<DrumBeat: December 4, 2006The Oil DrumDrumBeat: December 5, 2006>

226 comments on A Debate on the Substance and Timing of the Peak of Oil Production and Consumption, Part I

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liferaft on December 4, 2006 - 12:31pm Permalink | Subthread | Comments top
Because of a steady increase in US petroleum consumption and because of a steady decline in US oil production, total US petroleum (crude oil + product) imports have been increasing at an annual rate of about 4% per year since 2001. This is one reason that assertions that year over year US petroleum imports may be flat is not much of a comfort.

I'm confused by the last sentence.  Aren't these assertions just plain wrong?  Great article, and I heartily aree with your sentiment regarding consumer attitudes.
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westexas on December 4, 2006 - 1:00pm Permalink | Subthread | Parent | Comments top
This link takes you to a wealth of data:  http://tonto.eia.doe.gov/dnav/pet/pet_sum_sndw_dcus_nus_4.htm

Regarding imports, I have been focusing on the four week running average of Total Petroleum Imports, including SPR (at the top of the page you can select weekly or four week running average).    I think that there were some minor SPR imports, I think around 2002, but I don't believe that they had a material impact.

To get the long term increase in total imports since 2001 (around 4% per year), I roughly averaged the rate of increase through 2004 and through 2006 (relative to 2001).   I excluded 2005 because of the hurricane effects.

BTW, if anyone would like to volunteer, I think that it would be very, very interesting to see a chart of Total Petroleum Imports (four week running average)  from 2001 through the end of November, 2006.

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bunyonhead on December 4, 2006 - 1:13pm Permalink | Subthread | Parent | Comments top
Can do
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westexas on December 4, 2006 - 1:25pm Permalink | Subthread | Parent | Comments top
To simplify the chart, I would just show the last weekly number for each month, 1/01 to 11/06, inclusive (four week running average).

If you are so inclined you might add the monthly spot oil price (for WTI, Cushing):  http://tonto.eia.doe.gov/dnav/pet/pet_pri_spt_s1_m.htm

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bunyonhead on December 4, 2006 - 1:36pm Permalink | Subthread | Parent | Comments top
check email
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liferaft on December 4, 2006 - 1:23pm Permalink | Subthread | Parent | Comments top
Thanks for the link, I've added it to my essential PO links list!  I can see now why the assertion might be made.
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Khebab on December 4, 2006 - 2:08pm Permalink | Subthread | Parent | Comments top
I made a a few charts on the EIA import  numbers. The methodology is described here and consists in correcting for the trend first and then look at the residual patterns.

original data:

The linear model has a slope value equals to 0.3993. Once corrected for this linear model, I can observe residuals (i.e. seasonal fluctuations) around the trend:

The gray level image in the background is the observed seasonal fluctuations derived form the residuals shown on Fig. 3 (darker areas mean more frequent values). The red curve is the observed data for 2006. The * means that the data for the year 2005 and 2004 have been adjusted to match the increase for 2006 predicted by the linear model. The dark dotted line is the seasonal  average fluctuation.

Smoothed data (4 weeks):

Same as before: The linear model has a slope value equals to 0.3991. Once corrected for this linear model, I can observe residuals (i.e. seasonal fluctuations) around the trend:

Conclusion: The recent Total Petroleum product import fluctuations are in the lower range but are still within the domain of past fluctuation history.

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westexas on December 4, 2006 - 2:17pm Permalink | Subthread | Parent | Comments top
Khebab is my hero.  

What is the long term annual rate of increase in total imports?

Could you show 2001 to 2006 (inclusive) total imports versus monthly spot oil prices?

As I pointed out in the article, the key question is that happens when an expectation of exponentially rising imports collides with the reality of exponentially declining exports.

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westexas on December 4, 2006 - 2:32pm Permalink | Subthread | Parent | Comments top
Also,

The absolutely critical point that we need to keep in mind is that we require ever greater total imports every year--as long as either our consumption is increasing or our production is falling.  

The only reason that we would not need more total imports year over year would be if the rate of decline of consumption equaled the rate of decline of production.  The reality is that consumption is increasing, while production is falling.

My point is that the top three exporters, in aggregate, are showing exactly the same pattern--rising consumption and falling production.

Which brings me back to my original point--a collision between expectations of exponentially rising imports against the developing reality of exponentially falling exports.

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DelusionaL on December 5, 2006 - 1:24am Permalink | Subthread | Parent | Comments top
and it would follow that the internal consumption would need to be somewhat self supporting - in that they don't need to sell oil to help fund thier social programs etc.  
A catch 22,  the need to have cheap oil for domestic use yet wanting to sell it to te higest bidder for cash flow.  
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Khebab on December 4, 2006 - 2:38pm Permalink | Subthread | Parent | Comments top
Re: What is the long term annual rate of increase in total imports?

The value of the linear slope is 0.3993 mbpd per year which means an increase of +4.0 mbpd in imports in ten years (~30% increase).

Re: Could you show 2001 to 2006 (inclusive) total imports versus monthly spot oil prices?

I can't right now but I could look at it maybe tonight.

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westexas on December 4, 2006 - 2:52pm Permalink | Subthread | Parent | Comments top
I don't have my scientific calculator, but it looks like the trend line doubled, from about 6 mbpd to 12 mbpd, in the 15 years from 1990 to 2005, which suggests a long term exponential growth rate of about 4.8% per year.  

(Rule of 72, divide 72 by the interest rate, in percentage terms, to get the number of years required for a doubling).

72/4.8 = 15 years

Note that we are drawing down crude oil + product inventories as imports are now falling below the trend line.

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Khebab on December 4, 2006 - 4:35pm Permalink | Subthread | Parent | Comments top
Just for the fun it, the same chart with a 3 months moving average:


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mbnewtrain on December 5, 2006 - 12:18am Permalink | Subthread | Parent | Comments top
The above graphs show a drop in imports for last 90 days of 2006 compared to previous years and the average for 3 years.  Note that this drop started when gasoline and oil prices peaked at the begining of August.  I believe this is the effect of some short term conservation and some demand destruction.  The first few percent of conservation is easy - maybe everyone conserves 3 or 4 percent to save some money, especially lower income people.  

The real test comes next year when world exports drop and the asian economies are still growing.  US economy heading for the trash can in 2007 could dampen oil prices, but a  still growing US economy could send oil prices higher and produce a world wide recession.  US still loses in the long run as our production falls during a tightening market for oil.  

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umass1993 on December 4, 2006 - 3:52pm Permalink | Subthread | Parent | Comments top
A while ago I made a graph of US market share of total production.  As other importing economies grow, the US market share will decline, on top of the decline in total production.As your graph shows, we are consuming less now than in 2004, while total production is higher.

Essentially, we are getting 'crowded out' of the oil. We will continue along this path since the transitiion economies are able to devalue the dollar with their large dollar assets and therefore make oil imports more expensive for us....while they have plenty of dollars to spend.  They will do this in order to ensure that they have enough energy to maintain their growth.

If the CIA isn't paying attention to this, they are fools.

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westexas on December 4, 2006 - 5:00pm Permalink | Subthread | Parent | Comments top
"A while ago I made a graph of US market share of total production.  As other importing economies grow, the US market share will decline, on top of the decline in total production.  As your graph shows, we are consuming less now than in 2004, while total production is higher."

Could you clarify what you mean?  All of the above graphs refer to Total US Petroleum (crude + product) imports, and we are showing close to a long term growth rate of about 5% per year in total imports.

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BaSE on December 4, 2006 - 5:57pm Permalink | Subthread | Parent | Comments top
I think he is talking about share of the pie.  Our share of the overall pie has evidently decreased while the pie has gotten larger.
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jkissing on December 4, 2006 - 7:07pm Permalink | Subthread | Parent | Comments top
high growth economies crowd out low and medium growth economies. Nothing new here. The us used to be high growth compared with the rest of the world, and to an extent it still is. However, the asian dragons are higher growth, and naturally will receive a growing fraction of the pie.  Naturally we support this because the dragons have become our manufacturers, busting their butts 7/24 to ship us anything and everything we desire.
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Rich Walden on December 4, 2006 - 4:10pm Permalink | Subthread | Parent | Comments top
I see what you have done by "adjusting the data" for 2005 and 2004, however by doing this have you not distorted your final results? Essentially what I am asking is this not a circular arguement.
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Khebab on December 4, 2006 - 4:23pm Permalink | Subthread | Parent | Comments top
The goal for the adjustment is simply to try to visualize how 2006 would have look like if we had the same monthly fluctuations around the trend as 2005 and 2006. The goal of the above charts is to decorrelate multi-year trend from seasonal fluctuations and better pinpoint significant outliers.

Note that 2006 is an exceptional year because of the nasty hurricane season that caused a large rise in imports.

The comparison should be done between the red curve (2006) and the dotted black line (average residual) and also the gray level background that is representing residuals history.

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westexas on December 4, 2006 - 4:55pm Permalink | Subthread | Parent | Comments top
Note that 2006 is an exceptional year because of the nasty hurricane season that caused a large rise in imports.

I think you meant 2005.

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Khebab on December 4, 2006 - 5:04pm Permalink | Subthread | Parent | Comments top
Correct :)
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KansasCrude on December 4, 2006 - 1:19pm Permalink | Subthread | Parent | Comments top
WT and RR thanks again for sharing your thinking and data on the export situation.  I found the WSJ journal article that ran a couple of weeks ago to be spot on with other worldwide info of strikes, protests, and riots in the 3rd World in reference to the rationing going on. This is a big surprise to the MSM myopic Americans that don't even appear to be aware (clueless and proud of it) of these situations.
I also find it fascinating that given the weak dollar and high demand in the U.S. that prices continue to remain well below the peaks of last summer.  Obviously the ignorance is bliss stance has some value as the market suppliers continue to be price takers rather than price makers for the most part.  This to seems to be ready to evolve but the market is convinced that the economic conditions in the OPEC countries create more cheaters than compliers.
One question I have for you is that you continue to advocate increasing gas taxes and offsetting it with a reduction in the payroll tax.  As one quite aware of the retirement dynamics and the aging boomers what are your thoughts on how to offset the fact that they won't be paying any payroll taxes?  How about state employees that don't pay them either?  Tuff shat or do you have another relief mechanism in mind?
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westexas on December 4, 2006 - 1:38pm Permalink | Subthread | Parent | Comments top
As one quite aware of the retirement dynamics and the aging boomers what are your thoughts on how to offset the fact that they won't be paying any payroll taxes?  How about state employees that don't pay them either?  Tuff shat or do you have another relief mechanism in mind?

The devil is always in the details, but the bigger hurdle is to persuade people that we have a problem.

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