71 comments on Mainstream Dutch analysts foresee oil supply constrained world
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71 comments on Mainstream Dutch analysts foresee oil supply constrained world
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I thought TODDERs would be pleased to know that you are being watched/copied/referenced in analysts’ research such as UBS investment banks. I have seen a lot of TOD reference in expensive subscription news letter such as "What I Learnt This Week" ($20,000 per year).
Leanan, you may want to chase these people for some support $$$ .
100 mbpd? I simply dont see it. Peak in 2030? And they simply do not understand the scale of China. It is absolutely ridiculous to assume that China would be at such a low consumption level in 2030 (it is the same as the IEA forecast I presume). What are their economic forecast for China, because basically they are predicting a China collapse with their extremely conservative Chinese consumption figures, its the only way that China will consume so little with their 2030 100 mbpd global production forecast. So they should explain why they think the Chinese economy will see such extremely low consumption figures.
We're at the greatest demand boom in human history, and all reports simply fail to get it, whether it is China, the Middle East or even Russia. Russia will see a massive consumption boom, but all reports I've seen basically just state that Russian consumption will stay flat, it won't increase anything. What a joke.
The price bidding seen over the past couple of years is just a warmup. It is time to tell people that a huge chunk of the North American and Western European consumers have to be pushed off the road through sky-high prices to make room for the relentless demand boom coming from consumers in the rest of the world that is just about to drive on to the road.
Hidden deep within the footnotes is the assumption that by 2030, all Chinese are vegetarians
Yeah, I guess that must be it.
I havent read the whole report yet, but it seems rather right-wing to me, am I being biased here? They talk much about Iraq and rants about those pesky "nationalistic chinese people" who think they should be given a fair share, although the report do try to balance it by saying that the US is equally to blame for its "unsustainable extensive" oil use. So the 2 barrel a year Chinese (same as the average Guatemalan) are equally to blame as the 25 barrel a year American. Ludicrous. Its interesting why no report really puts the Chinese demand in perspective, but always tries to imply that the chinese are huge gas guzzlers and that they should start to reduce their excesses...
Of course, our middle case has the top five net oil exporters approaching zero around 2031. At the Saudi's current rate of increase in consumption, they would be consuming about 12 mbpd in 2031, versus their 2005 total liquids production rate of 11.1 mpbd.
Well, I think that is much more reasonable. The russians have most likely peaked their exports already, while the saudis have perhaps a couple of more years to go at best. I think it is more reasonable to project future consumption by looking at per capita annual consumption of other countries at different income levels/stages of development. Everything points to sharp increase in the Russian consumption, perhaps up to around 5 mbpd in 2020. Their income level by then, and their price structure of refined products would imply that. It's a low population density country as well which points to more oil being used. Regarding Saudi, it is harder to find countries that are comparable simply because they are such huge per capita consumers already. I cant imagine the average Saudi gobbling over 100 barrels a year in 2031 though, although their diversification plans away from oil income certainly points to sharp energy increases.
I agree that it is highly unlikely that the Saudis will show a +7.2%/year rate of increase in consumption for 26 years, but our middle case production decline scenario and modest rate of increase in consumption puts them around zero net oil exports in 2031. Increasingly, I think that a lot of world trade will consist of net food and net energy exporters trading with each other.
The common TOD assumption that the Chinese economy will keep booming in the face of projected oil, financial and environmental crises seems unrealistic to me.
When these reports have systematically underestimated the demand pressure from China and other countries, then they need to start to change their ways and be more realistic, that shouldn't be too much to ask for. They have been so far off on both the supply and demand side. If they think the world is heading for a depression, then yes, their chinese consumption forecasts make more sense, but that's not what they have projected for the world. It seems to me that they believe the US will still use vastly more oil than China even in 2030. That implies that they are extremely pessimistic about future economic growth in China, or they think that China will somehow be rich but use just a fraction of the oil used in similar income countries, when there's no logic behind any of these assumptions.
I think China will be a 'good boy' and not spoil the party untill after the Olympics are over and any resulting deals signed and sealed. Then it will be make up for lost time and 'Stand back, I'm comin' through'
Part One, demand loops ....
Regarding oil demand; it's hard to predict because there are many feedback loops that come into play at varying times for different reasons. The most obvious example is the drop in miles driven in the US because of a $2/gallon rise in pump prices in the past year and a half. Most prognosticators in the media and in business never considered that demand for gasoline would drop in the US for any reason.
Fooled ya!
With China, there is a 'hybrid' part- demand- part- command economy. The Chinese government will continue to try to keep a floor under growth ... but this does not necessarily translate into fuel demand the same way growth in the US drives consumption.
- It is just as hard to measure Chinese growth as it is to measure Saudi petroleum reserves. Good figures are not available. The Chinese lie. It is hard to see the Chinese continuing to have the same rate of growth when there are serious coal and fresh water shortages. The Chinese also have serious transport bottlenecks; they have built miles of freeways - which are jammed with traffic - when they needed to build railroads. Without more transport, there will be an inability to ship more goods out or raw materials in. We are at 'Peak Chinese Production' right now.
- The Chinese currency (Renmimbi) does not trade internationally. Nobody can really tell what it's worth as a result. The Chinese claim an exchange value - dollars to renmimbi - but that is an internal valueation that is set by fiat; that is, that valuation is set by the Bank of China. It is a kind of currency tax ... that has allowed the BOC to accumulate a trillion dollars. Nevertheless, any measure of China's economy by means of the value of its currency is an abstract exercise.
- The Chinese buy oil with American dollars it receives from its manufacturing sector in the currency exchange process AND from the influx of 'Hot Money' which is cash from hedge funds, investment banks and institutional investors seeking short- term yields. Much of this hot money is excess liquidity produced by the US Federal Reserve as well as dollars sold into the currency markets by other international players for various reasons. The Chinese reserves of dollars and the hot money are a distortion in the pricing mechanism that is also hard to measure.
- There is little relationship to the value of the dollar reserves held by the Chinese and the value of Renmimbi. The Chinese are using dollars as 'Monopoly money' because there is no other demand requiring a substantial outflow of dollars, leaving the Chinese to do with dollars as they wish. This spent on petroleum would be 'virtual demand'. I suspect these Chinese dollars are driving the futures exchanges. If, for some reason, the Chinese need dollars to sell they would unwind their futures positions. If they have a large position and the demand for dollars great, the result would be a significant drop in crude price even if actual demand on the ground in China remained the same.
- An outbreak in violence in western China, for example, would increase the value of dollars. Under this circumstance, the dollar might become very strong and the Chinese encouraged to sell dollars at a good price ... but petroleum valued in dollars would become proportionately cheaper. All this while physical demand in China remained level. At the same time, a large outflow of Chinese dollars into currency markets would tend to depreciate the dollars' value because of supply and demand. The different feedback loops make demand prediction difficult.
- The Federal Reserve is working as hard as possible to prevent a 'grand mal' debt deflation in the US ... they are doing this by flooding the eoconomy with liquidity. This process exports inflation. Increased consumption in OPEC/Middle East countries is funded in depreciating dollars. This is one reason why Saudi inflation is running 12% a year. Six percent of their own plus six percent of US inflation inherent in every buck.
All of the above create feedback loops that effect demand. For instance; if the dollar loses more value, the producers may require payment in other currencies, such as the Iranian demand for Euros from their European customers. Since Euros aren't a big part of Chinese currency reserves, the Chinese would have to buy Euros. This would put a value on Renmimbi ... since the Chinese are experiencing their own inflation, the Renmimbi would lose value too ... it's a matter of supply and demand. There are just not that many Euros out there in the currency markets. The result is; either the Chinese lose 'wealth' through the devalueation of their currency (priced at the wellhead) or they lose wealth through the currency exchange.
The Chinese alternative is to support the dollar ... which they are doing right now, by buying US Treasuries with dollars.
The bottom line; spending money on money is not spending money on petroleum.
One of these days the idiots in charge of the US government will figure out the stranglehold the US has on the oil producers and act accordingly. Since the idiots in charge gave us 'suburbia' I really doubt anything will change from a policy standpoint. Oh, well ....
I don't understand what you mean by that... IF the Chinese dump US dollars in large amounts in the international markets, then there is a huge possibility that the US Greenback would collapse. It is a fiat currency, and has no backing whatsoever. The FED has been printing money and bailing out stupid institutions like there's no tomorrow... There is already a problem of too many dollars, and the Chinese are protecting the US from imminent collapse...
Mudbucket: I looked for "What I Learnt This Week" but couldn't find it. Got a link?