Plateau update
Posted by Stuart Staniford on April 4, 2006 - 1:44am
Topic: Supply/Production
Tags: non-opec, oil supply forecasts, opec, peak oil, plateau [list all tags]
The new 13 month centered moving average makes for a nice smooth curve and shows the recent flatness in supply well. Readers are welcome to speculate about whether the break, when it comes, will be up or down.
There was a small frisson of excitement in checking the Saudi and Russian numbers (the two countries most important to the near-term peak oil debate). The EIA has them both down in January.
However, I really don't think we can conclude anything from this. Russia was affected by transitory problems due to cold weather in January. And as to Saudi Arabia: well the Joint Oil Data Initiative has January data for Saudi Arabia, and they reckon the production notched up in that month.
All in all, nothing very significant to report.
Finally, one last graph (a new one). This shows US imports of crude and petroleum products over the same time period as the other graphs (since January 2002). The graph is a four week moving average from the EIA. WesTexas has lately been raising the concern about world export capacity falling much faster than total production in the future. Not much sign of an issue at present (note that imports fall nearly every winter, and 2005 is exaggerated by the post hurricane import peak). However, if imports kept falling as we go into the summer, that would be something new.
Past coverage relevant to the plateau:
- Cigar Now?
- Missing Barrels
- Close, but no cigar
- November Statistics Updates
- IEA Monthly Report for December
- Refining the Plateau
- Can Acts of God and Bush Explain the Plateau?
- November IEA global production
- Happy Peak Oil Day?
- Where Supply Increases Come From
Other relevant coverage
I'll also point to Lou Grinzo's analysis of the monthly U.S. consumption figures:
http://www.grinzo.com/energy/blog_entry_archive/2006/03/2006x03x29_5.html
U.S. oil "demand" (i.e. consumption) in January was down 2% from a year earlier, and for gasoline it was down 0.6%. Especially interesting in conjunction with your vehicle miles travelled data being up in January.
Lou concludes:
The lesson I take from all this is that the production graph up there is also a consumption graph. Leveling off may not necessarily be entirely due to production limitations, in the sense that it is becoming impossible to increase production, per peak oil dogma.Now, clearly there are production issues (possibly in the future) or otherwise prices would not be as high as they are. But it is still possible that the immediate driver for the leveling off shown in the graph is due to consumption stalling more than production hitting a wall.
With all due respect to Lou, I think he's not paying quite enough attention to the seasonal issues (January is invariably the lowest demand month for gasoline), and the fact that this particular January was unusually warm means that demand for heating oil was sharply reduced.
As to your last two paragraphs. Obviously, the "production problems" cannot be mainly in the future, or stocks would have sharply increased (whereas they have only increased by about six days worth of production/consumption over the last two years). If there were producers who were able and willing to produce more, prices would not have increased so much, and demand would have continued to rise (given that the global economy has otherwise been doing well).
So I think we have to posit some combination of lack of ability or lack of willingness to increase production. (I'm inclined to think it a mixture myself - most countries can't increase production any more than they have, and Saudi Arabia maybe could but isn't trying very hard).
He means 10% in one year. That is completely implausible. Year-on-year gasoline consumption in the US has never dropped by anything like 10%, and drops in driving of only 2% have only come in the past with significant economic pain. Recall this graph:
Also, while US auto sales have started to shift, there's no sign of impact on overall fuel efficiency so far:
<small>
Vehicle miles traveled per gallon of supplied gasoline in the US. Source EIA and FHWA.
</small>
Did the drop in GDP cause the VMT to drop or the other way around?
There is some sort of relation between VMT and GDP increase, but unclear who does what, I would say.
http://www.fool.com/News/mft/2006/mft06040403.htm?logvisit=y?logvisit=y&source=estmarhln001999&a mp;npu=y
The other problem is, they only ask how much less they would drive if gas cost more. People always say they wouldn't drive less. But they never ask how much more people would drive if gas cost less. I'll bet people would say they'd drive quite a bit more if gas were a lot cheaper.
In this survey, people said they wouldn't drive less no matter how much gas cost. So we should ask, would you drive more if gas were free? And I'm sure the answer would be, yes, a lot more.
The first answer makes it sound like demand is inelastic, the second answer makes it sound like demand is elastic. It can't really be both. They should ask the question both ways and average the results, to get a better estimate of true elasticity.
I read a lot of discussion about the elasticity of demand for gasoline, but it's all couched in terms of the economic driver. That is, the only factor that is assumed to influence VMT or vehicle choice wrt to fuel efficiency is fuel price.
My interest, and one that seems very relevant to PO, is the role education plays in modifying demand elasticity. I'm a case in point. I could drive pretty much any car I wanted, within reason, and not worry about fuel consumption. Even quintupling the price would be more of a financial irritant than an impediment. However, education about either PO or GW seems to make people much less elastic in this regard, to the point that some of us stop driving for those reasons alone, not just the price. This same mindset seems to be working in a number of my acquaintances.
Does anyone have any thoughts on the validity of this observation, and does anyone know if any research has been done on these sorts of factors?
I'd say to that, look who's buying the Hybrids, who's putting PV up on their roof.. it might help them financially, and it might not, but it seems to be essentially done for prinicple at this point. ( I think it will bear out economically, as prices rise ) For people to change their driving habits means a huge leap of faith. I drive our daughter to a daycare 6-7 miles away. Not much, but it's frustrating since I used to walk her 1 mile, at a different age. But it's the right place for her right now. Which part of her future do I sacrifice for another part of her future?
- car sharing
- reduced shopping trip frequency
- reduced leisure travel
- substitution of public transport
- walking
- etc
Education does help, as does facilitation of substitution, but price is the most effective driver (sic). If you can afford a Ferrari then the price of gas is a trivial consideration, but what proportion of drivers can afford Ferraris? Extrapolate.When does gas price pain hit you? $5, $10, $20? How about a shortage or rationing? Do they change your mindset?
Now imagine your wage is halved, or you lose you job, or your mortgage payment doubles.
Nah, don't be so silly, Agric, these things can't happen
The definition of GDP has changed over the year because the government has changed the rules of GDP calculation to show rosy GDP figures to voters. Also in the last thirty years the component of GDP has changed very dramatically. In other words the financial economy has increased very rapidly in USA. I would assume that most of financial economy depends on the activity of traders and bankers. I don't think that their activity is very dependent on motor vehicle transportation.
Once I tried to do the same analysis for Japanese data. However, I soon found out that this analysis is meaningless for Japanese GDP and VMT. Japanese GDP increase had stagnated between 1991 and 2004. However, the number of motor vehicles has rapidly increased since the late 1980's. Therefore in this period VMT increased very rapidly while GDP either increased slowly or even decreased a little bit. Japanese saving rate is high. And deflation had kept their wealth intact. Therefore Japanese could buy nice cars without much economic activity increase. Therefore the correlation between GDP and VMT in USA data is not fundamental bur rather specifically for the situation of USA.
I remember that about 70-75% of oil is consumed for motor vehicles in USA while about 35-40% is in Japan. Since Japanese have more options for transportation than Americans, it would be easier for Japanese to reduce VMT without affecting economic activity than for Americans. However, the difference between USA and Japan is relative rather than absolute. I am sure that there is some room for US economy to decouple with motor vehicle usage.
IMO the correct word will be requires - a certain level of GDP requires a certain number of VMT. If GDP rises you need more VMT to support it, if you cut VMT (oil shock) you will get less GDP. If you cut GDP you will also get less VMT.
I don't doubt that fuel economy will improve in response to the high gas prices. I'm just pointing out that it hasn't really got going yet.
Second, I said "gasoline consumption", not "VMT". Some conservation from reduced VMT would surely play a part over time, but simply drving less aggressively would save most or all of the 10%.
Third, as for their being no change in the effective MPG so far: What would the fuel consumption and MPG have been had SUV sales not fallen off a cliff? What will the effective MPG be as this buying trend continues? As with VMT changes, a turnover in vehicles will clearly improve MPG over time, but in the short run a change in driving habits will provide a much bigger kicker.
Will people make these changes? Push up gasoline prices enough, and they will. Doomers (and I don't mean you, Stuart) keep telling us how PO will be an unprecedented event in human history, triggering economic and social armageddon, etc., but they never assume that people will take unprecedented steps in response. My view is that PO is very, very serious, but that the actions, both collective and individual, we can and will take to mitigate the effects of PO and peak NG are just as formidable.
I believe you are exactly correct (although some people will certainly resist making changes - demanding that the government save them from high prices). In fact, I am working on a blog essay along these lines. There will be pain, and probably an unprecedented hit to the economy, but I believe we will make it through. I think it is great that prices are increasing before the peak, because it gives everyone additional time to change their behaviors before change is forced on them.
RR
Make no mistake, I agree that we are in for some very difficult times. I just don't believe we are doomed. The current supply/demand imbalance, leading to higher prices, will push the peak further out.
RR
- Fantastic site. Keep up the good work.
- My id shows you where I am and how I feel (Sitting Duck!!)
- The price of petrol here in Bombay is about USD4.50 per gallon (Rs,50.00 per litre) Been this way for about six /eight months.
- Our current economic growth does not seem to have been impacted with petrol at these rates.
- we are putting about 1 million cars per annum
- last moth saw the highest growth in sales of cars in the country. (will try and find a link)
- I would not be unwilling to pay 2 ot 3 times the current price of petrol. (drive about 1500 km / month)
- All our Rickshaws, Taxis and buses in Bomay, are run on CNG only. It is mandatory here.
- I would really like to see a live chart of the world petrol /gas prices color coded for rate of recent rise. This would help us to see where the prices are going. If all of us provide the info for our own areas it would be possible to keep a good record of the rises as they hit. It will also reveal stress points in the systems.
- I am now investigating ways to reduce my carbon footprint.
Just my 2 bits ;0)Many people do not have the luxury, at least short-term, to reduce driving much, but should they somehow manage to decrease driving enough to promulgate a significant percentage reduction in usage, then, given the nature of fungible markets, the supply will go elsewhere and the price will not be mitigated, particularly in a world where population continues to grow. In effect, that new population means a defacto increase in consumption, requiring new conservation. The cycle trends down from there. So far so good. Conservation is the goal.
But Americans may suffer disproportionally due to our enormous deficit and a world awash in our fiat excesses. Many countries, particulary in the far east, are waking up to this reality and they are already taking steps to multilaterally ease their pain.
I guess my main point is, there will be suffering no matter how you look at it. I am a doomer because I feel that the human propensity to cooperate is about as reliable as Microsoft Windows and because physics does not care what we do. A world defined by global warming is a system with mega-mega-mega tonnages of extra energy boiling up monster hurricanes and 351 tornadoes in a record tornado season that has barely started. That is some eight times the last highest number for this early in the season. The Ghawar's water cut keeps increasing and it is only a matter of time, a very short time, that the field collapses like the Yibal field did in Yemen. (Both fields have been using the same advanced water sweep and bottle-brush technologies for about the same period.)
I too wish that we could all just get along and hold hands and sing kumbaya and gently, gently lower the American behemoth of an economy into a swell post-oil paradise, but that is the kind of thinking that will cause the really intense pain. The belief that if we all stand on tippy-toe on the thin branch of human intent we can keep ourselves safe is a special belief often advocated by those who are heavily leveraged into the American dream -- too much to lose and not enough incentive to make the hard decisions.
What is it that Upton Sinclair said? I paraphrase at best: It is difficult to convince a man of a truth when his livelihood depends on his not understanding.
Happy talk, such as you might expect from George Babbit, is only cheerleading, not bread nor oil. We know where we want to get: a system that is stable and sustainable. Why not shoot for that right from the start? Why not use our fabulous intelligence and go-get-'em attitude to make it happen? That is the question that nags me. Everyone seems to agree that we live on a finite planet, but the arguments belie that fact. Technology is a product of cheap energy. Cheap energy is NOT a product of technology. So why do we think that building more widgets will magically slake the cheap energy thirst of an ever-growing population?
V
LOL, I wonder how this breaks down by platform.
(moderate, Linux user)
(The full quote is, "Complexity kills. It sucks the life out of developers, it makes products difficult to plan, build and test, it introduces security challenges and it causes end-user and administrator frustration." Talking about why Vista is late, I think.)
Free Software rocks!
Believe:
- Alternatives are a cruel hoax (for business-as-usual).
- TPTB are keeping PO card close to the vest.
- It's gonna be an 'interesting' (painful, etc.) decade going forward.
- We will see a wide range of unexpected and effective responses to dwindling BTU/day.
Open source kinda guy.