likely that production in all four countries is falling.  

We know that both Saudi Arabia and Russia are well past the 50% of Qt mark, based on the HL method, and we know that at least some Western oil companies appear to be falling all over themselves to sell their Russian production.

What continues to amaze me is that anyone disputes these basic facts.

I'm amazed that you are amazed at people disputing basic facts. It's routine these days. That's a basic fact. :)
 "It's routine these days."

Tis true.  My favorite example is the Texas State Geologist talking about the possibilty of Texas exceeding its 1972 peak production level.  

I dispute that! ;-)
Orimulsion is absolutely disgusting stuff when burned.
The "peaks" of 1998 and 2001 are different in character. In both cases, they were led by demand falling, not by supply constraints. This is clearly visible in the graph above because prices peak and then fall for a year or so prior to those production peaks. The first of these was caused by the cascading emerging market currency crises that became known as the Asian flu. The second was caused by the collapse of the US technology stock bubble. In both cases, recessions in parts of the world led to falling demand for oil, falling prices, and eventually falling production.

I will play Devil's Advocate here. But I will play for real.

I don't buy it. This paragraph doesn't prove your case. Nothing is that simple. There is no reason why the present situation is not led by demand falling - rather than supply constraints. You give way too much credit to Bird Flu. "Parts of the world?" If "parts" of the world are important, then certainly I can use them for my arguments as well...

I know we can make this a friendly debate.

Oh, you said Asian Flu. I'm sorry. Still doesn't mean anything :) The West is the Best. How does a currency crisis in Thailand rate higher than $3 gasoline in Ohio? (and prove it)

You know I love you Stuart, but there is no way you can be let off that easy.

The high price of oil in the last 3 years has contributed to a "stabilization" of demand. Demand has also slowed simply because there is no need for it. As we all have been brainwashed - demand has been "wicked" high in China, and India. For years. Well. That couldn't go on forever. And it naturally peaked and stopped. Over. Big Deal. Now everything is back to "normal." Decent growth. High oil and gasoline prices. Steadily rising inflation. Fear of recession. "Slower demand." Simple. - (Nothing is that simple)

Re: I know we can make this a friendly debate.

Sure we can. IEA full report:

Despite underlying economic strength, global oil demand growth for 2006 has been revised down from 1.47 mb/d to 1.25 mb/d with mild first quarter temperatures and sustained high oil prices. US demand is less robust than was implied by preliminary weekly data and FSU apparent demand is adjusted downwards due to unexpectedly strong exports.
If we choose to believe them, demand growth has been revised downward a whopping 0.22/mbd.

And that's all I've got to say. Friendly enough?

The most convincing evidence/graph was the 5 year forward contract for oil.  (I looked for it but did not find it.  Perhaps a week ago on TOD).

Quite flat with variations of 5% to 10% for decades.  Until recently, when it has shot up to ~70, backed off to $60 and then back up to $70+.

The earlier spot fluctuations in price bypassed the 5 year market expectations (spot shortages, embargoes, booms & recessions are assumed to disappear in 5 years) but this one has not.

You probably mean this graph I reposted the other day

(Hit tip subtr4ct)

I think it's pretty telling that the plateau starts about the same time that the price rise starts.

If this price rise was fear driven, then you would think that it wouldn't affect production for a while after the price starts to rise.

I find this very compelling also.  I didn't put it in since I don't know where the source data came from and don't have access to it.
Did you try emailling subtr4ct? His email is in his info. He was the one who said he had the data in a spreadsheet.
As I noted above, China consumption is up .5mmb/d, and teh end of price controls implies that demand will continue to surge now that the chinese wannabe drivers can finally buy all they want for their new toys.
You don't seem to grasp either the argument or the facts.
Economic growth has not slowed, least of all in China or for that matter India.
When you have a demand led slowdown in production, you get a fall in price coming long before it. Just look at the graph.
You should probably consult BP's 2006 Statistical analysis.

Economic growth and Oil consumption/demand growth are two different things. According to BP, Indian and Chinese combined  2005 oil consumption(accounting for 11.5% of total world consumption) increased by only 1.3% in 2005. This is in sharp contrast to 2002(7%), 2003(7%), 2004(14%).

American consumption fell in 2005. Total world consumption increased by 1.3%(same as China and India). American and total world consumption both grew by 3.5% in 2005.

By definition, no more of anything can be consumed than is produced, once you allow for the very minor fluctuations in stores.
Do tell me when you find time to look at the graph.
I've looked at all the graphs.

You impugned my grasp of the facts and then proceeded to make statements that clearly have no basis in the data. The data from BP which I presented, on the other hand, clearly shows you to be wrong regarding the level of Chinese, Indian, and worldwide oil-consumption growth.

Your first sentence about production and consumption is related to what? You are trying to say that consumption would be higher if the oil was actually there?

The argument I'm making, supported by many in the industry, is that the oil is there. Maybe not at the price everyone would like, but it is there. How long this will continue to be the case is not clear.

There is a difference between a lack of excess supply capacity and an actual lack of supply. If the supply were actually constrained, my feeling is the price would be higher than $70. The price itself likely has some effect on  present demand, producing a self-balancing pressure that we may be underestimating.

My feeling is that many of these factors are in state of economic balance not necessarily seen before in the oil market. It is easy to draw parallels to certain time periods and with the benefit of 20/20 hindsight to make correlations between lines on a graph. It is harder to make a correct assessment of the present. There are some variables that we simply don't know and won't have until we are looking back at the picture.

Whether oil has peaked or at what stage of a peak we are in are still matters of speculation.

You seem to believe that something is proved by the graph. Maybe. Maybe not. A chart produced in 2002 or 2003 relating the price of oil to recession would have led one to believe(given the price rises since that time) that we would have experienced a recession by now. We have not. When trying to analyze the relationship between certain pieces of data to draw conclusions, we must be very careful not to overlook something in the equation that might be different from past experiences.

Please read my first response again, and try hard to distinguish between what I wrote ("economic growth") and what you fantasised that I wrote ("consumption growth").
Now that you have looked at the graph, you tacitly admit that it explodes your argument. We're getting somewhere. Now you just have to admit that you don't really have another one.
And please don't talk so much about your feelings, it makes hard-bitten types uncomfortable :-)
I sort of see this. You mean the two (purple) price drops (i.e. "demand") leading two (green) dips in production. But the last period doesn't show any price drop while production seems to be rolling over again.

The price axis looks linear, perhaps this needs to be put on a log scale?

You are just running away from this argument.You said "economic growth." We are talking about consumption growth. Your response was in response to something I said. I was talking about demand/consumption.

I proved my point with data. You have conveniently avoided your erroneous take on Chinese, Indian, and worldwide consumption growth. I contended originally that it has slowed(not dropped). It has. You indicated that it had not slowed.

You did not prove your assertion, Oil CEO. You claimed that growth slowed because demand slowed, which is observable. But then you attribute a reason to this without data to back up that reasoning. There is at least one other alternative reason why consumption growth would slow - supply is at or near peak and there is no more room for growth. You have totally overlooked that possibility which is equally plausible in favor of the conventional argument because it bolsters your assumptions.

I acknowledge that growth has slowed. I do not accept your rationale for why it has slowed because there is that other possibility and that other possibility is looking more and more likely, based on all other data, to be the real cause.

Hey, GreyZone. I read this response when it first came out. I have been thinking about a response for the last week or whatever it has been. So I have several. None better or worse than the others. I found that I couldn't do it without referencing smekhovo, so I kept putting it off, thinking it better to actually separate the two arguments.

I know this topic will come up again, so we can discuss it then.

I value your willingness to respond and engage in debate, so I have to apologize for not responding. Does that mean you win by default? No. I'll be back :)

As for the Man from Leningrad, still awaiting his response. Or have we carried this forward?

EIA's numbers confirm a slight reduction in overall US petroleum demand in 2005:

20.77 mbd/day in 2004
20.66 mbd/day in 2005

See, I don't always disagree with you Oil CEO.

Yes, but
Chinese demand was artificially restricted in 2005 by gov price controls. Refiners were taking losses at teh controlled prices so exported gasoline, leading to lines at gas stations. The price has been allowed to rise, refiners are now increasing supplies into the home market, and net crude imports for the first half of the year are up 17%.
$70 gasoline is high enough to stagnate demand in the US, but not in china (which is where the $ are.)

A post on another thread talked about how the rich us would always be able to outbid the developing countries. Imagine the wealthy on Nob Hill, looking down their noses at the coolies below... who hold the mortgage, currently in default. Who is rich, and who is poor?

Since the "Average daily oil production" chart is in effect the "Average daily oil demand" chart, the only thing that can be said with any hope of being meaningful at this point is that global demand for oil seems to be leveling off.

Saudi Arabia can continue to claim with impunity that they were prepared to expand production capacity to 12 million barrels/day, and beyond, but that stagnation of global demand has made it entirely unnecessary.

The assumption being that the laws of supply and demand have been repealed?  Somehow there's ample supply for the now limited demand, but prices are $70?
Who are we to question the wisdom of the Invisible Hand?
We are but mere mortals.

The Hand, having written its price on the wall, moves on with loftier goals in mind.

There is an ad on the TOD website that claims that there is 8 times as much oil in the Rocky Mountains as there is in Saudi Arabia.  Supply is apparently infinite.  I presume that the editors of this site don't interfere with the ads as a matter of policy. yNo8cGABABGAEgzK-iA0iKOVCQ1dP-B5gBtNP2vwGgAd6Cov0DsgESd3d3LnRoZW9pbGRydW0uY29tugEKMTYweDYwMF9hc8gBAd oBNGh0dHA6Ly93d3cudGhlb2lsZHJ1bS5jb20vc3RvcnkvMjAwNi82LzE0LzE2MzM2LzY2NDaAAgGVAgVvNAqYAvYOwAIByAL64E A&num=1&adurl= alias%3D200604OIL&client=ca-pub-4209842280388498

I haven't seen anything about "shale oil" for a long time on TOD, so I suppose this notion has been thoroughly debunked?

Actually we did touch on shale today and I've posted on it in the past...

Click Here :)

Maybe we should pass a law that would give shale oil producers a 10 year totally tax free ride -- no gas tax, no income tax, nothing. As much as ya want, 8 times Saudi Arabia, have at it.

If nobody responded this would "dis-prove" shale oil more than any EROEI calculation.

I think RR said in another post that he's going to do a paper on shale so hopefully we'll get more insight on the subject.

I don't see shale as the silver bullet that others see.  The verdict is still out on whether or not it even has a 1:1 EROEI IMO (i've heard 3:1, 1: 0.5, etc...)


the laws of supply and demand have been repealed

Finally. The first sensible law out of washington. I hope they also repeal the law of gravity and some other of that nerd b*s* stuff, so we can all go to the next universe time travelling. All that reality based hype, way to much detail there. Michael Crichton for President!

"Somehow there's ample supply for the now limited demand?"

No, I'm saying that the Saudis do not make themselves look foolish by arguing that there is exactly the right amount of supply for the demand.

Having been reading The Oil Drum and its commentaries for months, sometimes I think I see a confusion of all economics-based discussion with "Cornucopian delusion."

There's a difference between saying "free markets will solve our problems by encouraging investment into alternative energy sources as oil prices rise," which expresses a normative belief,

and saying "free markets will encourage investment into alternative energy sources as oil prices rise" which is a fairly reliable statement based on observation and in any event is a process that's already underway.

It's also accurate from an economic perspective to say "demand always equals supply."

Your average daily demand curve seems to clearly show slowing demand as oil prices rise. Now, it may also show the convergence of daily global demand with daily global production capacity, which might in effect mean peak oil if the curve flattens.

The problem is that the determination of whether that is true won't come for years and years, maybe not for decades, depending on what happens to the global economy in the intervening time.

What's been a steady drumbeat in business news over the past year or more is the threat of high energy prices/high interest reates/inflation putting the brakes on U.S. economic growth and by extension global economic growth.

If oil demand flattens out (and it can never exceed supply) then that will be interpreted by all the business media and economics as the predicted effect of high prices on demand, and hence on economic growth.

Put another way, if we have reached a production peak, and the supply curve goes essentially vertical, the price does not become infinite, it simply rises until demand growth stops. This means that economic growth slows, people are forced by price to undertake conservation measures, and they seek out alternatives (whether or not such alternatives are actually feasible). But an absolute production peak is not of necessity the cause of high oil prices (even though you have me convinced). And it will not be widely recognized as the cause of a global recession, if one is about to occur.

Consequently, the Saudis may not have to admit to peak oil production for decades.

It's also accurate from an economic perspective to say "demand always equals supply."

This is so off base.  You mean to tell me that supply and demand are always at equilibrium?  You're crazy.

From an econ POV S&D are not always in equilibrium and furthermore they are two distinctly different graphs that move inversely.  To say a few posts back that oil supply is oil demanded would imply that prices do not change.  If prices rise it's either due to a rise in demand or a fall in supply.  

Factors affecting supply are different than factors affecting demand so let's be clear that they are very different.  Too many times there will be symptoms of a real problem and we spend a lot of time talking about the symptom, rather than the problem.  It can be disguised as all kinds of things(hording), but the basic premise holds true.  

I'm in no way qualified to make distinct statements as to why oil has risen so hard so quickly, but when you look at the raw numbers, demand has risen considerably in the last decade.  No secret there.  Supply is currently hitting around peak production ever.  Open secret here.  These very well may be in equilibrium at this point, but that does not mean let's interchange supply and demand curves.

"From an econ POV S&D are not always in equilibrium and furthermore they are two distinctly different graphs that move inversely.  To say a few posts back that oil supply is oil demanded would imply that prices do not change.  If prices rise it's either due to a rise in demand or a fall in supply."

Stuart's wonderful graph isn't a supply curve or a demand curve, it's the quantity demanded/quantity supplied over an interval of time.

Keep in mind that I'm not arguing against peak oil. I'm arguing for its complete lack of transparency in the face of all economic forces acting on supply and demand. The flattening out of the quantity supplied is indistinguishable from the flattening out of quantity demanded, absent really broad historical perspective that may not be available for years and years.

Except in the case of artificial price controls, it's a complete abstraction to talk about world demand outstripping world supply.

One effect of a global recession caused by peak oil is that it would kill off demand to well below peak production levels and crash oil prices. At that point it might take years and years for demand to creep back up close to the previous peak. It will take that kind of reference point to demonstrate that peak oil actually happened. If you think it's already happened, set your alarm for 2016 or so for confirmation.

I was mistaken on the graph you were pointing out, I thought you were talking generally about S&D curves.

Except in the case of artificial price controls, it's a complete abstraction to talk about world demand outstripping world supply.

No it's not.  When lesser developed countries are priced out of the market the demand has outstripped the supply. There are no artificial price controls involved, the country or the people themselves simply can not afford gas and must substitute.

This is part of the circular logic used by economists - whatever supply exists is exactly what demand there must have really been otherwise there would have been more supply because demand would have paid for it. It's part of what Jay Hansen and others have criticized in current economic thinking and economists really do think that way.

You, on the other hand, are thinking about demand from a more human perspective, of what people would want versus what they can afford.

Demand is a tricky word used by most economists to bolster circular logic chains. Just be aware of that.

It's always worked well for 20 people in an open boat in the pacific with 1 gallon of water left - what's the problem??
Excellent point, Greyzone, and as you say one often overlooked or worse, portrayed incorrectly.
You cannot sell what you do not have.
Algiers, Algeria (capital of OPEC member) choses Light Rail Vehicles for their first Light Rail Line.
Alstom chosen to supply Algiers' first tramway
(14/06/06 17:40 CET)

A 225 million euros project


The operator Entreprise du Métro d'Alger (EMA) has just announced that it has chosen an international consortium led by ALSTOM Transport to supply a turnkey system for the first tramway line of the Algerian capital. The total value of this project is 225 million euros. Options may be added.

This project is part of the Algerian Government's development programme to meet the increasing demand for public transport and reduce traffic congestion in the Algerian capital. Algiers' first tramway line, which will link the city centre to the Eastern part of the capital, will be 16.3 km long with 30 stations. It was designed to transport 150,000 passengers daily. The first train sets will enter into service 30 months after the contract takes effect.

As a supplier of global solutions, ALSTOM will provide a turnkey system comprising the rolling stock, the tracks, the power supply system, the traction electrification, the signalling system and control equipment, part of the civil works and a workshop. ALSTOM has long experience in this field with references including the Barcelona tram and the KTX high-speed train for Korea.

Since the development of the first CITADIS in 1996, ALSTOM has sold 778 CITADIS cars to more than 20 cities around the world including Paris, Strasbourg, Lyon, Madrid, Rotterdam, Dublin, Melbourne, Tenerife and Tunis.

I often read post on Oildrum. It's a very interesting website.  

I have also a website, in french language where I post analysis  about the peak oil.

I make the same thing as Stuart. I compiled data from monthly report of AIE but not EIA.

I take only data from table 3 ( Wolrd Oil production) and Table 3a ( Oil Supply in OCDE Country) and I use the data which have three months delay.

I separate countries in different categories to look for interesting things.

And I find it.

You can see on my website where you can have the graphs in the different posts in pdf by clic on it.

For example, I find that the production of liquid of countries from non-opep-non-fsu has peaked in dec 2003 !


I don't know how to post a graph here but you can see on my the post " le processus de déplétion" on `

the sum of All the countries except the big oil exports countries as OPEP and FSU has already peak since two years!

The plateau that we observe on non-opep production should decline when Russia decline.

I observe another fact :

the production non-OPEP-non-OCDE is a very linear graph. The growth is 1,2 mb/j per year since 2000.

But, it's very likely that this growth will stop in the years to come.