The Oil Drum | DrumBeat: June 19, 2009

184 comments on DrumBeat: June 19, 2009

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Darwinian on June 19, 2009 - 9:53am

Someone help me out here. In the text of the above link touting the great reliability of BP as a reporting firm; Peak Oil pundits need to review their calculations after BP report, we find this:

And thus despite the fall in global oil consumption by 420,000 barrels per day (bpd) last year — the biggest since 1982 — crude demand in China and the developing world for the first time exceeded the combined use in the rich industrialized, OECD, economies.

Get that, world oil consumption fell last year by 420,000 bp/d. And since consumption basically equals oil produced, then production fell last year. But according to the EIA figures oil production increased last year by a whopping 1,064,000 barrels per day. (All liquids, the increase was only 784,000 bp/d if you are measuring C+C only.) That's a difference of almost 1.5 million barrels per day or 1.2 mb/d if you are talking about C+C.

Now unless gross storage increased last year by some half a billion barrels, someone's figures are off. But the article clearly states:

BP is definitely not OPEC. Its pronouncements carry weight...

Well, I guess that makes the EIA the one who's data is trash.

Ron P.

Edit, Correction. The top link states that oil production actually rose by .4% last year. That is an increase of 338,000 bp/d, all liquids. Well hell, I guess they did store a lot of oil somewhere last year, about 275,000,000 barrels. At any rate that puts the increase way less than the EIA states.

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PaulusP on June 19, 2009 - 10:15am

IIRC China started filling their strategic reserves in ernest once the price collapsed. 275 mb is 138 VLCC, so it's possible.

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steve_piper on June 19, 2009 - 10:20am

I have also noticed that EIA's global demand/production figures are consistently higher than IEA, and now BP (per these citations). I'm not sure who's right, but presumption of doubt is leaning against EIA. It might have something to do with how EIA folds liquids into their calculation.

Meanwhile, the article exults that reserves of oil can last decades at current rates, "despite the fact that the world’s proven oil reserves fell in 2008, the first drop in a decade, as per the BP statistics."

Let's think about this for a second.

NYMEX front-month crude averaged nearly $90/bbl in 2008 and proven reserves ... fell? The consensus fair price for incremental oil is $60-90/bbl (what a relief to have narrowed it down so much!) and proven reserves fell? Better get oil sands back into the reserves estimates. And tell the peak oil folks to sharpen up their fuzzy math....

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ccpo on June 19, 2009 - 3:35pm

Meanwhile, the article exults that reserves of oil can last decades at current rates

What I love about that is the blatant dishonesty of the statement in the context of the article. I have used the same sort of equation to make a point, not model realistic production curves. Because of the context, they are literally implying that we can produce the same amount of oil year after year until some point 40+ years from now it's instantly finished.

Absurd. Production just doesn't work that way. So, even if their projections of how much there is are accurate, they flow rate won't look anything like what they are implying and trouble will come long before that last barrel is pumped.

Sheesh...

Cheers

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steve_piper on June 19, 2009 - 4:07pm

Completely agreed.

I take note also of the spin being applied to Hubbert modeling lately: "static, simplified." The very same spinners will then proceed to say 'at current rates of use, proven reserves will last us 50 years.'

Long division: so nuanced, so sophistocated!

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ericy on June 19, 2009 - 4:37pm

And the wise-acre retort to this is to say "and at 1910 rates of use, proven reserves will last us thousands of years".

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aangel on June 19, 2009 - 6:38pm

From one of my presentations...

Reserve Production Fallacy

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sgage on June 19, 2009 - 6:41pm

Nice graph, aangel!

OK if I use it in my class?

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aangel on June 20, 2009 - 12:59pm

No problem. Send me your email and I'll send the slide in Keynote or PowerPoint format.

aangel ( a t ) postpeakliving ( do t ) com

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elwoodelmore on June 19, 2009 - 8:44pm

good visual, but wouldn't an extended time scale such that the area of the square is equal to the area under the curve be more accurate ?

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Twilight on June 19, 2009 - 9:27pm

It depends on what you are trying to illustrate - what is shown is likely closer to what people envision.

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elwoodelmore on June 20, 2009 - 5:57am

how about a reality based illustration ?

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xeroid on June 20, 2009 - 7:34am

Yep, use real world data and above all else try and explain ELM - show a chart for that, the UK is a good example for both peaking, production of a country does NOT always follow a gaussian curve and ELM!

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ccpo on June 19, 2009 - 11:06pm

Let's be careful to acknowledge the usefulness of such a characterization in helping the layperson understand how much oil there is. I object to it here because it is being used in a context that would, in my opinion, leave the layperson thinking there is zero issue wrt oil production for the next 40 years.

That is, in combination, a real production curve coupled with the above in explaining PO should be effective, but as propaganda, it is dishonest.

Cheers

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Undertow on June 19, 2009 - 11:04am

If you look at the IEA figures for supply/demand balance (Table 1 XLS format) there's a balancing item "Miscellaneous to balance" which is described as "Includes changes in non-reported stocks in OECD and non-OECD areas"

That's been all over the shop in the last year or so.

2007  2008 Q109
-0.2  0.3  -0.9

So to balance supply/demand the IEA assumes untracked storage was draining at 200kb/d in 2007, filling at 300kb/day in 2008 and amazingly draining at a whopping rate of almost 1mb/day in Q12009.

Q12009 Production is given as 84.0 and demand at 83.8, yet reported OECD stocks + floating/in-transit increased by 1.2 mb/day in Q1 according to the IEA requiring them to apply their massive fiddle factor and assume some untracked entity(/ies) decided to dump 1mb/d of stored oil throughout Q1 at the lowest possible price so that OECD countries could get a bargain.

Alternatively the figures may not be very accurate...

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memmel on June 19, 2009 - 3:10pm

Shame on you your not supposed to look behind the curtain.

I'm warning you if look to hard and you will end up like me :)

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FMagyar on June 19, 2009 - 4:47pm

We're off to see the Wizard, The Wonderful Wizard of Oz.

You'll find he is a whiz of a Wiz! If ever a Wiz! there was.

If ever oh ever a Wiz! there was The Wizard of Oz is one because,

Because, because, because, because, because.

Because of the wonderful things he does.

We're off to see the Wizard. The Wonderful Wizard of Oz.

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FuturePundit on June 20, 2009 - 1:45am

Storage draining in 1Q2009? They are crazy. In 1Q2009 speculators were (and still are) renting oil tankers to use to store oil to sell it when prices go up. No way was there a big drain of storage onto the market in 1Q2009.

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