Pessimists at EIA strike back
Posted by Stuart Staniford on June 7, 2006 - 11:28pm
Topic: Supply/Production
Tags: economics, peak oil, plateau [list all tags]
The EIA's International Petroleum Monthly came out on Monday, but I was out of town so didn't get to updating the plateau graphs until tonight (I build them in part out of the EIA's table 1.4, and in part from the IEA's monthly Oil Market Reports). You'll recall that last time the IEA's optimism about March, and even more heady optimism about April, was causing the moving average graph to lean up a little in the plateau.
Average daily oil production, by month, from various estimates. Click to enlarge. Believed to be all liquids. Graph is not zero-scaled. Source: IEA, and EIA. The IEA raw line is what they initially state each month. The IEA corrected line is calculated from the month-on-month production change quoted the following month.
The EIA is less excited about March - only around 84.0mbpd, down 400kbpd from February. This also casts doubt on the IEA's April figure, I think, but we'll see in a few days.
Here's the graph of the average of the two with moving averages. It has flattened a shade in light of the latest data point.
Average daily oil production, by month, averaged from estimates by the EIA and IEA, together with 13 month centered moving average, and recursed moving average of the moving average. The last data point in the monthly data is from the IEA's preliminary estimate alone, and the moving average windows are reduced at the graph edges to only include the data that exists. The squares represent the last point on the correspondingly covered curve where the entire window has full data. Believed to be all liquids. Graph is not zero-scaled. Click to enlarge. Source: IEA, and EIA.
I also draw your attention to this interesting piece at Econbrowser, where Professor Hamilton joins those of us wondering why the Saudi's are claiming they can't find customers so they have to throttle back production when prices have not gone down.
Past coverage relevant to the plateau:
- May IEA Oil Market Report
- OPEC Declines and the World Plateau
- Plateau Continues, Aided by Outages
- Plateau Update
- 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
Thanks again.
as for the IEA latest month spike, look at it this way - you were right up until last month where you made the adjustment as an experiment - if it appears wrong to all 3 people who've seen the graph so far (I'm the third), then it is probably better to go back to what had been your SOP when no one was confused by the latest month - whew! - you get my drift? capice?
Just thought you might want to fix this.
can this be right? SA peaked 20+years ago?
Then in the following years production increases from the North Sea and from Africa put Saudi Arabia again on the role of "swing" producer. After 2000 they had periods of poduction as low as 6 MBD.
"the world peaks when SA peaks."
so SA peaked in 1980, then have we already peaked and have been in decline for 26 yrs?
Remmember that a country's production profile can have several peaks. The term 'peak' usually refers to the highest of those peaks.
For instance, the US all-time peak was in 1970, but a new peak was experienced when Prudoe Bay came on stream, this time somewhat lower than the first.
Two peaks:
1980 - 10,21 MBD
2004 - 10,58 MBD
- 2,948 mbpd (from 2,018 mbpd in 1949)
- 3,452 mbpd (from 2,437 mbpd in 1960)
The long term Texas decline rate has been about 4.1% per year, after peaking in 1972. Interesting that the admitted Saudi decline is 5% year over year. It's possible that Saudi production may have been falling for a while, but they decided that they couldn't keep depleting their storage.I'm no expert, but that sure does look like a Plateau...
-C.
If SA is peaking their remaining reserves are likely lower than those of Russia.
By the way this month ASPO's newsletter reassesses SA.
- 1.9% decline
- flat for 20 years before decline sets in at 3%
Really? Plateau for 20 years? Wow...we should be so lucky-C.
Thxs for all the graphs being posted. If one assumes the current SA plateau is due to lots of superstraw tech in numerous small fields/geopockets, along with continued enhancement of the normal secondary and tertiary water-drive tech in the big, old fields: is there anyway to statistically calculate when this plateau will end, and then extrapolate the final SA 'geologic' depletion rate, the overriding assumption being that they are pumping flatout as much as possible to maximize IMMEDIATE economic funds?
Or is it statistically more likely that a 'logistic' plateau/depletion control regimen is being imposed by the Saudis to maximize FUTURE economic returns? In other words, they are going gangbusters to get the infrastructure installed now, but purposely choking back production to retain 'swing producer' pricing privileges over possibly Russia and other countries? Every rig being used in SA is one less that can be used elsewhere; the idea being the less oil the other countries can bring to the market, the more pricing power is retained by the Saudi Princes.
The ideal situation for the Saudis/OPEC would be if they possessed sufficient combined economic/geologic clout to outbid everybody for rigs and other infrastructure, even if the equipment was just parked and not used. By having 'First Mover Status' of fully developing the complete extent of their low-cost extraction system: they can thereby force higher costs to other oil producers and increased profits for themselves while continuing to plateau-choke production for as long as possible.
This strategy should work as long as the Saudis can produce oil vastly cheaper/barrel than any other oil producers. Of course, when ultimate geologic depletion rears its ugly head, this strategy will be much harder to deploy as the extraction price delta/barrel narrows to other producers, but by already having the infrastructure in early and already paid for: the profits will accrue faster to the Saudis.
Bob Shaw in Phx,AZ Are Humans Smarter than Yeast?
Since 1982 that has occurred often, even with decreases year on year (1999, 2002). The thing is crude prices have never been like today during the last 20 years. I don't think anyone is restraining from pumping.
Can deepwater and heavy oil come on stream in time to delay the coming decline?
http://www.energybulletin.net/16902.html
Published on 8 Jun 2006 by Falls Church News-Press. Archived on 8 Jun 2006.
The peak oil crisis: one year in review
by Tom Whipple
Excerpts:
For most of the last year, Saudi oil production has been steady at 9.5 million barrels a day at a time when world oil prices and presumably demand has increased. Recently a firm of "tanker trackers" announced that it looked to them as if Saudi production had dropped to around 9.1 million barrels a day in April and May. The number for April has been confirmed by the Saudis who claims they simply can't find buyers for their oil.
It may be perfectly true that the Saudis can't find a market for some of their oil. A lot of it is difficult to refine and a growing share of the world's oil consumers simply can't afford the going rate these days, even as the richer countries continue to grow nicely. A number of outside analysts are saying that it is just about time for Saudi production to go into decline, perhaps catastrophically. In a year or so, we should know who is right.
It is gospel that when an exporting country goes into depletion they will keep supplying the domestic market first so that their exports will drop much faster than their total production. Moreover, we are starting to hear talk about cutting back on exports just to save it for another day. The message of rapidly rising prices is that an exporter can earn growing revenues and keep more of his oil safely in the ground too, simply by slowing exports. The only obstacles to deliberately slowing exports are long term contracts, other trade relationships, security guarantees, and the fear that they could end up like Baghdad .
So what does the past year tell us? First of all, world oil production has moved up very little. While new wells and new oil fields continue to be drilled, this increased production has been largely offset by hurricane damage, insurgencies, and general oil depletion. The year of peak oil production will be determined by the balance of how fast the drillers can open increasingly more expensive and difficult to drill wells vs. mother nature, insurgents bent on closing down production, and increasing rates of world oil field depletion.
The US and other industrialized countries, most of which are, or soon will be, major importers, are facing the double whammy of rapidly reducing supplies of oil available for import. In the meantime, and for the moment, the worldwide demand for oil, even in the US , continues to increase.
The crash of the Saudi stock market took small investors by surprise. Just curious--do you think that the Saudi insiders knew something that the general population didn't know? I think that the Saudi market is down by 90% or so.
http://www.ameinfo.com/86438.html
Saudi stock market crash a cause for concern
May 20, 2006
Excerpt:
The ruin of hundreds of thousands of small shareholders in the Saudi stock market crash is a worrying development. It is financial catastrophe for those involved, and is already impacting on consumer spending. But the authorities now need to tread carefully to minimize the total economic effect of the crash.
there's little doubt its coming back down hard.
"It was, for example, not uncommon for an investor swept up in the market euphoria to sell all his assets, including his home, car and to borrow from his wife and friends, and then obtain a loan for the same amount from his bank with the collateral as security. Thus a 50% market decline wiped out these assets entirely once the loan was called in."
While its tempting to link everything to peak oil, it's easy to stretch the point.
Granted, just because "B" follows "A" doesn't mean that "B" is related to "A." However, consider the chain of events:
"A"--Saudi stock market drops by 90% of so.
"B"--Saudi oil minister admits that Saudi oil production is down by 5% year over year (which would have been known by Saudi insiders, but not by the small investors).
This article from AlJazeera quotes one saudi web site comment:
"The stock market is creating a rupture in society that will not be easily fixed. We are a people heading for poverty. What do we imagine our situation will be when this boom is over?"
All they need now is for news of a collapse in their oil production and their society will implode.
Excerpt:
"The government and its Capital Markets Authority (CMA) have blamed the crash on wealthy, sophisticated speculators who drove prices to record levels over the past year, then pulled out of the market when the CMA tried to impose order.
"Before, the media raved about teachers and pupils skipping class to track their stock options and mind their portfolios.
"Now, they relate tales of bankruptcy, reclaimed houses and heart attacks in trading rooms."
I doubt that the House of Saud can cling to power for many more years, and if they fall the consequences for international oil supply could be dire. I would expect the US to attempt to intervene at some point in order to secure supplies, but I doubt if intervention would be successful in achieving that goal. More likely it would make a bad situation worse as expensively as possible, as is happening in Iraq.
The fall in emerging markets can be seen as a 'contagion' similar to the 'Asian contagion' of 1998. IMO it is already spreading from the perifery to the centre, hence the recent fall in western markets (the next phase of the bear market that began in 2000 with the dotcom crash). Western investors (especially those who used their homes as ATMs) could soon find themselves in the same position as the Saudis, which could lead to political upheaval in western countries as well. This is why I think it possible (not likely, but possible) that the current American administration may not finish its term.
The House of Saud was installed in charge of the country by Britain after WWI, specifically because it would need foreign support to stay in power (the British govt did this all over the Middle East). After WWII, the US took over from Britain as the imperial overlord in the region and the guarantor of the tenure of, amongst other regimes, the House of Saud.
Because of this, the Saudi government will be cactus in the event of a serious economic crisis. Hold on tight for the Islamic Republic of Arabia.
The official name of Jordan is "The Hashemite Kingdom of Jordan." Arabia could well have been Hashemite Arabia, if Abdul Aziz Ibn Saud had not defeated Sharif Husayn, the great grandfather of present king of Jordan, Abdullah, in 1925. But I agree that once the House of Saud is toppled, it will not be replaced by another dynasty but an Islamic republic.
http://www.sharelynx.com/papers/Souk-al-Manakh.php
When there are folks around with tons of money and time on their hands, these games happen.
The EIA's Short Term Energy Report, which came out Tuesday:
http://www.eia.doe.gov/emeu/steo/pub/
It does not give estimates for the whole world but they do for OPEC (Table 3a). Their estimates for OPEC for April and May, are even more pessimistic than their estimate for March:
http://www.eia.doe.gov/emeu/steo/pub/3atab.html