The oil 'peak' has been reached

Jorge Nascimento Rodrigues is perhaps the only journalist in Portugal aware of the issue of oil scarcity. During the past few years, I have had the opportunity to collaborate with him several times, bringing the Peak Oil message to a larger audience on an almost regular basis. Last weekend, the largest weekly newspaper in Portugal (and among the diaspora), Expresso, had another article in its Economy section, penned by Jorge with a few thoughts on present events and trends. Samuel Foucher kindly provided an updated version of one of his graphs to illustrate the article.  

Below the fold you will find an English translation of this article.

This is an improved version of a log at the EuropeanTribune.

The alarm has sounded: the scarcity of oil will affect everyone, say analysts

'Peak' oil is no longer debatable. The projections for the year, the five-year period, or the decade when global oil production would start declining "are now a part of history", says Luís de Sousa, member of ASPO-Portugal and contributor to the blog "The Oil Drum", talking to the Expresso. "The period of peak is already being lived. Predicting it is no longer relevant", he adds.

According to this specialist, the vast majority of the important mathematical and accounting models of oil production used by entities independent from the oil industry all point to a similar time period when oil production reaches a maximum and begins to decline. This is a period of about a decade centred between 2008 and 2010, and the maximum oil produced is between 78 and 85 million barrels daily.

Luís de Sousa emphasizes that since 2005 world liquids production has been bound between 80 and 82 million barrels per day, clearly in agreement with those models. This plateau "has been sustained by the increase of natural gas liquids, with pure crude [petroleum] in decline since 2005".

Recently, the 'peak' has returned to the spotlight because of a secret report by the Future Studies group of the German Centre for the Armed Forces Transformation, a military think tank working for the Berlin Ministry of Defence. The study was published by "Der Spiegel", causing considerable concern by those less used to the issue and its geopolitical implications.

The Diplomacy of Oil

The report has an alarming tone: "scarcity shall affect everyone" and "oil price increases pose a systemic risk, not only for transport systems, but also for all other systems". And left a message: "It is vital to secure access to oil", for in a fairly short time-frame, between now and 2040, we may see "a change in the international security panorama with new risks - like that of fuel transport - and new actors in a possible conflict around the distribution of an increasingly scarce resource".

The German report concludes that "oil exports available through the market of supply and demand will shrink" and that need for oil diplomacy will sky-rocket because of oil's geo-politization.

The increasing scarcity referred by the Germans is associated with "an almost unchanging level of oil production, fixed within a band that began during 2004," emphasizes Luís de Sousa. This variation "band" is called by many specialists, with some humour, an "undulating plateau".  Meaning, in this plateau, production variations oscillate, like a wave, from year to year, independent of price variations. The present crisis, whose end continues to be debated, "will likely prolong this undulating period, flattening what otherwise would have been a prominent peak".

More important than the peak itself or the production plateau is the volume of oil available on the international market, or in other words, what is available for export beyond what is consumed by those producing the oil. "Maximum exports were reached in 2005, at an amount equal to 44 million barrels a day (mbd). Since then, production has entered into a slow, but irreversible, decline," says the ASPO specialist. Presently exports amount to 42 mbd, and in 2020 exports are likely to be under 35 mbd. Luís de Sousa also adds that in the contest for the oil available in the international markets, a change is taking place. "There is a transfer of consumption from the countries that form the OECD (developed countries) to those emerging.- If in 1990, half of the oil produced was consumed by the OECD, today that fraction is down to 1/3".  The world market has been turned upside down.

This long term structural change, deriving from the scarcity of this commodity and growing geopolitical risks (including those of navigation through strategic straits), has been further changed, in recent years, by what was dubbed the "financialization" of the crude futures market. This happened when financial speculators nicknamed "Wall Street refiners" entered the marketplace, buying and selling "paper barrels", causing an additional disturbance in the market, with sometimes "wild" oscillations.

PIIGS are the most affected

One of the groups in the OECD that will suffer most with the contraction of available oil is the one formed by those countries most dependent on oil in their energy mix, according to Luís de Sousa. "A detail must be noted - those countries in greatest difficulties will be precisely those called the PIIGS. These countries each have an oil dependence in their total energy mix of over 45%, including Greece with 58%, Portugal and Ireland with 55%, Spain with 48% and Italy with 46%. This is in contrast to the European Union average of 37%. If we add the four countries with oil dependency above the European average, but below 45%, we get a complete map of the zone where the 'undulating plateau' will have the greatest impact. Besides the PIIGS, this includes Austria (44%), Holland (42%), Belgium (41%) and Denmark (39%)."

The weakest sector for the five most vulnerable countries of the euro-zone (Portugal, Ireland, Italy, Greece and Spain) is the transport sector, particularly when road-based. "This dependency can derive from geographic location, inappropriate urban and national planning or both" says Luís de Sousa. He recommends increasing maritime and railway modes of transportation; it is not sufficient to modernize the  electrical infrastructure or to encourage other sources of energy.

And here's the graph that identified the PIIGS's reliance on oil:

Thanks to Jorge for continuing to raise awareness of a subject that, as he writes, shall affect us all. Thanks to Samuel for his prompt collaboration.

A list of posts on previous articles by Jorge (from EuropeanTribune):

Have Oil prices bottomed out?

Unmissable interview with Franck Biancheri

The Month of the Psychological Shock (Over Oil) in America?

Interesting to note that the two most oil-dependent EU countries (Greece and Ireland) are also those closest to financial disaster.

Peak Exports will happne much sooner than most expect. ME oil consumption is exploding (Kuwait and SA +10% in last year). Kuwait and Saudi Arabia have both signed deals with the Chinese to supply significant quantities of crude to joint venture refineries which will limit exports to others. Those at risk include Europe and US. The UAE is embarking on a massive expansion of refining and petrochemicals which will consume oil and NGL's. Saudi NGL exports will shrink massively as new petrochemcial projects come on stream over the next few years. Kuwait has delayed but not completely halted a massive new refinery.In all ME exports look set to fall sharply, and we had better hope that Iraq pulls the rabbit out of the hat.

These effects will be huge as meanwhile both India and China are massively expanding their refining assets and need imported oil.

At some point European demand will stabilise (probably has) and when it does the pinch will come quickly. As for Saudi spare capacity I would not bet on it. Some is real, some is fiction. Time will tell.

My guess 2012 will see all the spare capacity used up and Goldman Sachs buying paper barrels just like 2008.

The four horseman are in waiting.

Peak Exports will happen much sooner than most expect.

Not will happen but did happen. Peak oil exports was in 2005. Most people did not expect it. In fact most people don't even know it yet.

For a larger image of the above chart go here: Net Oil Exports.
Ron P.

The most recently observable peak was 2005 following which is a very shallow trend towards decline. The peak in 2000 could have been mistaken for the all time peak and the mjor upswing trend in '03, '04 and '05 make logical sense as China ramped up their economy and the US/UK/Aus went to war in Iraq. While this graph, and the keypost that accompanied it,do have a story to tell, I think it is important to temper any conclusions by addressing all the usual objections as to why exports may be down. This would include GFC, effciency gains and major developments in transport like the Nissan Leaf!

Please go back and study the history of oil production. You can spot as many peaks as you like! :-)

This is my point. Many of the previous peaks have turned out to be wrong and this has led to "the boy who cried wolf syndromë". Many of the villagers have now stopped listening. Rather than crying wolf, we need to be saying "There is a strong smell of wolf in the air, so it would be wise to gather in the sheep, just in case."

Would you take a bet then Nordic Mist? I have €50,000 which says that net exports of crude oil, condensates and NGL peaked in 2005 and will never again surpass it.

Hello Lumina. I'm a little bit tempted. I think we probably will see an increase for a while. But my main point isn't that I believe that oil production and exports will increase. My main point is that we have enough oil to provide enough energy during the transition to other energy sources. We're already on the way. Maybe we've already had peak oil demand? Could be. Might not be.

The financial system will break down before any meaningful amount of transition occurs. The Bank for International Settlements says that sovereign debt is "at the boiling point" and oil contraction hasn't really even begun.

It's really simple: all this debt can't be paid back with a contracting economy. It can't even be paid back with a steady state economy because of how many excess claims we built up when everyone thought the party was going to last forever. Nate goes into a bit more detail below.

The world financial system's days, in its current form, are numbered.

The financial system will break down before any meaningful amount of transition occurs. The Bank for International Settlements says that sovereign debt is "at the boiling point" and oil contraction hasn't really even begun.

I agree with this viewpoint. The crash of 08 (during the oil plateau) was followed by massive borrowing to keep BAU alive for a bit longer, which was on top of a period of huge borrowing, but the piggy bank is broken. Next time there is a build up in oil price to the point of a collapse, there won't be trillions available to borrow to ease the situation.

And the previous poster's claim that the transition is already underway fails to recognize the minor percentage renewable energy has achieved so far, and the enormous costs it would take to follow thru with the transition. It's like you state, "The world financial system's days, in its current form, are numbered."

It's interesting that a certain list or group of individuals on this website get it - there is an understanding that 'It just doesn't work anymore'. The complexity that was achieved, the intricate infrastructre, the multiple layers of transport were all buoyed up by really cheap oil. Now that stuff is gone, what was possible before isn't working any longer. That giant howling thing we could refer to as humankind's electro-mechanical modern world is creaking and cracking at the seams, bending, tilting in a breeze of drastic change, lumbering forward towards its inevitable and surely deafening fall.

fails to recognize the minor percentage renewable energy has achieved so far

It's all a matter of perspective. Here's a different point of view: 99.9% of our space heating comes from solar power (otherwise it would be about 400 degrees below zero), and 98% of our lighting comes from solar.

the enormous costs it would take to follow thru with the transition.

Have you ever looked at the size of FF industries? The additional investment to transition to renewables would be relatively quite small.

For instance, the US generates about 50% of our electricity from coal, which amounts to an average of 220 gigawatts. Wind, on average, produces power at 30% of it's nameplate rating, so we'd need about 733GW of wind. Wind costs about $2/W, so that would cost about $1,466 billion. Transmission might raise that about 10%, to about $1,613 billion.

Now, roughly 50% of coal plants need to be replaced in the next 20 years, so about 50% of the $1.6T coal replacement investment is needed anyway; new coal plants are just as expensive per KWH as wind, so that half, or $800B of the investment can be eliminated from our considerations.

Coal plants cost about $.035/KWH to fuel and operate, which is about 50% of the cost of wind. That's an expense that we'll have either way, so we can eliminate 50% of the remainder, which is about $400B: all told, we can discount the wind investment by 75%!

Wind's intermittency is often raised as another source of cost: I address that here.

--------

So, that gives us a cost of roughly $400B, or $40B per year for 10 years. That's a small % of US manufacturing, and a very small % of GDP.

A bargain.

at best of course maybe a half or maybe a little more of that coal could be replaced with an intermittant renewable power sources--and that amount only if we added considerable storage options and much smatter metering (for lack of a better term). So figure on 400 billion being pumped back new coal plants...unless nuke magically jumps up and carries the base load ball. Still if the other 400 billion needed to replace burned out coal gen stations does get pumped into wind, solar and geothermal it will be a huge change in our fuel use dynamic. But from what I've seen around here coal plants in use tend to be replaced (and not cheaply) piece at a time--I wouldn't doubt that is fairly common practice elsewhere. There will have to be some real policy and tax incentives to move the US off coal in a big way. And big coal is doing all it can to make sure that doesn't happen.

It's all a matter of perspective. Here's a different point of view: 99.9% of our space heating comes from solar power (otherwise it would be about 400 degrees below zero), and 98% of our lighting comes from solar.

So, in that case, let's eliminate all use of fossil fuels for space heating and lighting, solving the peak oil problem with a single stroke and slowing down the rate of increase of carbon dioxide concentrations in the atmosphere to be good stewards of our environment.

If you want perspective, think of the carrying capacity of a planet Earth without fossil fuels. That was the carrying capacity in our distant past and it will be the carrying capacity in the distant future. The only difference is that we will have an extra 6 to 8 billion people to support on that same carrying capacity, several times before what we had in the distant past. Good luck with that.

The only hope is to use the fossil fuel windfall to permanently increase carrying capacity as much as possible, while we still have fossil fuels. Which means less Hummers and exotic vacations, and more capital investment in renewable energy. And many other things of course.

let's eliminate all use of fossil fuels for space heating and lighting, solving the peak oil problem with a single stroke

I agree, something close to that's not really such a bad idea.

let's eliminate all use of fossil fuels for space heating and lighting, solving the peak oil problem with a single stroke

That would not solve the "peak oil problem"
It would only delay it for 2 or 3 decades.
With China's increasing auto use, probably less then that.
At that point we would have a couple more billion people on the earth and have a large die off as peak coal, peak oil, and peak NG hit all at once.

That plus an even larger plastic garbage patch floating in the pacific which no government wants to make any plans to clean it up.

True - we need to eliminate almost all oil and fossil fuel consumption, and ASAP.

I agree with Ron that peak exports likely coincided closely with peak oil.
This is kind of a maximum likelihood or maximum entropy argument -- given no other knowledge than the mean yearly production, the most likely estimate for any "derivative" of production (in the sense of a related measure to production) will line up with that peak. In proportional terms, a higher peak with a roughly constant proportional export will also reach a peak at the same time.

Perhaps a call to action is timely....

Statement by Dr. James E. Hansen
Freedom Plaza:
Equal Protection of the Laws

We hold this truth to be self evident – all people are created equal. That truth is the basis for equal protection of the laws – a right guaranteed by our Constitution. "All people" includes young people, mountain people, poor people.

Our government was instituted to protect the rights of all people.
We are gathered here today to draw attention to the failure of our government to protect the rights of the people, and failure to provide equal protection of the laws. People have suffered a long train of abuses, invariably with the same objective – to enrich the few at the expense of the many.

First, the government is failing to protect the future of young people, knowingly allowing and even subsidizing actions that benefit the few at the expense of the public and at the expense of all life sharing this Earth.

Second, the legislative and executive branches of government knowingly propose actions that demonstrably and utterly fail to preserve our climate, and the environment for life.

Third, our government allows and contributes to a great hoax, perpetrated on the public by moneyed interests, aimed at confusing the public about the reality of climate change.
We are in danger of becoming the land for the rich and the home of the bribe.

More than 200 years after the founding of our nation, we face a great moral crisis. Human-made climate change pits the rich and powerful against the young and unborn, against the defenseless, and against nature. The moral issue is comparable to slavery and civil rights.

Solution for civil rights was provided by the combination of people in the streets and the courts, which provided equal protection of the laws and ordered desegregation.

Brave people have been standing up in West Virginia, in Kentucky, in Tennessee, in Utah, in Australia, in the United Kingdom, around the world.

But now is the time to go on the offensive. We should not be begging courts to forgive the brave people who protest. We must ask the courts to order the government to present plans to phase down fossil fuel emissions at a pace dictated by science, a pace stabilizing climate, preserving nature and a future for young people, providing young people equal protection of the laws.

We can bring that case. But we can win only if the public understands the situation, sees through the lies of the moneyed interests, sees what is needed to solve the problem.

As long as fossil fuels are the cheapest energy, we will not solve the addiction. There will be more mountaintop removal, longwall mining, tar sands, deep ocean drilling, shale gas, seeking the last drop in the most pristine places.

We must put a fee on carbon, collected from fossil fuel companies, with all proceeds distributed to the public. One hundred percent or fight! Most people will get more in the monthly green check than they pay in increased energy prices. Our economy and innovations will be stimulated. We will move to clean energies.

A coalition is building for a carbon fee with 100 percent distributed to the public in a monthly check. In October this coalition will launch a campaign, Million Letter March, gathering letters showing that the people insist on an honest equitable solution. Please join the March.

Let us resolve to have a rebirth – a rebirth of our nation, a rebirth of equality of opportunity, true equality -- with a government of the people, by the people and for the people – all of the people.

I have the utmost respect for Dr James Hansen. He is absolutely correct about the tax / green check on fossil fuels, and not just about the climate benefits. If we continue to use the fossil fuel energy surplus on hummers instead of wind turbines or solar panels until the day before the collapse, we are simply digging humanity's grave alongside the oil wells and coal mines. A stiff carbon tax is really all that is needed for private enterprise to provide the solutions which can make the hard landing more survivable.

Thank you Steve!

Yes a call to real action is timely indeed. Unfortunately what with the Glen Becks, Sarah Palins Rush Limbaughs Faux News and the ignorant but vocal Tea Partiers I think the small minority who actually understand the severity of the crisis and the forces that are coalesced against reality and sanity are in for a real struggle. I don't have a clue what the future holds for me personally but I'm ready for a monumental paradigm shift that is coming to a neighbor near everyone of us.

This is what we are up against: http://www.rollingstone.com/politics/news/17390/210904

"Let me get this straight," I say to David. "You've been picking up a check from the government for decades, as a tax assessor, and your wife is on Medicare. How can you complain about the welfare state?"

"Well," he says, "there's a lot of people on welfare who don't deserve it. Too many people are living off the government."

"But," I protest, "you live off the government. And have been your whole life!"

"Yeah," he says, "but I don't make very much." Vast forests have already been sacrificed to the public debate about the Tea Party: what it is, what it means, where it's going. But after lengthy study of the phenomenon, I've concluded that the whole miserable narrative boils down to one stark fact: They're full of shit. All of them. At the voter level, the Tea Party is a movement that purports to be furious about government spending — only the reality is that the vast majority of its members are former Bush supporters who yawned through two terms of record deficits and spent the past two electoral cycles frothing not about spending but about John Kerry's medals and Barack Obama's Sixties associations. The average Tea Partier is sincerely against government spending — with the exception of the money spent on them. In fact, their lack of embarrassment when it comes to collecting government largesse is key to understanding what this movement is all about — and nowhere do we see that dynamic as clearly as here in Kentucky, where Rand Paul is barreling toward the Senate with the aid of conservative icons like Palin.

Does anyone think these people even care about anthropogenic climate change, peak oil or can grasp
the consequences of continued population growth.

Our government was instituted to protect the rights of all people.

I don't know about that. Private property defined citizenship back in the day the constitution was written. Protection of property ownership is a huge part of the nuts and bolts of the constitution. The 'all people are created equal' in reality was only refering to male citizens (which all of the framers were) and in most of the framer's eyes that phrase just knocked down supposed 'divine right' monarchs and the like to same class of propertied male citizens to which the framer's themselves belonged.

Now citizenship is somewhat less narrowly defined these days, and property is defined far more broadly. You want to win in court.. showing damage to property is about as tried and true as it gets. It may seem banal to break down all those lofty ideals to property concepts but precious little useful work gets done around here unless property is involved.

Lets not be bashful,
This stupit country of ours(Ireland) went on a property buying spree with all of europe's money so when we default it will be like Iceland. It will be all the german pensions funds ect that will take the hit. When it finishes we will still have enough land to feed ourselves and 75% of Eu fishing waters. And the best wind resorce in europe. Also enough gas for power if we ever get it ashore from Corrib field.
it might be rough but we wont starve. The same cant be said for most of europe.

Hey!!!

I live in the U.S.........

Who can be more dumb than us?

We borrow and spend, live way beyond our means, and have a country that revolves entirely around cars.

We have no real mass transportation to speak of, and doubling or tripling the gas tax is not in the cards.

Some counter-arguments to think about:
- the agricultural sector is heavily dependent on inputs (one of the highest levels of application of nitrates in the EU)
- the ag sector is heavily tilted towards livestock etc, not easily or quickly turned to tillage
- eu subsidies (single payment etc) likely to dry up in the future
- climate change already causing reliability problems for traditional crops (flooded spud fields, washed-out grain)
- credit increasingly difficult for wind (energy price volatility)

- corrib gas will be sold "at market prices" (EUR or STG? or NOK?)

- visit killybegs and la coruna - compare the fleet sizes. big difference.

Teagasc supposedly have an emergency plan to convert all the urban green-spaces to allotments, but i'm not sure about stockpiles of spades, fertilizer and seeds ....

Hi Rib,

About 6 years ago, on a Western Ireland bicycle trip, I stopped in a pub in Leenane (Co. Galway) and talked for a bit with an elderly gentleman. He predicted the current situation in remarkable detail. I often wondered if it was just the Guinness or if he really was knowledgeable.

On future tours, I remember thinking that if I sold everything I owned in the States, I could buy a tiny lot and house in Ireland - not a good deal!

But, I still think that Western Ireland is one of the greatest places in the world (finances aside).

It might be interesting that Switzerland (not EU) is also in the 56% oil fraction category
but does for the moment relatively well. However, the question is for how long this ``island in the sun"
condition can continue.

Switzerland has a strong financial sector that will "extend and pretend" as long as they can and hide the truth for a bit longer until the house of cards collapses.

DD

A little googling tells me that Switzerland uses little coal, and a modest but growing amount of N gas. Elec generation seems to be mostly nuclear and hydro.

How is the oil use allocated between personal transportation, freight, home heating, etc?

hi,

the oil in Switzerland used to be divided roughly half in "heating" needs and
``transportation" needs. Now the heating needs (in actually i would say on average
excellently isolated housing) are substituted by gas 12%
thus the 2009 number says 21.7% for heating needs and 33.4% for transport needs.
(which together make the 55.1% oil use)
electric energy is 23.6% (40% nuclear and 55% hydropower (in fact if imported
nuclear pumped hydropower would be counted as nuclear it is more like 50% and 50% each)

Actually nicely presented every year here:
http://www.bfe.admin.ch/themen/00526/00541/00542/00631/index.html?lang=e...

Thanks. Unfortunately, few or none of the detailed reports are in english, but with online translation I'm making progress....

I'm interested to see that flat oil consumption hides another dynamic: transport is expanding reasonably quickly, while fuel oil (all for home heating?) is falling.

yes, i find that very interesting as well.

the transport use of oil has expanded enormously in Switzerland
(one can see it also on the streets.. bigger cars and many families have two cars now
like us one bigger family type one and one small etc the average km per liter has evolved a little down
but in reality the effect is kind of hidden by the "average" it seems.).

for the heating a big effort was done in Switzerland as far as I can see it..

michael

Note that Sam Foucher's mean and median predictions both seem to show production going down about now.

The actual numbers going up or down a bit as far as total production or imports are probably not even all that relevant in the very short term;any strong economic recovery will more than likely cause prices to spike sharply even if production and exports are still rising a little bit.

The really serious effects will only be felt some months or years down the road, as prices are bid up by buyers chasing falling supplies regardless of the state of the economy.

Demand destruction in my opinion simply cannot outrun declining production for very long.

But once the world does finally recognize the supply problem, it is going to knock economic confidence out for the count.Then we get the viscious circle of un welcome feedbacks for real.

Note that Sam Foucher's mean and median predictions both seem to show production going down about now.

The figures show only trends. The "crying wolf" comments above have some merit. It's logically possible we'll have a new peak. I don't think so personally, but I can't prove it in the same way I could predict the trajectory of something I threw into the air.

Some guy from Texas went into one on a thread on a Swiss Forum about how it couldn't be proved that there was going to be a Peak Oil anytime soon. It's difficult to argue him down as my point of view is the result of a few years reading posts on this site and media articles pointed at from Drumbeat. It's not like I can scribble down a theorem and add QED.

Even if peak exports have come and gone, and literal peak production is upon us, continuing to report on overall production and projections are still vitally important, as it provides a means to show "where we are and where we are going". Massive lifestyle changes (whether voluntary, imposed, and unavoidable) will affect demand, and communicating national/state/county/city/neighborhood/individual mitigations are as important as ever. Woulda/coulda/shoulda would not be constructive, of course

TOD's focus could continue to shift from "look at what's coming" to "now that it's happened, here's what you can do".

TOD's focus could continue to shift from "look at what's coming" to "now that it's happened, here's what you can do".

I have a problem with 'what you can do'. In my opinion, far too much of the 'what you can do' that I have seen is quite unrealistic, and would tarnish the credibility of TOD. That would weaken the 'now it's happening' message.

I don't have an alternative suggestion, just a whine about this one.

In my opinion, far too much of the 'what you can do' that I have seen is quite unrealistic

Specifically, which TOD articles are you referring to? Let's be clear that it's the articles I'm talking about, not 100% of the comments.

TOD has already started switching focus. That is why there is so much doom here compared to the past. Nate's recent campfire post was an indication of this, a reaction to the shift from the theories of a peak to the realities of the peak.

I do not want to be a doomer. I really, really don't. It is hard to make new friends. But with ~7,000,000 humans about to start coping with resource constraints it is very hard not to be a doomer. Every time you think you see a solution to any one of our problems the foundational problem of massive overshoot reminds you that solutions are just another form of denial.

DD

But with ~7,000,000 humans about to start coping with resource constraints it is very hard not to be a doomer.

Not to nitpick but you are three zeros short. The figure should be 7,000,000,000. That's a lot of people. But you are right on target. People keep trying to figure a way to support seven billion people as fossil energy declines. There is simply no way.

The problem is overshoot. There is simply no cure for overshoot, not even more fossil energy. That would only add to the overshoot and make the misery much more intense when the collapse finally arrives.

Ron P.

Whoops! Thanks Ron! ;-)

DD

There are cures and then there are cures. Russia has found one way to reduce population which is rather self selecting. As oil induced affluence starts to recede around the world there will be far less intervention by do-gooders determined to save every poor starving wretch and natural causes will do what they have always done to populations in overshoot.

While I am totally against any form of "active" population reduction measures, I think we need to really consider the whole ethical and philosophical basis of medical intervention which could include the movement of food beyond its own region of production. Populations need to reach regional sustainability and actively manage the demographic dynamics that comes with a stable population.

Once the supply system breaks down I think population, at least in the first world countries will dive very fast. People simply do not know how to take care of themselves anymore without retail stores to supply their needs. I suspect that large cities will have people starve to death or kill each other off over spoils within a matter of a couple of months. People that have kept a connection to the land will be playing roulette avoiding roving bands looking for anything to devour. Growing a crop within the first year or so will be nearly impossible. Wild game is going to be hunted to near if not total extinction. Farm animals will disappear as quickly as humans. Do I get an A in Doomer 101?

I tend to agree. The most vulnerable to oil decline are actaully the developed countries but the effects will not be evenly distributed. Developing countries will also suffer but probably on a much longer horizon as the industrial services of the developed world are withdrawn. Poor people in developing countries are not as dependent on these services so their adjustments will be proportionally less and therfore far less socially disruptive. I'm not saying that there aren't massive problems in developing countries already, just that the change won't be as noticeable. The developed world however will find the adjustment much harder, even for those of us who have been aware of this problem and making individual preparations for some time.

@Termoil

Developing countries will also suffer but probably on a much longer horizon as the industrial services of the developed world are withdrawn.

I tend to agree But the developed world can afford the high prices for longer. There is also more slack in our systems and they are not efficient.

Perhaps the develpoed world only need hang on for longer than the developing countries.

Perhaps we could make our systems more efficient or even radically change our lifestyles by owning only the one car etc.

Perhaps the developing world could make themselves more efficient by having only the one meal per day.

I think governments in developed countries will organize massively to help----kind of like a bailout, but with food and medicine. Already the "free market" no longer really exists as of 2008, and what-----about 40 million Americans are on food stamps----so it is not such a stretch. I think this kind of basic assistance could go on for a long time (years) and it could be effective at keeping relatively young and healthy people alive while everyone reorganizes the world into a sun-based economy again. But sick people or older people might have more trouble staying alive for as long as before. Birthrates will be low, I think. People will be very serious about thinking long-term. Cities will get emptier. I think it doesn`t have to be such a cataclysm....in fact, I think some governments are working to try to make sure that it won`t be.

I personally believe mitigations exist on the small to medium scale (individual to town) that could make the transition less problematic. Will this work for 7 billion people? Highly doubtful.

Watch out there's a wolf at the door!


Luis, with OPEC spare capacity reported to be in the vicinity of 5 mmbpd (happy to adjust that down a bit to take into account heavy sour) how can we be at peak?

Fire away.

Chart lifted from Rembrandt's August oil watch monthly.

ME OPEC production is down and rig count is down, they just don't seem to be trying that hard, and why should they, more oil, lower price:


Source Baker Hughes

http://investor.shareholder.com/bhi/rig_counts/rc_index.cfm

The real problem for Europe is our very high dependence on imported oil - I got a shock when I plotted this:


Source BP 2010

Is there any more reason to believe Saudi Arabia's reported spare capacity than there is to believe Saudi Arabia's proven reserves?

We do not know. However, there are reports that floating storage has been largely drawn down, and there is no indication of increased output from OPEC in the last couple of months to balance the 0.5 mbpd implied shortfall of supply that would result. BRIC oil demand growth (particularly China) is showing no signs of slowing, so we may see a firm test of this spare capacity in the next few months.

Unless, of course, OECD economies re-enter recession.

I can't figure out which is worse: They have more oil, or they have less oil?

I have read here at TOD that KSA total capacity is now 12 million barrels per day and the above graph shows that its spare capacity is about 3.8 mbd. Since neither of these figures can be varified (KSA does not allow many details of their production to be made public, and will not allow any third party audits or reviews of these claims) these figures are suspect. Furthermore, because the increase in capacity of over 2 mbd has occured over the last two or three years, the time required to implement this spare capacity (more than just openning valves) may be many months or a few years. Also the question of reservior damage may be an issue with pumping some of these fields at maximum capacity with EOR techniques.

The only way to test KSA's ability to produce as promised is if prices spike to $100 or $120 per barrel and see if their production increases 2 or 3 mbd. If then they do not ramp up production to lower prices, their spare capacity claim is mostly bull sh*t.

Saudi net oil export numbers per day by year, versus average annual US spot crude oil prices (EIA):

2002:  7.1 mbpd & $26

2003:  8.3 mbpd & $31

2004:   8.6 mbpd & $42

2005:  9.1 mbpd & $57

2006:  8.4 mbpd & $66

2007:  8.0 mbpd & $72

2008:  8.4 mbpd & $100

What's interesting is that the Saudis increased their net oil exports from 7.1 mbpd in 2002 to 9.1 mbpd in 2005, in response to annual oil prices rising from $26 in 2002 to $57 in 2005, but then they "voluntarily" cut their net exports from 9.1 mbpd in 2005 to 8.4 mbpd in 2008, in response to annual oil prices rising from $57 in 2005 to $100 in 2008.

Some of us 'round these parts think that the Saudi's "voluntary" cuts after 2005 (especially 2005 to 2008) are analogous to the "voluntary" cuts in Texas oil production after 1972.

I can see the logic of that argument but I can also see an alternative viewpoint where the Saudis realised they could make as much or more money from pumping less oil. IIRC, the futures market in mid 2008 were pointing to much higher priced oil, meaning it was worth more in the ground than as production. Different story today and the Saudis may still be licking their wounds from investment losses of the GFC, which they realise was linked to $147/bbl. The reasonably stable price band this year may indicate the sweet spot that maximises revenue for oil producers, keeps OECD economies stable, (which protects Saudi Investments and demand) and still allows China to grow, which is important for geo-political stability.

I don't doubt that the Saudis are as shifty as rattlesnakes, but I don't believe they are fools either. I think they understand they are in the drivers seat, but that doesn't mean that they alone can choose the destination or drive in a manner dangerous to the the other passengers along for the ride.

I have always thought that way as well. Their output depends on their surplus revenue requirements more than anything else. I agree they will have thought through the price/production parabola and made a decision. However as their population, Royal and ordinary, rise rapidly; their choices diminish. When they need every penny of earnings, their production will be flat out.

But's let's look at Saudi exports tracked into IEA/OECD countries

Yes the sum of Saudi oil exports (IEA data) to places where the flow could be tracked reliably peaked in 2003 (Light peaked in 2002). But we are supposed to believe that Saudi Arabia actually increased production/exports through 2005 but sent all that increase and more only to countries where it could not be tracked by the IEA.

It is interesting to look at the area under these curves, by
seeing the daily, and annual, cash flows they represent

                                 
2002:  7.1 mbpd & $26  = M$184.6 = M$67379/yr
2003:  8.3 mbpd & $31  = M$257.3
2004:  8.6 mbpd & $42  = M$361.2
2005:  9.1 mbpd & $57  = M$518.7
2006:  8.4 mbpd & $66  = M$554.4
2007:  8.0 mbpd & $72  = M$576
2008:  8.4 mbpd & $100 = M$840   = M$306600/yr

That is some serious wealth transfer going on here, and even as
exports fell 2005/6/7, the revenue still climbed.

It shows the Billions in motivation, to lower exposure to oil.

Euan, that EIA graph can't be trusted, because it says spare capacity never dropped below 1 million bpd even in summer 2008. Capacity being idled when the price was $147/barrel? I think not! So that suggests current spare capacity should be corrected to 4, not 5 million bpd.

The pie chart of European oil sources is interesting. I see you reference BP 2010 - presumably their Statistical Review of World Energy - so I assume that the definition of "Europe" is as per that source. I.e. not the EU: Baltic states are excluded, whilst Switzerland & Norway are included. I'm not sure whether Overseas Territories are included, though I don't suppose Martinique and the Falklands make much difference.

The average annual oil price to date for 2010 exceeds all prior annual oil prices, except for 2008, when we averaged $100. IMO, the small amount of excess capacity in the world consists largely of what Matt Simmons called "Oil stained brine."

Saudi Arabia has a few vast sour heavy crude oil fields - Safaniyah is the largest- that lie idle cos there's insufficient refining capacity for that class of crude. So they easliy had >1 mmbpd spare at peak price. If you look at the spare capacity chart it actually follows price developments quite well in recent years - pinches in spare capacity corresponding to high price.

My view is that if no-one can use it, then it isn't spare capacity. Say I drill 4 subsea wells and tie them back with a 10" pipeline designed for a maximum throughput of 60000bpd. If each well is capable of 20000bpd, does that mean my field has a production capacity of 80000bpd?? No, of course not.

OK, we could go through a debottlenecking exercise, and get the pipeline uprated to 80000bpd, but that takes time. Until then, the production capacity should correctly be stated as 60000bpd.

OPEC spare capacity reported to be in the vicinity of 5 mmbpd (happy to adjust that down a bit to take into account heavy sour)

So you are agreeing with me?

Maybe. 4 million bpd spare capacity might be right, though I suspect it's still an overestimate.

More like 2 Million bpd. I wonder what will happen when Mexico goes away as an exporter.

Saudi Arabia has a few vast sour heavy crude oil fields - Safaniyah is the largest- that lie idle cos there's insufficient refining capacity for that class of crude.

How meaningful is it to talk about spare production capacity if there's no refining capacity to deal with it? Is this capacity truly likely to be put into production before such refineries are built? Are there any plans to build such refineries?

After all, what matters in the end is the rate at which oil products reach the market.

Europe = old west + old east excluding former yugoslavia and former soviet republics, and yes including Norway and Switzerland.

Euan!

You present Middle East rig count, but what about the Saudi-Arabian?
How to interpret this development? The number rises dramatically during the years 2005 and 2006 from between 10 and 20 in the preceeding period. Then have sort of a plateau at or above 50. Starts to drop below 50 in december 2008. And is now just about 30. (Source: Baker Hughes) The most obvious interpretation would be that they are very comfortable with their production capacity. Other interpretations?

/ Jan

P.S. And how do you include a figure in your comment.
D.S.

You need to upload the figure to a server somewhere (Flicker?) and then use HTML code in your comment to view it. I'm using a Mac and Safari that lets me view source code for web pages - can't paste it here cos its HTML and gets interpreted - maybe someone else can help?

Euan!

Are there (lots of) servers available that you may use for this purpose (free of charge)? Can you mention any?

If doing it this way is standard procedure (in HTML) I will try to find out how to do it!

I use a "Flickr" account for my pics, but I get that through my ISP (you might have to pay) - google to search for free services.
e.g.

To input that I used:
img src="http://farm5.static.flickr.com/4113/5003942982_3e9e5e73f4.jpg" width="166" height="73"
surrounded by < and > You can change the width/height settings as needed, or just don't include them to show graphs as big as they are (That graph is scaled down by 1/3 from original size). Always use preview when posting to make sure you've not fouled up.

Chris R!

Thanx, maybe I sort of (just about)understands this now!

/ Jan

... comfortable ... Other interpretations?

There are always many alternative explanations when background facts are so sparse.

I am particularly skeptical of the inference that they are 'comfortable' with the current situation. Perhaps their planning experts believe that the cost of further drilling will never be recovered. World oil trade will collapse and they will have only their own local oil market to supply.

But they have also abandoned projects to make their country self-sufficient in food production, so it is really hard for me to see how they can be comfortable about their future.

Is there an Islamic analog to the Christian idea of final days and rapture? Maybe they are comfortable with that. If it exists.

Is there an Islamic analog to the Christian idea of final days and rapture? Maybe they are comfortable with that. If it exists.

Now I always mix up shia and sunni because their names are so similar. But anyhow, the version of islam present in Iran has such an idea. Historically, they had 11 great imams. Now there is a prophecy about the coming of the 12:th imam, and when he come, he will kick infidel asses all day long. Mahmoud Ahmadinejad is a firm believer that this 12:th imam will come early next week,or so. Surpriced he is building nukes to bomb Israel? After all, the 12:th imam will come any day now, so they will get away with nuking the jews away. Add door knocking, and remove nukes, and you get islams reply to Jehovas Witneses.

But I know of no such belief system in the Saudi version of islam, wich is of the other kind. Although islam as a whole has a prophecy of a big war at the end of days, present in all branches of islam.

Here's another one, http://www.energybulletin.net/node/38327 , where Henry Groppe argues that the IEA caused the large price swing of 08 since they were predicting far more added oil to the market from the OECD than occurred. And the Saudi's apparently believed them and did not scale up more oil for it.

Interesting to note in this article that Henry predicts an oil price of $65-$85 until mid decade and that Saudi Arabia can maintain an oil output of 8-9.5 mb/d for up to 20 years.

Well, here is the figure I referred to on Saudi-Arabian rig count.

As implied before, at least lately they seem to be in no hurry to increase production. But, maybe that is a misinterpretation!?

Elm, happy you got your htmling fixed - I agree this shows no crisis now in oil production, but there was one starting in 03/04 and it way / will return. Long time lags for price signal to work through system.

Long time lags for price signal to work through system.

But do the Saudi's do their planning based on price signals? They seem a little more foresighted than that.

Looking at rig count data, in 04 they were in panic mode, probably because of watering out in N and then S Aindar. But they will have learned lessons from that. Eventually geology will catch up with their foresight.

Hi there €uan, nice to have an objective question.

Saudi Arabia crude production is merely 1.5 Mb/d below what it was in the first half of 2008 when prices hit 147 $/barrel. There are good reasons to belive that real spare capacity is well below declared figures, as Rune recently pointed out.

Will we ever see a monthly petroleum production figure above the maximum moratorium of June 2008? Possibly. Will it make a difference? I doubt so, we should keep stranded inside the yellow band in Samuel's graph. The 2004-2008 price rampage, the so called Financial Crisis, are all but developing episodes of the peak, or more precisely the undulating plateau, when periods of supply destruction succeed periods of demand destruction.

Remembering the words of the late Ali Bakhtiari, the 2004-2008 period was the Transition 1 phase - a rather beneficial time when price rises had little impact on our lives. The Economic crisis we are now living is Transition 2 - when most of us reading these lines are feeling on our skins the effects of the end of cheap growth. Following comes Transition 3 - a time I envision to be prompted by new commodities' prices increases with still high unemployment figures and low (or negative) economic growth; some of the things we are used to may simply became inaccessible.

Transition 3 will in its turn provide the proper environment for Transition 4 - which I hope to be a time of serious commitment from our societies in the OECD to the effective replacement of fossil fuels, finally focusing on crucial sectors like Transport.

Hi £uis, this is the answer I expected , and don't entirely disagree. If the credit crunch continues and demand drops a little bit more and we see $40 (which was my "forecast" last Christmas) then the momentum from $147 will be lost and caution will abound. If QE manages to force economic activity higher near term then I see no problem with a new peak. I'm beginning to think we may hobble side ways for a long time.

I spent a lot of time looking at data this last couple of weeks and am convinced energy efficiency is the route to go (along with nuclear), aim for the OECD to halve per capita energy consumption by 2050. Efficiency actually enables higher prices that will allow more expensive resources to be exploited, hence efficiency is the friend of energy security but the enemy of the climate.

Hi €uan & £uis,

£O£! You could have combined the Euro with the Chinese Yuan to get €¥

Best,

ƒred

am convinced energy efficiency is the route to go

I agree that energy efficiency is extremely important. On the other hand, over the longer term (10-25 years) isn't replacement the way to go? That is, electric transportation & HVAC, powered by wind, nuclear and solar?

Quite. Efficiency only cuts fat from the system, it doesn't produce net energy. Eventually, we will have to get off FFs, and you can't be 200% efficient to do that. You have to transition. How and when we do that is anybody's guess. It looks like we're happy with token gestures and no real move from the addiction. This won't end well.

It looks like we're happy with token gestures and no real move from the addiction. This won't end well.

Token gestures or talk about breaking our addiction won't matter at all unless we seriously start dealing with the planet's population and this ridiculous notion that we must have economic growth at any cost, even if that cost means destroying our planet's life support systems. Are we all idiots or what? Don't answer that, it was purely a rhetorical question.

Re population I agree - but what to do? There are so many dilemmas and contradictions in human society.

Population is certainly our greatest challenge. But, birth rates are declining almost everywhere. Will they decline quickly enough? Remember the whole of South-East Asia with its enourmous population already has very low birth-rates as does Europe. Even the birth rates in India and Bangladesh are falling rapidly. The total fertility rate in India/Bangladesh is now 2.65 drastically down in just the last decade (CIA factbook). I used to be very, very pessimistic. Now I'm only a bit pessimistic. (With regard to population - With regard to everything else I'm an optimist!)

Luckily there are some pretty big "token" gestures out there. Such as Sweden being on the way to carbon free economy by 2020. Others will follow and it will probably end well.

... it will probably end well.

Perhaps Sweden will reach a carbon free economy on its schedule. Perhaps. But, IMHO, they likely will have abandoned almost all of their charitable efforts throughout the rest of the World. Lives will be stunted by want and poverty, at least somewhere. In different local areas throughout the world events will happen unknown to people elsewhere in the world. After a while, those who suffer will die. But somewhere, and in many different places, there will be survivors, and children of survivors. The children will know nothing of the terrible times that happened elsewhere. There will be enough of these children of survivors to carry on at a level of civilization that will be much better than the condition of the homo primates of a few hundred thousand years ago. I suppose this can be called 'ending well'.

Man, you guys with your extremes.

I agree that some will do a great deal to prepare (or continue preparing), and they may see an easier time of it. Others might just find, like the Grasshopper vs the Ant, that they simply live in a part of the world that will support them pretty much as before..

and then there will be 'other' places which we can already see are so immensely overpacked with hungry mouths and too-few workable farms or fisheries.. and in many of these, will could easily see some very bad endings, as the luckier folks might have to start looking on in horror, without the spare resources to offer much by way of help.

Pakistan and New Orleans look like early shades of the horrible 'choices' by the rest of the world to restrain their generosity.. and it'll be hard to distinquish (after a while) when it was regionalism, racism, simple uncaringness.. or just the lack of enough surplus to do much about it.

Nordic_mist!

Your nick suggests your Nordic. Well I am a Swede. One tend to get a bit tired of all political goals that are proposed and discussed. And not always credible. I for one cannot remember them.

So I went to the governments web-site and checked. Maybe the targets are not quite as ambitious as you state.

http://www.sweden.gov.se/content/1/c6/12/00/88/d353dca5.pdf (page 2)

The year 2020

50 per cent renewable energy

10 per cent renewable energy in the transport sector

20 per cent more efficient energy use

40 per cent reduction in greenhouse gas emissions

The latter target applies to the sector outside the European Emissions Trading System

The Royal Academy of Sciences predicts that Sweden could be almost fossil-free in 40 years.

http://www.kva.se/en/pressroom/Press-releases-2010/Sverige-nastan-fossil...

(I did not find this release in English)

Such as Sweden being on the way to carbon free economy by 2020.

I live in Sweden and let me inform you that this is 100% words and 0% action. The only thing I've seen is a ramp up of wind farms. I live in a town who once got the award "the greenest city in Europe"and they still brag about it. You can see signs by the inroads to the town, "Wellcome to Växjö, the greenest city in Europe". So what do we got here? An extensive and quite efficient buss trafic system, and excellent bicycle roads going everywhere. And also, they want to brand themself as "the trade city", by building malls allover the place, with gigantic parking lots outside for all the cars. Excatly where is this sustainable? Green?

I would love it if it was just this town, but this is the case all over the country. Wind farms, some tax subsidies for "enviornmental cars", we have the largest relative fleet of ethanol blend combustion cars. But all this is just scraping on the surface. The politicians who said we should get off oil in 20 years or so simply don't understand the challenge.

OK Nick, anyone want to correct me if I'm wrong:

ERoEI = energy got / energy used
net energy gain = ERoEI -1
efficiency = net energy / ERoEI

Efficiency of wind (EroEi = 20) = 95%

Coal fired power has ERoEI = 0.36 (36% thermal efficiency) = -180% efficient.

So I conclude what you say is correct.

Happy to have a reasoned debate about this - I already stuck my neck on using this logic.

FWIW, wind has an E-ROI that is much higher than that. See Cutler Cleveland's summary of the literature at http://www.eoearth.org/article/Energy_return_on_investment_(EROI)_for_wind_energy which showed that wind's E-ROI was around 19. If you study his sources, you'll see that that most of the studies are quite old. If you look at the turbines used in those studies, you'll see that the turbines studied were much smaller than those in use today - look at Figure 2, and read the discussion. If you study that chart, you'll see a very clear correlation between turbine size and E-ROI. It's perfectly clear that Vesta's claim for a current E-ROI of around 50 is perfectly credible.

Now, I would really like to see coal get replaced ASAP, but I'm puzzled by your analysis of it's E-ROI: you're talking about a conversion to a higher quality form of energy, which is about 3x more useful. We can see just how much more useful electricity is from the fact that this conversion is reversible: we can take 1 btu of electricity and get 3 useful btu's of heat with a heat pump.

Of course, the external cost of coal make it much more expensive than wind power: pollution, CO2, occupational safety, slag heaps, radiation emissions, etc, etc.

I'm not sure where that leaves us, but I'm glad we agree.

we can take 1 btu of electricity and get 3 useful btu's of heat with a heat pump

ah - but that's the next stage of the calculation, of combining efficiencies. A heat pump run on wind will be enormously efficient, run on coal electric, still good but not so great as running on high ERoEI renewable.

hmmm. I'm not sure the efficiency argument is useful: wind power "wastes" about 2/3 of the wind that hits the turbine, and the upgrade of energy quality from coal heat to electricity makes the input and output not the same.

I think it's enough that wind is cheaper, clean, locally produced and renewable.

The true question is why do you need so much heat.

NAOM

speaking of heat pumps we are trying something new up here in the far north--recharging the ground with solar hot water in the summer. Its a brand new pilot project in these parts but I'm very interested in seeing how it pans out. If I recall Engineerpoet suggested some sort of ground recharging might make heat pumps feasible in the north a while back--he just didn't elaborate on the solar hot water aspect though it was probably intuitive to him.

you seem to be changing your concept of ERoEI in midstream here when you equate it with thermal efficiency. The actual ERoEI of coal fired power should essentially say how much coal was consumed to get the coal and build the machine that generated the electricity relative to the amount of coal that was actually producing useable end product energy (barrel of oil equivalents are of course acceptable). The thermal efficiency merely states how much of the potential energy available is lost which is a whole different can of worms. Of course a full analysis of ERoEI would seem to require a thorough accounting for all embedded energy and that is a mighty big can of worms in an of itself ?- )

Thanks for making this reply so I didn't have to.

Folks like Charlie Hall estimate the ERoEI of coal to be around 50.

Agree entirely. $40 certainly seems much more likely than $120. Hobbling sideways and perhaps upwards for a bit seems probably.

My forecast here on the Oil Drum from August 2008 when "everybody" else was screaming: "Oil prices will never fall below $100 etc" was that:

"Nordic_mist on August 12, 2008 - 5:20am Permalink | Subthread | Comments top Although I believe that the overall trend for Oil Prices will be up for the next couple of years at least, I also believe that the price spike up to 145 USD was in fact caused largely by the weakening dollar and a general rush into commodities. Remember, it is not long ago that the price of oil was at 55 USD/BBL. A steady upward trend would suggest a price of about 80-90 USD now. I therefore suspect that oil prices will fall back to about 80-90 USD/BBL and then continue to gradually trend upwards. Incidentally I believe the floor is at about this level due to increasing lift costs/bbl."

Ok. I didn't get it quite right. By the way on August 12th the oil price was about $115 and the following was the result of the Oil Drum poll:

http://www.theoildrum.com/node/4397

Do you remember your prediction at the time Euan? Just in case you have forgotten it was: "I voted 102-126 this time. Thinking we are close to bottom."

Well. Guess it depends on your definition of close! Won't hold that against you for a minute but it just shows how difficult it is to predict the future of oil prices. :-)

The question we have all tried to tease out here is when new finds and discoveries placed into production can no longer replace what is being used on a permanent basis. We know that time is near and may even be in the past for conventional oil(eg 2005/2008). 5 MB/day spare capacity plus some new production coming on line in a world of 5% overall declining fields leaves us with about 1.5 years. Maybe more. Hopefully not less.

I look at the price of gasoline and think of it as a gauge. If it goes too high, we have not produced enough **and** more importantly, we have not progressed far enough with implementing alternatives. If it goes lower, maybe we have more time to prepare. For me, that is getting my electric vehicle on the road, adding solar hot water to the house followed by additional solar and conservation based and food growing initiatives. I'm optimistic about EVs and solar power. I'm not too optimistic about being a farmer when most farmers my age are thinking of retiring. I know I can telecommute. There is fat in the system. There has to be a **concerted** effort to abandon non sustainable BAU for the next paradigm and I see that effort growing.

Let me see if I get this right;

In 2007 average (annual) oil price was $72/Bbl and world annual oil (all liquids) supply was 84,5 Mb/d.

OPEC supply in 2007 was 34,4 Mb/d (all liquids) and OPEC net exports of 28,5 Mb/d which was a decline of 1,3 Mb/d since 2005 when oil price (Brent) was $54/Bbl.

Was OPEC holding back marketable capacity these years to support a price growth or was OPEC running flat out?

Is there a relation between OPEC oil spare capacity and oil price?

First 6 months of 2010 world oil supply at 86,0 Mb/d, OPEC supply at 34,4 Mb/d (0,6 Mb/d is growth in OPEC lease condensates and NGLs) average oil price (first 6 months of 2010) $77/Bbl.

Non OPEC supply grew with 1,3 Mb/d from 2007 and as of the first 6 months of 2010.

Yes, it may be that OPEC has 5 Mb/d of spare marketable oil capacity; question is when was that developed? And what fields? To make the estimate complete we need to establish at what rate OPEC capacity is declining….after all we are now more than 2 years past July 2008.

Rooone, ME OPEC production does not decline in the same way that mortal fields decline. With supergiants you drive up the road and drill new wells to keep production going - that is until you run out of dry oil areas to drill. Hence link between rig count and production. Sure, in mortal areas like the north sea and Texas, once decline really takes hold, increasing rig count makes little difference. But KSA is not yet at that stage.

Relationship between OPEC spare capacity and price is clouded by discipline. When the spare capacity is low and price is high, discipline doesn't come into equation. When spare capacity is high then it dose. With increasing transfer of control to KSA (Kingdom Saudi Arabia) they have greater power to maintain discipline.

Non - OPEC supply growing, KSA is withholding more and more capacity. Actually doing us all a favor since dumping oil price will kill swathe of OECD new projects. System is finely balanced. KSA is very clever at keeping global oil industry alive.

Yoooooooooon,

When the spare capacity is low and price is high, discipline doesn't come into equation.

So how do you explain that OPEC now has around 50 % (IIRC) compliance to present quotas?
Angola is way over its quota and some OPEC members have recently proposed to adjust quotas upwards.

How would you characterize present oil price of $80/Bbl, high or low?


Non - OPEC supply growing, KSA is withholding more and more capacity. Actually doing us all a favor since dumping oil price will kill swathe of OECD new projects.

According to the most recent data from EIA supply from KSA is growing, ref the chart above.



Supply from 9 other OPEC members running flat, and some countries are in decline.

More in my post Global Oil Supplies as Reported by EIA's International Petroleum Monthly for September 2010.

Euan - Not that I disagree with your general premise but my old Texas fields have benefited significantly over the last 40 years by increasing rig counts. It may be difficult to appreciate given the long time frame and relatively small (though not always) incremental gains. And at times it wasn't a drill rig increase but a workover rig increase that made the difference...another reason it's difficult to pick up such activities. A good example was in the early 70's when new recompletion techniques significantly increased production in 20+ year old fields. I saw old field rates increase from 200 bopd to 5,000 bopd over the course of a couple of years. A lot of enhanced recovery methods in west Texas required a lot of new holes drilled but this was done over decades so it doesn't tend to jump out at you.

But this history does point out a very different path we'll see on the downslide of ME (and most of the rest of the globe) production vs. the US IMHO. For the first 30 years of my career beating new production out of old fields has been my primary business. And it was done almost exclusively for small (and sometimes very small) independent companies. The majors did the same on their big heritage fields but cumulatively it's been the small companies making the gains. These efforts, though profitable, were labor intensive. This this is what we haven't seen in the rest of the world for the most part. The KSA can drill a new horizontal well and add 3,000 bopd. But a group of small US companies can do 1,000 work overs and add 10,000 bopd. But no one notices those efforts. The NOC's don't appear to have the ability/desire to work at this level. They may in time and provide a fatter tail than some project, but I think that potential gain is rather speculative. Thus I'm not sure if comparing US production history to future global declines is very instructive. The N Sea history may be more pertinent but the added complication there is the high operational costs of producing offshore vs. relatively cheap onshore ME ops.

I'm not sure how I would model the future global decline profile but my instincts tell me it will be very different from what we've seen in the US over the last 60 years.

And it was done almost exclusively for small (and sometimes very small) independent companies. The majors did the same on their big heritage fields but cumulatively it's been the small companies making the gains. These efforts, though profitable, were labor intensive. This this is what we haven't seen in the rest of the world for the most part. The KSA can drill a new horizontal well and add 3,000 bopd. But a group of small US companies can do 1,000 work overs and add 10,000 bopd. But no one notices those efforts.

Rockman: I agree with your general idea, but big companies, at least in US onshore fields, do the same thing. When I worked Prudhoe back in the late '80s everyone thought it would be done by now, but it is still making a lot of oil. I've been told that something like 40% of current Prudhoe production comes from wells that have either been drilled (short coil sidetracks mostly) or had a workover in the last 4 years. That trend has been happening for quite awhile. Prudhoe is in decline for sure, but this activity definately fattens the tail substantially. It is expensive and labor intensive.

I'm not sure how I would model the future global decline profile but my instincts tell me it will be very different from what we've seen in the US over the last 60 years.

I totally agree.

geo - Actually Prudhoe makes my point...I think. You probably have a better handle it it then me: when was the last time that you saw them bragging about bringing on a 20 bopd workover in Prudhoe? As you say about the costs of operating up there: when the big boys are finished getting the bulk out are we going to see a bunch of little companies doing 100's of 10 bopd recompletions/workovers? In that sense Prudhoe may serve as a better example of the future ME ops.

But that was my point: you and I can pull up tens of thousands of wells doing less than 10 bopd because the tiny operators make a decent living off of them. I just don't see the KSA spending a lot of time doing 5 bopd workovers anytime soon...if ever. That's all I was trying to get across...nothing earth shattering. I suspect a better model for future global declies would be to study some country with a well documented PO in which the NOC called the shots. Not all NOC's function exactly the same but I suspect none have ever behaved in a manner similar to small US independents.

Rock,
I thought I was agreeing with you, more or less? I was just pointing out that a similar thing is happening, at a slightly larger scale in legacy fields in North America. I'll have to ask around, but I think in Prudhoe they do workovers to gain as little as a couple of hundred bbls/day. Just your stripper well example but multiplied times 10 to account for higher costs due to the remote location. It would be interesting to hear what is happening in some of the old big California fields, such as Long Beach?

As far as I know, NOC's don't do that sort of thing, but then I'm pretty far out of the loop about them.

I did think you were but I like over selling sometimes. LOL. I haven't looked at the old legact fields in Texas for a while especially west texas but I think many of the majors have sold off their interests some time ago.

A couple of hundred bopd!!!! That's sounds like early retirement to me. LOL

with OPEC spare capacity reported to be in the vicinity of 5 mmbpd (happy to adjust that down a bit to take into account heavy sour) how can we be at peak?

Fire away.

Good question, but it underlines the folly of efforts to Peak Oil Spot.

As no one grossly overproduces oil, oil numbers are a measure of consumption (also at that price point), and recent numbers do show Consumption certainly HAS peaked.
Big deal.

It does not have to mean the sky is falling; It can mean that alternatives (which includes more prudent use) are ramping quickly enough, to start to impact total demand.

Which is a good sign, as it extends the tail, or half life, of Finite Affordable Fuel

jg - I'll jump in and offer a view that may be just my concept of PO: assume on 1 January 2011 the combined exporters have an excess capacity of 10 million bopd. Perhaps my definition of PO is different than most but that excess capacity has no implication as to whether we've hit PO or not. If on 1 January 2011 the combined rate of actual production + excess capacity is less than it has ever been and then never increases beyond that level then we've passed PO.

And given the uncertainty of the numbers today: if the real excess capacity + actual production today is less than it has ever been and doesn't increase beyond any previous historical rate then we've been at PO for a while. It wouldn't matter if there were 30 million bopd excess capacity today IMHO. OTOH if there were a huge jump in demand and every exporter was producing every bbl possible and there wasn't even 1 bopd extra out there, that wouldn't prove we were at PO either IMHO. Again, perhaps I'm in the minority but PO has nothing to do with consumption or excess capacity. It's simply the max rate oil could be produced on any given day and if that rate is less than it has been historically.

My 2¢ worth. I 'm onboard with this view.

The practical issue of spare capacity guesstimates are not about the peak production value but rather the lifespan of the plateau. If there is a lot of spare capacity kicking about and the price is subject to bitfaltion™ the chances this spare capacity turns up on mass to boost production off the plateau into the stratosphere is unlikely. There is no motivation on the part of those that have it.

The amount of spare capacity is really a measure of how long the plateau of production can be held at the newly optimised post crash price.

The caveat is mega demand from BRIC could possibly boost production upwards if the oil is really is there.

to me the new prediction game is not the peak date but the rear side of the plateau date ..this will be dependent on how accurate these models of managed saudi production are.

Again, perhaps I'm in the minority but PO has nothing to do with consumption or excess capacity. It's simply the max rate oil could be produced on any given day and if that rate is less than it has been historically.

Problem with that definition, is that it is totally virtual - the max rate oil could be produced on any given day is impossible to actually prove, plus will vary with time, and to me is less revealing than the area under the curve. - and especially the shape of the tail.

yeah it is. but its not virtual in the sense a omnipresent being with 100% knowledge would know. Or amortal being in the rear view mirror.. we peaked. what is the drop off date?

the shape of the tail is really dictated to a large degree by the amount of spare capacity.

if the peak figure is fire-walled as some think with a glass ceiling controlled in part by those with spare capacity then spare capacity is the metric we need to see the tail

The period of peak is already being lived. Predicting it is no longer relevant", he adds.

How refreshing someone had the guts to say it that clearly and concisely.

Dear Euan,

Thank you for your sanity among so much total madness and blindness.

Before I am attacked let me mention the following: I have worked in the oil industry for the last 15 years in all areas from down-hole to production. I know the oil patch. I also have good friends in Saudi Arabia and other countries in the Middle East. I also know Brazil very well.

And before I am attacked with even more venom: I am fully aware that extracting oil is getting more expensive.

BUT: You have to be religous. A complete fanatic in fact to be able to extrapolate the World Production in the way that Luis does. Here we have a clearly rising trend of production with a few bumps during the financial crisis. To be able to produce the absolutely hilarious "mean" and "median" predictions from that trend is incredible. It is almost incredible as saying that a few years without a rise in production proves beyond all doubt that we are on an "undulating plateau" and oil production will fall from now on.

Let me be totally clear: There is LOADS of spare capacity out there.

Saudi Arabia: Huge areas have not even been prospected thoroughly. Several fields are ready to produce but have been left while Ghawar still produces. No hurry. No point in collapsing oil prices.
Brazil: Oil production will be rising for the forseable future. There are new finds being made on almost a monthly basis both by Petrobras and by OGX.
Iraq: Oil production will be rising for the forseable future. Hardly any drilling has taken place in the West of Iraq and it seems probable that there are vast reserves still to be found in that area.
Ghana: Just starting oil production and production will be rising for the forseable future.

Look. Stop the silliness. Let's focus on the important stuff: Reducing carbon emissions, reducing pollution both global and local. There are many very good reasons to replace oil (and gas) as soon as possible. In fact, we are doing so very rapidly already - so there may, just possibly, not be a huge increase in oil production going forward. But make no mistake about it. It will be due to DEMAND falling. Not due to there not being available supplies.

ps. I fully accept that at some point there will be peak oil and that there are limited supplies of hydrocarbons on the planet. But are we at the peak now? Hell no.

And don't forget the excess capacity in Texas and the North Sea. The following graph lines up the point in time when Texas producers started increasing their excess productive capacity (1972, Blue) with the point in time when North Sea producers elected to start increasing their excess productive capacity (1999, Black). Curiously, the initial voluntary cuts in production in both cases corresponded to sharply rising oil prices.

And we saw similar voluntary reductions in global crude oil production in the 2006 to 2008 time frame, in response to rising oil prices, with a cumulative shortfall in production, between what we would have produced at the 2005 rate and what was actually produced (EIA, C+C), also, curiously enough, in response to rising annual oil prices (from $57 in 2005 to $100 on 2008).

In any case, no worries, Party on!

What a perfect example of using "data that fits my thesis". Yes. Oil production fell in Texas and is currently falling in the North Sea. But of course you would also agree no doubt that US Oil Production is currently increasing and has been doing so since 2006 (Rembrandt Oilwatch Monthly). I'm not saying there will be a new peak. There probabaly won't. But there still very well might be!I also guess that you argued that Brazil was on an undulating plateau from 1985 to 1990 (It was as a matter of fact). But of course since then Brazilian oil production has trippled - and it now seems likely that it will tripple again. In short: Using the fact that oil production somewhere in the world has peaked - or stopped rising - as "proof" that the world has peaked is just silly.

Perhaps the fact that total global annual crude oil production has (so far at least) not exceeded the 2005 rate for four years and for 2010 to date might be meaningful--while it looks like four of the five years will show year over year increases in oil prices. Curiously, this is in marked contrast to the sharp increase in global crude oil production from 2002 to 2005, in response to rising oil prices.

Note that if we look at oil fields in the North Sea whose first full year of production was in 1999 or later, these "Post-Peak" oil fields had their own peak in 2005, at about one mbpd (versus a 1999 peak of about 6 mbpd). So the fact that new fields were coming on line, as the region peaked, didn't mean that the region had not peaked.

I'm not arguing that North Sea oil production is not falling. It most certainly is. Until an elephant or two is found it will keep declining. And that isn't very likely. However, Norway's oil production might possibly start rising again due to finds in other areas. (But obviously this won't affect production for at least 5-10 years).

You seem to be conflicted between "maybe global oil production will fall soon, maybe it won't".
What would you project the probability that peak oil (peak exports, actually) will occur in this decade? Over 50%? If so, why not pursue measures to mitigate the considerable risks?"

The answer should be obvious, except to those who wish to obfuscate.

I'm mostly sold on the Peak being around now, but am quite unsure as to what the near term (to 2020) will bring (continuation of post-'05 plateau or a drop). When I first learned about this subject I remember thinking 'we'll only be sure of Peak a decade at least after the fact'. I still think that.

However given the importance of oil, I'd say the implications of being at Peak now and facing a subsequent drop is so significant that even 10% risk is enough to justify acting immediately to reduce dependence on oil and enact whatever other attainable options we have (i.e. Damned if I know what to do).

Methinks Nordic_mist does not want to see the truth. I don't blame him/her.

DD

Dear Dan,

Instead of running around being miserable I'm working on a number of projects to reduce our dependence on oil including both renewables projects and energy savings. It will be interesting to see in 2015 who's truth is right. Anyway, predicting the future has always been completely impossible so we'll probably all be wrong when something totally unexpected happens!

On a positive note. If you look back at history you'll find that the new electricity generating capacity in Europe has almost always been totally different than the last. Things do change very quickly. eg. in the 2000's nearly all new generating capacity was from gas (70%) and renewables (30%). Now who would have predicted that in 1995? There'll be a bit of nuclear in the future as well. By the way - A number of European companies are now aiming to exceed their 20-20-20 goals and greatly increase the percentage of renewables in the mix. Add to that the possibility that electric cars (or serial hybrids) are a success and there might be masses of spare capacity of oil production available.

My key point is: Predicting the future is very, very, difficult. And the longer I've been studying energy the HARDER I find it to do. 3.5 years ago when I joined the oil drum I was totally convinced by the immediate peak-oil argument. Now I find it much harder to be. Luckily!

The other important issue is to start working on solutions to replace oil rather than complaining about how the world will go under in a couple of years.

I really hope that you and your comrades at arms can stop screaming wolf and shouting doom and do something to save the environment on the planet and help build a sustainable future.

Have to ask this of all newbies (or silent oldies) here: Where can you find a good first-principles model for global oil depletion, specifically constructed by people associated with the "oil patch"?

I will likely hear crickets.

Where can you find a good first-principles model for global oil depletion, specifically constructed by people associated with the "oil patch"?

They would ask the question as-- "When does the reserve replacement problem become the production flow problem?"

That is Reservegrowthrulz stock answer, which is really non-responsive.

The salient point is that this question is much easier to formulate an answer to than any general economics problem since oil is an inanimate object that can be counted.

Web - I would offer that answer is very responsive. Just not one which is very satisfying. The public companies, as you know so well, are consumed by the desire to satisfy Wall Street. Likewise the small independents are at the other end of the spectrum and are consumed by the desire for cash flow/profit. And neither end has any interest in your type of analysis IMHO. I certainly do even when I get lost sometimes in details beyond my comprehension. Just as I say about drilling ops: there is the plan and then there's what really happens. In your case there's your analysis and then there's what most companies care to focus upon. In fact, to some operators your analysis is tantamount to heresy. Long ago some folks were burned at the stake for such crazy talk. LOL.

That is Reservegrowthrulz stock answer, which is really non-responsive.

?!? How does translating your question into their terms earn a comparison with our resident troll?

As far as I am concerned he is not a troll. He brings up these comments that need to be defended against. Infuriating, yes, but not a troll.

@Nordic_mist,

My key point is: Predicting the future is very, very, difficult.

Amen to that!

We've all been burned trying to make predictions that are specific with respect to either 1) time or 2) price. My standard prediction now is: "Liquid fuels will become more expensive (in $) over the next decade." Pretty tame but there are soooo many variables in the mix right now economically.

To a certain extent I agree with you. I focus entirely on historical data for production and consumption and do not see a rapid fall from current production levels in the cards over the next decade. However, I do believe that westexas' "net exports" story is valid and that Peak Net Exports will cause a world of hurt for import-dependent nations like the US.

In your estimation, do you think the new/undeveloped fields you mention will produce enough to satisfy growing local demand with leftovers for the world market? If so, please let us in on some of your insider knowledge. I would love to see some more detailed information about the spare capacity you mention

Being an outsider to the oil industry I am agnostic on the production potential of different fields in the world. But being from the "Show Me" state of Missouri, you're going to have to convince me with some hard evidence.

Cheers and good-on-you for standing up for your position. Now just back it up with data.

Jon

Peak Net Exports will cause a world of hurt for import-dependent nations like the US.

The US is uniquely positioned to deal with PNE. Europe imports as much as the US per capita, but will have a harder time reducing consumption: if the US reduced personal transportation fuel consumption to the level of Europe, it could reduce imports by 2/3.

Further, the US has local abundant coal, NG and wind resources. It just has to ramp up EVs and EREVs and it's pretty much dealt with PNE.

Europe, OTOH, has to reorganize it's freight system to use rail, and doesn't seem to show any signs of doing so quickly. It could do so, of course - it just has to standardize and cooperate among member nations.

Europe imports as much as the US per capita, but will have a harder time reducing consumption

This is an assertion without rationale or data to support it. The amount of sprawl in the US makes reducing it's consumption extremely difficult. Europe, on the other hand, has population centers that are far more compact, so relocalization will be easier. And Europe does have a modern rail system, something the US would have to dump hundreds of billions (or trillions) into to bring back into shape.

Europe has better mass transit and shorter commutes.

US has easy gains to make by building less ridiculously inefficient vehicles.

US could cut 5mbpd consumption simply by replacing the car and light truck fleet with modern European or Japanese designs. 2 years to retool the factories and a decade to build the cars. You did it in 1941 you could do it today.

Europe's options are more limited but we could halve our transport consumption at a pinch. Most commutes are within cycling distance. I am 48 and cycle commute 4 miles each way. Quicker than driving.

Reducing 5mb/d buys the U.S. just a few years before depletion wins again.

We started too late to prevent massive economic contraction. I recommend getting used to the idea.

Reducing 5mb/d buys the U.S. just a few years before depletion wins again.

US oil production is rising, while consumption is falling. Imports are falling faster - we can call in the Import Land Model.

We started too late to prevent massive economic contraction.

And yet, the world is still growing, even as oil production has grown much, much more slowly from 2004. Germany is growing strongly, even as their oil consumption falls sharply. The examples showing that oil isn't necessary to economic growth are overwhelmingly clear.

We don't need oil. We still are addicted to it primarily because of resistance from industries whose workers and investors would lose jobs and investments (car industry, oil industry).

The tools are here: Hybrids like the Prius, EREVs like the Volt, and EVs like the Leaf have been engineered and are for sale. Wind power has grown to the point where it can provide whatever we need (and yes, nuclear and solar are important too). So, what's left is the pace of cultural change, and the small matter of politics - how we deal with the minority that wants to block change:

"The billionaire brothers Charles and David Koch are waging a war against Obama. He and his brother are lifelong libertarians and have quietly given more than a hundred million dollars to right-wing causes."

http://www.newyorker.com/reporting/2010/08/30/100830fa_fact_mayer?curren...

Evidence that "the world" is growing, please. And I'll require something more than basic GDP figures, given the GDP of most Western powers now is mainly produced from financial transactions that don't require any oil and produce nothing.

Additionally, the vast majority of developed nations are "growing" by simply printing debt and suffering horrible austerity as more and more people fail to keep up with the costs. I hardly see this as indicative of the world rolling on fine with less oil, indeed, the only nations growing substantially are those we're selling our debts to for nothing and whom consume a tiny fraction of fossil fuels per capita anyway.

Germany, by the way, won't be growing for much longer once the PIIGS start squealing again. They're only able to continue with their export market because they actually make stuff and there is a huge QE race to the bottom going on, which as of the past week or so, has ratcheted up a gear. This cannot last and financial bottlenecks make ANY transition impossible, regardless of whether we can live without oil and use renewables or not. If you can't fund anything and you're in a currency and then a trade war, you're SOL.

the vast majority of developed nations are "growing" by simply printing debt and suffering horrible austerity as more and more people fail to keep up with the costs.

Debt isn't included in GDP figures. End-user goods and services are included.

They're only able to continue with their export market because they actually make stuff

And, yet they're using less oil each year.

a huge QE race to the bottom going on

I know what QE is, but what are you referring to?

This is an assertion without rationale or data to support it.

Sure. One can't always write long comments.

The amount of sprawl in the US makes reducing it's consumption extremely difficult. Europe, on the other hand, has population centers that are far more compact, so relocalization will be easier.

I don't think relocalizing is the easiest or likeliest approach for either the US or Europe. It's far easier to replace one's vehicles with vehicles that use less oil. This will be easier for the US than Europe, because US fuel efficiency is so abysmal.

Europe does have a modern rail system, something the US would have to dump hundreds of billions (or trillions) into to bring back into shape.

Yes, for passenger traffic. OTOH, rail in Europe only handles about 10% of miles travelled: expanding that to say, 50%, would be a very, very big project.

Europe's big oil problem is freight, and moving freight from trucking to rail is harder in Europe than in the US. EU rail standardization efforts are moving very slowly, and a big expansion of rail freight would also be a pretty big, slow project. It can and should be done, but it's not as easy as the US's main problem, which is personal transportation.

We've been around this before and there is the time to replace a vehicle fleet that you simply dismiss. So we'll continue to agree to disagree.

We've been around this before and there is the time to replace a vehicle fleet that you simply dismiss.

We didn't finish the discussion. I noted that Hirsch's estimates for the fleet replacement time were about 2x what they should be, and the conversation didn't go further.

Again, 50% of miles traveled come from vehicles less than 6-7 years old. Further, many of those miles are found in an even smaller minority of cars. For instance, 20% of miles traveled in Japan from 2% of vehicles (taxis).

Taxis can easily travel 100,000 miles in a year. They have an almost instant payback for greater efficiency.

Hi Jon,

My main point is that we probably have enough oil to avoid any great shocks while we gradually change over to other energy sources. I don't for a minute believe the collapse scenarios outlined in the original post. The countries with increasing production will cover for the countries with falling production. Will total production increase or decrease? Not very sure to be honest. But the combination of the very high oil prices in 2008 and the focus on climate change have kicked off the process of moving away from oil. It'll take a long time but it will happen. At some time the availability of oil won't be very relevant.

One very interesting fact that I came across recently: An increase of only 10% of electricity production would cover the requirements for a 100% electric car fleet. Beat that! You get rid of all oil consumption for light vehicle transport and only need to increase your electricity production by 10%. Very doable. Why is the percentage so small? In a nutshell: Because the amount of electricity produced already is so enormous. I'll try to find a link to the source.

When it comes to the increases in production I think we have no idea how great the increases may be yet. Brazil is still just scratching the surface of the deep, pre-salt, fields. The number of new oil fields found is incredible. Iraq is interesting to. The reserves could be enormous. I'll try to put together some decent figures when I have a bit of time.

Nordic_mist,

My main point is that we probably have enough oil to avoid any great shocks while we gradually change over to other energy sources.

That's a strange assumption to me. We've already had one shock (2007/2008) and it was inside the context of a fully functioning financial system, a fully functioning energy system and liberal markets.

All these factors are changing as we have this conversation and you think we'll avoid "any great shocks?" Sounds like you aren't taking into consideration the whole picture.

I've just been turned on to "The fossil energy/climate change crunch: Can we pin our hopes on new energy technologies?" and will read it this weekend.
http://linkinghub.elsevier.com/retrieve/pii/S0360544209004873

Apparently it's an analysis similar to the Fake Fire Brigade series in that it asks, "Can we move an appreciable amount of our energy system to renewables and maintain this style/size of economy?" Here is the abstract:

There is a growing perception by society of the risks of dramatic global climate changes due to anthropogenic greenhouse gases, in particular energy related emissions of CO2. This has spurred a renewed interest in carbon free or carbon neutral technologies for converting sources of renewable primary energy to electricity and to transportation fuels. However, it takes energy to produce energy, even when the primary source is energetically cost free, such as solar or wind. The aim of this letter is to present a model which allows the simulation of the energy costs of the deployment of a new energy technology.
We show that the new technology may actually be an energy sink, instead of an energy source, relative to the global total primary energy supply (TPES) for many years or decades, depending on its intrinsic energy costs and deployment path, even though stated aims for its gross energy output are achieved. As expected, the energy payback time of the conversion devices, as well as fuel and maintenance costs are critical parameters. We illustrate the general model with simulations of the deployment of photovoltaic electricity, at global and national levels.

Thus, the only question remaining in my mind is where we land on the blue curve below. I suspect it will be closer to Point B than Point A. Keeping the world economy the same size isn't even a remote possibility, in my view.

Economy vs Renewable Energy

While I can't argue with your main point, this:

We've already had one shock (2007/2008) and it was inside the context of a fully functioning financial system, a fully functioning energy system and liberal markets.

Almost cost me a keyboard.

The financial system at the time was overleveraged to the point where a stray rumor could have brought it down, the need to write down much of that leverage is still weighing on the world's economy.

Yes, oil has something to do with it too, but "fully functioning economy"?

Apparently it's an analysis similar to the Fake Fire Brigade series in that it asks, "Can we move an appreciable amount of our energy system to renewables and maintain this style/size of economy?" ... We illustrate the general model with simulations of the deployment of photovoltaic electricity, at global and national levels.

This is a bad approach: if you take old PV E-ROI numbers (and that's what such analyses routinely do) it's easy to show that fast growth of PV is a big problem. Let them do this analysis for modern wind power.

Why is the percentage so small?

It has more to do with the astonishingly low efficiency of conventional ICE vehicles. The average US car gets 22MPG, which is about 1.6kWh per mile. An Ev might use .25kWh per mile!

Good point.

Hi NM,

Another perspective to think about is flow rates.

As the Giants water out, their massive flow rates will be difficult to offset with an ever-larger number of ever-smaller/deeper/heavier fields.

Ultimately Recoverable Resources (URR) do not correlate with production ; the reverse, in fact -
a statistical distribution of field sizes worldwide is something like a pyramid or bell-curve, with a small number of super-giant fields, a population of middle-sized ones, and very many small ones.

It's easy to persuade oneself that the big ones have all been found, and the remaining ones are smaller.

This implies that the net flow must decline as time passes, irrespective of URR.

If you combine flow rate projections with ELM (export land model) effects (where oil producing countries' own usage grows, further decreasing the quantity exported), the implication - the risk, in fact - that market availability could diminish significantly, rises.

There was a great deal of discussion and excellent technical analysis of these perspectives a few years back here on the oil drum ...

a statistical distribution of field sizes worldwide is something like a pyramid or bell-curve

I think you got this about right, but the shape is not even close to a bell curve or pyramid. A peak in size doesn't actually appear. The best fitting model shows that the mode of the field size distribution is likely zero in size. It drops off from there, perfectly explainable by dispersion in growth rates similar to what you will find in crystal nucleation and growth models.

The distribution of fields sizes (x) like this link if you invoke Wolfram Alpha

Because the geologists and petroleum engineers never did their homework and avoided truly educating people about the statistics of oil production, the best explanations are always found on TOD. :)

Nordic,

I really hope that you and your comrades at arms can stop screaming wolf and shouting doom and do something to save the environment on the planet and help build a sustainable future.

In my professional life I have done my part to be a responsible citizen and make change happen and I continue to do it today. Over the past three years I have helped multinational corporations reduce their carbon footprint through travel reduction by creating high-end video conferencing networks. Video communications is becoming a substitute in global business for many events that used to require travel. The efforts of myself and people like me have resulted in many thousands fewer plane trips by people who use the technology. Believe me, I care, but in the past few months (since I found this site while trying to figure out why the BP spill happened) I have become aware of what is happening in the world and I find that perhaps I have been naive to think that I could make enough of a difference to really matter.

I love our planet and the life it contains. I love most aspects of our civilization. But it looks to me that they are not compatible in their present form. As far as I can see the only path to sustainability is a radical scale-back of our civilization. It seems that the best way to save our planetary environment is for humans to reduce our footprint much greater than we will ever be able to do willingly. That's okay, nature's limits are about to help us with that.

I have made wine. I know what happens to the yeast cells after they eat up most of the sugar and release alcohol as waste. Most of it dies. Some of it goes dormant in hopes of coming back another time.

I keep looking at the data we have available hoping that I will see something that will let me not see doom. Every time something gives me hope I am reminded of reality by a mental picture of 7 billion people desperately trying to survive. Desperate people do desperate things, especially if it seems that there is no future for their children. If you do not believe that then perhaps you should look to events in Africa.

I worry that the longer we are able to sustain what we have will result in more time for 7 billion (or more) desperate people to destroy the environment to the point where our planet is a wasteland that will take millenia to recover. I worry that there will not be a place for our species on that planet. Desperate people will burn all the coal and all the wood and eat all the wildlife and rape the environment until it is completely destroyed and mostly lifeless.

On the other hand, if a collapse happens quickly then perhaps we can reach sustainable numbers without decimating the environment and perhaps there will be a future for us.

So you see, doom is actually hope. :-)

DD

Dan, Very glad to hear your not as miserable as I might have thought! :-)

Perhaps you missed my point. You asserted that regions that are showing, or that are projected to show, increasing production are evidence that we are no where near a global peak. My point about the North Sea was that significant new fields just coming on line as the region peaked only served to slow the average decline rate down to a little less than 5%/year.

In reality, Peak Oil is the story of the rise--and subsequent fall--of the large oil fields in a given region. Oil companies can and will make money in post-peak regions, but this incremental increase in production does not necessarily mean that they can make a material difference.

But my larger point was the following:

Perhaps the fact that total global annual crude oil production has (so far at least) not exceeded the 2005 rate for four years and for 2010 to date might be meaningful--while it looks like four of the five years will show year over year increases in oil prices. Curiously, this is in marked contrast to the sharp increase in global crude oil production from 2002 to 2005, in response to rising oil prices.

total global annual crude oil production has (so far at least) not exceeded the 2005 rate for four years and for 2010 to date

Using annual figures is cherry picking.

1) 2005 annual figures were only about .02 M bpd higher than 2008: that's statistically insignificant. In fact, the preliminary 2008 figures were higher than the 2005.

2) 2008 monthly and quarterly production in the first half exceeded 2005 quite convincingly: 2008 annual production clearly would have exceeded 2005 production by a large margin if it weren't for the collapse in demand.

But a peak is a peak is a peak -- defined by a simple math expression for a,b, and c, where a < b > c and b is the peak point.

A flat line with noise is a flat line with noise. From 2005 to 2008, I see a flat line with noise in the production curve.

...seems stats arguments are not the solution to peak oil crisis...

Reminds me of people arguing just how fast the Titanic was sinking. I guess Deffeyes was "cherry picking" when he predicted a global peak between 2004 and 2008, just like Hubbert predicted a peak between 1966 and 1971 for the Lower 48.

The fact remains that we have seen a cumulative shortfall in production, from 2006 to 2008 inclusive, relative to what we would have produced at the 2005 rate, despite annual oil prices going from $57 in 2005 to $100 in 2008. And of course 2005 production was impacted by the hurricanes.

I guess Deffeyes was "cherry picking" when he predicted a global peak between 2004 and 2008, just like Hubbert predicted a peak between 1966 and 1971 for the Lower 48.

Yes, we're cherry picking when we use those as examples of success at forecasting:

Deffeyes guessed in 2003 that peak had already happened in 2001, and predicted that production would fall in the coming years. If that had turned out to be the case, he could have claimed credit for a good "pick". But, it didn't happen, so he went on to choose later years as the peak. If you keep on making new predictions until it happens, you aren't really predicting.

Hubbert did well with domestic oil. OTOH, he tried to make a similar prediction in the late 70's that nat gas would fall off a cliff in the 80's. That didn't happen, so the prediction was forgotten. On the other hand, the oil prediction succeeded, so that was remembered.

So, these are pretty good examples of cherry picking.

-----------------------------------

The fact remains that we have seen a cumulative shortfall in production, from 2006 to 2008 inclusive, relative to what we would have produced at the 2005 rate, despite annual oil prices going from $57 in 2005 to $100 in 2008.

Both production and prices crashed in 2008, so I think you have to stop that timeline about halfway through 2008. And, of course, you really should note Robert Rapier's alternative explanation, that the Saudi's simply underestimated demand and underproduced for fear of popping a bubble too strongly.

And of course 2005 production was impacted by the hurricanes.

Sure, but clearly not as much as the collapse in consumption affected 2008. And, of course, the hurricane problem was a supply problem, so the argument for excluding it isn't as strong.

The above ground factors we see in action now are individually so much smaller in percentage terms and also much more diverse and disconnected compared to artificial peaks created by supply constraints such as 1979 and 73 oil shocks. I dont see the big coverall above ground issue excuse. The plateau kicked in 2005 a good few yrs before the melt down.

the very fact that above ground issues now are numerous smaller issues is a sign of peak itself because in the end they are part of the diminishing return scenario. no singular effort can overcome them by bypassing to a new basin such as the north sea.

is the south atlantic deep oil really going to put oil back on a upward slope? I dont think so... so it remains to be seen if all the smaller bottlenecks can be unravelled.

why hasn't the market solved these above ground issues? its no different than the market solving the technical issues of drilling under 2000m+ of water. if you cant throw all these above ground issues into one big hat there is little reason to think they can be solved on mass to have a positive effect. even if some are resolved... New above ground issues come into being all the time and always have including on the upslope of the curve...But in that case the geology allowed for growth in production to smear them out of the picture. If you have to rely on this multitude of issues you have pretty much lost the argument

peak now but the rear slope may be gentle... unconventional heavy oils may go some way to increase production but it could be argued its a different resource(i would).

I agree that if we redefine a year as being less than 12 months, then 2008 was the (so far) annual peak in crude oil production, but regardless of the specific time (should we try to narrow it down to the precise hour?) the larger point is that EIA data show that global crude oil production not only stopped growing in 2005, it has shown a cumulative shortfall relative to the 2005 rate. This is all consistent with Deffeyes prediction for a global peak in the 2004 to 2008 time frame (and an erroneous observation that global production appeared to have peaked prior to what his model showed does not count as a prediction).

the larger point is that EIA data show that global crude oil production not only stopped growing in 2005

If production was clearly higher in 2008 than in 2005, than it didn't stop growing, right?

it has shown a cumulative shortfall relative to the 2005 rate.

Not if Robert Rapier is right, and the Saudi's simply underestimated demand and underproduced for fear of popping a bubble too strongly. We know that the Saudi's had a very justifiable fear of a market crash that causes a price crash. They had very bad experiences with that kind of thing in both the 80's and the 90's. That kind of trauma is not forgotten quickly, especially by people like the Saudi's.

an erroneous observation that global production appeared to have peaked prior to what his model showed does not count as a prediction

It definitely does. Deffeyes guessed in 2003 that peak had already happened in 2001. That was a prediction that production would fall in 2004 and later years. If that had turned out to be the case, he could have claimed credit for a good "pick". But, it didn't happen, so he went on to choose later years as the peak. If you keep on making new predictions until it happens, you aren't really predicting.

We seem to be repeating ourselves a bit, don't we?

Maybe we can start arguing over the precise minute that we peaked?

Well, it's pretty clear that the annual numbers are misleading. If we're going to talk about PO predictions, or try to identify a point of PO, then we may as well do it right.

that should include significant and meaningful windows for margins of error?

Absolutely. That might prevent silliness like this:

"In my first oil book, Hubbert's Peak, I predicted on page 158 that world oil production would peak in the year 2005. Earlier in these Current Events postings, I refined the prediction to focus on November or December of 2005. Hurricane Katrina put the kibosh on November-December, but 2005 seems to have emerged the winner. The US Energy Information Agency now reports the 2005 production to have been a tiny bit larger than the price-boosted year of 2008. It was a close game, sports fans, but 2005 won. When they give out the Super Bowl rings, they don't look at the point spread."

http://www.princeton.edu/hubbert/current-events-09-11.html

I have to agree that micro rejigging of peak predictions a somewhat vacuous activity because it involves above ground factors socio-economic...the weather! but these guys have little choice

there is a difference in the degree of error they throw at their modeling and the general picture we get from looking at the body of the prediction industry on the graph.

I tend to not to place too much store in above ground arguments that are less than significant because they make the graph flatter and wider at best and are unlikely to add a spurt up at the expense of tail length.

why?

Because it requires multiple coincidences of relinquishing factors. So its unlikely they all get resolved at once and even if they could the fact they "could be" would force the hand of a player like the saudi/(russia?) to undo the effect. Why? Because they have optimised the game around their spare capacity..They are trapped along with the rest of us and are acting as a regulation against resolving factors.

Which is the point I made in the other post.. As one problem above ground resolves another crops up and dumps all over the curve like a load of superimposed static.

A new oil basin OTOH has to be factored in any general peak model

Which is why the south atlantic deep water may stretch it all out a bit but is unlikely to come on line in a meaningful way quick enough... Which I think is a good thing. Its good we have peaked (relatively speaking) with a degree of slack in the system but peaked I think we have

That sounds reasonable. "Above-ground" factors weren't really a significant part of my comments.

well I think they are by there absence if get my drift. But it matters not

Basically my position is that estimates of the amount the basins can deliver by these curve plotters are in the ball park... if you want a game changer you need new basins not field with in known basins.. for the us plateau watchers to be wrong there has to be abig fat load of EASY to access undiscoverd oil somewhere

in way I'm with SImmons on the infrastructure thing in as far as the number of rigs and guys you can throw at the problem.

.its almost Tainteresque(word!)

the numerous new ventures to offset depletion are just that

numerous

and right there is your problem

Its one thing to be right based on heuristics. Its even better to be right and have a fundamental model based on first-principles to back it up.

indeed

I tend to piggyback my rule of thumb thinking on the back of guys who can do the math. Its good for my ego cos I feel smarter.

Dupe

If RR is correct The argument that you make concerning the saudis sitting on 2mpd+ doesn't really matter because they definitely are not going to open up the taps now after the party is over

if they didn't want to pop the bubble why squeeze that deflating ballon now...if anything they are not going to pump ever!

in which case that reality is fixed in place like the geology

plateau 2005 everything on it is noise including above ground hiccups and belches

But of course you would also agree no doubt that US Oil Production is currently increasing and has been doing so since 2006 (Rembrandt Oilwatch Monthly).

Since 2006? Liquids yes, crude oil no. The trend for crude oil only turned up last year. Here is US production of C+C since 2001 in thousands of barrels per day according to the EIA.

2001  5,801
2002  5,746
2003  5,681
2004  5,419
2005  5,178
2006  5,102
2007  5,064
2008  4,950
2009  5,361
2010  5,471 (average for first six months.)

Several years ago the definition of "oil" changed. Some folks decided that bottled gas qualified as oil. And since the US produces more propane and butane per barrel of oil, our production of "liquids" has been greatly skewed.

But the point is that oil production bounces around. Some years it is up and some years it is down. But the trend is clearly down for the USA, for the North Sea, for Mexico and for lots of other countries. The trend for the world is flat right now, bouncing either up or down just a tad each year. Expect the trend to head down, like the USA and the North Sea very soon.

Ron P.

Not important for the point but if I rember correct the norwegian production around the year 2000 was about 3 to 3.5 mbpd. Are the scales mixed?

Norway is not the only North Sea producer.

The devil in the details and I always miss one that come back and hit my ass.

Just one more thing (as Columbo would say)... Just because it isn't easy to prove Saudi reserves doesn't mean that there is no oil in the desert!

Which is a good point, because "There is no oil in the desert!" is exactly what we have been saying on this list for the last 3.5 years.

Exactly. And without a shred of evidence to back it up. (OK... I've read all the posts showing sattelite pictures of Ghawar)... In fact I've read nearly all the posts for the last 3.5 years. But that doesn't increase or decrease the amount of oil in the desert. :-)

We don't automatically take any claim at face value, and yes, there is reason to believe that many OPEC claims are exaggerated. Besides, no one has said "there is no oil in the desert!", so you two are just beating on a strawman of your own making.

Will. I agree with you exactly. That was my point.

But that doesn't increase or decrease the amount of oil in the desert. :-)

You just reminded me of your Saudi friends, who for a very long time have maintained that their official reserves neither increase nor decrease despite the billions of barrels of oil they produce each year. We know one thing for sure about the Saudis: that they are lying through their teeth about the amount of oil they have left.

"There is no oil in the desert!" is exactly what we have been saying on this list for the last 3.5 years.

Total absolute nonsense! No one has said there is no oil in the desert. There is lots of oil in the desert. What we have been saying on this list for almost 5 years is there is less oil in the desert than claimed by OPEC.

That is nothing but a gross exaggeration Consumer, like the OPEC claim of over 1 trillion barrels of proven reserves.

Are you by any chance a Saudi? ;-)

Ron P.

I assumed that the statement was ridiculous enough that the /sarc tag was implied. Kind of like WT referring to the "voluntary" cutbacks in Texas oil production over the last 40 years.

Let me practice:

This morning, 17 large swine sprouted wings and flew out of my backside. /sarc.

There is another way, not using geology at all, to tell that oil supplies are at past peak.

Look at the world economy, especially the highly developed countries that use lots of oil...USA, Japan, Eurozone. All of them had a credit bubble then a subsiding in economic activity. They are fighting hard, but the system is showing real signs of stress and exhaustion and I can only conclude it`s a thermodynamic system running low on FF inputs. Lacking the former steady inputs of high EROI energy, the systems are in distress.

It just seems natural that governments, who take the role of supporting the energy and material flows moving through the system (what we see as an "economy") would respond to lower FF energy inputs in a way that causes a credit bubble, what we saw/felt as massive, hyper economic activity.

The 2008 crash seemed very natural too. And so I don`t think it is possible to say that lots more oil is out there. But I know a lot of people are wishing that there would be.

There is another way, not using geology at all, to tell that oil supplies are at past peak. Look at the world economy

There have been business cycles for a long time. We've had very similar bubbles in the past. The Depression lasted roughly 10 years. The Panic of 1873 lasted about 20 years, depending on the country.

I think this time is different!

I will cite one number---that is all that is needed I believe----to prove this thesis:

The number of cars in the US declined in 2009 for the first time ever (except for once in wartime in 1941). The number of cars declined by 4 million which was around 2% of the total car fleet.

Materials cycle and energy flows. We are seeing, for the first time, less material (substantially less--4 million cars is a lot of weight) cycling through the system of the most oil-dependent country in the world.

This is against everyone`s wishes and everyone`s hopes. (Except people who don`t like cars!)

I can SAFELY predict that from now on you will see the US auto fleet decline every year from now on. It is that simple. All because there is not enough energy to cycle them through their production-waste cycles, move them on the road, and employ their buyers in some profitable job.

SOme years there will be big declines in the fleet number, some maybe smaller. Every year will be down. Then Chindia will follow. And everywhere. Like it or not!

This is really, really historic!!

It is not simply another cycle. This is something else again!!! This is Wow!

One thing I learned a long time ago: "Never believe anybody who says: This time it's different".

Neville Chamberlain also failed to accept "that one". We all suffered the consequences. History is there for your service but it's polly not your cup of tea.

Never believe anybody who says: "This time it's different".

But at some Black Swan point in time it can indeed be different.

Re-read Nassim Taleb's anecdote in his book, Black Swan; about the talking turkeys at the turkey farm:
'For the last 2 years straight, farmer Thanksgiver has always fed us well all the way through end of November, why should this year be any different? It's never different this time. You worry too much.'

The number of cars in the US declined in 2009 for the first time ever (except for once in wartime in 1941). The number of cars declined by 4 million which was around 2% of the total car fleet.

Do you have a source for that?

You can google "US auto fleet declines 2009" and see the results. I think there are many.

People don't want to think about the implication of a declining auto fleet. Yet I believe that the auto fleets in the developed countries will decline. It has already started. There is no good substitute for petroleum. When you see a car speeding past you are seeing a huge energy flow, cars are a pure and natural expression of petroleum and coal energy flow. Consumerism is another manifestation of this energy flow. Merchants are having trouble because of the lack of cheap energy in the whole economy. And it is worldwide.

Nevertheless I think the future will be better because it will be cleaner. Clean air and water are precious. Cars are just fouling up the planet, as far as I'm concerned (I don't have one).

Saudi Arabia: Huge areas have not even been prospected thoroughly.

The trouble with Saudi Arabia is the Arab D anhydrite seal that caught all the oil and stuck into Ghawar. There has been extensive exploration efforts in Saudi Arabia that turned up very little - Shaybah an occasional success. And that includes IOCs in there looking for gas - turned up nothing. Very unlikely there's another supergiant lurking undiscovered since bumps on the Arab D are easy to see and drill.

Main unexploited resource IMO is the wet area of Ghawar that may produce at lower production rates for many decades but at higher cost, and since oil economics in Saudi Arabia includes paying for a vast state structure, not sure how they'll fare when they run out of dry oil in Uthmaniyah and Shedgum.

The Saudis are currently exploring for oil in 1200m water depth and doing so with intentions to drill there in the very near term. If there were really 5M barrels of easily accessible spare capacity sitting idle, then it’s hard to imagine they’d be spending the huge sums to explore and drill in these challenging environments, let alone doing so with the urgency and pace they are now demonstrating. Smart people such as the folks who run Aramco understand the economics of picking the low hanging fruit first, and they are way past that point, based on current actions.

Nordic - Are you perhaps mixing metrics a little? Perhaps I'm interpreting "spare capacity" incorrectly as what could be produced by simple turning a valve. Much of what you described is production from wells that haven't been drilled yet or fields not at a production stage yet. I'm not arguing for or against your projection of what might be added production capacity in the future, but that isn't production capacity today IMHO. The new capacity might be developed but it will take time, capital and economic incentative to do so. Tapping into whatever spare capacuty we have today requires none of these.

Isn't this the age old reserves vs. resources debate? If we have volume X of crude oil on tap that we can pump out at will, and there's volume Y known in the ground from geological theory and prospecting surveys, then we can't really say that we have X + Y available as spare capacity. The US could otherwise say that it has far more ready to unleash, if we're happy to count the deep-sea oil wells that may or may not be drilled in the future.

Rockman. I am. And I'll have to admit that re-reading my post I found it very messy! Anyway, done is done and said is said. I'll still argue that the increasing production in Brazil, Iraq, Ghana, Angola, Khazakstan etc. will probably lead to a greater total spare capacity being available in the market. There was definitely very little immediately spare capacity available in 2008. However, there is also no doubt in my mind that the sharp peak in oil prices was caused by speculation. Don't misunderstand me though: The general trend of rising oil price is due to fundamentals. ie. The rising cost of extracting the last barrel of oil.

As noted up the thread, IMO you are assuming that incremental regional increases in production and net exports will make a material difference. Given that global crude oil production stopped growing in 2005 and given the (so far) slight decline in global net oil exports, and given our model and numerous case histories, I think that we are in the early stages of a long term, and accelerating decline in global net oil exports--and incremental regional increases will not make a material difference. Incidentally, the EIA shows that net exports from Iraq fell last year, but they did show that Brazil went from net importer status in 2008 to net exporter status in 2009 (BP still shows them in net importer status).

We just finished an analysis of 16 net oil exporting countries showing multiyear production declines. The median net export decline rate was about 7%/year, within a range from low single digits to over 20%/year. At 7%/year, volume drops by 50% in about 10 years. But as the ratio of consumption to production increases, the net export decline rate tends to accelerate with time.

However, the underlying CNE (Cumulative Net Export) numbers are really eye opening. Sam Foucher's best case is that by the end of 2013, three years from now, the (2005) top five net oil exporters* will have shipped about half of their post-2005 CNE. IMO, a reasonable estimate is that by about 2021, the total global post-2005 CNE supply may be 50% depleted.

And then we have the very rapid increase in net imports from "Chindia." Their combined net imports rose from about 11% of total global net exports** in 2005 to 17% in 2009.

*Saudi Arabia, Russia, Norway, Iran and the UAE

**Net exporters with 100,000 bpd or more of net exports in 2005 (BP + Minor inputs from EIA)

Nordic - can't complain about your messiness...been there done that myself. I agree we have lots of new production coming in down the road. How that might relate to spare capacity is the tough question. Smart folks here try to balance the factors: increased production from new fields vs. declines in old fields vs. increased internal consumption by exporters vs. changes in global demand as economic activity fluctuates vs. geopolitical factors. A truly appreciate all these efforts by our very clever TOD family. But I also see the many assumptions required to build the full model. The long term "excess capacity" curve varies greatly on these assumptions. And there in falls the heart of the debate. And I think it's a very useful debate even though I'm not sure anyone can prove with any great certainty their model will develop as projected. But not from intellectual dishonesty but just the complexity of the issue.
.

Agreed. I'm not very sure where we'll end up. Probably something we haven't even though of will turn up. Like shale gas in the US "turned up".

I'll have to jump in when the "evil speculators" myth gets propagated. You'll notice that same excuse used during many commodity shortages. The myth is useful because it distracts from the underlying fact that a structural deficit exists. It is much easier to blame everything on "speculators" than to admit a shortage. The press also doesn't appear keen on publicizing that inflation is due to an increase in the currency supply, in our case because we've given banks the exclusive right to create new money and lend to the rest of us at interest.

Yes, the future (as opposed to spot) price of oil is determined by speculation. Oil futures were in backwardation during the entire price run-up, meaning that speculators were betting the price would fall. The spot price of oil OTOH is based on what someone actually pays before they use the product. So when you see a run-up in spot price it is because real people are buying and using a real product. If a speculator wanted to manipulate the spot price they would generally have to purchase and then store a commodity - creating an artificial scarcity. That is very difficult to do with oil since the changes in storage are negligible compared to daily use.

What you actually saw in 2008 was a shortage of physical product on the world market. End users were burning every drop of oil they could get, and there was still not enough at any price under $150. Once the world went into recession (IMO largely due to the oil shortage) there was demand destruction and a temporary glut of oil left on the world market. This temporary excess of physical product caused the spot price to collapse. Now you are seeing the market normalize as production drops slightly and the world economy began to recover. If world oil production remains flat or begins to decline, you should see a continual series of these price spikes and collapses - all begin blamed on evil speculators of course :)

Dup

Saudi Arabia: Huge areas have not even been prospected thoroughly. Several fields are ready to produce but have been left while Ghawar still produces. No hurry. No point in collapsing oil prices.

That kind of statement should never come without some kind of proof, a link to the evidence. The evidence I have says the exact opposite.

Aramco boosts drilling in seismically tough Red Sea

Aramco is seeking reserves in anticipation of global economic growth and increasing demand for oil. The Red Sea is two kilometres deep in places with a 7,000-foot thick salt sequence which can distort seismic images, according to the magazine.

Why is Saudi looking to produce what would be the most expensive oil in the world, under two kilometers of water and 7,000 feet of salt?

The Manifa project is costing them 14 billion dollars and will likely run higher. They are building islands in the Persian Gulf along with a causeway to each for the project. And the oil is so contanimated with hydrogen sulfide and vanadium that they must build their own special refinery to handle it. Vanadium is something no other refinery wishes to handle. Google Manifa Vanadium and get dozens of hits. You will also find where it has been discussed on TOD several times before.

And: Saudis eye CO2 injection at Ghawar Now why is ARAMCO going to all the expense of piping C02 all the way to Ghawar. It was of course stressed that Saudi does not really need to do this! Of course they don't need to do this, they were just looking for another place to spend a few more billion dollars.

We all know what Saudi says and the news tells us what they are doing. And what they are doing indicates that they are desperate to keep production up and are spending billions and billions in an effort to do so.

Ron P.

Because economics do not need to make sense if you are a "peak oil" denier. As a denier, you can say things like massive investments in hard to recover oil reserves are a way to save the easy oil for later.

Economics reveal the truth.

If it is expensive to extract then the cheap oil is drying up or gone.

I always find this constellation useful whenever I start doubting my "PO soon" beliefs ,,,,,,,,, It normally resets my opinion back to "PO oh yeah soon".

Some text over here : http://planetforlife.com/oilcrisis/oilsituation.html

That's a nice graph. I have never seen it annotated that way. I use that discovery curve as an input for the oil shock model, and it has a fundamental statistical basis that one can also reproduce. I refer to that mechanism as dispersive discovery. There are fundamental rules governing search over a constrained volume -- largely independent of the individual reservoir or field sizes -- that will produce that same discovery peak profile. No one has ever refuted that model and it remains the ONLY fundamental model for discovery; even Hubbert resorted to heuristics.

What a silly graph. It assumes that there will be no major discoveries in the future. And it totally underestimates the discoveries made in 2009 and 2010. I hate this kind of "let's draw a straight line downward for all of the future of mankind graph". It's just completely useless.

You can ignore anything on the graph shown as 2009 or 2010 and beyond as this graph has not been updated for those years yet.

This graph is not data from the peak oil researchers.
It is just the facts of the data as put out by the energy agencies, IEA, EIA, oil companies, etc.

Surly you must have seen this graph before, as most people here have been watching this graph year by year, as it has been developing in its present state, for many years.

To call it a silly graph, as this graph is one of the best representations of the facts to date, shows your state of awareness of the peak oil issue.

.

.

Little more to add her Doc. Thx.

"Silly graphs" straight from the really real reality.......... Denial is hard to argue.

The Nordic is a typical oil industry guy I would say, where denial runs rampant.

I find it quite amusing that being in the oil industry and knowing something about oil production immediately disqualifies me from making sensible comments. Perhaps, perhaps, my dear WHT it is you that are in denial? Will be very interesting to see how things develop during the next 5 years... If oil production hits the median or mean lines drawn in the first graph in the original post I'll eat all my hats. If there is never a year again where a lot of oil is found I'll eat my socks.

I developed a model for discovery of oil, something that you guys could never come up with especially in light of the trillions of dollars in profit the oil industry has taken in over the years.

We will see how this pans out. Of course, you won't be embarrassed because you have made your fortune and that is all that really matters.

I reckon its going to hold plateau for some time yet cos I think there is a fair bit of surplus capacity kicking around BUT i doubt we will see it go much higher.

All very well you saying its not going to hit the mean or median

is it going to stay in the yellow margin?

Of course I have seen this graph before and of course the historical data are more or less right. My point is that the graph only has its dramatic effect by drawing in the yellow bits in the future that nobody knows anything about.

Right, because there are huge fields that we somehow just totally missed up until now.

And you're in the oil industry, you say? Are they seriously that terrible at mapping resources, or are you just trying to tell me with a serious face that a quite clear trend is about to magically be reversed because... you work in the sector and have experience?

Much as I'd like to see you eat various parts of your attire, your fantasies, like your words behind them, hold no weight, and we judge you based on your comments on this forum, not by your Internet experience credentials. Anyone can claim to know the oil patch and be a 40 year vet of the industry. They soon show otherwise if they trot out the "There's more Ghawars out there, fer sure!" line.

Absolutely true. There probably are. Remember - Only a few years ago nobody would have predicted that oil fields would be found in the pre salt in Brazil.

Right, and that Brazil find, still an anomaly by the way and not a trend, has done nothing to production. Is this really the best you can muster to defend your outlandish claim? There is absolutely no evidence to support your claim of a renewed growth in discoveries to rival that of the past, let alone what would be needed to maintain present required production for the given demand.

Look at the scale again.

The "huge" discoveries of the past few years had to happen to stay on the predicted path.

Being a materialist, until 2005 is exceeded, it is peak.
It could happen, but it is looking further and further in the rear view mirror.

"those countries in greatest difficulties will be precisely those called the PIIGS. These countries each have an oil dependence in their total energy mix of over 45%, including Greece with 58%, Portugal and Ireland with 55%, Spain with 48% and Italy with 46%."

Could someone explain why these countries have such a high oil dependence?

For those one, don't know... but for Belgium which is a bit further in the list, the explanation is easy. We have a high level of taxation...with as huge loopholes. So if your employer has 10.000 eur for you, he can pay his own taxes, you pay your own taxes, and you will finally get about 3.000 eur net. So the trick is: with that 10.000 he can pay a very nice company car, all related taxes, gasoline/diesel, that you can use as much as you want, for work and personal trips. Taxes to pay for the advantage of a company car: about 500 eur a year.

Which explains that half of the cars in Belgium are company cars. And as diesel/gasoline is free, why limit your distances or take common transportation? And thus the next logical step is to buy an usually badly isolated house somewhere in the country side.

Final result: average oil consumption of a Belgian is about the same as the one of an American (divide total demand by population). And one third of this is diesel (very few gasoline cars here) and the other third is heating oil.

I am the weird guy who rent his company car to a friend who is a car addict and use instead his brompton bicycle to go everywhere.

Mehdi

In the case of Ireland we have no coal and a lot of oil is used for heating very sub standard insulated or non insulated houses. Due to years of bad planing people had to buy over priced houses up to 100Km from where they work. Also deliberate running down of rail, in favor off road transport. Finaly we are an Island if you want to get off only practical way is to fly.

What if there’s much less coal than we think?

http://www.grist.org/article/2010-08-18-what-if-theres-much-less-coal-th...

While it will be painful, all this is good news. As fossil fuels become expensive, alternatives will be more attractive, and innovation encouraged.

Not so fast. If the law of receding horizons has any say in the matter, then it won't be a simple switch to PV solar and EVs and hey presto, we're back to BAU. When oil gets expensive, everything gets more expensive. While it may incentivise for a move away from oil, it won't make it easier when the alternatives get pricier thanks to their reliance on the FF economy in place as is.

I expect that when people realize what Big Oil and Big Coal have done there will be an uprising.
There may be blood.

We have to drink all their milkshake first though.

Schwarzenegger attacks Big Oil, Prop 23 & GOP Lies!
http://www.youtube.com/watch?v=d9oOFtmT_EA

If our currencies (any of them) represented reality, then the spare capacity, a new peak and very slow subsequent decline rate might reasonable. But the complicating factor overlayed on global oil exploration/production is the overextended nature of our economic system of claims. We need credit growth each and every year to keep up servicing of prior debt issuance - both govt and especially private corporate and municipal. Organic growth has stopped and central banks the world over have taken over what was previously the role of commercial/local banks - inject credit from nothing into a growing system. The demise of this system will undoubtedly severely drop demand, which will suppress oil prices which will suppress both drilling and exploration. Once (if) the dust settles and global trade recommences with some new, lower leveraged (and hopefully resource pegged) currencies, the peak will be that much further cemented due to ongoing depletion, not to mention the negative perception shift occuring with export/import dynamics (i.e. protectionism). I have been vocal that july 2008 was not only the all time peak in oil production but also (due to the genesis of the bubble prick in credit) also the highest all time monthly price (barring some unforseen geopolitical conflict). I also believe 2008 will be the all time high in global economic output. I would put a 5% chance that this could occur in 2011 if the political resistance to quantitative easing and other spatial and temporal resource allocation shenananigans is weak. But not beyond that.

Basically, a peak in oil production circa now, looks entirely different with a far overshot global currency system than with a moderate, unleveraged, monetary system with responsible tethers. We have the former. In the rear view mirror, peak oil will have 2 major impacts - one inflationary -from resource persepective and two - deflationary, from pricking the 40 years and growing credit/monetary bubble. So far these two themes have been neck and neck with the inflationary one starting to gain a short lead - but I expect the deflationary theme to soon dominate (QE2 might help mkts but not economy), bringing about higher aggregate decline rates, and making 2005/8 look more and more like a certain peak with each passing year...

The buzzword that has been adopted in economic circles for this seeming paradox is "biflation".

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

The deflationists and the hyperinflationists are likely both correct, but with only part of the story.

DD

Ha! That is first I heard of that term.

Well, a 'biflation' term might also apply to our oil future. As EROI of oil declines ** a higher and higher price will be needed for oil companies to initiate new prospects. But as society gets poorer as too many claims on the future get called in today, they will be able to afford (both directly and indirectly) a lower and lower price of oil and its entire supply chain. We are still in a goldilocks range of $70-$80 which is both profitable and affordable (due to OECD/China govt credit spigot (esp China)), but where/when the price becomes 'too hot' or 'too cold' is an open question.

**technically as price drops, average EROI will go up, as the costliest projects are scrapped - but net energy (EROI X scale) would decline - at least over time.

Well, a 'biflation' term might also apply to our oil future. As EROI of oil declines ** a higher and higher price will be needed for oil companies to initiate new prospects. But as society gets poorer as too many claims on the future get called in today, they will be able to afford (both directly and indirectly) a lower and lower price of oil and its entire supply chain.

Someone posted a link to this paper the other day and just skimmed through it but after reading the term biflation it hit me that this might be related to what the authors refer to as a critical bifurcation marking a transition from a stable equilibrium to a cyclic or chaotic attractor.

Early-warning signals for critical transitions
Marten Scheffer1, Jordi Bascompte2, William A. Brock3, Victor Brovkin5, Stephen R. Carpenter4, Vasilis Dakos1,
Hermann Held6, Egbert H. van Nes1, Max Rietkerk7 & George Sugihara8

It is becoming increasingly clear that many complex systems have
critical thresholds—so-called tipping points—atwhich the system
shifts abruptly from one state to another. In medicine, we have
spontaneous systemic failures such as asthma attacks1 or epileptic
seizures2,3; in global finance, there is concern about systemic market
crashes4,5; in the Earth system, abrupt shifts in ocean circulation or
climate may occur6; and catastrophic shifts in range lands, fish populations
or wildlife populations may threaten ecosystem services7,8.
It is notably hard to predict such critical transitions, because the state
of the system may show little change before the tipping point is
reached. Also, models of complex systems are usually not accurate
enough to predict reliably where critical thresholds may occur.
Interestingly, though, it now appears that certain generic symptoms
may occur in a wide class of systems as they approach a critical point. At
first sight, it may seem surprising that disparate phenomena such as the
collapse of an over harvested population and ancient climatic transitions
could be indicated by similar signals. However, as we will explain
here, the dynamics of systems near a critical point have generic properties,
regardless of differences in the details of each system9. Therefore,
sharp transitions in a range of complex systems are in fact related. In
models, critical thresholds for such transitions correspond to bifurcations
10. Particularly relevant are ‘catastrophic bifurcations’ (see Box 1
for an example), where, once a threshold is exceeded, a positive feedback
propels the system through a phase of directional change towards
a contrasting state. Another important class of bifurcations are those
that mark the transition froma stable equilibrium to a cyclic or chaotic
attractor. Fundamental shifts that occur in systems when they pass
bifurcations are collectively referred to as critical transitions 11.

Emphasis mine.

So might 'biflation' be construed as an event signaling just such a critical transition?

But the complicating factor overlayed on global oil exploration/production is the overextended nature of our economic system of claims.

Nate, I've seen this said many times, and yet I haven't seen any real analysis which showed that any particular level of debt was "right". How does one establish that?

We need credit growth each and every year to keep up servicing of prior debt issuance - both govt and especially private corporate and municipal.

Again, I keep looking, and I haven't seen a good explanation for this idea. Why can't interest rates go to very low levels, and interest payments be made from ongoing flat income, just as any other "overhead" cost (government maintenance, book keeping, etc) would be paid?

I think the problem is one of distribution of wealth. You are correct that a very low level of interest helps the problem but in a situation where wealth creation has gone negative it is possible for the interest payments, even with very low interest, to have so great an impact on available monies that it consumes all of the income from productive activities.

Government is the easiest example. If debt increases to the point where all of the tax revenues are required to pay the interest on the debt, the government ceases to function. So the specific interest rate is not interesting it's only the ratio between the interest payments and the income.

The current real estate situation in the US (and others) is also a pretty good example. When the mortgage is more than the household income the household has become dysfunctional. Either income has to go up or the interest payment has to decrease.

In the case of "flat income" that you describe it has to be noted that, for the interest paying entity, that fraction of income is no longer available for productive use. If you have a growing family, or growing expectations, you will either be or feel like you are getting poorer as time progresses.

As the banks loans money to businesses at interest the borrowing businesses must have a higher income to pay back the loan or they will have less profit in the future to use for consumption or investment.

If debt increases to the point where all of the tax revenues are required to pay the interest on the debt, the government ceases to function. So the specific interest rate is not interesting it's only the ratio between the interest payments and the income.

If the interest rate declines by 90%, wouldn't the cash flow required to make interest payments decline by 90%?

that fraction of income is no longer available for productive use.

The same is true for any kind of overhead, such as government, or routine bookeeping.

As the banks loans money to businesses at interest the borrowing businesses must have a higher income to pay back the loan or they will have less profit in the future to use for consumption or investment.

Think of a situation where both the loan principal and the interest payments are constant. Think of the interest payments as administrative fees, like rent, or accountant's fees.

[A] monetary system with responsible tethers

Nate,

Ha ha. That's a good one in terms of untruthiness phrases.

You might want to look back at a dwindling discussion here at your Clowns post.

The circus tent is closed.

The stakes are being pulled out of the ground so as to "untether" ourselves from terra firma.

But a few left-behind clowns (me included) are sobering up during the tear down operations over the cognitive connections we make between W (well being) and V (values) and M (money) and F (financial systems that are untethered from terra firma).

"IMO" what people fail to get is the non-asymetry of oil decline.

I have lived through periods when oil production was 60, 70, 80mbpd and remember them as being n"not too bad"...

Looking at graphs we are then told that oil supply will decline, and naturally compare -say- 2025 output with 1995 output and think "hey, things were not too bad back in 1995 so why worry?

What this thinking completely fails to realise is that back in 1995 there where -in all likelyhood- 1/4 less people globally all wanting the same barrel as in 2025...

Pure Econonics points to asymetry as the future demand always will need to be a much greater % than past. 10 years of 5% growth asymetrically is 2.65 times difference...

Nick.

future demand always will need to be a much greater % than past

My consumption is lower now than it was 20 years ago, and I'm looking forward to driving an EV, living in something close to a PassivHaus, and using wind powered electricity.

FF consumption doesn't need to rise.

People also don't need to breed or consume as much, but it's happening, and for every EV driving Passivhaus residing person, there's a dozen more who are happy to go with BAU. If any transition is going to work, it needs to focus on everyone cutting down on everything, not just a more efficient vehicle or boiler, but less of everything.

Admiral. I'm not sure that what you are saying is true. Certainly not in Europe: During the 2000's nearly all new electricity generating capacity added was either gas or renewable. No oil. No coal. Things are changing and changing quickly. In China too: Nearly all the new coal power stations are now of the newest kind and the ramp-up of renewables is absolutely incredible. Things will take time. But change is coming and will continue.

Admiral. I'm not sure that what you are saying is true. Certainly not in Europe: During the 2000's nearly all new electricity generating capacity added was either gas or renewable. No oil. No coal. Things are changing and changing quickly. In China too: Nearly all the new coal power stations are now of the newest kind and the ramp-up of renewables is absolutely incredible. Things will take time. But change is coming and will continue.

Correct, and being on a plateau, or declining consumption, that is being augmented
by alternatives, all helps extend the tail, and so hopefully avoid serious 'siege mode' transitions. At least in most countries.

It will always be important to remember that shuffling paper will cure nothing: you have to actually build something, if you want change.

Those without money, local resources, or technology will have a bumpier road.

If any transition is going to work, it needs to focus on everyone cutting down on everything, not just a more efficient vehicle or boiler, but less of everything.

The price signal a powerful motivator to get people to change. In the US right now, energy in all its forms is still cheap enough that it isn't an important consideration when buying cars, building houses or choosing where to live. As fossil fuels get more expensive these habits will change. We just have to hope that the change is not too rapid.

Whether the change is rapid or not will probably depend on the value of the dollar more than production rates. And the value of the dollar is dependent on ... well, just about everything!

Uncertainty abounds!

Jon

AV;

"for every EV driving Passivhaus residing person, there's a dozen more who are happy to go with BAU.. it needs to focus on everyone cutting down on everything,"

That depends on whether you're outrunning the Lion or just the other Impala.

I have to believe it's somewhere in the median.. but that's no reason not to shoot for the ideals anyway!

We don't need to "cut down on everything", we need to dramatically reduce our FF consumption everywhere. It may seem like a subtle distinction, but it's important.

The easy way: electrify everything, and get our electricity from wind, nuclear, solar, etc.

My comments are related to resource limits in general, not just energy. We need a sustainable population once we correct the overshoot and exergy crises, because switching to renewables doesn't really address this idea of consumption or procreation.

Look carefully at most analyses of environmental footprint and sustainability. You'll see that fossil fuels account for 75% (PO), either directly or indirectly (CO2).

As for procreation: it's far easier and faster to reduce our per capita footprint than it is to reduce our population.

So I'm reading that companies are gearing up to explore arctic regions now becoming accessible due to climate change related warming. Is it possible that there are large deposits of oil undiscovered in these arctic areas? Not that there may be very many people left to enjoy such an oil bounty after the permafrost melts and releases huge amounts of methane.

there probably are

but think what it means if that is where we have to look

I'm a little surprised that there is only one journalist on this topic in Portugal so I was wondering how many other countries don't really have a grasp of the situation. I have some friends in France who can't read English all that well - does anyone know are there any Peak Oil sites in France (French).

Your French friends can educate themselves by reviewing historical production/consumption charts at: Visualisation de l'énergie.

Any improvements to the translation would be greatly appreciated.

Salut!

Jon

In France's upper polical spheres the situation is very well understood. Christine Lagarde's posture of "Madame la marquise" is only masquarading for the sake of competition among nations. The french-german TV channel "ARTE" has run a lot of documentaries about the "end of oil". Even the state channel "France 2" has aired some broadcasts along this lines ; at midnight however.

A French forum (rather well documented and inspired by a lot of cross referencing towards TOD) : http://oleocene.org/

There is also the site manicore.com from Jean-Marc Jancovici which, although looks a bit dated in terms of presentation (been online for long) has very good info, JM Jancovici has also published quite a few books on peak oil and related matters (and there are also videos of his courses on the matter at écoles des mines available).

You also have politicians (green party) like Yves Cochet talking very directly about it (and also a few books)

Overall I would say that the energy issue is very present in French "subconscious" or something (especially due to the fact that we have almost no fossile resources anymore and never had much), the memory of 70ies oil shock is very present (and the slogan "on a pas de pétrole mais on a des idées" "we don't have any oil but we have ideas"), and the development of nuclear as well.

However for the (although quite simple) concept of peak oil and the urgency around it, seems to me very comparable to other countries in the sense that there is still a very small percentage of people really grasping the issue.

There is also the blog from M Auzanneau on le Monde where a few key articles were published :

http://petrole.blog.lemonde.fr/

Also de Margerie, the TOTAL ceo is in fact, amongst oil companies top execs, the one talking the most directly on peak oil.

And also quite a few Jean Laherrère texts and videos on the net.

The term "après pétrole" is often used by main parties politicians.

So overall the same strange feeling that people aware of the matter are getting everywhere I guess : the info is there but does not seem to gain "critical mass", and not much is done about the related issue (truth being maybe not much can be done, ie avoiding collapse further to the overshoot due to fossile fuel use)

According to Mike Ruppert, at the time he published Confronting Collapse the world was using one
billion barrels of oil every 11 days. How does this jibe with your figures on spare capacity?!!

Leaning a bit back and not looking too sharp at data I would say that the famous "ondulating plateau" started in 1974 when the exponential curb that oil production showed until then broke down by the first oil crisis. If that curb had continued the world would have produced almost endless amounts of oil around 1990 - something obviously impossible. Taking in account that conventional crude oil production peaked in 1995 - the same year as oil exports peaked - simply shows that we reached the end of that long plateau. My conclusions are:

1) Hubbard was quite an optimist predicting a peak around 2000 - given an unrestrained production.

2) Jimmy Carter was not the only one who has seen a dangerously near peak back in the 70-ties. It must have been a common assumption within greater parts of industry and politics.

3) There have always been strong reasons to keep on producing like hell in spite of better knowledge, like for example: The cold war or economical competition with Europe and later on with Asia.

4) The whole structure of globalism is based on growth, fiat currencies and fractional banking. All efforts to evade the peak with regenerative energies or conservation can't sustain the actual economy.

5) There are certainly modes for survival and maybe even for a better and more fulfilled life. But the transition will be very harsh because it implements not only a shift in lifestyle but also a shift in power. Those who have power tend to defend it. There is probably no solution within the actual system of production, distribution and social, political and cultural status.

6) Mankind will be smart this time. (last point unreservedly)

Discussions of whether a local maximum are the global maximum for oil production are kinda reminding me of people discussing Global Warming - saying it's not happening when we get an ice storm, and it is when LA hits 113 and most of Russia is on fire... in both cases it will be really hard to show the dissenters you were right, until it's crystal clear, by which point we'll be screwed and arguing about something else.

The comparison to temperatures is absolutely wrong.

Non-renewable resources have definite constraints that renewable sources such as rainfall and heat waves do not. The estimates of non-renewables get better and better with time as well as we get closer to the constraints.

Peak Gas. Remember? Just a few years ago "everybody" was saying that the US would be huge importer of LNG. Everybody. Then shale gas turned up. Now the US is likely to be self-sufficient for a long time. The LNG terminals built to import gas are being used to export gas.

Nordic_mist,

I completely agree with you. It is a bit astonishing how people (very many at this site for example) can be so dead sure about how the future will turn out. There are so many variables involved most of which are very hard to predict.

Since you mention natural gas production in the US I have a couple of figures I would very much like to discuss (have wanted for some time).

First let us look at the production data:

It would seem production is stagnating. Or maybe it to early to make that kind of statement. Still the data might vindicate those that question the way the shale gas is being promoted by companies involved. Maybe it is not as productive as they like to let on.

The rig data are a bit complicated Baker and Hughes report on the number of gas directed rigs, which seems to have stagnated. On the other hand shale gas drilling is mostly or only horizontal. Horizontal rigs are increasing. However, as I understand it, it is not clear which part of those are oil and which are gas directed. Maybe the stagnation in total gas directed rig comes from a large drop in conventional (vertical) together with an increase in horizontal gas directed. Comment anybody?

Is it possible to give any statement on the typical time lapse between drilling activity and the start of the corresponding production?

The US still imports LNG

Despite all the media hype about a glut, if it wasn't for a doubling of LNG imports in January and February compared to the same period in 2009 then the EIA would have reported that "Natural gas in storage is at the bottom end of the average range".

Timely chart UT, now how does that correspond to Nordic's claim here (undocumeted of cource):

The LNG terminals built to import gas are being used to export gas.

To me it looks like the intro of Shale gas had little effect at all on imports and actually almost doubled since 2008 till date.

Nordic,do you Care to provide a supportive link on this ?

Paal, I went a little bit far in my comment. But to say that the introduction of shale gas has had little effect on imports is fairly far fetched!

http://www.eia.doe.gov/pub/oil_gas/natural_gas/feature_articles/2010/ngi...

"Gross imports (including both natural gas transported by pipeline and LNG) continued to decline in 2009 after a relatively large decrease in 2008. As a result, gross imports were nearly 850 Bcf lower in 2009 than in 2007. Net imports, which reached a recent peak as a portion of consumption at 16 percent in 2007, represented only 12 percent of total domestic consumption, at a total of 2.7 trillion cubic feet (Tcf), in 2009. The decrease in net imports resulted from a decline in gross imports and an increase in gross exports."

"In 2009, the United States exported a small volume of LNG to South Korea for the first time. The main recipients of U.S. natural gas exports continue to be Japan and Mexico. Japan receives about 92 percent of U.S. LNG exports."

What can I say?
Other than look at UT's chart and look at my comment. Nothing wrong there IMHO, it's almost back up at 5y average these days.

From your eia-link (was that link to document your claim? or is it just a link?)

"Although liquefied natural gas (LNG) gross imports increased almost 30 percent (from a 5-year low established in 2008)"

Seems to me the LNG facilities were more busy than ever IMPORTING gas to the US, probably little spare time to do "all your EXPORTING" claims......... never mind.

US LNG exports are trivial compared with imports and have been on a declining trend despite Nordic's belief.

In 2009 Exports of LNG was about 7% of imports of LNG

Great UT!
Typically 1 month worth of imports is re-exported. Proof trumps guesswork any day.

I believe that this statement is very incorrect.

The LNG terminals built to import gas are being used to export gas.

Importing and exporting OIL can use the same terminal.

With LNG, If I have understood the processes properly, a whole new plant would have to be built to produce and liquify LNG as compared to turning the LNG back into gas for pipelines.

.

.

Oil production in Brazil is forecast to double in the next 10 years from 2.7 million bbls/day in 2010 to 5.4 million bbls/day in 2020:

http://www.upi.com/Science_News/Resource-Wars/2010/06/22/Brazil-plans-22...

Oil production in Iraq is forecast (by some) to increase from its current level of 2.4 million bbls/day to 8 million bbls/day in 2020 or there abouts...

http://nextbigfuture.com/2010/04/iraq-oil-production-to-start-surging-in...

That's a total of 13.4 million bbls/day total production just from those two countries in 2020...

Ok. Ok. I know that Iraq may not achieve the targets. But let's wait and see before we conclude negatively.

Nordic, you seem to be "stuck in time",btw strange you didn't mention Jack2- or the Kashagan filds when you were at it.

The Iraq and Brazil "Hurrays" have mostly gone mute, didn't you know? At least for now that is. You seem to be a blind believer buying into anything positive and rejecting everything negative- I think there is a name for such a behavior.

Read about the Kashagan Oil Field ( http://en.wikipedia.org/wiki/Kashagan_Field ) discovered in year 2000, which initially should be onstream in 2005 ......... latest on this ....... is 2014.That is a delay of 10 years. Do you understand the ramifications of this? Does the "Kashagan-story" maybe repeat itself , in say Brazil and/or Iraq? Now you tell me.

In the meantime, your dinner is part of BAU and "Just in Time"-thinking. Bon appetite.

OilFinder, is that you?

Quite the opposite. I very much know of the negative news. But it must be legal to mention countries on this site that have increasing production? I don't know Iraq very well personally but I know Brazil very well indeed. Oil production in Brazil seems set to increase for a very, very, long time to come.

Also Paal, I believe you've probably missed most of my previous posts. My point is that I believe a collapse in supply of oil is unlikely. That doesn't mean that I'm not worried about supply security and also climate change. Quite the opposite again - I'm working on projects to reduce the use of fossil fuels.

BUT: I currently think that the scenario of a short to mid-term supply glut of oil and a fall in prices to $40 is far more likely than a severe shortage and an increase of prices to $120 +. Let's not shout too loudly for now and see how things develop.

Oil will never be $40 a bbl until the whole big beast collapses into oblivion.

I remember very well when "everybody" on this site was saying that oil prices could never fall below $100 again.

With demand at the value it was. No one said anything about the biggest depression since the '20s killing any growth in the West and so all prices dived too. The price is happily going up now as production is bumping against renewed demand, therefore it can be argued that those arguing against sub-$100 oil are correct given the same parameters are being met again.

If you're stating that it takes a global depression of unparalleled depth to ruin the price forecast, well, bully for you. Enjoy the pyrrhic victory.

When it comes to being stuck in time I would say that is you. You extrapolate only historical data that you like and ignore all new finds of oil. I'm sure if you have a look at Brazil's oil production chart in Rembrandt's Oilwatch monthly for August you will see that production is headed straight up without any indication of a problem. By the way. Have a look at Kazakstan's production as well: Up from 0.4 million bbls/day in 1995 to 1.5 million bbls/day in 2010.

I'm telling you guys, just look at Brazil and Kazakstan - don't look at depletion rates for older existing fields, don't look at the UK & Indonesia becoming net importers or Mexico oil production dropping. No, just focus on B & K! Oh, now I feel better. Sure, it's working!!

Here is my answer to all of your handwavings

This is the most important chart in the history of this world- as far as I'm concerned.
You have been given gists to this effect all over these threads but to little avail. Just keep nesting your Black Swan eggs for another day, but my X-rays can tell you there are a few stillborns there already.

Another thing- for your own credit's sake - quit exaggerated undocumented claims on this list.

Paal,

Quickly eyeballing your curve it is easy to see that there is lots and lots of oil above the line on the left to cover the bit below the line on the right for a very long time to come. And remember the bits on the left are growing as recovery improves.

Isn't it funny ? When I eyeball that curve I see roughly the "same amount" left for the future - as already is used (2010ish). As you point out there are more to be found (that yellow stuff) but we all se where that is headed.

What will make the "2nd half of oil" increasingly difficult to get hold of - is layed out here on TOD in the vicinity of gazillion times - add that knowledge to the mix and add a few grains of philosophy and you have my stance : We are at or near PO for all practicalities.We shall see.

Nordic:

And remember the bits on the left are growing as recovery improves.

Well frankly spoken- those reserves may in another scenario , add in some philosophical unforeseen stuff here ................................. ,never materialize in the quantities illustrated and claimed- so there we go.

You don't understand you say ? Well I know. It's all about being open to the idea of the unknown.

paal - Not that I disagree with your general postion and nor do I disagree with Nordic about SOME of his future reserve gains. But you guys seem have gotten trapped into the reserve numbers vs. oil producttion rate hole. Perhaps my definition of PO is different than most but excess capacity we see today has no implication as to whether we've hit PO or not. If on 1 January the combined rate of actual production + excess capacity is less than it has ever been and then never increases beyond that level then we've passed PO. Likewise if we add X billions bbls of oil in the next 20 years that has no direct bearing on PO. I think any debate about future increases in oil RESERVES is pointless if the potential production rate isn't offered. And if these future rate increases are offered they are still of incomplete value if they aren't balanced against future global decline rates IMHO.

Again, perhaps I'm in the minority but PO has nothing to do with consumption, excess capacity or undeveloped reserves. It simply the max rate oil that could be produced on any given day and if that rate is less than it has been historically. I can fully accept a proposition that we have twice as much oil left in the ground that we've produced since the beginning of time. I can because that number is completely irrelevant IMHO. It's the max rate that those reserves will be recovered that interests me. Future oil discovery is interesting from a geologic perspective. But at of the end of day it's the net oil production rate vs. consumption that will determine the state of our lives.

Rock- to clarify ;

It (po) simply is the max rate oil that could be produced on any given day

This is ecactly my take. I just referred the above graphics because it has all the tell_tell signs of an imminent PO reality- give or take a few years.

Also I can agree with all the rest you spell out in your reply.
I even reckon PO will never be recognized as THE actual problem, b/c a plethora of other problems/challenges will over-steer that fact and obfuscate it's actual importance.Ref content and analysis here for instance : http://theautomaticearth.blogspot.com/

paal - I thought we were pretty much of the same side of the fence. But even with this view of PO that number doesn't have the significance it once did for me. Thanks to TOD and all the insights regarding the economic feedback loops and geopolitical possibilities, the pure physical aspect of PO doesn't seem nearly as important as it once did to me. I'm beginning to feel like PI (peak important) will replace PO in our conversations. An easy example: China. Let's say it's shown in no unquestionable facts that PO happens 1 January, 2011. What does that mean to the economy of the US or any other country? Oil prices will rise to a degree. But as we just saw those higher prices can lead to recession which leads to lower prices. But ignore this feedback loop for the moment. If a country can still import all the oil it needs and can pay for it than PO has no affect on them with respect to acquiring oil. So they aren't PI yet. But another country can match the first company's paying price but it doesn't matter: there is no more excess capacity. And if they can't outbid the other buyers than that country is now past PI. IOW regardless of how much oil is being produced if a country can't acquire a share than they are on that long PO slide some describe...and that would be the case whether the globe has reached PO or not IMHO. China seems to be on a very determined path to avoid PI regardless of when PO hits home. China has been acquiring rights to oil production around the world. This represents oil that will never be in the market place. In that sense China is pushing the rest of the world's economies closer to PI with every new deal they cut...just like the $7 billion deal they just cut with the Spanish NOC.

This represents oil that will never be in the market place.

I have the impression that all of these Chinese deals are at market prices. So, in effect, these future sales will still be in the market.

Do you have info that indicates that these are fixed-price deals??

I'm beginning to feel like PI (peak important) will replace PO in our conversations. ...... If a country can still import all the oil it needs and can pay for it than PO has no affect on them with respect to acquiring oil. So they aren't PI yet.

Yes, it is smarter to focus on the tail, and to also realize countries will have widely varying tails.

PI will be in the region of maximum pain, as some countries start to fall off the pace, leaving those with deeper pockets, or something else fundamental like excess food, they can use to stay in the game.

China does seem to be quietly locking-in supply lines, I wonder how long before some of that is seriously tested, or is money a strong enough leash ?

Again, I have the impression that all of these Chinese deals are at market prices. So, in effect, these future sales will still be in the market. So, they don't need a leash, because the seller is getting the spot market price. If China's competitors need additional oil and don't have contracts, they'll go to the spot market, and this additional demand will raise spot market prices, thus raising the price to China. So, China is still very much in the market, competing with everyone else for oil.

Does that make sense to you?

Do you have info that indicates that these are fixed-price deals??

I'm not sure what you mean, as China is doing rather more than simply bidding for energy.

They have poured Billions into Russia and Mongolia in quite focused energy infrastructure deals - yes, they may be exposed to a possible future Nationalize, but given China can pay and there is little alternative for the supplier, that's a risk they can manage. Politicians are relatively cheap.

Even the Brazil deal, is a long term infrastructure one, that will place China in a preferred place in the queue.

These are long term deals, their effect will be noticed in 1-2 decades.

Well, my question is: at what price will the products of these refineries, etc be sold?

As far as I know, all oil sales contracts these days price the product at spot market prices.

If the products of these refineries will be priced at market prices, then China doesn't really have a preferred place in the queue, they're just guaranteed the ability to be in the market.

That's a total of 13.4 million bbls/day total production just from those two countries in 2020...

Feeling presumptuous?

Very.

When in human history has that kind of oil production occurred so rapidly?

Never. :-) In the case of Iraq I think it highly unlikely. In the case of Brazil it seems fairly probable.

And remember the official target of Iraq is 12 million bbls/day for Iraq alone so the assuption of 8 million bbls/day is already discounting that by 30%. Will be very interesting to see how things actually develop. Another factor will be oil price. Currently seems quite likely that we'll have a double dip and then oil prices might well fall back to $40-50. Fell pretty confident that we will never see oil prices much above $100 except for the possibility of a very short spike.

http://www.energybulletin.net/stories/2010-09-30/high-risk-fossil-fuel-b...
Quote from this article:
Colorado, Utah, and Wyoming hold oil shale reserves estimated to contain 1.2 trillion to 1.8 trillion barrels of oil, according to the U.S. Department of Energy, half of which the department says is recoverable. Eastern Utah alone holds tar sands oil reserves estimated at 12 billion to 19 billion barrels. If current projections turn out to be accurate, there would be enough oil and gas to power the United States for at least another century.

Using 20 Mb/d US consumption that would indeed give 82 - 125 years of supply. The above quoted reserves are greater than all the reserves in the world combined including the Canadian and Venezuelan oil sands! It is not surprising that, with the attitude of the DOE, the BAU is continuing that will lead to a very dangerous situation in near future.

Oil shale in the Rockies is not (yet) economically feasible to extract/process, so assuming supply trends off of it would lead to highly questionable conclusions.

The reference to "oil shale" in the article is odd. Most of the article discusses things completely unrelated to it. I wonder if the author understands the difference?

Using 20 Mb/d US consumption that would indeed give 82 - 125 years of supply.

So why is the US importing so much oil then? You use 20 mbd as the flow rate, so why isn't there that much supply now? What's going to happen later that will make those sources of oil affordable? It only works if the cost to the consumer is such that the economy can use it and hum along. In the final analysis, it really doesn't matter if it exists or not, it only matters if it's economically viable to extract and bring to market.

PE - Actually ngass and the USGS are being pessimitic. !00% of the oil in the western shales is recoverable. Just like the trillions of onces of gold in the waters of the world's ocean are recoverable. Just need a high enough price to jusify it. As long as the extraction cost/sales price aren't factored into the recovery than the world has enough resources for centuries.

Thank goodness...now we can relax and have a nice weekend.

This thread is fascinating and there seems to be some pretty knowledgeable people here.

I personally believe, as many do here, that the larger problem is our wasteful lifestyle. I’m American and I’m embarrassed that the latest statistics show the U.S. has 5% of the world’s population and consume 24.3% of the world’s FF. (ref. provided)

Whether oil reserves are diminishing, or the cost of production is accelerating out of reach, living a sustainable lifestyle is the first step to survival. The U.S. isn’t even constructing homes to be as energy efficient as they easily could, if the political “oil lobby” and “lumber lobby” (to name just two special interests) didn’t have so much financial/political power.

It’s about money $$$$, plain and simple. What exactly would happen to the oil industry if our oil needs dropped by 80%?

As Rockman said “A good example was in the early 70's when new recompletion techniques significantly increased production in 20+ year old fields. I saw old field rates increase from 200 bopd to 5,000 bopd over the course of a couple of years. A lot of enhanced recovery methods in west Texas required a lot of new holes drilled but this was done over decades so it doesn't tend to jump out at you.”

Russia is now out producing KSA and they are using recompletion techniques on old wells combined with their ultra deep drilling techniques. They do not believe in the “peak oil” theories.

Can anyone here comment on the Russian theory that oil is in fact not a fossil fuel, but a never-ending microbial cycle. We have evidence of life forms existing under pressure and temperature conditions deep under the sea where there is no sunlight. It would not be impossible to think of other microbial life forms existing in the earth’s crust. Nor would it be unthinkable that their waste by-products is methane gas CH4 which is a pretty basic molecule using elemental building blocks.

Reboot2009
www.GlobalFamilySurvival.com

To- Reboot2009 -
You do not have any contact email address listed in your profile.
Can you send me an email at (DocScience at hotmail dot com) and I can send you my comments ?

Thank goodness...now we can relax and have a nice weekend.

I'm right there with you on that line of humor, Rockman. Just ease back this weekend knowing 'it's there' - just concentrating on its existence rather than its economic viability.

Hey I hear that bacteria can make fatty acids and other hydrocarbons in their biological membranes. Let's just consider the biomass of the world: 100 billion tonnes.

So that means we can rest easy, since the hydrocarbons just simply need to be extracted from that 100 billion tonnes and converted to a fuel that can be pumped into my car at $3 a gallon.

Hey it may require a lot of money to do it but we wont run out.

Easy as pie ;-)

(end sarcasm)

You laugh now, but it's no different to many proponents of renewables who contend that the world, being bathed in more energy per day than mankind could hope to use in any single year, makes energy crises a silly notion. What they fail to consider is that energy never was the problem. The universe is chock full of it, last I checked. It's the exergy issue and, more pressing than that, the cost of such a problem to our society. Anyone can hand wave away PO by saying "It's liquid fuels. We'll all move to PV/wind/nuke powered EVs and carry on regardless", but that horribly simplifies the issue.

Perhaps they expect us to pay for this all with seawater gold nuggets...

It's the exergy issue and, more pressing than that, the cost of such a problem to our society.

Not really. Wind and nuclear are affordable. It's more the capex lag problem.

Anyone can hand wave away PO by saying "It's liquid fuels. We'll all move to PV/wind/nuke powered EVs and carry on regardless", but that horribly simplifies the issue.

Only a little. Those thing are affordable and effective. The tools are here: Hybrids like the Prius, EREVs like the Volt, and EVs like the Leaf have been engineered and are for sale. Wind power has grown to the point where it can provide whatever we need (and yes, nuclear and solar are important too). So, what's left is the pace of cultural change, and the small matter of politics - how we deal with the minority that wants to block change. The big problem is resistance from legacy industries, like Koch industries:

"The billionaire brothers Charles and David Koch are waging a war against Obama. He and his brother are lifelong libertarians and have quietly given more than a hundred million dollars to right-wing causes."

http://www.newyorker.com/reporting/2010/08/30/100830fa_fact_mayer?curren...

I have watched this oil situation develop now, for many years.
As the price of oil increases, the cost of building everything increases in step with oil.
Steel and all other metals increased in value in step with oil.
New processing plants for LNG, tar sands facilities, and the cost of steel for everything increased.
Even though the cost of energy rose so much, many projects were canceled and delayed because they just became too expensive.
Even the cost of building windpower and other alternative energy projects increases in step with energy prices.
Many people are saying that the alternative energy projects will be built when the cost of oil gets high enough or oil shortages start to show up.

At that point it will be unaffordable to most people, and people do not seem to understand this.
The world is headed into an un-affordability crises of immense proportions.
It takes a lot of energy to build any type of vehicle including electric vehicles, which means they will also be too expensive for most people. So to assume that large numbers of people will just buy
electric vehicles is in my opinion a pipe dream. Several places in north America are already turning older asphalt roads into gravel due to high cost of repaving.

There has not been any projects started in the last 10 years, that are on large enough scales to make a difference on a worldwide scale and that is what is needed.
To this point, nothing is being done on a large scale, and it will most likely be too late for most people when they find out what the problem is.

What I feel will be the situation for the foreseeable future, is that the world continues to gradually go into a deeper recession, as the people in government keep telling them that recovery is just a around the corner.

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