The Oil Drum | EIA insisting on plateau

240 comments on EIA insisting on plateau

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umass1993 on August 3, 2006 - 12:34pm

The plateau is there, and it can't be explained by slow global growth. All of the world's major economies have been growing like gangbusters since 2003.

The US has grow quite vibrantly since 2003. However we are not consuming as much petroleum as we were last year. This is unusual for the US. Although, gasoline consumption has grown, it's just that consumption of other products has diminished.

Another way of saying this, is that the US is getting less of the market share of oil production. I expect this trend to continue (other nations may adjust their currency in order to make it continue). When global oil production tilts downward, then the US will be getting a declining share of a declining resource. A double whammy that will undoubtedly make a lot of people angry.

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westexas on August 3, 2006 - 12:41pm

Two big differences between the current crude + condensate decline and prior declines: (1) the world is at about 50% of (conventional) Qt and (2) it's a very high probability that all of the four largest producing fields in the world are now declining.

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clifman on August 3, 2006 - 1:45pm

Here's what I'm going to watch for (referring to the C & C graph): During the first half of '03 there was a 3 month decline amounting to about 2MBD, then a rapid recovery & further growth. During the first half of '04, there was a 5 month decline of a little less than 1MBD, then recovery. From May to October '05 there was a 5 month decline of a little more than 1MBD, then recovery. From Dec. '05 to May '06 there was another 5 month decline of about 1MBD. So the ratchet seems to spring back after 5 months. If Westexas is right, and I think he is, then recovery on this curve is an historical event, not a current or future one. What will June show? Stay tuned.

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clifman on August 3, 2006 - 1:53pm

One might also postulate that the dip in Sept/Oct '05 was hurricane driven, and that the spike in Nov/Dec was recovery from that. So without Katrina and Rita, those 4 months would all have been somewhere much closer to 73.5 MBD, and we'd be able to much more clearly see the undulating decline that set in from May '05...

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clifman on September 6, 2006 - 3:02pm

June # is 73.382 MBD. That's up from May's 73.334 by .048 MBD. So the slide stopped (or has at least been interrupted) but it doesn't look much like the recovery seen in the first month's reversal in the previous five month declines noted above. Time will continue to tell...

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Gunga2006 on August 3, 2006 - 12:57pm

<The US has grow quite vibrantly since 2003. However we are not consuming as much petroleum as we were last year. This is unusual for the US.>
If you are using GDP growth for the basis of the above quote, the discrepancy you note could be due inflation is not being adequately accounted for in the governments GDP numbers. If increasing GDP is primarily due to inflation instead of increasing national output the decreasing or flat petroleum usage makes sense.

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memmel on August 3, 2006 - 1:06pm

Gasp are you saying the US goverment may be hiding real inflation numbers from the public while the Feds continue to raise rates ?

And a lot of companies still have not passed down high fuel costs yet once they have to it will be a perfect storm.

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Gunga2006 on August 3, 2006 - 1:13pm

I'm not confident that the government adequately accounts for inflation when they post real GDP numbers.
When I consider inflation and GDP numbers I see in my mind a bunch of gov't guys telling me "You want the truth? You can't handle the truth."

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westexas on August 3, 2006 - 1:18pm

"You want the truth? You can't handle the truth."

Alternatively, if you want the truth, assume the opposite of what most government officials are telling us.

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oilmanbob on August 3, 2006 - 1:26pm

WT, no joke. I feel as though the government is pencil-whipping all of us. Serious question-how much crude has been replaced with ethanol? Is this why we are not suffering more from the decline in total production? And, if this is the case how much more will ethanol and bio-fuels continue to mask the real situation?
Right now our collective response seems like an ostrich responding to Chicken Little with its head in the sand:
"Ain't no sky falling down here!"

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newman1979 on August 3, 2006 - 2:18pm

The truth is that the GDP deflator was much higher than the 3.3% used in the latest BLS release. If the correct deflator was used, the release would have shown more inflation and less real growth. John William's Shadow Government Statistics reports that it should be -.5% growth and 6% inflation. Now you know that the adage "garbage in equals garbage out" has legs. Of course the FED has been deflating the indices for years to cheat the retiree's and cola based wage earners. It works out great for debtors and big government spenders, no wonder on a GAAP basis the Federal Government has a negative net worth of at least $177,000 for every man, woman and child in this country according to the US Treasury.

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fallout on August 3, 2006 - 2:53pm

Speaking of governmental fudged numbers.....
Have you seen the cover story from todays "USA Today"?:

What's the real federal deficit?
Rob Portman, director of the Office of Management and Budget, presents "The Mid-Year Budget Review" at the National Press Club on July 11. Due to increased tax receipts, the Bush administration says it's goal of cutting the federal deficit in half by 2009 is a year ahead of schedule. But deficit numbers vary depending on who's counting.

By Dennis Cauchon, USA TODAY
The federal government keeps two sets of books.
The set the government promotes to the public has a healthier bottom line: a $318 billion deficit in 2005.
The set the government doesn't talk about is the audited financial statement produced by the government's accountants following standard accounting rules. It reports a more ominous financial picture: a $760 billion deficit for 2005. If Social Security and Medicare were included -- as the board that sets accounting rules is considering -- the federal deficit would have been $3.5 trillion.

Congress has written its own accounting rules -- which would be illegal for a corporation to use because they ignore important costs such as the growing expense of retirement benefits for civil servants and military personnel.

Last year, the audited statement produced by the accountants said the government ran a deficit equal to $6,700 for every American household. The number given to the public put the deficit at $2,800 per household.

Looks like those bogus government numbers are starting to get a bit more scrutiny.

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Freddy Hutter on August 3, 2006 - 5:25pm

Remember, lies have to be continually covered. For your negative GDP growth, they have to lie about the Unemployment Rate and Mass Layoffs and Export Records and ...

Grow up.

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fleam on August 3, 2006 - 6:48pm

Er, it's been in the news for years now that the way the gov't counts unemployment is ..... Soviet. They're counting a small portion of the unemployed, which is those people who are on unemployment insurance, actively looking for work. It counts a person working part-time for a low wage as "a job", supposedly equivalent to that person at the job they had a few years ago, well-paying and full time.

People who look at unemployment generally double the gov't figures.

The same kind of tricks are used for exports, and all kinds of things. It's a HUGE shell game and this is fairly mainstream knowledge. You have to pretend it's all legit to get a job in the US media, and you have to sound like you accept it all at face value to get various "selling" jobs where you're convincing people to give you your life savings to throw away in the stock market, but most people know much about our economy is hallucinated.

Take "Productivity" for instance. Amazing things are called "productivity" including, or should I say especially, exporting US jobs.

And here's where Kunstler is dead right, the current "booming" economy is based on the real estate bubble. Building sprawl. Building statues! More statues! Bigger statues! Jobs for all! Making the stone tools and the people who get that red rock for the top of the head, and the people who keep the grass trimmed around the statues, etc. You get the idea. A huge proportion of US jobs depend on those McMansions, and even more jobs, like nail salons and the Olive Garden, depend on people feeling "spendy" because their McMansion appreciated this year. And car sales are very much driven by "home" sales, look at all the ads on TV for trucks, showing someone loading lumber because they're gonna get some work done on the house, yep.

The gov't's job, almost, is to keep the people from freaking out, and try to make the coming Depression more of a slide than a crash. Like in The Matrix, can't break the illusion too abrubtly (sp?), it could be fatal.

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Freddy Hutter on August 3, 2006 - 8:16pm

It's been said here before that the Labour Dept has seven measures for UR, just as it does for inflation and other measures. Your allegations are just plain crap and your by your rheotoric it is plain that u are in the nihilist camp and nothing said will satisfy you. You are just waiting for the apocalypse like many others here.

The problem is clinical not factual.

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WebHubbleTelescope on August 3, 2006 - 9:47pm

You mean that people that observe the dynamics of Ponzi schemes from afar are nihilists?

I always considered them smart.

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liferaft on August 3, 2006 - 10:54pm

It wasn't us who started the planet down the apocalyptic path. While watching is not my cup of tea it sure beats blindly rushing into oblivion.

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tate423 on August 4, 2006 - 2:21pm

I don't tend to follow the herd at blasting peopel since many times we are misunderstood. However Freddy I can plainly see what people here routinely blast you for your complete lack of indepedent thought.

Try "shadow government statistics" in google and see what pops us. You need to quit drinking the kool aid mate.

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Agric on August 4, 2006 - 7:06pm

Have you ever seriously researched this Freddy? It is beyond reasonable dispute that the calculations and consequent results for the 'preferred' US government statistics for unemployment, inflation, GDP are materially different from those of 20 years ago. The change is always in the 'preferable' direction.

The monthly NFP stats are hugely skewed by the CES Net Birth/Death Model:
http://www.bls.gov/web/cesbd.htm
While I think that such a model is probably reasonable and necessary it is based on GDP estimates...

Which are probably overstated by about 3% since these are based on the 'GDP deflator' - a measure of inflation - which seriously understates 'real' inflation and inflation as measured 20 years ago.

Had you noticed that the US GDP estimates for the last few years have been revised downwards by a pretty uniform 0.5% because some basic assumptions have been somewhat incorrect? The news was about a week ago, I don't have a link but might be able to find some.

Have you properly read John Williams 'shadow government statistics' stuff? the arguments are quite compelling, here are links:
http://www.shadowstats.com/cgi-bin/sgs
http://www.financialsense.com/editorials/williams_j/main.html

If there are any aspects in the above you find questionable and want substantiating data and links ask and I will see what I can do.

(I have an extant response to you on climate change in the works but incomplete, might manage to finish tonight but Sunday is more likely)

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Freddy Hutter on August 4, 2006 - 10:09pm

Sorry Agric but i no longer take the time to defend the stat sector from ridiculous paranoia and conspiracy theorists. I collaborate with statisticians often and hold them in high regard. The assertion that big brother is manipulating data is for the most part bunk. Most dept's allow drilling into their figures and many subsets. The usa has no more revisions or higer magnitude thereof or in any certain direction than any other country. Look at how the 2001 recession figures (real gdp) have changed biannually as an empirical example.

I sincerely regret not continuing this debate with you but after 20 yrs of listening to too many nuts i just have run out of patience. Absolutely no reflection on yourself. Take care.

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Agric on August 7, 2006 - 9:39pm

I don't mind. Life is sometimes too short for trivial debate: the reality IS, the somewhat arbitrary picture of official statistics is just a distorted reflection.

I'm no novice at statistics, though no expert at the esoteric mathematical nuances of statistical theory. That the BLS and other govt / official stats producers have changed the basis of calculating several important economic measures over the last 20 years is very evident - and they admit it.

There are some valid logical arguments for the changes made but they seem to be more dictated by govt 'self interest' to me. The currently 'preferred' US measures of unemployment, inflation, GDP are significantly different from the way they were calculated 20 years ago and the way European countries calculate them. On the 'old US' or 'European' basis the numbers would probably be about: 8% unemployment, +1% GDP for Q1+Q2 2006 together annualised (+0.0% Q2 alone), +5.5% CPI.

Replied on rapid climate change:
http://www.theoildrum.com/comments/2006/7/28/19350/1306/169#169

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Sunspot on August 3, 2006 - 1:22pm

I'm starting to see warnings in the MSM about higher prices coming. Just mostly hints so far, but it has been mentioned on CNN.
My favorite, though, is Bob's Furniture, or as I call them, Bob's Chinese Furniture. Are they nationwide? I'm thinking so... But they are the low price leaders with their "no-name" brands. The latest adds on the TV are saying "buy now, before the prices go up due to higher energy costs".
I've set aside a flyer from my local grocery chain and put a date on it. It may be quite interesting to compare it with a current one in a few months. Try it, amaze your friends...

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louGrinzo on August 3, 2006 - 2:43pm

I wouldn't read too much into furniture retailer ads. Now that energy awareness has likely hit its highest level in the US since the early 1980's, I'm guessing we'll see a lot of companies trying to leverage that situation.

Higher energy prices will indeed tend to push up furniture prices, of course, but barring some economic catastrophe, they're likely overplaying it by a fair amount.

Tracking that actual food prices is a much more useful exercise, in my opinion, as it's real data, not advertising claims.

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Fire Temple on August 3, 2006 - 8:25pm

Commodity price hikes have indeed trickled down!

My wife usually does the shopping so I had stayed a bit insulated. But shopping at Walmart the other day, it was very clear that there has been a significant "up tick." (I seem to recall paying about $5 per four-pack of shaving blades a year or so ago -- now it's $9!)

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petersburger on August 4, 2006 - 12:07am

I seem to recall paying about $5 per four-pack of shaving blades a year or so ago -- now it's $9!

Must be all of them doomers stocking up on essential shaving supplies. ;-)

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treeman on August 4, 2006 - 2:29am

Has to do with the price of stainless steel or the nickel in it or something. I have noticed tremendous increases in the price of anything stainless lately. All commodities will rise in price as oil does but some energy intensive ones will rise faster.

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homebrew on August 4, 2006 - 8:36pm

Because you know there is SOOO much stainless steel in razor blades...com'on now.

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treeman on August 5, 2006 - 3:19am

They are up to five blades per now. I can hardly lift them. Maybe it's the plastic.

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Nagorak on August 4, 2006 - 3:47am

Walmart probably just dropped that from their list of commonly recognized items, jacking up the price to a normal level. Compare their non-lossleader stuff, it's not any cheaper than anywhere else.

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umass1993 on August 3, 2006 - 3:21pm

I am no fan of them inflation methodologies used by the federal government. However, I think the dip in the personal savings (borrowing?) rate can explain a significant part of this phenomena.

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240 comments on EIA insisting on plateau

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“The aim of every political constitution is, or ought to be, first to obtain for rulers men who possess most wisdom to discern, and most virtue to pursue, the common good of the society; and in the next place, to take the most effectual precautions for keeping them virtuous whilst they continue to hold their public trust.”

—James Madison, FEDERALIST #57 (1787)