The Oil Drum | World Oil Production Peaked in 2008

176 comments on World Oil Production Peaked in 2008

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westexas on March 17, 2009 - 10:14am

No real argument from me, although I think that the key point is that crude production basically stopped growing in 2005, with a cumulative shortfall between what we would have produced at either the 5/05 rate or the 2005 average annual rate, relative to what we actually produced (EIA, C+C).

And as I have pointed out, IMO, Deffeyes basically nailed it. Despite an erroneous observation regarding 2000, he never backed away from what his model showed, a world crude peak from 2004 to 2008, most likely in 2005. And note that Deffeyes was modeling conventional production. His point was the unconventional production would just slow the rate of decline in total production.

As I have also noted, based on the logistic (HL) models, the world was to 2005, as the North Sea was to 1999 as the Lower 48 was to 1970 (conventional reserves approximately 50% depleted in all three cases). It's interesting to look at the initial three year decline rates in all three cases:

Lower US 48 (EIA, C+C):

1970 to 1973 Decline Rate: -1.4%/year
(It would take 51 years to fall by 50%)

1973 to 1979 Decline Rate: -3.9%/year
(It would take less than 19 years to fall by 50%)

Average annual US crude oil prices increased at about +15%/year from 1970 to 1979 (and at about +21%/year from 1970 to 1981, going up ten-fold in 11 years), i.e., higher crude prices, less crude production.

North Sea (EIA, C+C):

1999 to 2002 Decline Rate: -0.9%/year
(It would take 80 years to fall by 50%)

2002 to 2008 Decline Rate: -6.7%/year
(It would take less than 11 years to fall by 50%)

Average annual Brent crude prices increased at about +19%/year from 1999 to 2008, i.e., higher crude prices, less crude production.

World (EIA, C+C)

The 2008 average annual crude rate--subject to revision, generally downward--is basically flat with the 2005 rate, well within any reasonable margin or error, with 2006 and 2007 being below the 2005 rate.

If the world had maintained the 2005 rate of 73.7 mpbd, we would have produced 80.7 Gb from 2006 to 2008, inclusive. The EIA shows cumulative production over this time period of 80.3 Gb.

Average annual oil prices almost doubled from 2005 to 2008, i.e., higher crude prices, less crude production.

I suspect that the key difference between the post-2005 world data and the post-1970 Lower 48 and post-1999 North Sea data is that the world is getting some contribution from unconventional production.

Mathematically, world conventional production is to 2009 as the North Sea was to 2003 and as the Lower 48 was to 1974. 2003 was the beginning of the more rapid North Sea decline, as was 1974 for the Lower 48. It's possible that the decline in demand may be masking a more rapid decline in world crude production.

In any case, IMO the "When did we peak?" argument is increasingly irrelevant. With a collection of very old giant oil fields heading to where the East Texas Field is now (99% water cut), and with high underlying decline rates from existing wells, combined with declining investments in oil production, I think that it is unlikely that the world will ever produce 74 mbpd or more of crude oil on an annual average basis in future years.

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x on March 17, 2009 - 10:26am

Another chance for me to rail against comparing, adding and etc. things that are different. Why do analysts insist on putting oil sands and such output in the Peak Oil argument? Can't do that.

Peak Oil was and still is about conventional oil production. It is the decline and eventual end of oil that Hubbert and the rest like Deffeyes were worried about. It is conventional oil that has had the high return for decades. While other output may be similar, the yield and method of extraction is different enough to be excluded.

No insight is gained by mixing these oil resources. All it does is obfuscate and confuse. Could that be the reason it is done?

Let each form of liquid fuel, or any other fuel for that matter, stand on its merits or demerits. Logic requires it. Befuddled thinkers who compare, add, subtract and etc. things that are different add nothing to understanding. They do not understand basic principles of logic.

There are some things in mathematics one can not do like divide by zero. Logic has rules too and one of them is that things that are different can not be added etc.. If they are anyway the result is silly nonsense.

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aangel on March 17, 2009 - 11:00am

Like everything in life, I don't think there is one correct way to look at this situation. You keep trying to assert that your way is the "best" way and other peoples' way is the "wrong" way.

Points of view are like tools in a toolbox. Use the one best for the job.

Point of View 1
Group all liquids because ultimately it's the aggregate that's important to our end uses. This works because the liquids, with some time and effort, are often interchangeable to the machines that run them (or you can change the machine). This is a more strategic view.

Point of View 2
Distinguish the liquids to gain a better understanding of the immediate situation so that short-term decisions can be made, like "will we have a shortage of home heating oil this winter?' etc. This can often benefit tactical choices.

If you have a different way to look at things, I request that you simply say something like, "The benefit of the author's point of view is x but if you look at it from a different point of view, which I'll describe in a moment, the benefit is y."

The benefit of approaching discussions this way is that, If everyone were to do this, we wouldn't keep getting into these endless "he's wrong and I'm right!" battles here.

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stravinsky7 on March 18, 2009 - 1:19am

i don't think x is trying to start an argument.

it is not wrong to project "peak liquids". In fact, it is vitally important.

however, the article purports to be on peak oil, which it is not, in fact.

"liquids" is frustrating because it is obfuscating. those who have studied enough know the vast difference between "liquids which possess potential chemical energy" and "crude oil" understand that to oh ummm probably 99.2ish percent of the population its all the same. (But the shape of the graphs the two terms produce are not).

yeah, x. i'm with ya.

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ccpo on March 18, 2009 - 1:42am

The problem with x is that he/she says you can't compare apples and oranges (different liquids), but that you also can't count fruit (EROEI).

Can't have it both ways.

Cheers

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aangel on March 18, 2009 - 12:45pm

Leaving aside x's intent (I have no idea what it is) my point is that "there is no one and true and correct point of view usable in all situations" and x keeps asserting that the way people are using liquids can't be done and that his/her way is the "correct way."

There is no "correct" way to view the topic -- there are just ways that give different results depending on what the goal is.

Each point of view has value because it is able to show something that is hidden when using a different point of view.

In the diagram a. below, can you see the orange dot? Of course not, but change the background (the point of view, or filter, if you wish) and the dot becomes visible as in b.

Photobucket

The point of view x is advocating has perfectly good uses but is not as effective when using a different filter of goals and understanding. Same with the point of view he is asserting is "illogical" or "silly nonsense."

If you want a well-rounded understanding of a topic, gather as many points of view as you can. Each one will expand your understanding because each one reveals something unable to be seen by the others.

In this particular case, it is pretty clear to me that x is unable to see what other people are seeing. Does that make him/her a bad person or stupid? Not at all. But if he/she keeps insisting that his/her view is the only one worth examining, it does make him/her in the very least dogmatic and positional. It also turns the conversation from an exploration into a battle in which there must be a winner and a loser.

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ccpo on March 19, 2009 - 1:16pm

But if he/she keeps insisting that his/her view is the only one worth examining, it does make him/her in the very least dogmatic and positional. It also turns the conversation from an exploration into a battle in which there must be a winner and a loser.

To be fair to x, your position stated above is just as dogmatic and positional. What is it they say, not making a choice is a choice? I often enjoy your posts, but sometimes I scroll right through them because they are filled with New Agey, nobody's wrong, everybody's right stuff like the above. (And I was very much of that sort of mind in the past, and it still informs my thinking.)

The obvious problem is that sometimes there is *one* best answer, and to say that isn't true is simply false so we need to be just as aware of the possibility there is only one answer as we are that it is *usually* best to take all views into account.

That said, I don't think EROEI is one of those cases where x is right.

Cheers

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aangel on March 20, 2009 - 3:07pm

I assert that "right" and "wrong" exist only in language and are convenient labels. What you call "right" someone else calls "wrong" so clearly their usage depends on the context in which they are used. If it were not so, there would be no disagreements about what is "right" and what is "wrong."

Call it New Agey if you if you'd like, but it's actually epistemology, or at least that's my point of view.

;-)

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ccpo on March 20, 2009 - 3:43pm

It's claptrap when you take it that far, Aangel.

Murder is bad. Very few disagree, and those few are murderers.

C'mon... If you can't accept the shortcomings of your stance, you are being nothing more than dogmatic.

You keep referring back to what language is and isn't. I think you sometimes forget that the medium isn't the message, but that the medium we have is the way the message gets transmitted, which means the medium actually is a large portion of the message.

There's not much value in getting too "cute" with this stuff as you lose the real medium: the audience.

Just an observation from someone who makes their living working in the language.

Cheers

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noutram on March 17, 2009 - 2:10pm

But even 'conventional oil' can be broken down into categories like onshore, offshore/deep sea/polar with different cost structures/margins/etc.

All these different sources of energy have different EROI, what's clear is that we are transitioning to an era where the cheapest most easily available energy has gone and as a consequence an increasingly greater chunk of civilisations resources will have to go to maintain base supply -let alone grow it.

And since the renewables/alternatives are 'priced' in energy units (steel, copper, silicon, etc.) as this base price creeps up so will the price of these alternatives resulting in the conclusion that they will never be a cheaper substitute when viewed on a short term basis. The main difference however is that the ongoing source of energy supplied by the renewable group once created is of course effectively limitless within the confines of our needs.

Nick.

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sofistek on March 17, 2009 - 8:03pm

"The main difference however is that the ongoing source of energy supplied by the renewable group once created is of course effectively limitless within the confines of our needs."

Assuming our needs are modest, that may be true. However, one should not assume that renewable resources are unlimited. Even renewable resources will be unsustainable if they are consumed above their renewal rate, above the rate that doesn't adversely impact the biosphere, or in a way that damages our environment.

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Luke H on March 18, 2009 - 4:14am

Even renewables have a significant non renewable aspect. The resources required to build and service the renewables' physical plants, storage facilities and shipping/transmission facilities are not renenwable and are not equally abundant or accessible. Energy availability is only part of the equation as we start to hook up the rest of humanity.

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AlanfromBigEasy on March 18, 2009 - 7:28am

Those are usually renewable as well. Some hydroelectricity, some aluminum source (recycled or not) = Transmission wires and more.

Steel is very recyclable, and several energy sources can be used.

Concrete is less recyclable.

Alan

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mcgowanmc on March 18, 2009 - 8:53am

"There are some things in mathematics one can not do like divide by zero. Logic has rules too and one of them is that things that are different can not be added etc.. If they are anyway the result is silly nonsense."

EROEI- If it costs a barrel to pull a barrel why pull the
barrel?

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xeroid on March 18, 2009 - 12:13pm

You could convert wind to oil and carry on using ICE vehicles without needing batteries to use wind for transport?

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Matt on March 17, 2009 - 11:00am

In any case, IMO the "When did we peak?" argument is increasingly irrelevant

Agreed. Nevertheless, it can be argued that without hurricane Katrina in 2005 and without the olympic games in China in 2008, the monthly peak could have well been in December 2005.

Unfortunatley, our politicians still cling to the wording of the IEA WEO 2008 which says that oil production will not peak before 2030. The international energy agencies and many government departments around the world will have to take a great part of the blame for the financial crisis and the global recession. Had Colin Campbell's warnings

The World's Endowment of Conventional Oil and its Depletion

by C.J.Campbell
© January, 1996
http://www.hubbertpeak.com/Campbell/cen21.htm

been heeded and had governments officially forwarded these warnings to banks, they would have been more prudent in their investments like airport expansions, toll-roads, car-dependent subdivisions etc.

As the peak becomes more visible in the next years, the public will ask questions about OPEC's oil reserves and when the confidence in these and all other reserves will vanish, oil hoarding will start and international oil markets are likley to freeze up like credit markets now. This may happen in the timeframe of 2013-2015.

Those who in the past tried to deny peak oil in an attempt to avoid panic on their watch will bitterly regret it because if we had had an earlier confidence crisis on oil reserves, more of the oil thoughtlessly consumed since then could have been used more wisely, e.g to build up electric rail to replace oil based transport. These projects may get stuck in diesel shortages later.

It is easy to calculate that for every month the world is saving, say, 3 mb/d crunch time is delayed by 1 day.

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memmel on March 17, 2009 - 4:30pm

Look peak oil itself is not important. The pricing around the peak will depend on supply and demand for several years before and after the peak the difference between peak and the current production levels will be less than 2mbd or well within the error margins and also well within what we could easily reduce consumption with a small amount of belt tightening if needed.

So peak does not matte much and even the two years before and after peak don't matter all that much.

What matters is given our ability to add production and the decline rates and decent estimate of the rate of demand change when we are down 4mbd vs demand. Once this happens we are probably permanently in and era of expensive oil. Further declines in oil output may make a bad situation worse but they don't change the intrinsic game we will never see cheap oil with a fully functioning economy again.

Now only with that argument thus this supposed peak in 2008 matter. If the real peak was in 2005 and 2008 was a result of some shifty accounting practices then we are not in the second year just past peak we are further out in year 4.

Now this is important and I suggest you can readily remove the so called peak in 2008 and justify everything that happened including all of 2008. The only small requirement is a short term surge from KSA from unsustainable sources of about 50 million barrels of oil up to at most 80 million barrels. Barely a days supply of excess oil added as the economy was crashing and the ability of the US to import oil was crippled by hurricanes. There certainly was and unmistakable and real short term surge in exports from KSA.

With that one single exception you can go back and look at the real situation assuming a peak in 2005. If the true sustainable and reasonably accurate peak was back in 2005 and if declining producers padded their numbers into 2008 then we probably did do what one would have expected and seen continued steady overall declines from peak since 2005.

Further more there is good reason to expect the base decline rate to accelerate probably in 2008 we where down 2-3mbd 2009 will probably see overall production fall further by 4mbd thus if we really peaked in 2005 by the end of 2009 production will have declined to the point that peak is unmistakable and even if OPEC is holding back some supply bringing it online on 2010 will only serve to slow the decline rate not cause a secondary plateau. Further out the current pullback in drilling becomes a real issue as supply still cant be brought online fast enough to avert steady decline.

But you can see that in a sense a peak in 2005 is important because it puts us over the edge so to speak for oil supplies. We have used up the few years of fairly slow declines surrounding the peak.

Bottom line is for 2008 all I see is that the Saudi's where able to enact a short term surge that overwhelmed the supply channel as all hell was breaking loose on the financial front. I leave it up to you to decide if the decision of the Saudi to surge as the US pulled the rug out from under Lehman and tried to safely prick the bubble where coordinated or not.

But regardless of the large number of short term events during the second half of 2008 if we peaked in 2005 then pretty much no matter what was done then we will know soon what the real situation is. Any spare capacity generated by cutbacks by OPEC will be gone in a year or less if we are 4 years post peak.

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Matt on March 17, 2009 - 11:27pm

If the true sustainable and reasonably accurate peak was back in 2005 and if declining producers padded their numbers into 2008 then we probably did do what one would have expected and seen continued steady overall declines from peak since 2005.

Look at the Saudi decline from 2005 to 2007. There was no workover coming on-stream 2007-2008 to explain the 2nd Saudi peak sitting on top of the rest. Local demand was surging at least by 500 kb/d so there was internal pressure to produce more. Some of that 2008 peak must have come from storage. Maybe the temptation of high oil prices during the olympic boom in China. Have Saudis damaged their oil fields in this episode? Their interest now is to "rest" their fields. We can be sure they will do everything possible to confuse us to the last minute.

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memmel on March 18, 2009 - 12:53am

I've posted numerous times and repeatedly that Saudi Arabia has short term surge capacity my lowest estimate is 0.5 mbd
it could be this.

1.) 0.5-1 mbd or real long term capacity
2.) 0.5-1mbd of surge capacity (over production)
3.) 40-100 million barrels of oil in storage.
4.) 40-100 million barrels of stored finished product ( redirect internal oil outward replace with stored product)
5.) 100 million barres to ? Storage outside Saudi Arabia in Rotterdam, Caribbean, Other leased storage

http://www.menafn.com/qn_news_story_s.asp?storyid=1093236252

http://www.midrocpm.se/Global/Midroc_Project_Management/PDF/Saudi_refere...

http://www.highbeam.com/doc/1G1-44095054.html

Saudi Aramco has extensive oil storage facilities both in the kingdom and overseas. Together with VLCCs and ULCCs chartered by Vela occasionally for floating stocks, its network now has the capability of storing up to 100 million barrels worldwide.

The network includes leased overland storage facilities in Europe, the US, the Caribbean and the Asian/Pacific Basin. It also includes facilities purchased, or bought into, by Saudi Aramco - as well as facilities for oil products and gas liquids leased by Samarec.

Its wholly-owned subsidiary, Aramco Overseas, has recently acquired a 34.35% stake at the Maatschap crude oil terminal and storage facilities in Rotterdam from Texaco. ...

We have and estimated 80 million extra barrels of oil in storage right now. Saudi Arabia could readily have caused this without pumping a single extra drop of oil if its storage facilities where full.

I've never questioned the ability of the Saudi's to flood the market with up to 2mbd for 30-90 days.

I would argue I doubt they could do it for longer and I seriously doubt they can perform this flood any sooner than may once a year if not once every 18 months. To be crude they simply can't keep it up.

Next ignoring the supposed total amount of oil supply in 2008 we certainly saw a differential increase in supply consistent with a flood of oil from Saudi Arabia well within their storage capacity much less withing any spare capacity or over production capacity they may have. Set this against a rapid economic meltdown leading to a sharp drop in demand on the order of 1mbd and viola we have 50-80 million extra barrels of oil laying around putting the kebash on oil prices. And last but not least you have to assume that this was Arab light and Arab ultra light no reason to play games with the heavy stuff.

Its easy enough to do hell at any point over the last several years the US could if it wanted have unloaded the SPR and achieved a similar temporary drop in oil prices. God knows what prices would go to if the US unload 400 million barrels of light sweet onto the market.

Think about it to get the events that happen using occams razor only requires the Saudi's to flood the market from known storage capacity much less using my estimates.

One last thing looking back on the past leading up to the Election the US was extremely aggressive with Iran to the point that I and other were concerned about a war. This could have been for a double purpose bait Iran to attack as the Saudi's emptied storage and also ensure a military presence was in place to prevent and attack on KSA while they had drained down their storage and where vulnerable.
The protective bully angle is interesting and in a sense covers KSA both ways if a war started then their problems are history and the bully role offered short term cover. One has to wonder what the outcome would have been if oil prices had not collapsed. The collapsing of oil prices has been itself a powerful weapon against Iran. Makes one wonder what will happen with Iran when prices rebound.

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Tremain on March 18, 2009 - 3:27am

I must agree with memmel that 2005 versus 2008 does indeed matter for the very reasons he has stated, but when considering the reasons for the tempoary production boost in 2008 there is of course the possibility that the production figures are a deliberate misappropriation of the truth in the grand tradition of the “Gulf of Tonkin Incident” “Sadam’s weapons of mass destruction” etc. The motive by the powers that be is certainly there.

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dohboi on March 18, 2009 - 2:09pm

Indeed. Note that if you lop off the "peek" in mid-'08 and turn it over to fill in the immediately following deep trough, you end up with a steady line around 74, pretty much where we had been since 2005.

I don't see why anyone should be thrown of by a one-month anomaly. It is just that--anomalous. Averaged over any slightly larger time frame and it disappears completely, swallowed by the trough that follows.

It is as insignificant as the fact that is can still get cold in Tibet or Minnesota even as global temperatures are increasing on average. Both kinds of data are essentially insignificant to the larger, more important pattern.

My goodness, if we can get thrown of by such an obviously anomalous blip, it does not bode well for our abilities to interpret complex charts and systems.

By the way, eyeballing the multi-color chart, it does seem as though most of the blip is attributable to Azerbaijan, Canada, Brazil and KSA. It that born out by the numbers. Are there factors in those countries that allow for sudden increases in production under the right economic conditions (like $147/bbl oil prices)? Could they have drawn down reserves during the price spike that they then filled in the following months (but reported otherwise)?

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memmel on March 18, 2009 - 3:30pm

Generally I believe Canada and Brazil's numbers. Azerbaijan is actually a bit iffy to me. Not that I question their production capacity all that much but its not clear how much actually makes it out in any given month and if they are able to reliably produce at capacity. I've got no idea if its significant or not but generally I treat their number as a capacity number with real production potentially as low as 80% of capacity. Overall in and of itself its not enough to make a huge change but its once one of the anomalies that when added with other iffy production numbers works toward the overall imbalance. Assuming they continue to get reliable pipelines built then this will change for them with production approaching capacity routinely. Given the nature of the country once the distribution network is reliable one can expect that the official production number may even be slightly low vs real production and more oil is sold under the table.
I posted in this thread about stolen oil or hot oil I don't think the overall amount in any given year is enough to make a huge change in the numbers its probably less than 0.5mbd globally in illicit oil. By illict I simply mean oil not recorded as being produced generally its governments hiding redirection of profits. However this does add up over 70 years of the oil trade. We could easily have produced and additional 100GB of oil over the last 70 years thats never made it into the official production figures. My opinion is that inflation of production numbers only becomes and issue as a politcal region declines in production before this the numbers are often understated.
A lot of the sharp increase in production as prices rose in 200 might have been that with the new cash flow illicit oil was simply brought on the books instead of being sold off the books. On the same token maybe we did not decline as much as is officially stated as prices fell more oil was sold without being recorded. Again I don't think in any given year its actually that much oil its only its cumulative effect thats important but variance in the black market for oil is certainly a factor. We have to assume that it increases as prices fall and that this oil is sold at a discount acting to keep prices slightly lower then otherwise.

Anyway this is the type of stuff you need to think about when you talk about marginal changes in the oil supply less than 2mbd plenty of potential factors exist to make the absolute value of production difficult to determine with any accuracy.

Seasonal variation alone is problematic at our current levels. Production capacity is a constant and seasonal demand is variable and oil storage facilities are actually fairly large with about 20 days worth of oil in storage at any point in time and at least that much in transit on the ocean. In absolute terms plenty of factors can result in a change of about 25-50 million barrels in total amount of oil moving around in any given month if not more. That sounds like a lot but a lot of its in pipelines not just on super tankers so it a matter of pipeline loading and maybe about 10 supertankers moving differently in a given month storage level etc etc.

And yes KSA can readily flood this system with and additional 50-100 million barrels. The variance is 25-50 but and obvious addition of 50-100 makes a difference. 200 million extra barrels no doubt about it slams the system thats a flood.

That of course leaves KSA.

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SailDog on March 17, 2009 - 1:48pm

Agreed. The data isn't good enough to fix a precise month and anyway it doesn't matter. Oil peaked in the period 2004 to 2008.

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jjauregui on March 20, 2009 - 2:00am

westexas,

Very nice summary. Thank you. The central point is we are really well past peak. While the intervening production plateau did not meet true demand, thus driving the price of oil nearly to $150/barrel, it was a largely manageable period economically and socially. The downside will not be so manageable, so it is incumbent on everyone to be even more reasonable in the face of coming adversity. Public intolerance for obvious government mismanagement of the current financial debacles provides us an idea of what is to come as we enter the Post-Peak period.

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