China's vehicle fleet likely will exceed Japan's in size this year, at ca. 76 million. Sales remain robust even in the face of 9 day long traffic jams. BYD attempted to market a PHEV, with sales in the hundreds. First time motorists in developing nations want cheap vehicles.

The bulk of the articles I come across on China's cars talk about the mounds of money to be made there, with little attention paid to the obvious call on resources this will entail. Even with efficiencies exceeding those of Europe or Japan these vehicles will quickly demand a brand new share of available petroleum in the handful of mb/d, irrespective of what happens in the OECD, or so it seems to me. Things would have to go pretty sideways to be otherwise, judging by their performance through this recession.

Euan,

I believe we are now caught in the “oil price trap”. Oil prices are too high to help many western economies grow and too low to allow for meaningful exploration and developments to counter declines and grow future supplies.

Figure 02 should raise some questions about the relations between prices and supplies.

Hello Gail and thanks!

I agree figure 04 in this presentation will be interesting to follow how it develops. In EIA’s STEO for September 2010 EIA forecasted OECD oil supplies to decline around 0,5 Mb/d from 2010 to 2011.
Oil supplies within OECD responded somewhat to the growth in prices earlier this decade, but now it seems like these effects are waning.

I presently expect OECD supplies to decline with around 1 Mb/d from 2010 to 2011.

Will OECD demand/consumption decline with its supplies or will demand/consumption level off and thus result in growing net imports into OECD in the months ahead?

It will also be interesting to follow how Non OECD demand develops.

As of now it is hard to predict the full effects from the stimulus packages within OECD (and within other economies) and how long their effects last.
I believe oil prices in the region of $70 - 80/bbl first impacts discretionary spending and at the next turn it may affect demand.

We could experience a period where demand contracts and brings prices with it which will result in less exploration and developments of new supplies that would set up a new price rally somewhere in the future.

I don't find Figure 4 to be all that surprising. Demand seems to be wiggling around flat.

Figure 5 is far more to be concerned about. The clear trend for non-OECD economies is to use a lot more energy. If the emerging countries continue their strong growth in usage, we could easily see a situation in which the OECD economies continue their dismal performance of the last couple of year AND oil prices go through the roof.

Economic doldrums and sky high energy prices driven by growth outside the OECD is a nasty combination.

"I have said this before but the interesting spike-up/spike-down in price in 2008 is likely related to the fact that price is a derivative of some other peaked or bubble measure."
Yes, the Gaussian is investor confidence that prices will continue to rise :^)

Hi WHT,
I get from your graphs that the minimum rate of change happens at the peak.
I take it that these expressions are for illustrative purposes only?

Silly Telescope!

The post shows a rather flat oil production curve with a rather curvy sawtooth price waveform superimposed over of it.

You take the logistic function and superimpose a curvy sawtooth waveform on top of that, noting that the sawtooth like curve is the derivative of the symmetrical logistic curve.

Meaning what exactly?
Probably that real world of oil price and production have absolutely zilch to do with the mathematical world of your curves; otherwise reasoning backwards a price sawtooth should occur when production rapidly rises and later falls--and we don't see that.

This is about as logical as Kepler deducing the orbits of the planets from consecutively inserting the 5 platonic solids inside
a sphere.

http://en.wikipedia.org/wiki/Mysterium_Cosmographicum

And WHT, you're no Johannes Kepler.

I can imagine that problems indirectly resulting from oil shortages may affect coal extraction - initially high coal prices, but then lower prices, as credit problems set in and as oil production declines.

I am not persuaded by the type of curve-fitting analysis that was done for coal. It seems to me the approach is iffy to begin with, and especially so if applied to coal, which is extracted as needed over many years. But it may be that the forecast turns out to be right, for the wrong reasons.

I believe 2011 to become an interesting year and could well become the year we leave this (C+C) plateau.

I think your Sept 2011 WAG is pretty good. I didn't realize that imports had dropped 4mm bpd in OCD countries. That tells me that most of the slack has been removed. Now supply shortages are more likely to appear. One year from now? Sure, why not. The key is going to be production. I thought 74mm bpd was going to be the peak, but it looks likes we are going to reach 75 or 76mm. That could keep prices under $100 until sometime in 2012. But a year from now in 2011, I think supply issues will be apparent.

Newager

"What is fascinating is the plateau of crude & condensate production since May 05. "

That was the first thing that caught my eye too. Nice plateau you have there. It would be shame if something happened to it.

The economies of the US, EU, and Japan are expected to lay there twitching well into 2011, and might even keep doing nothing until 2012. So their demand should not explode upwards. Will we stay on the plateau until 2014, or will it start down sooner?

Although not all Politicians are guilty of this, the subject they are usually "serious" about, is their re-election...

Note that many graphs have amplified axes, but the ones that have a common Zero, underline just how little consumption changes, even with a large spike in price.

That's a feature of measures that on rates of change. The large spike in price and reverse spike is just a time derivative of some other factor. I contend that the price does not control anything (production is largely steady) but varies a result of other changes. No other way to explain it as production has largely been steady. See my graph up thread.

It seems like at some point, we will start seeing debt defaults among some of the importers, making the situation even more interesting. Who will want to continue to sell to them, especially if their primary source of funds is tourism that is declining is demand?

This suggests that demand elasticity has declined. Also of course not only has population increases but also a significant amount of wealth has been transfered to the poorer countries over this same time period thus they have more people and more money today and are more competitive for the remaining oil supplies.

Back in the old OECD the initials somehow remind me of the Soviet Union :)

In the US VMT as rebounded and is now showing slow growth.

http://www.fhwa.dot.gov/ohim/tvtw/10juntvt/figure1.cfm

And of course the crash following the last rapid rise in prices will probably work to make demand less elastic at first if we see another price rise as people will be less willing to make significant changes for what they expect to be another short term spike. On the financial front given the actions that have been taken and the powers that have been granted and outright financial crash is far less likely until the system reaches a much higher stress point.

Some people have mentioned that travel will fall but more likely air travel will be replaced with shorter local vacations so the total oil usage might not change nearly as much as you think.

In the US the housing construction industry is now DOA so it can't collapse to take pressure off prices.
Outside of the OECD growth is still vigorous thus prices have to rise to the point they not only slow growth but also turn demand negative. Who knows how high prices would have to go to blunt demand in China ?

In short across the board demand today is significantly less elastic than it was in 2005-2009.

Hi c185pilot.
I can see why you are worried.

Help is on it's way. Utube video

Isn't it beautiful?
The manufacturers in Slovenia want to put solar cells on the wings.
Aviation will just have to get more subtle in the post oil decline.
With luck we will still be able to get up in the air.

Fire does not burn in a vacuum. Its physically impossible for OECD citizens to spend a lot more on energy and still have enough left over to pay for everything else that sustains our economy.

Assuming the 420-450M growth of total population in 5-6 years is correct, consider this. If USA population has grown 12M since 2005 [wikipedia], and if US per capita oil consumption is 5 times the average per capita in 'developing' nations, including China, then as thought experiment, the US 12M growth over 5 years would be equivalent to perhaps the potential oil demand of 60M extra citizens in the 'developing world'. That is, something over 13% of that world population growth total if expressed in a way relevant to oil consumption? We should bear in mind that within my definition of 'developing world' (see note) the largest share is 'not-developing-very-much' at all? e.g. very rough estimate for the latter at the moment who continue with very little access to fossil fuel: within India and China; 600M Indians, 400M Chinese, most of Africa's total population, 150M Bangladeshis, similar in Pakistan, Indonesia, etc

(US share of consumption of world oil exports is still an enormous factor and memmel makes relevant points about elasticity of demand.)

note: I only eyeballed Jonathan S Callaghan export browser database to check actual figures for oil consumption, and categorized the 'developing world' as World minus OECD and FSU and Opec-10; which probably erroneously puts the whole of S&C America in the 'developing' category.

If you only look at the last five years of production from these countries, you get a different perspective:

Alghough oil prices are 2-1/5 times higher than in 2005, half of these countires have nearly the same production as in 2005 -2006. True for Libya, Algeria, Equatorial Guinea, Canada (since 2006), Sudan (since 2007).

I also would like to know if these production figures are C & C or "all liquids" count that includes NGL (Qatar) or biofuels (Brazil). There is a difference in the energy content of NGL and biofuels like ethanol, so a rise in these fuels is only good for 60% or less energy compared to crude.

There are arguably a few new countries joining the group - perhaps Uganda, Ghana, Mongolia, deep water off of Africa.

I think a major issue for all countries (these and other countries) is how high the oil price can stay on a consistent basis. If EROI limits are such that the oil price can never stay above, say, $85 barrel for long, then it will not be economic to produce the most difficult-to-produce oil, and enhanced oil recovery will not be economic on a huge scale. If oil price is not high, production will tend to drop more quickly than it would otherwise.

In terms of global C&C supplies, it seems that the only real term potential game-changer would be new production out of Iraq. I'm not optimistic--but how possible/probable is it for a substantial boost in Iraqi production to at least extend the plateau?

Iraqi oil production has gone essentially sideways since 2001. That's 10 years gone just there. Wild-eyed optimists are anticipating a quadrupling (but more likely a doubling, all things being equal) of the current figure, but not for another 10 years.

Global oil decline is/was running at 6.1% p.a. according to the IEA. More and more mainstream government agencies around the world are forecasting peak oil around 2014-15 (so we take this as our outer bound for the PO date). Now do the math. How many Iraq's will we need to fill in the shortfall between 2015-2020? I suspect it would be a lot.

Our 2007 presentation to ASPO-USA on the (2005) top five net oil exporters:

http://energybulletin.net/node/38948

The 2007, 2008 and 2009 data points for top five net oil exports fall between Sam Foucher's middle case and best case scenarios.

For the major part of Western states (USA, Canada, Europe, Japan, ...), even if they produce a small part of the oil they use, the major part is imported from other states that export oil (OPEC, russia, ...).

Best leave Canada out of that statement. Canadian oil exports have been increasing for decades while Canadian oil imports and consumption have been flat for many years, and at this point in time Canada is exporting more oil and products to the US than it is consuming itself. See my reply to Gail, above, for details.

The volumes are relatively small, though, and don't do much to compensate for declines in other OECD producers. They certainly will not compensate for a decline in exports from OPEC countries.