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89 comments on Oilwatch Monthly - July 2008
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89 comments on Oilwatch Monthly - July 2008
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There is a severe economic crisis brewing in the US, and I believe this will cause a significant demand destruction across the planet, making oil cheaper again. I know, in 2009 and 2010, Peak Oil researchers will be ridiculed by everyone. Once the price of oil goes down significantly, which is sure to happen, people will forget about the ticking Oil Bomb, and go ahead with buying the gas-guzzling SUVs again... I have already failed in convincing my friends about Peak Oil and its dangers.
The only way to bring awareness is to conclusively prove that Old Super-Giant Oil fields are actually declining in production. Since such data is hard to come by, people won't listen, and keep looking for easy answers and scape-goats for this price rice.
Dunno about US demand destruction, mate.
Looking at this, we see that recessions in the US have historically simply levelled out consumption, stopping its rise, or else dropped it by 1 million bbl/day for each year of the recession.
So, by mid-2009 we might see US demand drop from 20.7Mbbl/day to 19.7Mbbl/day. Assuming that total liquids production remains at 86Mbbl/day, can we imagine that China, India, Russia and Brazil will manage to find ways to use another 250,000bbl/day each?
I wouldn't expect world demand to drop in the next few years, and so the price is just going to keep on going up. Sorry.
Well, I imagine a deep recession in the US would cause significant economic recessions in India and China too, which are dependent of American consumption to a large extent. It could, very well, reduce demand for a while, though I agree that by 2012, the game would be over.
But it is also possible that somehow, oil extraction may increase, given the new investment in Iraq, Venezuela and Brazil lately.
Check Out http://en.wikipedia.org/wiki/Oil_megaprojects
These people have all the raw data in the world. And what are their conclusions?
New Oil Fields - In thousand barrels per day...
2008 - 5559
2009 - 4636
2010 - 5330
2011 - 3500
2012 - 3476
2013 - 1365
2010 is the peak of new oil production, from the known new facilities coming online. Couple that with Global Economic recession, and you'll see that Oil price is coming down in the short term. We'll just have to wait and watch...
Brazil is still, although just barely, a net oil importer.
Venezuela has shown lower production and lower net oil exports, for 10 years. At their current rate of decline in net oil exports, they would approach zero in about 20 years.
The new oil projects tables like the one above, along with lower consumer demand, look they will solve our oil shortage untill you consider decline rates. As Jim Kingsdale points out at his website:
This estimate of about 4 mb/d of new oil needed just to offset old field decline rate is from CERA, the perpetual overestimator of world oil supply, and doesn't consider that much of recent production in the old fields has been done with horizontal wells, which often result in decline rates more like 10%. So we could ease the less significant end user demand quite a bit, add around 5 mb/d of new oil each year from the new project tables, and still easily wipe out all that good with a real decline rate of about 7%!
Also consider that about half the new projects oil is oil sands, deepwater and the like with an EROI around 4. The math of energy source displacement dictates that this kind of EROI replacing our conventional crude EROI from the old fields means that about 3 barrels of new oil must be produced to replace each barrel of old field declining production to give the world the same net energy. So adding this multiplier of 3 to the new projects table leaves us in the hole by mucho barrels.
This is really bad.
If mature oil fields are declining so fast,... Oh Hell!
I had seen a slideshow presentation on CERA website, compiled in 2005, which claimed that Peak Oil is a hoax. It is still being circulated by Peak Oil deniers. But if CERA says the decline is so high, it has to be a lot higher than that.
You know, this is really gotten out of hand, and I don't like it. But CERA guys are still so optimistic, I don't understand why... Their numbers are different than what the IEA and EIA tell us...
Look at this...
Peak Oil Theory – “World Running Out of Oil Soon” – Is Faulty; Could Distort Policy & Energy Debate
Source: http://www.cera.com/aspx/cda/public1/news/pressReleases/pressReleaseDeta...
Also look at "No Evidence of Precipitous Fall on Horizon for World Oil Production: Global 4.5% Decline Rate Means No Near-Term Peak: CERA/IHS Study"
Source: http://www.cera.com/aspx/cda/public1/news/pressReleases/pressReleaseDeta...
Atleast these people agree that "aggregate global decline rate is 4.5 percent". But they are as optimistic as always...
You don't give the source of your data. EIA gives production, net imports, and consumption (called "product supplied") information through April 2008. Net US imports peaked in 2005. This is a graph of recent data. 2008 is a partial year.
If you right-click the image I posted, "copy image location", then you see it's from a TOD article...
Your own graph is very telling. With a decline in US imports of oil over the past three years, we've seen the world price of oil triple.
The point is, even the complete mess the US is in at the moment does not overnight cause 10Mbbl/day of demand to disappear. It's a slow change, and the slow US decline in demand can easily be taken up by declines in supply across the world, and rises in demand elsewhere.
Thus, we cannot expect that the USA's mess is going to drop world oil prices in the next few years. It hasn't so far, why would it in future?
Demand destruction will occur, but now demand/consumption will always exceed production/supply. Thus the rate of extraction will remain the same.
Thus the date of terminal depletion (DOTD) will not change. Likewise because the U.S. is 1/4th of global demand/consumption, the U.S. could pursue maximum conservation policies and the rest of the world would gobble up what we might conserve.
Because DOTD looms and with it looms a reduction of the U.S. population, it would be wise to scrap consumerism, cars, and boats, and use the oil that we can still afford buy for risk management programs.
It's all over folks. Now plan B is planning for the collapse that looms in the not-too-distant future.
Long before DOTD, the U.S. will collapse: increasing U.S. dependence on imported oil, declining domestic production, Land Export Model, bankrupt economy, and the increasing inability to purchase oil as it goes to $500 per barrel and higher.
where is this demand destruction going to come from if it isnt SUV drivers? I thought that would be the first place to look for it.
Sorry, but by definition, SUV drivers have the money to buy expensive gasoline. Demand destruction would most likely start at the bottom with some poor schmuck driving a clapped-out Dodge minivan gives up and takes the bus to work, even though the trip will take an hour vs. 15 minutes by car. Huge pickups, full-size vans, and SUVs still dominate the gas pumps at the local Costco...
Not the bus.
Repaired a Suzuki Sidekick and doubled my gas mileage.
I agree there is going to be demand destruction. However, we have no way of knowing how it will affect prices because we have no way of knowing what the increased instability is going to do to oil producers. Whether it is bombings in Nigeria or strikes in Brazil.
All we can know for sure is that there is going to be extreme volatility. If oil goes to $20 a barrel it may not stay there for long, and it may shoot up $300 in a month.
There is a severe economic crisis brewing in the US, and I believe this will cause a significant demand destruction across the planet, making oil cheaper again.
It's possible maybe, but I tend to think it more likely that global demand will keep bumping up against the roof -- i.e. supply. No way to know for sure, though.
The only way to bring awareness is to conclusively prove that Old Super-Giant Oil fields are actually declining in production.
Here I disagree. You can conclusively prove anything you want, but it won't go anywhere until events compel a recognition of reality, and sometimes the compelling involves a powerful kick in the groin.
On the other hand, I believe that the power-that-be are getting ready to acknowledge peak, and pressing the subliminal message: therefore get behind our efforts to get control of what remains.
A global depression is the only thing that can significantly reduce global oil demand in the near term. There are too many people bidding on the same thing. This $11 decrease for a barrel doesn't mean anything because it's not based on a bunch of new supply coming online.
We are going to see price fluctuations, but as it stands right now these periods of people shorting the market will rebound like a rubber band.
What is happening is called conditioning. Oil cost multiplies by a factor of 8 in not even the same number of years, so people cry out for blood. Every time it tests a new high the anger returns. Then the price dips back and people let out a sigh of relief. The optimism comes back for a while. Then the cycle begins again and prices rise. It's this up and down (though mostly UP!) that makes a lot of pundits and their TV audiences blame all the wrong things. Within 3 years people will beg to return to the days of $147/barrel oil.
What Hubbert and others couldn't account for are above ground political factors such as ELM, economics, and resource wars. Regardless of KSA's ability to ramp up further, we are on an energy and economic tightrope.
American oil consumption will decrease when China stops giving us all that free money. China's oil consumption will increase when they stop giving us all that free money. Same amount of money, same amount of consumption. Just location is different.
War with Iran is not the same deal. There will be less oil available short term for people to buy. I see America broke and unable to buy oil from Nigeria, and China able to buy oil from Nigeria and price out Haiti, etc.