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This past week, I gave a presentation to a group interested in a particular type of renewable energy–solar energy that is deployed in space, so it would provide electricity 24 hours per day. Their question was: how low does the production cost of electricity really need to be?

I gave them this two-fold answer:

1. We are hitting something similar to “Peak Oil” right now. The symptoms are the opposite of the ones that most people expected. There is a glut of supply, and prices are far below the cost of production. Many commodities besides oil are affected; these include natural gas, coal, iron ore, many metals, and many types of food. Our concern should be that low prices will bring down production, quite possibly for many commodities simultaneously. Perhaps the problem should be called “Limits to Growth,” rather than “Peak Oil,” because it is a different type of problem than most people expected.

2. The only theoretical solution would be to create a huge supply of renewable energy that would work in today’s devices. It would need to be cheap to produce and be available in the immediate future. Electricity would need to be produced for no more than four cents per kWh, and liquid fuels would need to be produced for less than $20 per barrel of oil equivalent. The low cost would need to be the result of very sparing use of resources, rather than the result of government subsidies.

Of course, we have many other problems associated with a finite world, including rising population, water limits, and climate change. For this reason, even a huge supply of very cheap renewable energy would not be a permanent solution.

This is a link to the presentation: Energy Economics Outlook. I will not attempt to explain the slides in detail.

…click on the above link to read the rest of the article…

Egypt update: net oil importer and chokepoints

December 7, 2015

Egypt update: net oil importer and chokepoints

Oil production and consumption

Fig 1: Oil production vs consumption

After a post-peak decline production has stabilized but consumption has increased relentlessly at a long-term 1.7% pa, slightly below population growth of around 2% pa. Egypt is now a net oil importer. On these trends, the gap between consumption and production is likely to get larger. This increases imports and the need for fuel subsidies. Let’s zoom into the monthly oil production (crude and NGL separately)

Fig 2: Production of crude oil and natural gas plant liquids

Crude oil production declined again since 2009 at 2.5% pa, offset by an increase in NGLs of 4.7% pa

Fig 3: Net crude exports and refinery utilisation

The crude oil exported up to 2005 (at low oil prices!) is now missing. EIA data are presently only available up to 2012. The EIA writes:

According to data from OPEC’s Annual Statistical Bulletin, Egypt’s refined petroleum output averaged 445,000 b/d in 2013, suggesting that refinery utilization was about 63%. Egypt’s refining output declined by 28% from 2009 to 2013. Facts Global Energy attributes this decline to Egypt’s policy that permits foreign oil producers to export more crude oil as repayment of EGPC’s financial debt. As a result, Egypt’s crude oil exports [56% EU, 28% India, 13% China] have not declined over the past few years, despite declining production. In turn, there is a lower volume of domestic crude oil available for the domestic refineries, and Egypt must make up for the difference by importing petroleum products and/or crude oil. Egypt imported about 145,000 b/d of petroleum products in 2014, according to Global Trade Information Services. Egypt also exported about 60,000 b/d of petroleum products that same year.

…click on the above link to read the rest of the article…

A Surprising Look at Oil Consumption

November 25, 2015

A Surprising Look at Oil Consumption

The EIA publishes oil consumption numbers for all major nations. However they have data for most nations only through 2013. They do have data for some nations through 2014. Nevertheless a lot can be gleaned from just looking at those consumption numbers. If oil consumption numbers are growing year after year, then there is a good chance that nation is growing economically. But if oil consumption numbers are continually declining year after year, then it is more than a little silly to say all is well, economically, with that nation. Or that is my opinion anyway.

First, who’s oil consumption is increasing year after year, or who’s economy is booming? All charts below are consumption as total liquids in thousand barrels per day. Some charts are through 2014 while others are through 2013. Whatever the last year is on the yearly axis is the last year for that data.

Important: All charts are consumption, not production.

No doubt the Middle East is booming. The reason, most of them are oil producers and oil, for most of this chart anyway, the price of oil was increasing. They had lots of income, their consumption was increasing every year as was their economies.

Saudi Arabia, by far the Middle East’s largest consumer, has increased consumption every year since 1995.

…click on the above link to read the rest of the article…

Petrodollar Reflux to Hit Treasuries, Other Assets

November 2, 2015

Petrodollar Reflux to Hit Treasuries, Other Assets

Oil-producing countries dump assets to fill budget holes.

Executive Report with ISA Intel, Oil & Energy Insider:

The collapse in oil prices is draining oil-exporting countries of revenue. With substantially lower oil revenues, many of the world’s sovereign wealth funds are dropping in value, which has ramifications for the assets they are invested in. The IMF took a look at this connection between oil prices and sovereign wealth funds and raised the possibility that asset prices around the world could be negatively impacted.

Oil-Backed Sovereign Wealth Funds

Sovereign wealth funds emerged in a big way when oil prices started to rise in the early 2000s. An enormous transfer of wealth occurred from oil-consuming countries to oil-producing countries. Countries like the U.S., for instance, had to shell out ever more cash to buy imported oil from, say, Saudi Arabia.

The wealth accumulated in oil-producing countries. Since they needed to put all the surplus somewhere, they setup sovereign wealth funds to invest the money abroad. The IMF says that the total assets from all of the world’s sovereign wealth funds is estimated at $7.3 trillion.

The wealth transfer is clearly visible when looking at the current account balances of several countries. For example, the United States saw its relatively minor current account deficit balloon into a truly massive deficit by 2005, when oil imports peaked and prices rose. Of course, oil-exporting countries saw the mirror image of that experience, with surpluses opening up from 2004/2005 onwards.

The surpluses quickly disappeared following the financial crisis in 2008-2009 – when oil prices crashed below $40 per barrel – but came back relatively quickly following a rapid resurgence in crude prices.

…click on the above link to read the rest of the article…

Looking Back 10 Years After Peak Oil

October 27, 2015

Looking Back 10 Years After Peak Oil

All views expressed here are those of Verwimp Bruno and do not necessarily represent those of Ron Patterson.

1. INTRODUCTION

Peak Oil is the moment in time when, on a global scale, the maximum rate of oil production is reached. The moment after which oil production, by nature, must decline forever. Since Earth is a closed system, next to this production (supply) event, there must be an equal demand event: Peak Oil Consumption. Since there are no substantial above ground deposits, Peak Oil Production and Peak Oil Consumption must coincide. The world consists of a lot of different countries, some of which are already far beyond peak oil production That leads to the assumption the world as a whole reaches peak oil production. On the demand side, it is worth looking, because different countries have different economies, different degrees of development, and so on, if, while some countries still experience significant growth in oil consumption, some countries are already well beyond Peak Oil Consumption by now.

2. PRODUCTION vs CONSUMPTION

The production history of crude oil is well documented. For all relevant OPEC and NON-OPEC countries the data are gathered by Peakoilbarrel.com here, OPEC Charts, and here, Non-OPEC Charts, respectively. It is clear some countries have reached peak oil production long time ago. For readers of this blog, familiar with these data, this is no surprise. Still world oil production is growing, because some countries make up for the countries that are losing production. Many readers of Peakoilbarrel.com wonder when the exact moment will be when global oil production will have reached that ultimate peak. But how relevant is that moment? Will it bring doom, gloom, the end of motoring, plastics and tooth paste. It might be more interesting to know whether your country is before, beyond or at Peak Oil Consumption right now. And what about coal and natural gas?

…click on the above link to read the rest of the article…

Saudi, US Oil Inventories Hit Record High as Demand Fizzles

October 20, 2015

Saudi, US Oil Inventories Hit Record High as Demand Fizzles

The amount of oil in storage globally, not including the various “strategic petroleum reserves” in the US, China, Europe, Japan, and other locations, has grown to staggering proportions this year, as oversupply drowns out tepid demand.

In the US, oil storage is seasonal. A big buildup starting late fall gets Americans and their favorite gas or diesel sipping or guzzling toys or clunkers through “driving season” – late spring and summer – when somehow everyone has to drive somewhere. After driving season, petroleum stocks fall. This pattern has played out this year as well, but with a difference.

Last week, the EIA reported that crude oil stocks rose 7.6 million barrels to 468.6 million barrels, the highest for this time of the year since records have been kept. Crude oil stocks are now 98 million barrels higher than they were last year at this time, when they were already bouncing into the upper end of the 5-year range.

This chart from the EIA shows the out-of-whack relationship between the five-year range (gray area) and the weekly buildup (blue line) this time around:

Instead of getting better somehow, this situation simply got worse over driving season. At the peak of the buildup this year, crude oil stocks were 22.5% higher than a year earlier. Now they’re 26.4% higher than they were at this time last year.

If the inventory buildup this fall, winter, and spring continues in this manner from today’s much higher starting point, we can look forward to a fiasco on the storage front – and on the pricing front. Because at this rate, by April, we’ll be having oil coming out of our ears!

But this is a global issue for producers (or conversely, an opportunity for oil consumers). Here’s Saudi Arabia, which has been pumping oil at record levels to maintain its market share against Russia and the boys from the oil patch in the US and Canada: its inventories are ballooning too.

…click on the above link to read the rest of the article…

Oil and the Global Economy

October 10, 2015

Oil and the Global Economy

How important is oil to the future of the global economy? The remarkable economic expansion of in the United States and other industrial nations over the past century or more has been fueled by a steadily growing supply of low-cost energy—mostly from fossil fuels—oil in particular which accounts for more global energy consumption than any other source.

But there is growing uncertainty whether this trend will continue as it has in the past. How will shifting trends regarding the cost, demand, and supply for oil affect the global economy and the outlook for investment and economic growth?

Guests:

Stephen P.A. Brown – professor of economics and director, Center for Business and Economic Research, Lee Business School, University of Nevada, Las Vegas; visiting fellow, Resources for the Future; associate editor, Energy Policy
Mark Lewis – senior analyst for energy, climate, and sustainability research, Kepler Cheuvreux ; former head of energy commodities research, Deutsche Bank
Jim Hansen – president, Ravenna Capital Management

Key Questions:

Cost: What are the key trends regarding costs of oil production and what are the implications for the global economy and investment in the energy sector.

Price: How are recent trends regarding oil prices affecting the global economy? Is there a tension between sagging prices and rising costs and if so, what are the implications for the global economy and investment in the energy sector?

Demand: How are trends regarding oil demand —rising sharply in some countries, flattening in others—affecting the global economy?

Supply: How does uncertainty regarding energy supply factor into the outlook for the global economy and investment in the near-term and further down the road?

…click on the above link to read the rest of the article…

What Greece, Cyprus, and Puerto Rico Have in Common

July 9, 2015

What Greece, Cyprus, and Puerto Rico Have in Common

We all know one thing that Greece, Cyprus, and Puerto Rico have in common–severe financial problems. There is something else that they have in common–a high proportion of their energy use is from oil. Figure 1 shows the ratio of oil use to energy use for selected European countries in 2006.

Greece and Cyprus are at the bottom of this chart. The other “PIIGS” countries (Ireland, Spain, Italy, and Portugal) are immediately above Greece. Puerto Rico is not European so is not on Figure 1, but it if were shown on this chart, it would between Greece and Cyprus–its oil as a percentage of its energy consumption was 98.4% in 2006. The year 2006 was chosen because it was before the big crash of 2008. The percentages are bit lower now, but the relationship is very similar now.

Why would high oil consumption as a percentage of total energy be a problem for countries? The issue, as I see it, is competitiveness (or lack thereof) in the world marketplace. Years ago, say back in the early 1900s, when countries built up their infrastructure, oil price was much lower than today–less than $20 a barrel (even in inflation-adjusted dollars). Between 1985 and 2000 there was another period when prices were below $40 barrel. Back then, the price of oil was not too different from the price of other types of energy, so an energy mix slanted toward oil was not a problem.

Oil prices are now in the $60 barrel range. This is still high by historical standards. Furthermore, much of the financial difficulty countries have gotten into has occurred in the recent past, when oil prices were in the $100 per barrel range.

While countries with a large share of oil in their energy mix tend to fare poorly, at least some countries with a preponderance of cheap energy fuels in their energy mix have tended to do very well. For example, China’s economy has grown rapidly in recent years. In 2006, its share of oil in its energy mix was only 23.0%, putting it below Norway but above Poland, if it were included in Figure 1.

…click on the above link to read the rest of the article…

Asia’s oil consumption at record high while production peaked in 2010

June 24, 2015

Asia’s oil consumption at record high while production peaked in 2010

The annual BP Statistical Review has come out, as usual in June. In this post we focus on the Asia Pacific region. This is important because the Australian government has offered the help of “Team Australia” to build the “Asian Century”. The question no one asks (or wants to ask) is how much oil there is to carry Asia through the decades to come. No one can give an answer of course but it is clear that if past oil consumption and production trends continue the region will slide into a huge oil crisis.

Overview

Oil production in the Asia Pacific peaked in 2010 (China offshore!) at 8.4 mb/d while consumption continued to increase to 30.9 mb/d.

Fig 1: Asia-Pacific oil production and consumption

The difference between consumption and production (net imports) is now 73% of consumption, up from 68% ten years ago.

Oil consumption changes

Let’s zoom into the last 10 years. Consumption growth dropped from 6.2% in 2009/10 to 1.5% in 2013/2014 but this is still an annual 440 kb/d. If this reduced consumption growth were to continue an extra 2.2 mb/d would be needed by 2020 and 4.4 mb/d by 2025.

Fig 2: Asia’s oil production and consumption changes since 2005

Since global crude oil production started to peak in 2005 (base year in above graph), Asia did remarkably well to suck additional oil out of the global market, around 6 mb/d

…click on the above link to read the rest of the article…

Changes to Total Global Credit Affects The Oil Price

May 5, 2015

Changes to Total Global Credit Affects The Oil Price

In some posts on Fractional Flow I have presented some of my explorations of any relations between the oil price, changes to global total credit/debt and interest rates. My objective has been to gain and share some of my insights of how I see the economic undertows that also influences the price formation for crude oil.

I have earlier asserted;

Any forecasts of oil (and gas) demand/supplies and oil price trajectories are NOT very helpful if they do not incorporate forecasts for changes to total global credit/debt, interest rates and developments to consumers’/societies’ affordability.

In this post I present results from an analysis of developments to the annual changes in total debt in the private, non financial sector of some Advanced Economies (AE’s), and 5 Emerging Economies (EME’s) from Q1 2000 and as of Q3 2014 with data from the Bank for International Settlements (BIS in Basel, Switzerland).

The AE’s are: Euro area, Japan and the US.

The 5 EME’s are: Brazil, China, India, Indonesia and Thailand which in the post are collectively referred to as “The 5 EME’s”.

Year over year (YOY) changes in total private debt for the analyzed economies were juxtaposed with YOY changes in total petroleum consumption in these based upon data from BP Statistical Review 2014.

As the AE’s slowed growth in, and/or deleveraged their total private debt after the Global Financial Crisis (GFC) in 2008/2009, the EME’s continued their strong growth in total private debt and China accelerated it significantly in 2009.
The AE’s petroleum consumption declined noticeably as from 2007, resulting from the combination of high oil prices and tepid debt growth and/or deleveraging.
The EME’s remained defiant to high oil prices and continued their strong growth in petroleum consumption, which likely was made possible by strong growth in total private debt.
Demand remains what the consumers can pay for!

…click on the above link to read the rest of the article…

Who Benefits Most From Cheap Oil?

March 27, 2015

Who Benefits Most From Cheap Oil?

We are living in a world obsessed with oil and its price movements. Some time back, when all the trade pundits were predicting a stable 100$ benchmark, the prices fell… and how! The current fall in the oil price has been particularly harsh and excruciating for some of the prominent players such as Russia and Venezuela. To add fuel to the fire, on March 16, 2015, the oil price plummeted to a 6-year low level of 42.98 dollar per barrel. With the possible addition of Iranian oil to the global oil supply, the refusal of OPEC to cut down its production levels, rising US crude inventory and weak global demand, one can easily predict that cheap oil is here to stay. These are testing times for global economy where a simple question arises: Who benefits the most from cheap oil?

The answer is not one but the two Asian Giants: India and China, who are among the biggest global importers of oil.

Source: EIA

India

With a projected growth rate of more than 7.8% in 2015, India is all set to grow more than China according to the IMF and World Bank. With a consumption of more than 3 million barrels of oil per day, India is the fourth largest global consumer of oil in the world. Since the country imports around 80% of its total crude oil requirement, cheap oil has drastically reduced India’s import bill and current account deficit from the previous years. As per India’s current finance minister, the country might even achieve a current account surplus in the fourth quarter of 2015. Moreover, India has recently de-regulated the price of diesel and petrol and brought it in line with the international rates. The deregulation of fuel has reduced its retail cost which has resulted in reduction of the overall inflation rate.

…click on the above link to read the rest of the article…

How Much Crude Oil Do You Consume On A Daily Basis?

February 27, 2015

How Much Crude Oil Do You Consume On A Daily Basis?

Oil. The commodity. We know what it’s worth – at least we thought we did – but what does a barrel of the black stuff get you in real life? Before we get theoretical, let’s first consider how much oil you use.

If you’re in the United States, that figure is approximately 2.5 gallons of crude oil per day; roughly one barrel every seventeen days; or nearly 22 barrels per year. That’s just your share of US total consumption of course; the true number is harder to discern – minus industrial and non-residential uses, daily consumption drops to about 1.5 gallons per person per day. Subtract the percentage of the population aged 14 and below and the daily consumption climbs back above 2 gallons. This is big picture, and it’s quite variable, so let’s go further.

Most of the nation’s daily crude consumption stems from transportation. If you’re an average driver in an average car, your crude consumption is in the order of 12 barrels per year. However, if your car is more than ten years old, chances are that figure is closer to 15 barrels annually. Does an electric car offer significant savings? Of course it does, but for an unconventional comparison let’s assume all of the electricity is sourced from oil – in truth, petroleum is not a very efficient fuel and accounts for just 1 percent of electricity generation in the US. Under this assumption, a Tesla Model S, with an 85 kilowatt-hour (kWh)battery and a range of 260 miles, will consume approximately 8 barrels of crude per year.

Frequent flyer? Say 2,000 miles per year on a US carrier? Add about two-thirds of a barrel of crude to your annual consumption.

A 3,000-mile cruise on the MS Oasis of the Seas may sound relaxing, but at roughly 4 barrels of crude per passenger, the carbon footprint alone is worth reviewing.

…click on the above link to read the rest of the article…

US oil consumption did not increase as result of US tight oil boom

November 11, 2014

US oil consumption did not increase as result of US tight oil boom.

In part 1 of a series of articles on the impact of US tight (shale) oil we examine the impact on US oil consumption.

Fig 1: US crude oil production with tight oil from Texas and North Dakota

Data from: http://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbbl_a.htm

In 2013, an additional 2.3 mb/d of tight oil was produced from wells in Texas (1.5 mb/d) and North Dakota (0.8 mb/d). Note that these data are preliminary estimates.

Fig 2: Data from the Texas Rail Road Commission in barrels/day

Graph from: http://peakoilbarrel.com/texas-rrc-oil-gas-report-august-data/

The blue straight line is from the EIA http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRFPTX2&f=M

The other lines present the monthly updates of the Texas RRC. We see it takes almost 2 years until numbers stabilize. Around 1.1 mb/d is from conventional oil.

Let’s have a look at US consumption by fuel
…click on the above link to read the rest of the article…

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