The Oil Drum

[With Centrica and EDF announcing hefty retail gas price increases in the UK this week, I thought it was worth reposting this story that was first published in December 2007. The follow on story Daddy will the lights be on at Christmas?, is perhaps more pertinent this year than last.]

OECD European gas production looks set to peak in 2008. After that, falling production combined with rising demand will see OECD European gas imports wanting to rise from current 197 BCM per annum to 442 BCM per annum by 2020. Where will this gas come from and how will rising European imports affect N America and the rest of the world?

Figure 1 OECD Europe gas production and conceptual forecast. Click all charts to enlarge

OECD European gas production looks set to peak in 2008. After that, falling production combined with rising demand will see OECD European gas imports wanting to rise from current 197 BCM per annum to 442 BCM per annum by 2020. Where will this gas come from and how will rising European imports affect N America and the rest of the world?

Figure 1 OECD Europe gas production and conceptual forecast. Click all charts to enlarge

In 2006, 92% of the primary energy consumed in the UK was derived from fossil solar fuels - oil, natural gas and coal.

Not so long ago the UK was self sufficient in these energy resources but now we are importing increasing amounts of all three.

Dependency upon imported energy undermines UK national security and will have potentially dire consequences for the balance of trade.

In 2006, 92% of the primary energy consumed in the UK was derived from fossil solar fuels - oil, natural gas and coal.

Not so long ago the UK was self sufficient in these energy resources but now we are importing increasing amounts of all three.

Dependency upon imported energy undermines UK national security and will have potentially dire consequences for the balance of trade.

This is more for the historic record than much else, although it is true that every picture tells a story, and with the impact evident in the gas prices, here is the current state of the gasoline stocks in the US, according to the EIA Wednesday. The timing of the curve should capture the measure of this season’s drop in volume.

Robert has already discussed this on his own site but since there was some discussion of these figures, I thought it useful to post them so that the more general audience could see them. So all I want to do is insert the relevant states of the various plots that we usually put up at frequent intervals. (Though I will also pause to point that the curve is now turning up, as Robert predicted it would on Tuesday). Perhaps the most relevant (in regard to us not worrying) is the state of the crude stocks, since with those available, then we can produce more gasoline as it now becomes more in demand. It may not, however, turn around fast enough to avoid an all-time high in gas prices.

I was reading the story that Leanan had posted on the IEA estimate for oil demand, and it struck me that we are in that navel gazing part of the year where we try and estimate what will happen to oil supply and prediction. Since it helps to have data, let’s see what the crude oil and gasoline situation looks like, using the EIA data.

It is worth remembering, as we look at the history of crude stocks over the past year that, about twelve months ago we were looking into a future that was anticipating a second bad hurricane season, as well as the usual geo-political machinations and technical problems that would combine to limit crude oil supplies. In the end these were not as severe as we had expected, and the precaution of building oil stocks for the summer was not, this past year, needed as we had a more benign summer than usual.

First of all, while I kept the title consistent with Jeffrey's opening essay, I consider it to be a misnomer. I do not intend to debate the timing of Peak Oil. Some have misunderstood my long-running debate with Jeffrey to be a quibble about the timing of the peak. That is not the case. Yes, in my opinion Peak Oil is at least 3 years out. But that opinion is based on some things I can't discuss, so I have indicated that I will not debate the matter.

Jeffrey and I agree on many things. We agree that some sort of revenue-neutral fossil fuel tax is needed to reign in our energy usage and encourage alternatives with low fossil-fuel inputs. We agree that transportation electrification should be a priority. We agree that once Peak Oil does occur, there will be an export crisis. We agree that regardless of whether the date of Peak Oil is today, or 5 years from now, we should have already gotten started on a major effort at moving away from fossil fuels. (Incidentally, even though a peak in the near-term is still a minority view, Global Warming has an overwhelming scientific consensus. So, if we can't make the case to move away from fossil fuels as a result of Peak Oil, there is still the need to do so due to Global Warming.)

That's an end to my digression, and now I will address the issue on which we disagree. First, I want to make it clear that I respect Jeffrey a great deal. I have learned much from his work, and I consider his contributions to be valuable. But I disagree with his interpretation of the export data. Jeffrey did make a prediction that we would see declining exports this year, and he predicted that this was because of a production peak in some of the major exporting countries.

With little media fanfare as of yet, a major report by the political heavyweight think tank Council on Foreign Relations was recently released. "Independent Task Force Report #58 - National Security Consequences of Oil Dependency" (pdf warning) paints a somewhat more urgent picture of our energy situation than most other oil and energy research coming out of Washington. Though there is no mention of the words "Peak Oil' in the 90 page report, to the astute reader it is clear that this group of experts, led by ex-CIA chiefs, John Deutsch and James Schlesinger, understand that the era of cheap energy is ending, and that our dependency on oil has major geopolitical implications with few easy answers. The bombshell in this report is the admission that the United States will be unable to achieve energy independence, and should focus instead on reducing our dependency on oil. Though this concept is nothing new to readers of this site, coming from a highly respected mainstream think tank (CFR), recommendations such as conservation, gasoline taxes, and gasoline rationing might be an uncomfortable but necessary wake up call to some of the conservative (cornucopian?) decisionmakers in our nations capital. Indeed, this report may be the next integral step of political eye-opening (the first being the Hirsch Report last year) that hastens our national efforts towards addressing our energy addiction.

This post is a general summary of the report, along with some interspersed comments and conclusions.

Our oil import dependency(pg. 31) (Click to enlarge)

After Khebab had posted his excellent information on the Production Forecasts on Monday, I sent a copy of the initial summary plot to the person I consider my ultimate boss in this neck of the woods. The reply came down "Does this mean the end of the world?" And I was for a while perplexed as to exactly how to reply.

In large measure much of the information that we talk about on this site is not widely known. To most people none of those who have modeled the coming of peak oil are known, and they would not know Cambridge Energy Research Associates from the Central Electric Railfan's Association . Every so often we have looked to see how popular the terms "Peak Oil" , "Saudi Oil" and "OPEC" are on the internet, starting in April 2005. Using blogpulse as the tool I thought it germane to see if there had been any change in the popularity of the phrases. Prof G changed the plots to compare "Peak Oil" with "Global Warming" and "Climate Change" in July 2005 and found that interest in "Peak Oil" was going down. We went back for another look in February this year and the Peak Oil line was again just a thin line at the bottom. But by April there was another upswing in popularity. So how are we currently doing? (Answers below the fold).

More data from the DTI. On 26th Oct '06 the DTI updated their monthly oil statistics. The Excel spreadsheet is available here: Excel link. Hat tip Nick Rouse for bringing this to my attention.

The key quote is:

Oil production in the period June 2006 to August 2006 was 12.1 per cent lower than a year ago.

This isn't good news and perhaps we are becoming weary of such announcements however there is a little more we can say about these recent numbers...