Articles in topic "Demand/Consumption"
The U.S. should take a cautious approach to exporting natural gas.
That’s the clear lesson of three decades of bad guesses by analysts about natural gas prices and supplies. If pro-export advocates are wrong this time, consumers and businesses will be the ones who suffer from higher domestic gas prices.
Several recent studies concluded that domestic price increases from exports would be small. This conclusion, however, is based on unrealistic assumptions about the size of U.S. gas supplies and the true cost of producing shale gas.
In fact, supplies are likely substantially smaller than predicted, while costs are higher.
History should provide ample reasons for the U.S. to look before it leaps into large-scale exports. Two cycles of investment fiasco involving natural gas imports to the U.S. have occurred in the past 30 years, first in the 1970s, and again just a few years ago, when more than 47 applications for natural gas import terminals were pending at one point.
Both of these were due to incorrect predictions about domestic supply. The supply models that past gas import decisions were based on had widespread support by experts. But they were wrong.
The lesson: gas supply estimates are much more uncertain than experts and conventional wisdom assumes.
Posted by Gail the Actuary on February 6, 2013 - 10:57am
Tags: demand destruction, fuel savings, gasoline, gasoline consumption, gasoline savings, industrialization, mileage, miles per gallon, mpg, oil consumption, oil demand destruction, vmt [list all tags]
United States oil consumption in 2012 will be about 4.7 million barrels a day, or 20%, lower than it would have been, if the pre-2005 trend in oil consumption growth of 1.5% per year had continued. This drop in consumption is no doubt related to a rise in oil prices starting about 2004.
Oil prices started rising rapidly in the 2004-2005 period (Figure 2, below). They reached a peak in 2008, then dipped in 2009. They are now again at a very high level.
Given the timing of the drop off in oil consumption, we would expect that most of the drop off would be the result of “demand destruction” as the result of high oil prices. In this post, we will see more specifically where this decline in consumption occurred.
A small part of the decline in oil consumption comes from improved gasoline mileage. My analysis incidates that about 7% of the reduction in oil use was due to better automobile mileage. The amount of savings related to improved gasoline mileage between 2004 and 2012 brought gasoline consumption down by about 347,000 barrels a day. The annual savings due to mileage improvements would be about one-eighth of this, or 43,000 barrels a day.
Apart from improved gasoline mileage, the vast majority of the savings seem to come from (1) continued shrinkage of US industrial activity, (2) a reduction in vehicle miles traveled, and (3) recessionary influences (likely related to high oil prices) on businesses, leading to job layoffs and less fuel use.
The Oil Drum staff wishes a Happy New Year to all in our readership community. We are on a brief hiatus during this period, and will be back with our regular publications early in the new year. In the meantime, we present the top ten of best read Oil Drum posts in 2012. The ninth in this series is a post by Arthur Berman on the cost of shale gas production and its relation to the US natural gas price, originally published in February 2012.
U.S. Shale Plays
The advent of shale plays provided an important new source of gas. Yet this new supply is characterized by high decline rates which means that wells must be continuously drilled to maintain supply. In 2001, the U.S. natural gas decline rate was about 23% and the annual replacement requirement was 12 Bcf/d when total consumption was 54 Bcf/d. Today, the decline rate is estimated to be 32% and increased consumption of gas means that approximately 22 Bcf/d must be replaced each year (Exhibits 1 and 2).
The Oil Drum staff wishes a Merry Christmas to all in our readership community. We are on a brief hiatus in this period, and will be back with our regular publications early in the new year. In the meantime, we present the top ten of best read Oil Drum posts in 2012. The fourth in this series is a March 2012 post by Robert Rapier reacting to statements by Bill O'Reilly on US oil supply and demand.
Last week I was interviewed by Alan Colmes from Fox News Radio on the topic of gas prices. During the interview, he mentioned an idea that Bill O'Reilly has proposed, and that is to address gasoline prices by discouraging U.S. oil companies from exporting their products. The critics of Bill's proposal have generally focused on the notion that "We can't tell the oil companies where to sell their product."
However, there is a far more fundamental issue, and that is that the basic facts of his proposal are based on an erroneous assumption. Let's first have a look at the proposal, in his own words:
O'Reilly: We began covering the skyrocketing oil prices last Friday with Lou Dobbs. He was candid, saying because of the mild winter, there is plenty of oil and gas in the U.S.A. So supply and demand here should dictate lower prices.
With all due respect, Bill O'Reilly has a fundamental misunderstanding about oil supplies. There is not "plenty of oil and gas in the U.S.A." He has mistakenly translated net exports of finished products like gasoline and diesel into "plenty of oil and gas in the U.S.A.", as I explain below.
Continuing on from six posts that looked at global oil production trends, we now turn our attention to oil consumption / demand, which in our opinion, is every bit as fascinating and important to understanding the global energy system. In this post we focus on Europe and North America using JODI data (Joint Organisations Data Initiative) which is based upon figures reported by national governments which we therefore assume to be reliable. The JODI data base is not complete. Reporting began in January 2002. Most OECD countries have a complete set of reports but a number of countries like China only began to report in January 04 and many developing countries have a patchy reporting record. Russia and the former states of the Soviet Union do not report oil consumption figures at all.
Figure 1 This group of 11 countries classified as "Europe Core" combined show near uniform demand for oil products for the past decade. We consider this to be a somewhat remarkable trend since oil prices rose from $31/bbl in 2002 to >$100/bbl in 2008 (annual averages). Following 2008 the world has witnessed the biggest financial crisis since 1929. And yet demand for oil in this group of countries has been hardly affected by these momentous events. Note that this group includes Switzerland and Norway, neither of which are members of the Euro or the EU. These 11 countries typically have strong manufacturing / exporting economies. It seems likely that none will have significant oil fired power generation. All have modern motor vehicle fleets that already deliver fuel economy much higher than in N America. All but Norway are dependent upon imported oil.
Oil Watch posts are joint with Rembrandt Koppelaar.
Posted by Rembrandt on December 13, 2012 - 4:56am
Tags: automobile, car fleet, corporate average fuel economy, fuel efficiency, oil, oil consumption, united states [list all tags]
This is a guest post by James Hamilton, Professor of Economics at the University of California, San Diego. This post originally appeared on the Econbrowser blog here.
A lot of attention has been given to the optimistic assessments of future U.S. and Iraqi oil production in the IEA's World Energy Outlook 2012. However, perhaps even more dramatic is the report's prediction of a significant long-term decline in petroleum consumption from the OECD countries. For example, the report predicts about a 1 mb/d drop in U.S. oil consumption by 2020 and a 5 mb/d drop by 2035 relative to current levels. I was curious to examine some of the fundamentals behind petroleum consumption to assess the plausibility of the IEA projections.
Posted by Rembrandt on October 6, 2012 - 5:14am
Tags: automobile, consumers, consumption, corporate average fuel economy, economic adjustment, economic effects, economic growth, efficiency, oil demand, oil prices, supply, thresholds [list all tags]
This is a guest post by James Hamilton, Professor of Economics at the University of California, well known for work on the relationship between oil prices and economic growth. The article originally appeared on his blog EconBrowser.
As U.S. retail gasoline prices once again near $4.00 a gallon, does this pose a threat to the economy and President Obama's prospects for re-election? My answer is no.
The graph below plots average U.S. gasoline prices, adjusted for inflation, over the last decade. This is now the fourth time we've been near the $4 threshold. It first happened in June 2008, again in May 2011, and again in April of this year. In fact, on each of those previous 3 occasions the average U.S. retail price of gasoline was higher than it is today.
Figure 1. Monthly real gasoline price, Jan 2002 to Sep 2012. Data source: monthly gasoline price from EIA, with value for September representing the weekly September 17 value. Expressed in units of August 2012 dollars by multiplying by ratio of August CPI (from FRED) to that of the reported month.
Posted by Gail the Actuary on September 7, 2012 - 6:23pm
Tags: coal, deforestation, economy, electricity, energy supply, erosion, gdp, hunter-gatherer, hydroelectric, oil, peat, petroleum, population, soil [list all tags]
The tie between energy supply, population, and the economy goes back to the hunter-gatherer period. Hunter-gatherers managed to multiply their population at least 4-fold, and perhaps by as much as 25-fold, by using energy techniques which allowed them to expand their territory from central Africa to virtually the whole world, including the Americas and Australia.
The agricultural revolution starting about 7,000 or 8,000 BCE was the next big change, multiplying population more than 50-fold. The big breakthrough here was the domestication of grains, which allowed food to be stored for winter, and transported more easily.
The next major breakthrough was the industrial revolution using coal. Even before this, there were major energy advances, particularly using peat in Netherlands and early use of coal in England. These advances allowed the world’s population to grow more than four-fold between the year 1 CE and 1820 CE. Between 1820 and the present, population has grown approximately seven-fold.
When we look at the situation on a year-by-year basis (Table 1), we see that on a yearly average basis, growth has been by far the greatest since 1820, which is the time since the widespread use of fossil fuels. We also see that economic growth seems to proceed only slightly faster than population growth up until 1820. After 1820, there is a much wider “gap” between energy growth and GDP growth, suggesting that the widespread use of fossil fuels has allowed a rising standard of living.
The rise in population growth and GDP growth is significantly higher in the period since World War II than it was in the period prior to that time. This is the period during which growth in which oil consumption had a significant impact on the economy. Oil greatly improved transportation and also enabled much greater agricultural output. An indirect result was more world trade, which enabled production of goods needing inputs around the world, such as computers.
When a person looks back over history, the impression one gets is that the economy is a system that transforms resources, especially energy, into food and other goods that people need. As these goods become available, population grows. The more energy is consumed, the more the economy grows, and the faster world population grows. When little energy is added, economic growth proceeds slowly, and population growth is low.
Economists seem to be of the view that GDP growth gives rise to growth in energy products, and not the other way around. This is a rather strange view, in light of the long tie between energy and the economy, and in light of the apparent causal relationship. With a sufficiently narrow, short-term view, perhaps the view of economists can be supported, but over the longer run it is hard to see how this view can be maintained.
Ed. note: This post first appeared on Robert's blog R-Squared Energy.
Oil Prices Rise, But Demand Growth Remains Strong
Access to affordable, stable energy supplies is critical for economies throughout the world. For developing countries, affordable energy can offer a pathway to a better quality of life. But between 2000 and 2010, world oil prices became much less affordable. The average global oil price advanced from approximately $25 per barrel to more than $100 per barrel – far outpacing rates of inflation in most countries.
Many books and articles have been published that argued that the increase in prices has been due to oil speculation, the restriction of supplies by OPEC, growth in developing countries, peak oil, or various geopolitical factors. Regardless of the cause, the response to higher prices in developed and developing countries may be surprising.
This is a guest post by Tom Murphy. Tom is an associate professor of physics at the University of California, San Diego. This post originally appeared on Tom's blog Do the Math.
I recently devised a laser-phototransistor gauge to monitor my natural gas meter dial—like ya do. As a side benefit, I acquired good data on how much energy goes into various domestic uses of natural gas. Using this, I was able to figure out how much energy it takes to heat water on the stove, cook something in the oven, or heat water for a shower. Together with the knowledge of the heat capacity of water, I can compute heating efficiency from my measurements. What could be more fun? I’ll share the results here, some of which surprised me.